The Irresistible Rise of the Entrepreneur

Mid-November. Dark, cold, gloomy. You leave your house in the dark, you come home in the dark. It’s freezing, the fog hangs in the Vale of York – and only the brave travel from Pickering to Whitby without a clove of garlic and a silver bullet in the car…

November is by common consent the most depressing month of the year: which is why I am going to write one of my most upbeat blog posts, celebrating the irresistible – and very optimistic – rise of the British entrepreneur.

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It’s not just November: the bickering continues around the Brexit negotiations; the Bank of England have said inflation will remain high, placing more pressure on wages; we have a rudderless Government and an Opposition committed to turning us into Venezuela.

Despite all this, the optimism, endeavour and commitment of the British entrepreneur continue to shine through.

New research from the Hampshire Trust Bank and the Centre for Economics and Business Research (CEBR) has revealed that the number of small and medium sized enterprises (SMEs) in the UK has grown by almost a quarter over the last five years. The FSB now puts the number of private sector businesses at 5.5m.

Leading the way in the CEBR survey was the ‘office administration and business sector’ with the number of SMEs increasing by 76% between 2011 and 2016. Second place went to ‘human health services’ with a 50% rise.

The cynic might retort that this is not real growth; it is simply people becoming virtual assistants or personal trainers.

But it is Friday morning (at time of writing): the glass is not so much half full as running over. Every business has to start somewhere: Apple was once a college dropout building a computer in his garage. Virgin was once someone who left school at 16 selling records in a student magazine.

Small businesses are unquestionably good for the economy – they are innovative, they drive growth and they stimulate local economies. If Tesco want a shop fitting out they use a national firm: if it is the local florist, then there’s work for the local electrician, joiner, glazer and plumber.

Some interesting statistics also came out of HSBC’s second Essence of Enterprise report, which found British entrepreneurs looking to the future with confidence, on average expecting their businesses to grow by 62% over the next five years. Perhaps worryingly though, Britain is creating fewer technology start-ups than other countries – 17% compared to a global average of 24%. (And yet half of our schools still don’t offer a GCSE in Computer Science. Madness, Mrs May, madness…)

Perhaps the most interesting point to emerge from the HSBC report was on motivation. Today’s entrepreneurs are driven not solely by money (sometimes not even by money) but by a desire to have a positive impact on society – something which absolutely chimes with the philosophy of TAB, not just in this country but around the world.

What I find fantastic is that the entrepreneurial flame burns at both ends of the age spectrum. Over the last ten years the number of businesses run by the over 55s has risen by 63% – but that is eclipsed by the number of entrepreneurs past the theoretical retirement age. People over 65 now run 140% more businesses than they did ten years ago.

But if you want to be really encouraged, read this report on the festival of young entrepreneurs which has just taken place in London. It holds out so much hope for the future of the country – although with entrepreneurs as young as nine, it makes me feel positively old.

But someone who is even closer to a new hip (well, hopefully…) is Philip Hammond who, on Wednesday next week, will present the first Autumn Budget. He has a lot to do to build bridges with the small business community: many people are still angry at his ill-conceived raid on the self-employed in the last Budget.

So what do I want to see from the Budget? More than anything I want to see a Budget which shows the Government understands what it means to be an entrepreneur: that they understand the risks – both personal and financial – in setting up a small business. Entrepreneurs and SMEs are not a cash cow to be milked, they are a source of employment, innovation and growth. They are the future of the economy.

Let’s hope that the Chancellor recognises that – or he risks a lot of those very optimistic and ambitious young entrepreneurs deciding that Berlin, Lisbon or San Francisco might be a more attractive place to develop their business…

 

Big Brother? He’s Sitting on your Desk…

In the old days advertising was very simple. You developed a product and went along to Madison Avenue. You consulted Don Draper – he put his Lucky Strike and his secretary to one side for a few minutes and came up with a catchy slogan. The artwork was done and your ad targeted with laser precision. It went up on a billboard at the side of the interstate: everyone who drove past saw it. In theory…

Fast forward 57 years: last week Facebook announced soaring third quarter profits, bringing in more than $10bn in advertising revenue. Profits for the three months rose to £4.7bn (£3.5bn), which is up 80% on a year ago. Much of that revenue comes from small and medium sized businesses – exactly like ours – which make up the bulk of Facebook’s 6m active advertisers.

