Scottish Government

CHAPTER FIVE ANALYSIS OF INTERVIEW DATA

Introduction

5.1 This chapter provides a detailed analysis of the 41 face-to-face interviews undertaken by the research team. The nature of the sample provides a rich data source on the real experiences of minority ethnic business owners ( MEBs) in Scotland, but the findings cannot necessarily be generalised, rather they reflect the rich diversity of such experience. The findings from this chapter need to be placed in the context of the secondary and quantitative data analysis, this is done in the next chapter to interpret and integrate the findings.

5.2 The qualitative software package, QSR Nvivo, has been used to code data against key themes such as advice, support, finance, social capital, motivation, networks, generational issues and succession planning. This coding is based on known issues from the literature, from the quantitative analysis, and the nature of the experiences of MEB owners themselves, allowing the data to 'tell its story', as well as analysis against known frameworks. The result is a particularly rich diversity, which seems to be distinctive in Scotland, a vitality that is remarkable given the range of sectors and experience. This is brought out in some of the analysis, which is described in the remaining sections of this chapter.

Business and personal profiles

5.3 It can be seen from Table 5.1, that the MEBs included in the interview programme provide a cross-section of different traditional and emergent sectors. A similar diversity is provided by the representation of different ages, by different generations and the inclusion of a selection of women MEB owners. The analysis indicates a small weighting in the interviews of first generation to second and third generation owners in the proportion of 55 per cent to 45 per cent. Similarly, a wide diversity is represented in terms of size and growth with reported turnovers varying between less than £50k to £20 million. What is more remarkable is the resilience shown by MEB owners from the analysis. Business growth appears to have been achieved even by MEB owners that are surviving in traditional sectors that face increased competition, although some have experienced declining turnovers.

5.4 The majority of MEB owners interviewed were relatively well established, although a number of recently established young firms were also included. The issue of succession planning was explored with the more mature businesses.

5.5 Table 5.1 shows that the interview sample contains a cross section of traditional and emergent sectors. The analysis will consequently reflect the nature of different issues that may be reflected in business development, growth and diversification. Tables 5.2 and 5.3 provide summaries of MEB owners by minority ethnic group and by location respectively. A good representation of MEBs was eventually achieved by the research team including MEBs from different minority ethnic groups and different locations. The research team are indebted to members of the Research Advisory Group, which has greatly helped in achieving this representation.

Table 5.1: Interviews by minority ethnic group, sector and location

Source: Paisley PERC Minority Ethnic Business Database

Table 5.2: Summary by minority ethnic group

Source: Paisley PERC Minority Ethnic Business Database

Table 5.3: Summary by location

Source: Paisley PERC Minority Ethnic Business Database

Business growth

5.6 The majority of MEB owners were achieving business growth even in traditional and competitive sectors. This was achieved by a combination of different factors including successful diversification, through exploitation of opportunities in different markets, through developing niche or quality products in traditional markets, through innovation and through co-operative behaviour. In some cases the transfer of business ownership from 1 ^st to 2 ^nd generation owners had led to innovation in business practices or the identification of additional markets. For example, one 2 ^nd generation owner in a traditional sector had introduced incentives to employees to maintain business growth:

"We keep growing. We keep going after more business, going after new markets, we're always we're constantly pushing for more business and we have very motivated sales force out there. Well money motivates them, they've all rewarded for bringing results so they're all keen to get them...more business in."

5.7 In general, there were successful diversification and survival strategies evident in traditional sectors and successful innovation and growth strategies in new and emergent sectors. These are described in more detail.

Survival strategies in traditional sectors

5.8 One strategy that had achieved survival and growth in a traditional sector with increased competition included co-operation with other business owners. This was mentioned by one MEB owner:

"Say we have the likes of the paper shop across the road and a grocery store across the road we all work together rather than fighting with each other we all benefit rather than cut throat which would benefit nobody but the customers and you'd still get the customers moaning, it wouldn't make any difference."

5.9 One MEB business owner admitted that they faced increased competition from the increasing growth in market share of supermarkets, but at present they were able to maintain custom through incentives to bring in customers, once inside the premises they may complain but would still buy.

"We do get people complaining that the supermarkets are cheaper but as we always advice them that if you feel that they're cheaper then please do go and get it from there because we can't buy it for a pound and sell it for 50p to you in simple terms. So they he haw and they moan and groan but once they're in the store they do buy it."

