A storm gathers over the new SME dawn

Mon, Mar 5, 2012, 00:00

The proposed dissolution of the state’s enterprise boards this year is causing concern in the the SME community. Savings will be made, but so much more could be be lost if the Government gets the transition wrong, writes OLIVE KEOGH

IT’S BUSINESS AS usual at the City and County Enterprise Boards. The detail of how they are to be dissolved under the Government’s Action Plan for Jobs initiative is still awaited and it will require legislation to put the plan into effect. The most optimistic scenario is that this could happen before the summer recess. However, it make take considerably longer, not least because the Enterprise Boards are statutory bodies that will have to be dismantled appropriately.

Much has been made of the fact that the Enterprise Boards will effectively be folded into Enterprise Ireland. In fact, they already have very close links. Funding for the boards is channelled through Enterprise Ireland, which has a unit based in Shannon specifically dedicated to liaising with them.

“The Enterprise Boards are resourced until the end of the year and open for business. Whatever happens, we will endeavour to make the transition as smooth as possible for our clients,” said Vincent Reynolds, chairman of the national network of enterprise boards.

For the most part, country and city enterprise boards are seen as doing a good job. The fear is that by making them part of a bigger entity, the intimacy of the local service they provide may be lost and the speed of decision-making slowed down.

The boards are up and running since the mid-1990s, and those working in them are very familiar with the social and business communities they serve. This comes into play when applications are being assessed. For example, a board would avoid supporting a project they know would displace existing jobs. At the moment, each board has the autonomy to make its own decisions.

The concern is that this may not be so under the new structure. Fears have also been expressed about undue political influence if the link between the new entities and the local authorities is too close.

“It’s absolute madness the way they are doing it,” says Mark Fielding, chief executive of ISME, which represents small and medium-sized businesses. “In one fell swoop, they are cutting the 35 organisations that are actually making a difference to micro-businesses here. I’d be very fearful of the boards operating under the wing of the local authorities, because they do not have the ethos or experience of dealing with small business. At the moment, the boards are independent and flexible and there is a real chance this will be lost. Whatever happens, they still need local assessment boards,” says Fielding.

“One aspect that’s welcome is the reduction in overheads, but only if the money saved is ploughed back into supporting local business and not put into central coffers to fix potholes. Another worry is what happens where a business owes money in local authority rates and is then receiving a grant or financial assistance. Will the authority try to grab the finance or just make it more awkward for them?”

Barry Redmond, founder of recent start-up Brimm Brothers, which produces power metres for competitive cyclists, has experience of dealing with both his local enterprise board and Enterprise Ireland.

“We found both organisations very good to deal with but in different ways,” Redmond says. “The enterprise board is interested in you at the very early stage, and their service is very personal. With Enterprise Ireland, you have to be a certain size to get on their radar.

“There is quite a cultural difference between the two. The enterprise board will give you the few thousand that can make all the difference when you’re starting off, whereas Enterprise Ireland waits to see how you’re doing before getting involved. They fulfil different purposes. I wouldn’t like to see that being lost.”

Philip O’Connor, founder of Seymours biscuits in Cork, has received assistance from the West Cork Enterprise Board. “I hope the new body will be able to influence the relevant rates and water divisions within the local authorities to have realistic charges,” he says. “I have a water bill for over €600. Nearly 75 per cent of it is for the administration charge. If there is one thing I’d like under the new system, it’s for someone to periodically come out and sit down with start-up owners/managers and get a real first-hand perspective of the issues confronting them. I know that if I didn’t pick up the phone, I’d probably never hear from them. It’s also hard for small business owners (who are doing everything) to keep up to date with all the latest Government initiatives, PRSI changes and employment supports that are being announced. I think the new authority should take on a role to assimilate this information on a monthly basis and update their clients.”

Eoin Costello is an entrepreneur and business mentor. Based on his experience he would like to see the new structure place more emphasis on fostering innovation. Costello suggests the introduction of mini innovation vouchers to the value of €500 to help increase contact between SMEs and academic institutions. He also wants to see direct expert intervention to help small companies focus on business development, innovation and sustainable growth.

“I worked on a national project with the Enterprise Europe Network last year,” says Costello, “to identify the obstacles that prevent Irish SMEs from engaging in innovation. Of the 33 individual recommendations that arose, 14 concerned a need for a role best summarised as a ‘business development and innovation coach’. Commercial business development and innovation consultants are too expensive for the majority of small businesses; therefore, there is a market failure in this space which the proposed structure could productively address in the national interest.”

Siobhan King Hughes, founder of Sensormind, a web-based monitoring system for the elderly at home, says the new structure needs to support the unusual.

“I know of very bright people who have gone outside Ireland to set up their business because their ‘mad’ idea was turned down here,” she says. “We already support steady, predictable business models. We need to work on supports for newer models of business and services. Really innovative ideas need fast decision-making and flexible supports. For example, something like Y Combinator in the US, which pioneered a new model of start-up funding. Twice a year, it invests a small amount of money (average $18,000) in a large number of start-ups. The start-ups move to Silicon Valley for three months during which Y Combinator works intensively with them to get them ready to pitch to investors.”

I’d be very fearful of the boards operating under the wing of the local authorities, because they do not have the ethos or experience of dealing with small business

Whatever happens, we will endeavour to make the transition as smooth as possible for our clients

Coming to an sme near you in 2012 . . . what the government action plan for jobs says it will do

Establish a “one-stop-shop” for small business supports by dissolving the County and City Enterprise Boards and creating a new Micro-Enterprise and Small Business Unit in Enterprise Ireland that will work with local authorities to establish a new network of Local Enterprise Offices in each local authority.

Implement a range of new supports for small and medium-sized businesses struggling to access credit, including a €150 million Development Capital Scheme aimed at addressing a funding gap for mid-sized, high-growth indigenous companies with significant prospects for jobs and export growth. A Loan Guarantee Scheme and a €100 million Micro-Finance Loan Scheme will also be introduced.

Provide better support to indigenous companies by:

- establishing a new Potential Exporters division in Enterprise Ireland

- providing up to €1.2 million per year in extra funding for mentoring and management development networks

- increasing mentoring of SMEs

- assisting small businesses to engage in RD and innovation with improvements to the RD tax credit system