Iuventa / Výskum mládeže / Data catalogue / 2012 / Survey of needs of young entrepreneurs and obstacles in their businesses

Survey of needs of young entrepreneurs and obstacles in their businesses

Research identification sheet ID: DAYR 036

Authors of the survey: Ing. Vladimír Jakubec, PhD., Ing. Monika Sobeková – Majková, PhD., Ing. Ján Solík, PhD.
Period of data collection: 09/2011 – 11/2011
Data collection: Združenie mladých podnikateľov Slovenska (Young Entrepreneurs Association of Slovakia)

Abstract

In the long term, Europe has been struggling with the issue of declining interest of young people in running business. The status of the business spirit and interest of young people in running their businesses was also reflected in results of surveys of the European Commission, according to which three-fifths of Europeans have never considered running business and one half of them think there is even no sense in starting if there is a risk of failure. That was also the reason why the European Commission adopted, in 2007, a plan to support business and business education at schools and business skill were included to key competences of lifelong education.

Any measures and policy to support young people, either by the public sector, non-governmental organisations or entrepreneurial unions and associations in the Slovak Republic have been made without any relevant survey in the recent years. A demand for such survey has been confirmed also by adopting of the Draft action plan of the youth policy for years 2010 – 2011, which is based on the Key areas and action plan of the state policy to children and youth in the Slovak Republic for years 2008 – 2013 adopted by the Government of the Slovak Republic on 31 March 2010. That fact accentuates awareness of the importance of that aspect on the European as well as on the national level.

The survey of needs of young entrepreneurs in Slovakia and obstacles in their businesses was aimed at identifying basic issues of young entrepreneurs and subsequent analysis of barriers hindering development of young people’s business development in Slovakia.

Goals of the survey

The purpose of the survey was to uncover the perception and attitudes of young people to running business and analyse reasons of the situation, assess critical points at early stages of running business by means of a retrospective view, identify differences in attitudes to running business in various groups of respondents, analyse information sources, quality of information and efficiency of their providing and utilisation, assess perception of supporting programs and analyse awareness of them and identify proposals for change, completion and increase of availability of supporting programs in the field of direct and indirect support to young entrepreneurs.

Methodology and the survey sample

The survey had a quantitative and qualitative part and consisted of two units. The first one was aimed at existing young entrepreneurs and the second one on potential young entrepreneurs. The qualitative survey was carried out between June and August 2011 on a sample of 10 young entrepreneurs. The quantitative part was carried out in the form of an on-line questionnaire in the period from September to November 2011 with 1,232 respondents, out of whom 908 potential entrepreneurs and 324 entrepreneurs.

Conclusions and main findings of the survey

  • Awareness of supporting programs is, in general, very low. Young entrepreneurs do not know supporting programs of the National Agency for development of small and medium enterprises (56.79 % do not know microloan schemes; 69.14 % do not know that there is a possibility to utilise business or technological incubators or online consultancy on agency portal msponline.sk). more than 73 % of young entrepreneurs do not know SZRB schemes. Respondents showed the highest level of satisfaction with supporting contribution to self-employed people to start their businesses which was viewed as excellent or good by more than 27 % of respondents.
  • 73.77 % of respondents think that high quality mentoring is more important for young entrepreneurs than access to subsidized funds. When we look at particular segments, we can conclude that there were more women (84.48 %) than men (67.79 %) who agreed with that statement. The result further show that this statement was adhered to more by entrepreneurs with lower level of education (80 % of people with secondary school with school leaving examination vs. 67.5 % of entrepreneurs with university education). Support of the above statement declines with increased duration of running business.

By comparing answers of entrepreneurs and potential entrepreneurs, we can see that 74% members in the entrepreneurs group agreed with the statement that mentoring is more important than subsidized funds. In the group of young entrepreneurs, that answer was provided by 61 % of respondents, i.e. almost two-thirds.

  • The results imply that, from the viewpoint of motivation of young entrepreneurs to running business, positive motives dominate over negative ones. Respondents stated that the most common motives leading to running one’s own business were the will to become independent (58.64 %) and make one’s dream/idea come true (55.25 %). The above motives are followed by, with a big distance, by the so called negative motives, such as the fact that respondents did not find their jobs satisfying or they were making little money there (26.85% both). Running one’s own business was the only chance to find one’s way in the labour market for 18.52 % of respondents. This reason was more commonly mentioned by women than men (22.41% compared to 16.35 %).

In the segment of young people considering running their own businesses, as many as 56 % of respondents stated they wanted to run their own businesses in order to make their dream come true r to implement their business idea, 52 % because they wanted to become independent, one quarter were not satisfied with their jobs and one-fifth were not happy with their working hours.