5.10 Another MEB owner from this traditional sector mentioned how they had managed to achieve growth through greater professionalism.

"Well the number of retailers has definitely declined but the professionalism in the retail industry has improved so the business is still fairly there as a general market --but for us as a company we've actually seen quite a substantial amount of growth in the last couple of years."

5.11 Sometimes survival had been achieved through identifying an opportunity to maintain and grow within a traditional sector, as commented upon by one MEB owner in retailing

"Not really just kept it steady I would say. I think it would have decreased but because I brought the Post Office on board it's kept level. So my last couple of years have just been level, I haven't made any more that what I should but the income from the Post Office has helped us that all I would say. I would say it's declining now, the convenience market, because of all these other you know Tesco Express and Sainsbury's and all the small shops opening up I think its making a big difference."

5.12 Growth has also been achieved by a traditional clothing manufacturer through spotting gaps in the market and developing a niche product.

"Our main competitors are I would say are white British companies based mainly in the Midlands, Nottingham, Leicester that sort of area. That's a very traditional area for this sort of thing. Very traditional for this embroidery business and these are companies that have been around longer than we have but their main focus tend to be either selling the embroidery machines or the threads, there was nobody who was a consumables expert till we came along and we saw this gap in the market and we've took advantage of that."

Growth Strategies in Emergent Sectors

5.13 Of course, outwith traditional sectors, some very successful strategies were evident in the emergent sectors. These were not necessarily restricted to the well-known growth sectors such as IT and technology-related areas but included newer areas such as the creative industries and leisure-related activities. This business growth was achieved through the drive of high ambition and the searching for new markets, particularly international markets and through a willingness to continually invest as reported by one owner.

"Just to keep growing, to keep driving it forward--to tackle more international markets to basically get better at what we do become more efficient, we're always investing in our systems and improving the business wherever we can."

5.14 An example of new market areas exploited by MEB owners was reported by one owner in a new leisure-related sector.

"I just seen the scope for it, I just seen there was a huge scope, a huge gap in the market, especially in Scotland, I'm the only one that does this in Scotland, the only one."

5.15 Co-operative and networking strategies to achieve growth were also in evidence in new and niche markets such as the growing leisure and travel market. One recently established and start-up MEB owner, for example, indicated that they had been able to exploit new services to the Middle East, discussing new services to Dubai they had identified growth opportunities through co-operation.

"I've been attending the Arabian travel market and the last 2 years and I've been meeting obviously different companies, tour operators and everything taking ideas from there."

Motivation and business start-up

5.16 A mixture of positive and more negative reasons was reported on motivation for business start-up. The analysis indicates approximately 50 per cent giving positive reasons, with approximately equal proportions citing either more negative reasons or 'other' reasons for business entry. Positive reasons are associated with independence and discreet decision-making associated with a strong desire to 'own a business' and to enjoy the lifestyle or increased independence of income. For example, one owner had left his previous employment because it he desired the independence and decision-making associated with business ownership.

"I'll be a lot more happier working for myself cause you probably end up making more money apart from the fact that you really don't want to be listening to other people and work to other peoples deadlines..."

5.17 Another MEB owner cited the incentive of independence that came from control as owner as opposed to working for others.

"I worked my butt off basically given the service for other people, you know and making customers happy for other people, so why not do that for myself and make some money? I mean I might be getting a wage every week, but I mean, I'd rather make more than that, you know to be honest with you, just something for myself, you know, that's all it is."

5.18 Additional positive motivations were associated with greater ambition and drive that is required for any successful entrepreneur.

"You know I'm not just ...not just in business, I like a challenge and I like to put myself through challenges to see what I can achieve you know......."

5.19 More negative reasons were in some evidence, albeit a minority. These were associated with limited employment opportunities or viewing entrepreneurship as an alternative to unemployment. One example is given from an MEB owner in the IT sector, discussing the need to find an alternative to being unemployed.

"I was unemployed for a good part of a year and I didn't sign on for the first 7 months, I didn't but the day I signed on I started working for someone and its very devastating I was so....I was lowering myself so I've been working ever since I've left school and never had to resort to public funds and especially when you've graduated you don't expect to be on the......unemployed. Its probably an Asian thing you know not to go to the state."

5.20 Strong and positive motivations were reflected in high ambitions of business owners, whether in business start-up or established businesses, with an associated strong determination to overcome barriers that may exist. Encouragingly, start-ups were likely to be in new and emergent sectors, avoiding the long hours and hard work that may be associated with traditional sectors like catering and retailing. This was partly explained by the different ambitions and approaches of 2 ^nd and 3 ^rd generation owners as explained by one young 2 ^nd generation owner, partly to live up to greater expectations.

