The RENT conference started in Bodo (Norway) with a panelist discussion on entrepreneurship and more precisely on the role of entrepreneurship in the current crisis situation that the world is going through.

I don’t want to sum up the whole discussion. Rather I’d like to stress a few striking facts or figures mentioned by the speakers.

• Professor Sarah Carter mentioned that 6 sectors were identified in Scotland as promising for the future of the economy. Those 6 sectors are however under-represented and contribute only a tiny fraction (<1%) of GDP. Why is it that  so-called low-growth low-tech companies get so little attention?
• Out of 100 start-ups created, 4 of them contribute more than 50% of the jobs created
• Paul Westhead stressed the need to promote enterprise sustainability and survival, especially in low-tech sector. He suggested that policy makers offer customized support to the different types of entrepreneurs rather than providing one-size-fits-all support
• Paul Westhead (again) rightfully said that it’s easier to avoid a looser than pick up a winner.

My take:

I came back fully energized from this discussion. It’s great to finally listen to people who go against the general practices and suggest new ways of doing things. One aspect seems very important to me. So-called “Gazelles” (high-growth companies) do exist but the world is still mainly made of “normal” low-tech companies which also require a dedicated approach and support. My impression is that governments should recognize the need to help those companies and offer them a new kind of support.  What I’ve believed for years, and as suggested by Paul Westhead, is that entrepreneurs should be challenged by external advisors. I’m maybe preaching for my own but I do think that the major part of failures could be avoided if entrepreneurs had their business idea challenged and removed from the main pitfalls. All too often I see entrepreneurs of those low-tech sectors required to prepare business plans and the like before even thinking about whether their venture has a tiny chance for success. I see entrepreneurs unprepared and yet ready to register their company, unable to explain me why I should be buying from them, without real differentiation and sometimes with no idea of what the business looks like.

Unfortunately, as a reaction of a candidate entrepreneur revealed a few weeks go, not all entrepreneurs are willing to have their business idea challenged. It’s much more comfortable to live with dreams until those very dreams are challenged by the market itself.

Yvonne Slots and Loek Swelsen presented at the RENT XXV conference in Bodo, Norway, a piece of research on business transfers.

Their research was conducted in the region of Parkstad, The Netherlands, at the borders with Germany (Aachen) and Belgium. This region is characterized by an important number of closed businesses, so Yvonne Slots in her introduction. The two researchers at the Hogeschool Zuid studied in particular the bottlenecks in the transfer of soon-to-be-transfered businesses, owned by aging entrepreneurs. The importance of those businesses is crucial for the region as they represent 14000 jobs.

Slots and Swelsen found out several bottlenecks :

• valuation of the company
• finding a takeover candidate
• emotional aspects
• lack of knowhow by the potential takeover candidate
• fiscal problems
• difficulties towards funding

My take:

All in all two aspects really struck me. First of all Slots and Swelsen reported difficulties towards funding as an impediment. I really have a hard time understanding this. Banks are usually approached to fund new businesses and I understand that they might be risk averse when the business doesn’t exist yet and that the future can not be sketched on the basis of facts and figures. However, in the case of a takeover, evaluation the risks is much easier as a history of reliable figures is available. In this case, funding should actually not be a problem provided the business is profitable.

The second aspect regards the takeover candidate. Swelsen reported during the presentation that aging entrepreneurs “wake up” too late as fas as take over is concerned. The take over process needs to be taken care of well in advance and not preparing the take over sufficiently in advance may explain why finding a takeover candidate is so problematic.

Last but not least the discussion following the presentation involved Lex van Teeffelen. Lex is also a specialist of take over and discovered that in 50% of failed take overs, he had found valuable assets that had been neglected.

With the baby boom generation getting retired, thousands of existing businesses will be on the market for takeover. Yet few of them will be taken over. What a pity. Thousands of jobs-seekers will remain unemployed will opportunities are available.

The RENT conference, held this year in Bodo (Norway) opens up on the role of entrepreneurship in solving the European debt crisis. Who could actually doubt that entrepreneurship is part of the solution ?

During my latest weekly session at the Brussels Agency for Enterprises (BEA) I mentioned the record level of bankruptcies in Belgium. Since January 2008 the number of bankruptcies has increased by 35% as readers of this blog may have already read.

One of the candidates entrepreneurs objected that the increase number of bankruptcies was the consequence of a proportional increase of firms’ creations. I wanted to verify by myself and search the info on StatBel. To get the firms creation figure I summed up the figures of first VAT registrations, VAT renewals and relocation to Belgium. The two other figures available (relocation outside Belgium and business closure) were obviously negative figures that were not of interest.

Unfortunately the truth was slightly different from what the person at the BEA thought. Actually we reached in 2010 the level of 2007 back in terms of firms creation. The all-time low was reached in 2009 with 69665 units.

The number of bankruptcies get increasing over the 4-year span and started slowing down (but not decreasing) in 2009. However 2011 figures show that the increase rate is once again picking up.

My take:

At first sight it is not right to think that more bankruptcies are the consequences of more forms being created. If statistics were available for the years before 2006 we could research whether a postponed effect is visible since a bankruptcy logically happens x years after a firm was created. If we take a period of 3 years as a reference for the occurrence of 50% of the bankruptcies we may expect a decrease in 2011 (since creation of firms decreased from 2008 onwards). It is unfortunately not the case. It seems that records are about to be broken once again in 2011. 1165 firms went bankrupt in September 2011 which is an all-time high. There is something else happening out there.

The Brussels Center for Enterprises in Difficulties (CED) published early this year a report of its activities for 2010. It showed that more and more firms of more than 10 years are asking for help. Those firms were more or less absent in the previous years, which shows that they are suffering from the crisis too. The CED concluded that those firms were less flexible and that this lack of flexibility was among the reasons for the difficulties they were going through.

This is the question I asked myself when having a look at Olivier Laffut’s LinkedIn profile. The founder of the successful venture “Les Tartes de Françoise” (now striving for a market in New-York) is actually coming from the finance world which is seemingly unusual for someone in the fast food industry. I immediately made a parallel with Olivier Van Espen and Frédéric Duqué, the founders of Guapa, another entrepreneurial success of Belgium. Both came from sectors far away from the fast food industry and yet were able to drive formidable growth.
The knowledge corridor principle states that entrepreneurs recognize opportunities primarily in the field where they have been professionally active. This knowledge corridor (Ronstadt, 1988) principle is further divided by Shane (2000) into three entities (prior knowledge of markets, prior knowledge of ways to serve markets, prior knowledge of customers’ problems) which constitute competitive advantages for those who possess them.
If this pre-knowledge can seem to constitute a competitive advantage at first, it may also become a hurdle. The entrepreneurs may become blind to signals which do not confirm his/her knowledge of the market. I’ve seen numerous entrepreneurs believing they had found THE idea, starting their venture, and eventually failing because they felt to recognize (or accept) contradictory signals coming from the market. Humans are strange animals who don’t like to be contradicted.

My take:

An interesting assumption to test would be that, all others things being equal, entrepreneurs not suffering from the knowledge corridor have better chances to succeed. There are at least examples like Guapa and Les Tartes de Françoise which confirm that you can be highly successful even without prior knowledge of the market.