Majority of small businesses not interested in scaling

Study shows most Irish ‘micro-businesses’ keen to stay at similar scale to current levels

As many as 85 per cent of Irish micro-businesses said they traded profitably last year with 45 per cent reporting an increase in turnover

As many as 85 per cent of Irish micro-businesses said they traded profitably last year with 45 per cent reporting an increase in turnover

 

Most small businesses have little interest in significantly scaling despite there being a push to so by the Government.

In fact, a new study shows that the majority of so-called micro-businesses start small and stay small with just one in four looking to grow into a national or international business.

The University College Cork (UCC) study indicates that 71 per cent of micro-businesses are keen to keep their business similar in scale to how it operates currently.

In addition, the proportion of companies “looking to grow rapidly with a view to exit” stands at 40 per cent, versus 58 per cent in the US.

Overall, just 27 per cent of micro-businesses expressed an interest in building a big business.

Almost half of micro-business owners said they wanted to build a business they could hand on to family members while only 43 per cent expressed an interested in having a chance to “build great wealth or a very high income”.

These figures would seem to be in sharp contrast to current Government policy, which is to improve SME productivity by 1 per cent per year to 2025.

“Government policy is to grow small business but this may not be what small business want,” said Dr Jane Bourke, a senior lecturer in economics at Cork University Business School, who co-wrote the report.

Between one and nine employees

Micro-businesses are defined as companies with between one and nine employees. Such companies constitute 90 per cent of business in the Republic and collectively employ more than 400,000 people.

More than 1,500 Irish micro-businesses were surveyed for the report by authors Dr Bourke, and Prof Stephen Roper of the Warwick Business School.

“These businesses are our plumbers, our builders, our accountants and our mechanics, they play an important role in the fabric of Ireland’s national and local economy, “ said Dr Bourke.

The study reveals that such businesses have been much quicker to adopt digital technologies than similarly sized companies in the US.

On average, Irish micro-businesses have 3.1 employees and have been operating for almost 25 years. The ratio of male to female owners is approximately two to one and 77 per cent of such companies are family owned.

As many as 85 per cent of Irish micro-businesses said they traded profitably last year with 45 per cent reporting an increase in turnover.

Forty-one per cent said they were exporting goods and/or services overseas.

The study also indicates that 47 per cent of micro-businesses use external finance from banks or other lenders. This is considerably higher than in the US or UK.