"There's a lot of Asian children like myself or ....will not go into retail because it...I think they're looking for not just satisfaction they looking for a bit....looking to get something out of life as well cause mums and dads have just worked like donkeys all their lives and they've got us somewhere…."

5.21 It is important to stress, however, that positive reasons for motivation do not guarantee successful business development, what will be more important is the ability to learn from experience.

5.22 However, there was also reference to the greater barriers that MEB owners might face in start-up, perhaps just in gaining credibility, in dealing with customers and other businesses. Of course all small firm start-ups face barriers such as issues of credibility, but it is arguable that these are higher for MEB owners. This was testified to by a number of owners, although the degree of the severity of such barriers seemed to vary by sector and by region. One MEB owner summed up the situation in the following way.

"I think we're looked down on, I think its an uphill struggle for anybody from an ethnic origin although I consider myself Indian as far as origin but as far as nationality is concerned I'm British and that's the way I see myself."

5.23 Of course, there were some high growth and successful business start-ups. However, when such barriers are combined with other issues, described later, such as the lack of engagement with start-up assistance through the Business Gateways, there is a case for providing specialised assistance for new start minority ethnic businesses.

Financing their businesses

5.24 The interview data analysis indicates, as expected, that there is a heavy reliance on personal and family sources for the financing of MEB owners' businesses with little utilisation of formal external sources of finance, particularly at start-up. Although there was evidence that banks became more important after start-up, a typical approach would be to continue to fund their businesses through personal and internal sources as reported by one MEB owner:

"Well its self-financing just through profits which I make, you know good profits and we keep utilising some of those profits to build the business up."

5.25 The importance of family and the community was important for start-up (and in some cases development) finance, but once established, most MEB business owners further growth and development was self-funded. As indicated by one owner, the following was often representative of the financing.

"[From] parents, mainly finding the initial need of a cash injection and from there onwards it is pretty much self-financed."

5.26 In some cases the community was important for providing sources of start-up finance and this was not necessarily limited to extended family networks or to the local community but could be international in extent. For example one Chinese owner indicated that they had raised funding from three sources:

"[From] the relatives in Hong Kong and the relatives in mainland China and some friends here."

5.27 Exceptionally, with a high growth business, one MEB owner reported how they had financed their business through institutional finance and through venture finance, but had still resorted to bringing the business back into private ownership, because of some difficulties encountered with this formal venture capital.

"At start up it was personal, then as we grew we had bank finance. Then the bank suggested 3i's, actually we were the first in Scotland to have quality institutional investments, they ended up with 24.9 per cent of our company and we became a public company. But that's when the problems began -----as we began to grow the ethnic difference began to come through and the glass ceilings began to appear. We bought ourselves back with venture capital funding and now we're pretty much personally funded backed by the --- bank."

5.28 Financing start-up by reliance on personal and immediate family sources is, of course, the testified experience of the vast majority of all small business owners, not just MEB owners. Banks become more important for most small business owners, once a track record of trading is established. However, what is distinctive and noticeable with MEB owners in Scotland, is that there is a marked reluctance to approach or attempt to utilise bank finance after start-up or for development finance. In some cases there was a perception that the time involved was not worthwhile, even though approaches may have been made as indicated in the following comment.

"We did approach a bank for loans but after several meetings and several business plans it was getting to the stage that I realised that it was too much effort and not enough gain, so I did not really go down that route any more."

5.29 In other cases there were deeper cultural and religious reasons given for not approaching the banks. For example, because of deeply held beliefs as stated by the following owner.

"I don't believe in borrowing money from the bank because we don't believe in paying interest.. [due to religious beliefs]….if I can do without borrowing from a bank I will do it."

5.30 Although such views were in evidence, there were also strong feelings against using banks which were more centred on cultural practice, some taking pride in not having to resort to banks, who were often seen as a last resort. For example the following owner comments on being able to raise finance by 'bootstrapping' (raising small amounts from varied sources), as a way of avoiding the banks as an alternative source of finance.

"A hundred pounds here, a hundred pounds there we just...........every time he got a couple of hundred quid thirty quid here thirty quid there you know what I mean there's been nobody going to the banks and paying them interest. We've not borrowed a single penny from any banking institution."

