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Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances Whilst it appears that our sample is representative of the population of ethnic minority businesses, the small number of these businesses in the sample limits the analysis we can carry out for this group. In particular, our analysis is forced to lump all types of ethnic minority gr oups together, despite knowing that ethnic minority groups are highly diverse in their use of external finance and business support (Ram et al, 2002). Future work will seek to boost the number of ethnic minority businesses in the sample, allowing analysis by dif ferent ethnic m inority groups. Female businesses Regarding female majority owned businesses the survey finds that: • 25% of businesses are majority-owned by females (just over 900,000 businesses). • This figure falls to 15% among medium sized enterprises (50-249 employees) Comment SBS (2003) reports that 91% of businesses are majority owned by white individuals. SBS (2003) also reports that 38% of businesses have management teams consisting of 50% or more female managers. Our results suggest there are fewer female majority owned business than female majority managed businesses. Other business characteristics The following other business characteristics are noted (see also Table A2.2.1 in Appendix to Section 2) • The vast majority of SMEs export none of their sales abroad: only 8.5% export up to a half of their sales and the proportion exporting a half or more of their sales is less than 2% (against 4.2% reported in SBS, 2003). • Less than 1% of businesses are social enterprises i.e., businesses run for a mix of social and commercial objectives. Over 99% of businesses are operated on a solely for profit basis. • Regarding the origins of the businesses: 82% were established by the current owners; 12% were purchased; and 6% were inherited. • 60% of businesses are registered for VAT. The high proportion (40%), not VAT registered, reflects the large number of businesses falling below the VAT threshold of £58,000. • Over three-quarters of SMEs are majority owned by a single family (the proportion is the same considering companies only). Again this highlights the importance to SME owners of maintaining a tight-control over the running of their businesses. Black: Black Caribbean 0.6% Black African 0.4% Other Black 0.1% Chinese 0.8% Other 0.3% 39
Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances • 47% of SMEs are home based; this figure falls to 21% when businesses with no employees are excluded. • 36% of SMEs are a member of one or more business organizations (1.3 million businesses). • 59% of SMEs in this group are members of a trade association. 2.2 Principal owner characteristics he characteristics of the individual with the largest ownership share (principal wner) are reported in the Appendix to Section 2, Table A2.2.2. These results dicate that: • Females are the principal owners of about 18.5% of small businesses. 15 T o in • 79% of principal owners are aged between 40 and 65. • In addition, 61% of principal owners have more than 15 years business experience. • The role of formal academic qualifications is less clear cut. On the one hand, 29% of principal owners have no, or at most very basic (Olevels/GCSE), academic qualifications; on the other hand about 23% have a University degree. Comment ore likely to survive (and, hence, to be observed in the sample). 16 Regarding the age of principal owners, older and more experienced individuals tend to have accumulated more business know-how which makes their businesses m Also, it is likely that the wide variation in formal academic qualifications reflects the diversity of the types of business in the SME sector, and the wide-ranging skills required to run them. Summary comparisons with other UK and US data sources he following table provides a summary comparison of the business and owner haracteristics in SMEF with those in the: • United States Survey of Small Business Finances (last conducted in 1998: see Bitler et al, 2001) 17 T c • United Kingdom Annual Survey of Small Businesses (SBS, 2003) 15 The previous analysis of female businesses related to majority female ownership. Majority ownership is the basis for the analysis of female businesses in the remainder of this report. 16 Previous studies have highlighted the importance of experience for business survival (Cressy, 1996). 17 The latest US SSBF was conducted in 2004, but the data are not yet available to the public. 40
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