  • More than one-quarter of respondents got into business without any assessment of their ideas. Results show that those entrepreneurs who had already experienced failure in their businesses prepare a business plan or its simplified version before starting new business more often (73.53 %) than „starting entrepreneurs” (63.52 %) or entrepreneurs who have only been successful in their businesses (61.40 %).
  • More than one half of respondents from among young entrepreneurs (53.70 %) stated that they had no subject dealing with running business at school. Those, who had such subject, stated that i) the subject encouraged them in deciding to start their own businesses in the future and ii) provided them with enough information about running business (both equally 16.67 %).
  • As many as 73.77 % of responding entrepreneurs stated they were starting with the initial capital of up to € 5,000; another group making up 20.68 % stated that they were starting their businesses with the capital of € 5,000 to € 15,000. That implies that around 19 out of 20 young entrepreneurs start their businesses with the capital smaller than € 15,000. The dominant source of the starting capital (62.96 %) are savings of entrepreneurs, followed by borrowings from family members or friends (21.30 %). The distribution of answers between genders was almost identical.
  • The survey has uncovered that almost 40% of entrepreneurs encountered the phenomenon of bad payers as early as in the first year of running business. In the group of entrepreneurs running their businesses for up to three years, the probability of encountering bad payers increased to 62 %, in the group of entrepreneurs running their businesses for up to six years it was almost 80 % and in the group of entrepreneurs running their businesses for seven and more years the probability reached the level of almost 88 %.

In the group of entrepreneurs running their businesses for less than 1 year, with threatened solvency, only 28% of respondents answered that they had such business plan at the start of the their business that would help them. In the group that did not have problems with secondary insolvency in the first year of running business, there were as many as 48 % of responses that declared they had had a business plan helping them in running their businesses.

  • Starting entrepreneurs most commonly collect information about running business from business portals (57.41 %), advices from other entrepreneurs (54.32 %) and friends (49.07 %). Addressed respondents stated that, at the beginning of their businesses, they most missed information concerning acquiring funds 54.01 %, followed by insufficient information about insurance payments and accounting 50.% and administrative obligations 48.15 %.

When surveying information sources utilised by potential entrepreneurs in the preparatory stage, we can conclude that men, more often than women, make use of advices from their friends, commercial trainings, professional literature and business portals. On the contrary, women more frequently use trainings held by labour offices or NARMSP. Respondents missed most information about possibilities of funding, inspirational business ideas, instructions to set up a particular business and advices from successful entrepreneurs.

  • More than ¾ of young entrepreneurs are interested in meeting experienced entrepreneurs. At the same time, it is true that the younger are the starting entrepreneurs, the stronger is their interest in such meetings.
  • More than 18 % of young entrepreneurs stated that the paperwork related to the business takes more than 4 business days a month and 20 % of entrepreneurs stated they spent 2-4 days of their business time on paperwork.
  • As many as 71 % of respondents from among potential entrepreneurs declared they missed starting capital to be able to make their living by running business. The second most common reason (41 %) was a good business plan and only 35 % think they miss necessary qualification and experience. Respondents with university education most commonly found themselves qualified but missing good business ideas.
  • As many as three-quarters (75 %) of respondents think that men and won have the same chances to get to good opportunities for starting business. One quarter disagreed with that statement. When examining the distribution of responses broken down to gender, women have rather more pessimistic replies to that question than men; the difference is as much as 14 %. Men thus more often think that there is equality of chances of men and women.
  • If young people decide to run their own businesses, most of the respondents (54 %) stated they would run business separately; a part that would accept partners is 46 %. Compared to young entrepreneurs it is possible to state that 28 % of young entrepreneurs are currently running businesses with partners.
  • Young people considering running business would like to cope with lack of capital by means of a loan from the bank (53 %) or they would look for an investor (44 %) and, on the third place, they would take a borrowing from their friends (30 %). Entrepreneurs could state more answers. When we compare replies to the same question – if there are enough possibilities for young businesspeople to get funds - by respondents from the other group, young entrepreneurs, a smaller part of them think there are (22 %), while 33 % (by 14 % more) think there are not. A relatively high proportion of young entrepreneurs (as many as 42 %) could not assess it. When we compare expectations of this group of respondents to the real situation of existing entrepreneurs, we can see that expectations of “potential entrepreneurs” are distant from the reality.
  • Potential entrepreneurs from among young people, when identifying obstacles in running business, most commonly mentioned lack of starting capital (77.64 %), insufficient experience, knowledge and professional contacts (71.70 %). Every respondent could mention several barriers in this section in the order based on the most common occurrence.

Recommendations of the survey

  • Intensify awareness of young people about such programs by means of supporting programs and reduce the paperwork related to supporting schemes.
  • Focus the supporting schemes aimed at easing funding of business projects on availability of capital of up € 15,000, i.e. functioning micro loan or assurance schemes.
  • Focus supporting young entrepreneurs on mentoring, where successful entrepreneurs hand over their experience with development and management of businesses.
  • Show young people positive business role models and inspirational business ideas.
  • Support creativity and courage of university students to take over their own destinies.
  • Support such manner of providing information that will combine advantages of collecting information on the Internet completed with the possibility to obtain personalised information based on the personal contact.
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