5.31 There is some evidence that brokers may be involved as intermediaries between MEB owners and the main commercial banks or loan companies (an initial finding that can be supported from the earlier UK study for the British Bankers' Association on Access to Funding and Business Support, Ram, et al. (2002)). An example is provided by one MEB owner who discusses how he found it easier to raise the credit and bank finance that was needed by going through an intermediary or broker.

"Banks are not interested unless as I say your dealing through one of these intermediaries ....what do you call them again...people who help to get you loans and all that. If your going for a loan you go yourself there's a hundred barriers in front of you but if you go through a broker it seems so easy that's what I found out and then your having to pay a little bit extra than what you would if you'd done it yourself all these fees are involved in that."

5.32 There is strong evidence that the role of the community is important for providing start-up finance as indicated. There is also a high dependency on personal sources and family for start-up finance, even allowing for the well-established and mature businesses, such as the following 2 ^nd generation owner, who recalled the initial start-up.

"Our main source of finance used to start up ----I believe that my father and my uncles used personal sources, family, and community contacts- to start-up."

5.33 However, even with 2 ^nd or 3 ^rd generation and younger firms there was still a reliance on personal sources and a reluctance to approach banks and a reliance on " the community".

Relationships with the commercial banks

5.34 Reported relationships with commercial banks, where they existed, were variable with a mixture of views and experience. There were some difficulties reported, for example, approaching several banks before securing funding, high levels of security required and difficulty securing credit. An example of this category is provided by one MEB owner who claimed that his bank had promised to provide finance.

"My old bank promised they would give me money but when it comes to the nitty gritty--- no [and] I eventually got one after I think about three. The third one lucky."

5.35 However, in general there was an acceptance that banks are bound by normal practices of risk assessment in lending decisions, that they had to be convinced as much as anyone else about the financial viability of propositions. In addition, where a relationship had been established for some time, there was evidence of satisfactory views of relationships. An example of this category is provided from one MEB owner.

"Banks are fine. We find them to be very helpful because they'll give you support that you need and they'll always tell you to stay...keep you within your means so they're always quite a restrictive measure to make sure you don't over commit yourself."

5.36 Of more concern is the reluctance to approach the commercial banks and potential lost opportunity for funding growth and for additional profits and business from MEBs for the commercial banks. There is evidence that this may be partly explained by an expectation on the part of MEB owners that there is considerable additional paperwork and bureaucracy required if they were to approach a bank for funding. There may also be language barriers created by the limited employment of minority ethnic staff by the banks themselves. Although Chinese business owners have been shown by the quantitative analysis to do well in accessing formal sources of finance, this perceived difficulty was explained by one Chinese owner in answer to a question about approaching banks for finance.

"No. I never think about that and I know its very difficult and because from when we go to open a business account ...its very difficult spending a lot of time and also passing from.....because we're not British, we're not Scottish we're Chinese people and I think it was very difficult."

Experience in rural areas

5.37 A small number of interviews were undertaken in the rural area of the Highlands and Islands, as indicated in Table 5.3. This limited evidence suggests here a combination of greater range of funding opportunities and the more dispersed nature of minority ethnic communities, meant that there appeared to be less reliance on personal sources and community sources than elsewhere in Scotland, there was more evidence that a combination of sources were used including public sector grant, public sector loans and banks.

The role of social capital

5.38 It is arguable that the role of social capital is of key importance in minority ethnic enterprise development. Its role is complementary to that of informal capital, providing advice alongside informal finance. Social capital replaces the role of institutional sources of advice in the same way that informal finance can replace and substitute for the role of institutional sources of formal finance. The complementary nature of its role is revealed through the involvement of family, relatives and the general local community as sources of advice. MEB owners may also rely upon access to business advice through a network of business contacts through their own community.

5.39 In some cases, advice may be provided through direct involvement in the business as discussed by one MEB owner.

"It was my brother actually bought the first property and because I'm doing my professional qualifications I'm in my final stages, we bought one bought two and then we thought that they could be a way of earning money, I mean I put a lot of my studies into it and I started getting a lot out of it so I mean it just progressed from there... ....well I work quite close with my brother and that we've seen a common goal and now we're kind of progressing towards that....financially...... but they're happy that we've both got a common goal."

5.40 There are a variety of important roles for social capital apart from the financial ones, friends and relatives may be used as business mentors, giving direct advice, they may be directly involved in decision-making or they may be used as a sounding board, as a means of developing and honing concepts and ideas and as an aid to problem-solving. This was illustrated by one MEB owner when discussing how he was able to call upon sources of social capital as a sounding board for decision-making and recognised the importance of such advice in the learning process as a small business owner.

