fbpx

Why is it so Difficult to Give Businesses Free Money?

10 June 2015

When ambitious, capable businesses improve and grow, the economy booms and the entire country benefits. The government wants to help with this so much that it is willing to give out free money – literally. Last time we checked the long list of government schemes to help businesses, there were 597! So why is it that not only are most businesses not aware of these free initiatives (a recent survey revealed that 81% of businesses in London had seldom or never sought support from gov.uk), the uptake itself has not been as high as expected?

In my view, there is a combination of reasons that have led to this anomaly.…

Realistically, the government is reluctant to give away free money to just anyone for fear of fraudsters taking advantage. To protect against this, a layer of bureaucracy has developed whereby middlemen stepped in to do the appropriate checks on the businesses and hand out the money on behalf of the government (keeping their cut, of course).

Unfortunately, but perhaps not unexpectedly, the public sector preoccupation with form-filling and box ticking seems to have permeated most of these private sector partners (the middlemen) involved, leaving business consultant and direct support providers in charge of spreading the word.

At the receiving end, are businesses that are focused on growth – which are the ones that the government would like to support. These are businesses that typically do not have time to waste jumping through bureaucratic hoops. They would rather spend that time and effort building their business.

A lot of the businesses that are naturally drawn to the governmental business support and end up participating in these programs are those who were focused on help rather than on hard work – clearly not the ideal profile the government would like to help.

Undoubtedly, most of those who have taken on support have reported being quite happy with the level of support and the results they have achieved and have reported increased levels of profitability.

However, the potential benefits that these programs could deliver is not truly being achieved and both parties – the government and businesses – continue to grow even warier at the relevance of the support. The government typically responds by cuts to business support (as most Councils have been seeing over the last few years), restructuring previous programmes Business Growth Service.

Equally, businesses have grown sceptical of the combination of time-wasting bureaucrats and business support agents who they feel are continually trying to sell them something.

This vicious cycle effectively results in the ‘free money’ that was on offer often remaining in government coffers and never reaching the intended recipients.

In the end, the top down approach of handing out money to businesses to help them grow needs to be replaced with a bottom up approach driven by businesses and their owners recognising the value of external support to their business. There needs to be a more dedicated and sustained effort at education around what businesses don’t even know that they don’t know.

Government programs now are designed to not only help with accessing finance, but also to fill skill gaps in management teams, assist with exporting plans, encourage and develop new ideas for businesses, provide expertise and help streamlining manufacturing processes, and help provide access to a wide network of peers.

If a business seeks out a business consultant/ support professional they trust, this naturally cuts the suspicion of the middleman. It also means that the government is not simply tossing money about, but is indeed investing in skills and strategies for business – a far more effective way of boosting growth.

The focus therefore needs to shift to a process of education around benefits rather than a play on some extra money available. There is now sufficient evidence across the world that business consulting and other forms of business support result in increased productivity and profitability while delivering a return on investment.

However, the proportion of people seeking external help (from any source) still remains extremely low. The proportion of businesses failing remains as high as ever (60% businesses failed in London in their first 2 years). Even among those that survived, whether they could do better with external support remains the question.

If you would like to see if you are eligible to participate in the Business Growth Service, click here to find out

If you would like to discuss any of the points covered here, please feel free to request a free call below.

Request a Free Call

We are looking to invest in good businesses.

If you would like to have an obligation free discussion about selling your business, please email shweta@growthidea.co.uk. You can find more about our investment criterion on https://growthidea.co.uk/private-equity.

There are no comments yet.

Leave a comment:

Close