« november 2008 « factors of business success in portugal « paula.bordelo@ine.pt...

«

November 2008

«

Factors of Business Success in Portugal«

paula.bordelo@ine.pt

ana.chumbau@ine.pt

« Background

The Survey

Main Results

Suggestions

«

«

Summary

1

Why? FOBS survey arose from the need to deepen the knowledge of the entrepreneurs and their businesses

Goals: Have an insight into the factors that determine the success and growth of newly born enterprises

How?

Looking into

Motivations for starting up one’s own business

Barriers and risks encountered during the first years of existence

Current situation of the enterprise

Business plans for future development

«

Background

2

January 2005: Task Force “Factors of Business Success”, coordinated by Eurostat

Mission: Design the questionnaire and define the project’s methodology

February - March 2005: Feasibility study to test the methodology and the questionnaire (cohort of 100 enterprises in PT).

October 2005 – March 2006: Final survey

15 participant countries: Bulgaria (BG), Czech Republic (CZ), Denmark (DK), Estonia (EE), France (FR), Italy (IT), Latvia (LV), Lithuania (LT), Luxembourg (LU), Austria (AT), Portugal (PT), Romania (RO), Slovenia (SI), Slovakia (SK) and Switzerland (SE). «

Background

3

Target Population

Enterprises newly born in 2002 that survived in 2005 (according to Business Demography definitions)

Sections C to K, excluding class 74.15 of NACE Rev.1.1

14 069 enterprises

«

The Survey «

4

Sample

Stratified random sampling, broken-down by 9 economic activity classes and 3 employee size classes

2 688 enterprises

Response Rate: 70% Response Rate: 70%

Survey participationSurvey participation: Mandatory : Mandatory

Survey typeSurvey type: Mail : Mail

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«

5

Questionnaire Structure

Section A – Identification of the Original Entrepreneurs

Section B – Conditions of the enterprise at start-up and profile of the Original Entrepreneurs

Section C – The enterprises’ present situation

Section D – Future plans

The Survey

I – Profile of the Original Entrepreneurs

II – Conditions for Enterprises Start-up

III – Main Difficulties

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«

6

Main Results

«

I – Profile of the original entrepreneurs «

85.8% were men, 55.7% had 40 years and over and 51.2% had the primary and lower secondary education

7

14,2%

85,8%

Females Males

55,7%

32,8%

11,5%

40 years and over Between 30 and 39 years Less than 30 years

51,2%

26,4%

6,7%

15,7%

0%

20%

40%

60%

1Primary and lower secondary education Upper secondary education

Post-secondary non-tertiary Tertiary education

«

«

8

The three age groups are dominated by men, representing each one more than 75.0%

I – Profile of the original entrepreneurs

22.0%15.4% 11.9%

78.0%84.6% 88.1%

0%

20%

40%

60%

80%

100%

Less than 30 years Between 30 and 39 years 40 years and over

Females Males

«

«

9

83.8% had previous work experience in the activity branch of the start-up enterprise

I – Profile of the original entrepreneurs

60.0% had no previous experience in running an enterprise

60.0%

29.4%

10.5%

No experience Yes, once Yes, more than once

83.8%

16.2%

Yes No

«

«

47.5% considered “Making more money” the most important start-up motivation

10

I – Profile of the original entrepreneurs

8.2%

13.0%

18.1%

18.8%

19.1%

19.4%

28.2%

32.7%

44.6%

47.5%

17.8%

20.8%

20.6%

38.9%

24.3%

28.3%

30.8%

32.5%

30.9%

36.5%

91.3%

83.6%

78.8%

74.0%

66.1%

61.3%

42.3%

56.5%

52.3%

41.0%

34.8%

24.4%

16.0%

5.4%

2.1%

4.5%

15.8%

6.6%

11.9%

0% 20% 40% 60% 80% 100%

Work as subcont. for former employer

Living from hobby

Age of children

Reach international market

Family tradition

Satisfaction in work

Combining work & private life

Sole possibility to carry out profession

New service/product idea

Avoid unemployment

Being one's boss

Seeking a new challenge

Making more money

Very important Some importance Not important/Do not know

«

«

11

Among the Top 4 start-up motivations:

“Seeking a new challenge” ranked as very important for upper education levels

“Making more money” ranked as very important only for Primary and lower secondary education level