"Family and friends. ---You listen, you do ask them things but then you make up your own mind on what ....you know...I mean its good to have someone there that you can ask because you've got to learn from somewhere.....you know being brought up in a family where business was discussed quite regularly even in the house my grandfather was over from Pakistan would always be discussing business with my father and I would be sitting there listening so.....it was instilled in me from a young age"

5.41 The use of the informal network for business advice is illustrated by another MEB owner who discussed how they would use the informal network of contacts in the community.

"For business advice we use family and friends, we use community sources....Just like local businessmen in the community and stuff ...we speak to them or if we've got an idea of doing something we'll just run it past them, get their feel get their advice on it."

5.42 Again, like the importance of informal capital, there was evidence that such sources of social capital were still important for 2 ^nd generation and young company owners, although, the source of social capital or sources of advice may well be different in nature, because of different, if overlapping, networks. One young MEB owner referred to his circle of friends that he relied upon for advice in a variety of professional and business ownership situations.

"I've got friends that are also involved in business, I've got some very clever friends actually, a few guys that are chartered accountants, a guys that's involved in finance just some guys that are running some franchises as well, there's one boy that just opened up a Papa Jones, an American Pizza place, and there's another guy that's opened up another Insurance claims place, Cold Concept Solutions, so these guys....basically we feed off each other."

5.43 There was recognition that the family was still important for 2 ^nd generation owners, not necessarily for direct advice to provide support, but to discuss issues and problems as discussed by another 2 ^nd generation owner.

"Family's always important I think...you know...yes there's always family disagreements and conflicts but I think you know having my father there as someone who's shoulder I could lean on and I could ask things even though I didn't agree with a lot of things."

5.44 It is still usual to use family and friends for additional advice or for advice on problems that cannot be solved individually, as revealed by this typical statement.

"Normally if the knowledge you have you solve yourself but if some cases on issues you never come across then you ask your friends or your family. So normally in you case do you just do it yourself? If any problem come up and I know to solve it then I'll solve it, a problem I've never faced before I will ask friends and relatives."

Social capital: help or hindrance?

5.45 Potentially the importance of social capital is both help and hindrance to MEB owners. For example, there is no doubt that the ability to call upon sources of advice and the accumulated learning of previous business experience as social capital is invaluable to new start MEB owners and even for well-established owners, especially those in traditional sectors where there is a wealth of accumulated experience and indeed co-operative behaviour to overcome problems. Yet this may also be viewed, in some respects, as a barrier to business growth and achievement, particularly where advice may be limiting or inappropriate. For example, one young MEB owner commented on how he decided that advice from his family was inappropriate for the entrepreneurial risk-taking that he sought.

"I left school and went straight into business. I worked for a year for my father and grandfather and I had a different......I had different views to what they had so I decided to do my own thing. Well it was basically.....they were very much old school and had...you know they weren't prepared to take risks, they were very set in their ways and they didn't want to.....didn't want to see change brought into the business, I was keen to do things which they didn't want me to do so I decided to.....but I couldn't work with them and I branched off and started my own business."

5.46 However, the role of social capital can also be revealed in some surprising ways, for example, in the development of opportunities to diversify and enter different sectors due to contacts and knowledge in the community. An example is provided by one owner who was able to move from clothing into catering.

"[We moved] because of our relations and our friends and relatives they are in the restaurant trade--so they suggested ...you know why don't you look at this side of the business, then we just looked into it and decided."

5.47 The role of social capital is probably underrated, in terms of its role in the development of MEBs. It can be as important as family networks and the community are as sources of finance. It is used in a surprising number of ways, for advice, for support, as a sounding board and for information on alternative business opportunities. This partly reflects the richness and diversity of minority ethnic communities in Scotland.

5.48 The role of social capital is complex, with many dimensions, some of the issues have been highlighted, but it is an area that deserves further investigation.

The role of human capital

5.49 The qualitative analysis supports the quantitative analysis in indicating that MEB owners are well qualified, often having university education and degree qualifications. Previous business experience or relevant employment experience were also in evidence. Strong and extensive human capital has been reported with previous studies with MEB owners and provides one factor that can explain the strong growth, innovation and successful business strategies of MEB owners, whether in traditional or emergent sectors.

