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Dev-Bank Wales MBO


20 February 2019

Maximising the Contribution of Habitual Entrepreneurs to the Economy

According to the latest data from StartUp Nation, nearly 87,000 new businesses have been created in the first six weeks of 2019.

However, not all of those starting a business are doing for the first time and a growing number establishing new ventures are so-called “habitual entrepreneurs” who have done it before and are looking to do it again.

They include serial entrepreneurs – those who prefer to close one business before starting another (such as Steve Jobs) – and portfolio entrepreneurs – those who run a number of businesses concurrently (such as Richard Branson)

So what does research tell us about such individuals and their firms?

First of all, habitual entrepreneurs make a disproportionate contribution to the level of business start-ups across the UK. Whilst making up less than one per cent of the UK population, habitual entrepreneurs set up around one in three start-ups of all the start-ups in the UK. In addition, those with previous entrepreneurial experience are over three times as likely to start a new business as those with no previous experience.

This may reflect the greater resources that are available to those who previously sold a business that, in turn, provides the start-up capital required to make intentions become reality. When it comes to accessing external finance, they utilise their previous track record in business ownership and their entrepreneurial experience to persuade investors to back their businesses.

This clearly suggests that those with previous entrepreneurial experience are more likely to be thinking of and actually starting a new business. However, this still begs the question why enterprise support is focused almost exclusively on getting new entrants with no previous experience into entrepreneurial activity?

Of course, the “holy grail” for policymakers is not the lifestyle business established by the vast majority of those starting a business, but those new businesses that can create can create wealth, employment and innovation in their local economies.

And habitual entrepreneurs may be the solution as they tend to run businesses that create a greater level of employment, higher turnover in both the first and third years of trading, and export a high proportion of their output.

If these expectations are accurate, then it is clear that businesses started by habitual entrepreneurs are exactly those which governments across the world are looking to support, and conform to the “scale up” concept of the minority of rapidly growing businesses which create a majority of employment in the small business sector.

Therefore, given the importance of those with previous ownership experience in generating new businesses, it seems clear that policymakers could and should be targeting greater support in 2019 at supporting proven entrepreneurs rather than increasing start-up levels in general.

If both the UK and Welsh Governments wants to create the growing companies of the future, then there is certainly mileage in promoting the entrepreneurial potential of those individuals who have “been there and done it”.


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