It's A Small World
No one ever said running a small business was easy — especially in europe. Regulatory headaches, difficult access to capital and a hodgepodge of privatization policies make the hard job of running a business even harder. Little wonder that more than half of small-business start-ups fail within five years. And yet Europe depends more and more on the bold entrepreneur. Across the region, over half the 120 million private-sector jobs are in small businesses (with fewer than 50 employees). As Europe's industrial giants move jobs to low-wage locales in developing countries, small and medium enterprises (SMES) are the engine of new job growth, accounting for about two-thirds of all new jobs created.
What's it like running a small business in a Europe struggling to emerge from recession? To find out — and explore what might be done to lighten their load — time visited four businesses in four different countries. Some are thriving, some are on the verge of giving up, but all have shown themselves to be willing to sacrifice and innovate to keep their vision intact and their businesses alive.
UNITED KINGDOM: RED TAPE
Mary Gallagher puts her hands on her hips and casts a practiced eye around Athenaeum House, the residential-care home for the elderly she runs in North London with her husband, Patrick. But before she can join her staff in feeding and tending to residents, she must tackle mounds of paperwork — a task that takes up about a quarter of her time. "What elderly people need is time spent with them," she sighs, picking up a folder thick with documents. "Paper doesn't look after people."
Government regulations mandate that Gallagher must assess the performance of each staff member six times a year, and review the care plans of each of her residents once a month. She must pay out certain benefits, like tax credit or maternity pay, to employees on behalf of the government. As much as Gallagher would like to free up time, to hire someone to take on the paperwork would cost her about €22,300 annually — more than she can afford.
And she's hardly alone. There are about 24,000 care homes for the elderly in England and Scotland. Over each of the past five years, says the National Care Homes Association, about 800-900 homes have closed.
And here's the disturbing part: small business owners in the U.K. arguably enjoy the most favorable climate of any in Europe. The U.K.'s Department of Trade and Industry claims the nation is among Europe's fastest and cheapest places to start a business. Setting up a limited company in the U.K., says the DTI, takes one week and costs €28, compared with an E.U. average of 25 days and €883. Earlier this year, a World Bank survey named Britain among the 10 least-regulated business nations. Yet talk to a British small-business person and you'll get an earful — largely about red tape. A recent Small Business Service Omnibus survey revealed that 10% of British small businesses feel they are so choked by regulation and taxes that their very existence is threatened.
Sure, low interest rates and stable inflation have given small businesses a favorable environment. And the Federation of Small Businesses (FSB), which draws its membership from Britain's 3.8 million SMES, commends governmental and other programs that offer access to capital. But since the Labour Party came to power in 1997, says the FSB, red tape and administration costs have increased 17%. And part of the struggle Gallagher faces comes from being dependent on the government. U.K. government authorities fund about 70% of the patients who occupy the nation's 350,000 beds for the elderly, and uses its clout to drive down prices and regulate caregivers. It's not as if regulators aren't trying to address the amount of paperwork. The DTI says that a flat-rate vat scheme, introduced last year, has cut red tape for 700,000 small businesses. It also notes that before any regulations are introduced, studies are done to assess the effect they might have on small business. But others remain unconvinced. "There is this emphasis on a paper trail," says a spokesman for the FSB. "But a tick in the box doesn't mean the business is any better."
Still, Gallagher remains positive. As she moves through Athenaeum House, she has a warm rapport with her residents — bending at the bedside of one and asking about the family of another. "When you're looking after people like this," she says, "you're involved in every aspect of their lives."
FRANCE: INFLEXIBLE FRIENDS
Never mind the slumping economy, or the difficulty of running a business in this land of red tape. French plastics manufacturer Appli'Plast defied conventional wisdom last week. The Normandy-based company finalized the purchase of a new factory site, which will more than quadruple Appli'Plast's capacity — and perhaps even its workforce. "Hiring more people is also part of the general plan," says Appli'Plast owner Eric Lenoir. "But that will only come if we can continue growing. With an average of one company going out of business per day in this region, you should never be too confident."
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