5.50 In some cases, human capital was also strengthened by a willingness to undertake additional training, although the quantitative baseline analysis suggests that participation in formal management training was low. However, one MEB owner was able to comment on the range of additional courses and qualifications that he had obtained demonstrating a keenness and desire to add to qualifications, experience and training.

"When we had the retail shops, because I was the manager of one of the shops and I felt at that time that I needed some proper education as well to do the job that just going from experience wasn't enough, so I went to Reid Kerr College in Paisley and I done night classes and I got a diploma in supervisory management studies, so that's the formal qualification and then since then I've been to Anniesland College and I've got some education in computers there, I've also taken advantage of Glasgow City Council training and I've gone on to do other things in managing business and so forth."

5.51 In general, there was a willingness to pursue education and training. There may be differences in human capital across Scotland with MEB owners which may be related to opportunity and provision. For example, in Glasgow-based MEBs there was reference to training provided by the Ethnic Minority Enterprise Centre ( EMEC) and management development seminars provided by the City Council. Those that had more limited experience tended to report earlier histories of problems (including racism) forcing them to leave education. For example, a 1 ^st generation owner commented that he left school because he found school "very difficult, we were bullied a lot because there were only 2 or 3 Asians in that area."

5.52 Barriers to education and the accumulation of human capital were mentioned by others. Indeed one business owner considered that he had avoided such barriers by working in America, where talent could be recognised on its merits.

"When I graduated I joined Ford Motor Company as a graduate trainee and that was a very lucky break because allowed me to join the meritocracy. If I'd worked in Scotland I would have been excluded by colour, speech, schooling etc religion."

5.53 Negative experiences need to be balanced against more positive ones and a positive desire to use human capital in business ownership. For example, where a university education was apparent with 2 ^nd generation owners, a strong motivation to enter business ownership was still evident, as expressed by one young MEB owner when discussing previous education and career choices.

"I was at school and then university and then I joined my fathers business. ---I came straight into business from university. -----I always wanted to do business, right from an early age I was interested in business, so my father asked me to join the business and I hadn't really considered doing anything else."

5.54 This characteristic, of completing education up to degree level, but retaining a strong desire to enter entrepreneurship as a career appears to be strongly represented in South Asian business owners.

5.55 An alternative scenario where the MEB owner has left education at an early stage and then accumulated business experience, building up knowledge and experience from the entrepreneurial process, appears to be more typical of Chinese business owners. This was commented on by one Chinese business owner reflecting on motivation and extensive accumulated business experience.

"I've always been in business ever since I left education I've always wanted to be in business. To serve, basically to serve our community, our Chinese ethnic community and I've done that for 21 years. --I've been in a few businesses, I have like most business ups and downs. I was initially from down in England, had you know.....a good 10 years business life down there , moved up here and continued to do so, so yea its been about 21 years in business."

5.56 The role of entrepreneurial learning is important to the success of MEB owners in developing the accumulated knowledge that may allow them to respond, innovate and develop successful businesses in the face of increased competition. As commented by one MEB owner in a traditional sector,

"Well I've learned a lot from the business as I say, business is a learning process like everything else in life as you go on you learn."

5.57 Undertaking of additional training, especially by well-established owners appears to be at relatively low levels, a factor that was indicated by the baseline quantitative analysis. Additional management training was also something that was reported as a need by a number of MEB owners. The experience in rural areas suggests that training may be difficult to access, despite there being identified training needs, although it is recognised that training may be more difficult to provide in rural areas, due to a support premium (Baldock and Smallbone 2003).

Business and succession planning

5.58 A related management development issue is the extent to which MEB owners were engaging in business and succession planning. As is the case with many small business owners, there is a reluctance to engage in forward planning, expressing a preference for having a plan 'in my mind' rather than detailed on paper.

5.59 This in itself may not be an issue, however, when the lack of forward planning is applied to the discussion of succession planing and planning for exit, the indications are, from the interview data analysis, that many MEB owners are ill-prepared for the transfer of knowledge, if there is to be a succession of ownership. Given that many MEBs are family-owned businesses this is likely to be an important issue. One of the problems is the transfer of tacit knowledge that resides with the owner and management of the current business. As expressed by one MEB owner, the transfer of such tacit knowledge is difficult to prepare for, indicating that it needs careful planning and involvement of successors long before transfer takes place and indicating that it was an area of concern.