I – Profile of the original entrepreneurs

69.7%

68.4%

63.6%

54.8%

68.9%

60.3%

47.4%

73.3%

71.0%

57.8%

52.2%

59.7%

65.9%

69.7%

47.1%

47.8%

42.2%

26.7%

29.0%

45.2%

36.4%

31.6%

30.3%

52.9%

40.3%

34.1%

30.3%

63.1%

52.6%

39.7%

31.1%

0% 20% 40% 60% 80%

New service/product idea

Being one's boss

Making more money

Seeking a new challenge

Avoid unemployment

Being one's boss

Making more money

Seeking a new challenge

Avoid unemployment

Being one's boss

Making more money

Seeking a new challenge

Avoid unemployment

Being one's boss

Seeking a new challenge

Making more money

Ter

tiary

edu

catio

nP

ost-

seco

ndar

yno

n-te

rtia

ry

Upp

er s

econ

dary

educ

atio

n

Prim

ary

and

low

erse

cond

ary

educ

atio

n

«

«

12

61.5% of women “Worked as an employee” before start-up comparing with 49.0% of men

43.9% of men “Ran another enterprise” before start-up while only 22.0% of women

61,5%

49,0%

22,0%

43,9%

1,9% 1,7%

10,3%3,9%4,4%

1,5%0%

20%

40%

60%

80%

Females Males

Worked as an employeeRan another enterpriseWere a studentWere unemployed and available to the labour market Had no gainful activity and were not available to the labour market

I – Profile of the original entrepreneurs

“Worked as an employee” before start-up was dominant in both genders

«

«

13

Entrepreneurs up to 39 years mostly “Worked as an employee” before the start-up (69.2% and 55.2%)

“Ran another enterprise” before the start-up was the dominant situation in the group “40 years and over” (49.4%)

69,2%

55,2%

44,3%

9,2%

1,4% 0,5%5,4% 7,0%

3,4%1,2% 1,2% 2,4%

35,2%

49,4%

14,9%

0%

20%

40%

60%

80%

Less than 30 anos Between 30 and 39 years 40 years and over

Worked as an employeeRan another enterpriseWere a studentWere unemployed and available to the labour market Had no gainful activity and were not available to the labour market

I – Profile of the original entrepreneurs

Inverse relationship between “Worked as an employee” and age and direct relationship between experience in “Ran another enterprise” and age

«

«

14

0,3%

0,5%

7,0%

9,9%

15,5%

17,5%

17,6%

31,7%

0% 10% 20% 30% 40%

C - M ining and quarrying

J - Financial intermediation

H - Hotels and restaurants

I - Transport, storage andcommunication

D - Industry

F - Construction

K - Real estate, renting andbusiness activities (not 74.15)

G - Wholesale and retail trade

31.7% start-up an enterprise in “Wholesale and retail trade” sector

Around 66% of newly born enterprises were concentrated in Services activities (NACE sections G, H, I, K)

I – Profile of the original entrepreneurs

«

«

15

3,3%

0,2%

1,3%

87,2%

16,1%

12,9%

10,0%

0% 20% 40% 60% 80% 100%

Venture capital

Capital contribution fromother enterprises

Financial support from publicauthorities

Bank loan without collateral

Financial assistance fromfamily/friends

Bank loan with collateral

Using own funds/savings

87.2% used “Own funds/savings” to finance the enterprise start-up

II – Conditions for enterprises start-up

«

«

16

46.8% received advices for start-up mainly from “Family and friends”

97,8%

95,3%

95,0%

94,9%

88,0%

85,6%

80,9%

4,7%

5,1%

14,4%

12,0%

19,1%

43,1%

46,8%

5,0%

2,2%

0% 20% 40% 60%

Unemploymentadministration

Financial institution

Organisations specialising inbusiness start-ups

Training course forentrepreneurs

Didn't need advices

P rofessional consultants

Didn't have any relevantadvice

P rofessional acquaintances

Family and friends

II – Conditions for enterprises start-up

«

«

17

69.0% didn’t receive/take any special training targeted at helping the enterprise start-up

27,1%

3,9%

69,0%

Training on own initiative

Training upon request of public authorities

Didn't take training

II – Conditions for enterprises start-up

«

«

18

72.1% didn’t have cooperation with other enterprises or considered this issue not relevant

10,4%15,6%

72,1%

0,1%

1,7%

Cooperation with other enterprises in a network

Subcontractor to a larger enterpriseFranchisee or a licensee

Participation in a joint ventureNone/Not relevant

II – Conditions for enterprises start-up

«

«

19

In 2004, 2 years after the start-up, the average size of the newly born enterprises was 5.5 persons employed

II – Conditions for enterprises start-up

Primary and lower secondary education

Upper secondary education

Post-secondary non-tertiary

Tertiary education

[0 - 2] persons employed 31,8 35,3 30,2 32,8

[3 - 5] persons employed 37,0 34,2 35,9 36,7

6+ persons employed 31,2 30,5 33,9 30,5

Average 5,3 5,3 6,1 6,6

Median 4,0 4,0 4,0 4,0

Mode 2,0 2,0 2,0 2,0

Main Descriptive statistics of the original entrepreneur

Employed size classes

Localization measures

Frequencies distribution of start-up enterprises (%)