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Meanwhile Amazon boss Jeff Bezos once again leapfrogged Bill Gates to become the richest man in the world, as Amazon shares surged thanks to Q3 sales being 34% up on the same period last year. Sales were $43.7bn (£33.5bn) compared to $32.7bn in 2016. And if you are wondering how much $43.7bn is – it is equivalent to the economy of Slovenia.

Facebook now generates more advertising revenue than most major TV networks. So why do SMEs advertise in such huge numbers with the company? Why are the projections that ever more businesses will join them? And most importantly, what does the future look like?

In the early days you had a business page on Facebook. ‘No, no, we don’t need to advertise. We’ve a Facebook page.’ Sadly, Facebook business pages have pretty much gone the way of the penny-farthing. ‘Organic reach’ is dying out, with estimates suggesting that less than 1% of a business’s ‘fans’ actually see the updates the business posts.

But businesses still need to advertise – and the first thing that attracts them to Facebook is the sheer scale of the numbers. Facebook has 2.07bn active users – strip out 10% of that figure for duplicate accounts and you still have around a quarter of the world’s population.

More than 1.5bn people log into Facebook every month, with more than a billion now logging in every day. With people spending ever increasing amounts of time on social media – studies suggest that the average American now spends up to 2 hours a day on social networks – there is plenty of time for advertising to connect.

Secondly, advertising on Facebook is cheap – and scalable. You do not have to commit to a billboard or a TV slot. Businesses can set their own budget and ‘dip a toe in the water’ with a spend of £40-50 getting an advertising message in front of 5,000 to 10,000 people. After that, it is scalable: the ad doesn’t work? Scrap it. It does work? Spend more money and increase its reach.

But the real reason advertising on a platform like Facebook is so attractive is the very specific targeting. Businesses can target users with Facebook ads by location, demographics, age, gender, interests, behaviour and connections. Everyone in North Yorkshire between the ages of 25 and 35 interested in being an entrepreneur? No problem: how much would you like to spend?

It’s the same story with Amazon. Once a book store, Amazon is now arguably the world’s most trusted and effective search engine. Marketing technology company Kenshoo reported that 72% of people visit Amazon if they’re planning to buy something online. And why wouldn’t they? The Amazon search engine is fast, it’s accurate – and the product listings page has everything a shopper could want to know: price, descriptions, pictures and reviews.

But even if you don’t buy the product from Amazon, you’ve researched it – and Big Brother has quietly stored the information away, ready to make recommendations next time you drop by.

We all know the feeling of being ‘stalked online.’ You look at something – and seconds later ads for it are following you round the internet. The first time it happened to me (it was for work shirts, honestly) I found it quite unnerving: now it is an accepted part of being online – but it still leaves me feeling that Big Brother is watching me. That feeling is only going to increase – and if Amazon and Facebook ever merge then believing in privacy will be like believing that the Earth is flat.

So what does the future look like? As I wrote last week, ‘algorithms will do the heavy lifting.’ The buzzwords are ‘deep learning’ and ‘machine learning’ and the ‘machines’ are only going to go on learning. However good you think your insight is, it won’t be as good as the Amazon/Facebook algorithm. My desire for work shirts has been noted – and will never be forgotten.

Over the next ten years, advertising will move from communicating to predicting. Content and advertising will be so intertwined that we will not be able to tell which is which. As brands learn more and more about you, your emotional commitment to them will strengthen: a recent study by neuroscientist Paul Zak claimed that three out of eight people already love their favourite brand more than they love their spouse. (Checks to see if wife is reading over his shoulder…)

And advertisers will know exactly how much we like their brands because our pulses (via our smart watches) will tell them. And with that chilling thought I’ll leave you to enjoy the weekend. Just remember to take your watch off before you log on to Facebook…