"When you build a business from scratch you know exactly all the strengths and weaknesses of the business you know the business inside out and its not something you can actually,--you know.. that someone else can sit and learn, so I think if anything that's probably my single biggest concern."

5.60 The nature of the way that many MEB owners do business and develop their businesses often militates against forward planning, although, as already noted, this does not prevent considerable innovation, creativity and successful entrepreneurial growth. However, it can be noted that this may be connected to the relatively low utilisation of formal sources of bank finance. The reliance on informal and community sources for finance is connected to perceptions that planning is unnecessary, being required only to raise money. An example of such a view was provided by one MEB owner.

"To be honest, I don't believe in it (planning) because its so, ---its not dynamic its static and you only use a plan when you want to get money from some group so personally I don't believe and with certain groups you got to buy your plan to suit the taste and knowledge of what they know, the group knows, you go beyond what they know and they think you are just ....talking nonsense or just ......so they don't see beyond so it depends on who you talking so I personally I don't believe this if for me. This is when you asked me early on 'where you get the money from?' mainly from friends or connections. I think that goes a far better way then just a business plan to get money from the bank."

5.61 This underlines the importance of any related intervention or initiative by support agencies which should emphasise the process of planning rather than the production of business plans per se.

5.62 It was admitted by some business owners that succession was a problem because their children were not interested in taking on commitments that might mean long hours of work. It was admitted that their children had different objectives. This was a factor for MEB owners in traditional sectors particularly catering and retailing. For example, in discussing this, one MEB from a traditional sector commented that with different attitudes of his children he had changed his mind about growth plans for his business.

"I did want to increase my stores but I've changed my mind recently in the last 6 months, I've completely changed I thought you know the children would come over and they would help in the business but they've got a different attitude towards the business, they don't mind helping just now but they actually don't want to go into that sector at all and from what I'm seeing for the future a lot of the business are just being sold off."

5.63 The nature of the long hours of work, particularly in the convenience food retail sector, was noted by another MEB owner commented on why her son would not want to take over the business.

"Because he sees the lifestyle and the hardness and there's no social life in it and we work 24 x 7, we don't have holidays, myself and my husband have never been on holiday together."

5.64 It is likely that increased competition, notable in the retail convenience sector, will continue to have an adverse effect on MEB owners, despite their ability to innovate and diversify. The limited degree of succession planning, in all sectors, while true of all small businesses, should be an area of concern.

Attitudes to mainstream advice and support

5.65 It is well known that there is a lack of engagement with mainstream sources of advice and support, as reported through the quantitative baseline analysis. The interview findings give greater depth on attitudes to such sources of advice and support. These findings will obviously be an important consideration in the formulation of any policy initiative that may attempt to tackle the lack of engagement.

5.66 There appear to be a number of different levels of attitudes to mainstream sources of advice and support. At the most basic level, there is, firstly, a lack of awareness of their existence. At a secondary level, there is a belief that the services provided are time consuming or involve some form of payment for advice. Where knowledge is improved, then a third approach is characterised by a belief that such services are not relevant to the needs of MEB owners and such owners may by-pass such sources of advice and support.

5.67 An example of these attitudes is provided by one MEB owner, which involves both a basic level and a rationalisation that such services will only restrict the development of the business.

"Well I never really heard of these people before. Its very hard to say if they'd be any use but if your in business and you want to move fast you want these kind of people holding you back by ....'oh you've no filled in this form up...or you haven't given us a drawing...or you haven't done this because....' When you go after a business and the people who are selling the business aren't going to wait till one of these local authorities or business associations or these kind of people are satisfied with the paperwork we've sent them."

5.68 An example of high growth businesses that may by-pass such services is provided by one high growth minority ethnic entrepreneur who considered that they would by-pass the support agencies.

"I have, and I've had a terrible experience the Gateway didn't even bother to answer my calls recently when about a year ago when I decided to talk to the bank I thought I'd share it with them, however once again I'm very adept at skirting round them. What I've done is become a very active member of the CBI and I'm part of the growing business forum."

5.69 In a very different scenario, an MEB owner might be overwhelmed by additional pressures to be aware of the relevance of mainstream support agencies. In some cases, MEB owners considered that the pressure of other concerns meant that such sources were not very relevant to their position. One MEB owner in this position reported that, while there was awareness, such pressures would take priority over such considerations.