Number of persons employed

«

«

20

60.6% sold their goods/services to the “Local/Regional market”

9,9%

45,8%

60,6%

1,8%

0% 20% 40% 60% 80%

Outside EU

Within EU

National market

Local/regional market

II – Conditions for enterprises start-up

«

«

21

34.8% considered “Administrative issues” the most important start-up difficulty

III – Main difficulties

4,9%

7,7%

8,4%

11,8%

14,2%

18,1%

18,4%

23,3%

27,5%

32,3%

33,6%

34,8%

9,7%

23,0%

27,7%

19,7%

39,4%

26,1%

30,9%

34,5%

29,5%

28,0%

27,5%

34,3%

85,4%

69,3%

64,0%

68,5%

46,4%

55,7%

50,7%

42,2%

43,0%

39,7%

38,9%

31,0%

0% 20% 40% 60% 80% 100%

None/not relevant

Alone as entrepreneur

Findind suppliers

Backing from family

P ricing goods/services

Finding suitable premises

Information technology

Contacts with costumers

Get financing

Outstanding invoices

Suitable personnel

Administrative issues

Very important Some importance Not important/Do not know

«

«

22

Among the Top 4 start-up difficulties:

“Administrative issues” was the most important difficulty for entrepreneurs with no experience

Get “Suitable personnel” was the most important difficulty for entrepreneurs with more than one experience in running enterprises

III – Main difficulties

24,1%

25,7%

34,3%

37,5%

29,5%

31,8%

34,3%

34,7%

36,4%

35,0%

30,8%

25,9%

0% 10% 20% 30% 40%

Outstanding invoices

Get financing

Administrative issues

Suitable personnel

Contacts with costumers

Suitable personnel

Administrative issues

Outstanding invoices

Get financing

Outstanding invoices

Suitable personnel

Administrative issues

Yes

, mor

e th

an o

nce

Yes

, onc

eN

o

Pre

viou

s ex

perie

nce

in s

tarti

ng u

p an

ent

erpr

ise

«

«

23

75.4% considered “Competition too vigorous” the most important factor as impediment to selling their products or services

10.2%

22.5%

23.3%

75.4%

26.7%

41.4%

50.5%

16.9%

63.1%

36.1%

26.2%

7.7%

0% 20% 40% 60% 80% 100%

Absence of marketing skills

Dificulties in pricing the products/services

Little demand for products/services offered

Competition too vigorous

Very important Some importance Not important/Do not know

III – Main difficulties

«

«

24

55.3% considered “Profitability” the most important factor as impediment for developing their business activity

14.9%

15.1%

21.4%

24.0%

29.3%

32.5%

42.3%

50.3%

55.3%

34.4%

32.4%

34.5%

40.4%

36.8%

34.2%

36.3%

24.1%

31.0%

87.6%

59.4%

50.6%

52.6%

44.1%

35.6%

33.9%

33.3%

21.4%

25.6%

13.6%

14.6%

2.7%

26.0%

9.7%

0% 20% 40% 60% 80% 100%

Finding partners

Availability of risk capital

Availability of managerial competences

Combining family and work

Availability of short term credit

Availability of bank loans

Regulatory and administrative burden

Availability of qualified personnel

Staff costs

Non or late paying costs

Profitability

Very important Some importance Not important/Do not know

III – Main difficulties

«

«

25

Suggestions

Some remarks on the Questionnaire:

Question: “Have you started an enterprise before?”

For reflection: Would be important to know the activity situation of these enterprises?

Are they still active?

Are they bankrupted?

Were they involved in a demographic event such as a merger or a split-off ?

«

«

26

Question: “Did you receive or take any special training that was targeted at helping you start your enterprise?”

For reflection: Question too limited? Specially for entrepreneurs who had started an enterprise before?

Why not replace or complement it by asking if they did receive training in subjects relating with Enterprises Management (marketing and sales, financial management, accounting, human resources, etc.)?

Suggestions

«

«

27

Question: “Do you consider your enterprise to be innovative with respect to any of the following categories?” Yes/No

a) A new good or service introduced to the market (product innovation)

b) A new production process or method (process innovation)

c) A new organization of management (organizational innovation)

d) A new way of selling your goods or services (marketing innovation)

51,2%

28,0%26,4%

42,0%

6,7%11,0%

15,7%20,0%

0%

20%

40%

60%

Portugal European Union

Primary and lower secondary education Upper secondary education

Post-secondary non-tertiary Tertiary education

For reflection: Question too subjective? Is the entrepreneur’s educational background determinant in their evaluation?

Why not focus on the characteristics of the new product, process…? Example: Is the product new in the market? Has competitors in the domestic market?

Suggestions

«

Thank you Thank you for your for your

attention!attention!