In January 2011 David Cameron announced an ambitious plan to support the establishment of up to 40,000 new enterprises through the New Enterprise Allowance (NEA).
Under the new scheme people will continue to receive a weekly allowance for up to six months while they set up their enterprise. They will also have access to a low-cost loan of up to £1,000 and are provided with mentoring. The NEA has been generally well received, though there were concerns about how it would be implemented and whether it would actually achieve the desired outcomes.
I met with Chris Grayling, Minister of State in the Department of Work and Pensions (DWP). He explained that the NEA was the result of their manifesto promises to get Britain working by helping more people become self-employed, especially those on unemployment benefit.
This is part of the government’s Big Society initiative, to encourage successful business people to volunteer their time and share their expertise to help the next generation of entrepreneurs. The key challenges of the NEA were first in finding these mentors, and then managing the process without becoming bogged down in red tape and expensive process.
The DWP devised a very simple pilot programme rather than just farm out the work the NEA to the usual suspects traditionally selected to deliver government services. A short application process was announced, requesting a ten-page pitch within a few days for a trailblazer in Merseyside worth around £100,000. The winner was a consortium of seven local chambers of commerce.
Kath Boullen is chief executive of St Helens Chamber, a thriving hub of enterprise providing support to its members with expert advice, business information, serviced offices and networking events. The chamber also provides other very valuable local services, including working with children excluded from school.
Boullen and her team approached their members for potential mentors and provided a two-hour briefing. This explained they would be expected to provide their mentoring for free, inspired by the model operated very successfully by The Princes Trust.
So instead of the usual monolithic service providers delivering yet another moderately successful government initiative inefficiently and at huge cost, the NEA works through local volunteers providing simple advice because they want to help others, rather than for financial gain.
Early indications are that the trailblazer is working much better than expected. Boullen explained that only around seven per cent of those referred by Jobcentre Plus fail to attend the first meeting, a dropout rate less than a commercial seminar.
Of those who have attended, over 80 per cent were deemed to have an idea worth pursuing. This judgement is based on whether the mentor feels inspired enough to continue helping the budding entrepreneur, rather than weighing the number of forms they have filled in or counting the number of spreadsheets in a business plan.
The NEA will be extended to 17 more districts in the next three months and will be available nationwide in August. It is still early days for the programme, but several new businesses are already up and running, and over 300 more are in the pipeline.
In June, the DWP will launch The Work Programme, billed as a results-based initiative aiming to help 2.4 million people get back to work. Some familiar names are in the list of successful bidders and my hope is that they will continue to make the provision of free mentoring a cornerstone of their delivery.
The first rewards for a successful entrepreneur include financial security and an improved quality of life. Later, there is an added and often unexpected bonus: the opportunity to continue their own learning by themselves becoming unpaid mentors.
Originally published in The Financial Times. Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker.