CIC Regulator Sara Burgess explains a key regulatory change due for introduction in October 2014 that will come as welcome news to good causes, Community Interest Companies (CICs) and their investors.
In 2015, the Community Interest Company (CIC) model will be ten years old. It has proved to be one of the fastest-growing structures in many years, in spite of some early reservations, hesitation and fears.
CICs have slotted very successfully into the mix of options for meeting social need and delivering social purpose. They have weathered the economic crash and the numbers continue to increase. By the time we get to the 10th anniversary in June next year, there will be well over 10,000 CICs across the UK and we are likely to see more growth following some key recent initiatives.
CICs limited by shares have always been able to distribute some of their profits in share dividends to private investors. Over the years it has become evident that the regulations around this created barriers to setting up a CIC limited by shares and to investment into them. We made some changes in 2010, but when we consulted on it again in 2013 it was clear there was more to do.
In October 2014, the regulations will change to remove the 20% cap on share dividends and as a result of this remove the peg to the paid-up value of the share, which amongst other things was making CIC shares of little interest to investors.
CIC shares will have greater value, but CICs will still only be able to distribute 35% of post-tax profit in dividends, everything else is kept in the company. The more profit the company makes, the more it can pay in dividends (within the 35% distribution cap).
If a CIC has sufficiently more profit to pay its shareholders, it is making sufficiently more profit to put back into the purpose of the company, to meet its community interest. If the CIC is paying millions in share dividends, imagine how much it will be putting back into its community interest! Shareholders will get a return on their investment and see a return on the social impact of the company. Once it is set up, the CIC will always be a CIC, unless it winds up so it won't be taken over by shareholders who want to take all of the profit.
Recently there has been a surge in the number of graduates choosing to work for themselves as soon as they leave university. Rather than becoming employees they are choosing self-employment. Armed with their entrepreneurial skills they are turning their talents and passions into businesses, the most popular of which being website design and mobile app development.
It seems graduates are plagued by gloomy thoughts of leaving higher education to compete for the restricted number of jobs available. The latest graduate unemployment figures from the Office for National Statistics showed that around 9% of recent graduates were out of work, while a significant 47% were forced to take ‘non-graduate’ jobs after leaving university.
So, with this in mind it’s no wonder start-ups are on the increase, after all, who wants to job hunt when you can be your own boss so easily, especially with advancements in mobile and online technology, which allows you to start and run businesses from anywhere.
Small-business owners can now tap into a global marketplace of highly skilled freelancers and run a flexible workforce, with flexibility to hire more staff on a temporary or one-off project basis without the overheads or office space requirements that come with taking on employees.
With that in mind there really has never been a better time to start a business, and it seems Britain’s young graduates are doing just that with the number of recent graduates registering as freelancers or micro-business owners increasing by 97% in the last twelve months. The number of male graduate entrepreneurs was up 110% and female graduates up 94%.
Considering the average cost to start a business from scratch is £632*, for a graduate leaving university with little or no start-up funds, the prospect of going it alone doesn’t feel as daunting as the days when you had to ask your local bank manager for a business loan. With low start-up costs and armed with all of the tools to get a business off the ground, the graduate entrepreneur is here to stay.
* Statistic from a recent survey of 1,000 start-ups by PeoplePerHour
Blog supplied by Xenios Thrasyvoulou, founder and CEO at PeoplePerHour (@PeoplePerHour)
I understand all too well the trials and tribulations of setting up a new business, which is why I agreed to become an ambassador for Britain’s Top Real Role Model 2014. The annual competition, launched by direct selling company Amway UK and now in its fourth year, is dedicated to encouraging new talent amongst the nation’s entrepreneurs.
Amway UK has already handed a total of £20,000 in funding to entrepreneurs for the business ventures they presented, but we now need a new wave of creative bravery in business to generate success and employment opportunities.
Recent research carried out by Amway UK suggests that more than two-thirds of us would prefer a female boss to a male one, with the stereotypically female attributes such as compassion, trust and loyalty coming out on top. These ‘softer’ attributes were favoured over more traditional ones such as courage, confidence and strong leadership.
I think this is a very interesting shift in attitudes. I feel that female bosses tend to have a slightly more ‘3-D approach’ to business and see the whole picture. They also tend to care more about their employees, which helps get the best out of people. You don’t have to scatter people out of your way to be successful.
Starting up your own business and backing your ideas can be very lonely and takes a lot of courage so it is crucial that we support fledgling companies. I can’t wait to see the finalists’ ideas and share their enthusiasm and energy. I have been fortunate enough to have people around me to encourage and share my dreams.
I ran Twenty8twelve with my sister Sienna for seven years, in what is a notoriously fickle and unforgiving industry. You need a bit of steel to go with the creativity, but it is important to be a good boss, as well as a good designer. Having Sienna in the business was an amazing help because of the profile she has. We made a good team, because she has incredible style and she forced me to take risks.
My current label, Savannah, is about finding out what my customer wants and meeting her needs. I’ve kept true to my mantra of providing style at an affordable price point.
I am a driven person because I love what I do, but I have space for other people and I don’t think you can run a business without understanding what makes your staff tick as human beings. I was brought up to believe that if you wanted something, you had to work for it.
So, my advice to would-be entrepreneurs is to roll your sleeves up, be prepared to start at the bottom, but once you have employees, let your softer attributes come to the fore – trust and loyalty can go a long way.
The recent publication of A Portrait of Modern Britain had some commentators questioning the motivation of its publishers – right-wing think tank Policy Exchange, which was founded by current Tory ministers Michael Gove, Nick Boles and Francis Maude.
Policy Exchange called for all political parties to better understand and recognise the “clear and striking differences” between ethnic minorities and stop “lumping them together” or risk appealing to none.
One of the study’s headline claims was that the five largest “distinct Black and Minority Ethnic (BME) communities” (ie Indians, Pakistanis, Bangladeshis, Black Africans and Black Caribbeans) will double in size from 14% of the UK population (eight million people) to 20-30% by 2050.
According to A Portrait of Modern Britain: “Ethnic minority businesses [ie where at least half the management team is from an ethnic minority group – about 7% of UK SMEs] are already highly successful and contribute £25bn to the UK economy. There are higher aspirations to start-up amongst ethnic minority groups, especially Black African (35%) and Black Caribbean (18%) groups (compared with 10% for White British), but ‘conversion’ remains very low.”
So what do we know about UK BME businesses? According to Black Women Mean Business:
So, why is the UK BME start-up rate so low? Last year, The Ethnic Minority Businesses and Access to Finance report, which was commissioned by Deputy Prime Minister Nick Clegg, concluded that “although the banking industry was working hard to ensure ethnic minority businesses have access to finance, there is more to be done to help under-represented groups”.
Clegg said that while there was no evidence that the challenges ethnic minority businesses face are due to racial discrimination, they still encounter problems accessing loans. “We know that 35% of individuals from Black African origin say they want to start a business, but only 6% actually do. Are they having problems accessing loans?” questioned Clegg. His friend, the Prime Minister, certainly seems to think so. Or at least he did in 2010 when he said black entrepreneurs were “four-times more likely to be denied a bank loan than white entrepreneurs”.
Race equality think tank Runnymede Trust welcomed the government’s review of access to finance for BME entrepreneurs and the UK banks agreeing to fund independent research into the experiences of BME businesses when seeking finance.
Dr Omar Khan, Runnymede Trust Head of Policy Research, commented: “Black and Asian businesses have long felt that they’re not treated fairly by lenders. We hope that government also engages in further initiatives to better understand why racial inequalities persist, not only to improve the lives of ethnic minorities, but also to grow the UK economy.”
Writing for The Voice in October last year, in an article called Want To Beat Racism? Start A Business, journalist Nels Abbey pondered possible reasons why more black people in the UK aren’t starting up. “In each of the home countries that black Britain’s lineage comes from, entrepreneurship is the norm,” he observed. “[Yet] for some strange reason, when black people arrive on these shores we seem to lose that entrepreneurial zeal and ingenuity. Not all of us. Just most of us.”
He puts this down to (perhaps) “a lack of confidence in our abilities in the face of more established business people”, as well as “actual and perceived racism maybe” and the “legacy of colonial structures”. Other possible reasons were “lack of resources, red tape, comfort, laziness even. Or maybe just a desire not to challenge the social order”.
Abbey concluded: “A single successful black business is worth more than any number of anti-racism demonstrations. A successful and respected business is a symbol of power and self-determination. You have to respect it, regardless of who runs it. Everyone loves a winner, no matter their colour.”
Blog written by Mark Williams, editor of the Start Up Donut.
Small businesses have many advantages and great opportunities to stand out from the crowd. Free from the shackles of over-administration and red tape you can adapt your processes quickly and easily so are well placed to deliver outstanding service.
It may be surprising then that according to a survey by Oracle only 29% of the UK’s small businesses believe that customer service is a key differentiator in today’s competitive marketplaces as compared to 88% in Spain and 77% in Italy.
With research elsewhere showing that 81% of customers would be willing to pay more in order to receive superior customer service, we need to go that extra mile to make sure we are giving it to them. So if we know that service is key, how do we deliver it? Here are just a few brief tips:
Blog by Stephanie Vaughan Jones, Channel Manager at Penelope, the virtual phone system from Moneypenny for start up and emerging businesses. Stephanie is presenting on this subject at ‘Get Growing’, The Great British Business Roadshow. For information or to book a place at any of this year's events visit: www.britishbusinessroadshow.co.uk
I like to think that I am an ethical consumer. Wherever possible I shop locally (on foot or by public transport too), I purchase Fairtrade goods and my mortgage and savings are with an ethical bank. And I am not alone. Research has shown that demand for ethical goods and services grew 12% during the recent economic crisis against mainstream growth of just 0.2%.
The recent furore surrounding the tax shenanigans of high profile businesses and celebrities only serves to back this up with widespread condemnation and boycotts by consumers and commentators alike.
So, as a member of the Donut team and a supporter off all things small business, this AAT infographic got me thinking. It shows how few small and microbusinesses incorporate ethical thinking into their business strategy. As well as the bigger moral picture, companies are also potentially missing a trick by not attracting employees and customers who really care about ethical practices.