"I didn't actually approach any of them because that was the last thing on my mind when....picture yourself in a scenario where ...you've been out of work for 3 or 4 months and your always used to working all your life, all of a sudden you're sitting there your getting no ---money, you're getting nothing, you've got mortgages coming over the top of your head and you're maybe a couple of months behind in your mortgage and stuff like that, all the bills are piling up the last thing you think about is going to these people and saying, 'what can you do for me' ."

5.70 A more typical view, however, was associated with a lack of awareness and a lack of knowledge of how such agencies might deal with MEB owners.

5.71 A further issue concerns the nature of communication used by mainstream support agencies such as the Local Enterprise Companies and Business Gateway. This Chinese owner when discussing the services of Business Gateway commented on the notable lack of different forms of communication and languages appropriate for MEB owners.

"They have one ethnic minority people advisor; (who) only speaks English, or I think for Hindu people, nobody speaks Chinese. I think if somebody had speak Chinese it would be more and more helpful."

5.72 However, at least in the main cities, Business Gateway do provide translation services, at no additional costs with leaflets in different languages, although it is likely that the level of such specialised support will vary as discussed in Chapter 6.

5.73 Where experience was reported with support agencies, such as Business Gateway, they were highly variable. In some cases positive, in some cases commenting that, " grants were more useful than advice", and in some cases more negative. For example, one owner considered that advisers were not aware of the needs or experience of minority ethnic enterprises.

"They actually didn't help you much, they actually gave you a knock back saying well you need this qualification to do that but they didn't look at your experience side of it all, they didn't think..... look maybe the ethnic minority need this help here."

Additional issues

5.74 A number of additional issues are discussed that were identified by a number of MEB owners. Although they varied in importance, nevertheless, they were sufficient to be mentioned and discussed in detail by a number of MEB owners. These issues included diversification, insurance premiums, crime and racism.

Diversification

5.75 It was noticeable that diversification was stated as an objective for most of the MEB owners, but some either lacked the opportunity or resources to see this objective to fruition. However, those that had achieved diversification demonstrated that even in declining and traditional sectors, it was possible to take advantage of opportunities. For example, one MEB owner with a small retail outlet, located in the Central Belt was able to describe how they had taken opportunities to expand the space and acquire the local post office.

"I demolished the stairs to make it into one small shop and then we bought the flat upstairs which meant we could extend it even further so its now 2000 sq ft so it's a big shop and then just 2 years ago we added on the Post Office. We had the opportunity to buy it and we brought it into the shop and we went open plan."

5.76 Diversification perhaps explains the continued survival of some MEB owners in traditional sectors, such as retailing or wholesaling. Even though it was quite common for such MEB owners to discuss major losses of customers to increased competition, the businesses were surviving because previous profits had been invested in new businesses in alternative sectors, notably property and services. Alternatively, some owners had shown remarkable perseverance and innovation, demonstrating the depth and richness of innovative and entrepreneurial capacity that exists in Scotland's MEB community. For example, one MEB owner discussed how they had achieved diversification through innovation with a traditional clothing manufacture business, in response to increased competition.

"We started with the one product which is an interlining which embroidery backing is a derivative, is part of that family, we diversified into other products very successfully until about 1997 and then the clothing market disappeared, Marks and Spencer's and everybody started pulling out the U.K. Overnight we saw almost our ---say 60 per cent-- of our customer base disappear within a year and probably today I would think we lost 90 per cent of our customer base that we had for clothing manufacturers at that time so we knew to survive we had to diversify into other products and that's why we went into embroidery."

5.77 The extent of diversification meant that many MEB owners were effectively portfolio entrepreneurs, owning a number of different businesses, often in non-connected sectors. As suggested this may help to explain, how owners(particularly first generation) have managed to survive and prosper in the face of increased competition in traditional sectors. However, others were trapped in limited and declining markets with insufficient resources (whether financial or human) to breakout into different sectors. Support agencies may be able to successfully target such firms with advice and related support, drawing upon the experience of the successful MEB support programme, operated by Glasgow City Council, and the experience of successful MEB owners, which has targeted MEB owners in traditional sectors to assist them with diversification plans and fund raising (see Annex 4 for a description of the MEB support programme).

Crime and insurance

5.78 It is difficult to determine the extent to which these issues are more prevalent with MEB owners in Scotland, compared to all small business owners. Such issues may be increasing and be prevalent in the small business community generally, in addition they may reflect the location of some MEB owners who may be in low-income location areas with higher levels of crime and higher insurance rates. Having made these qualifications, however, it was noticeable that such issues were volunteered in general discussion about a range of issues facing their businesses. It seems that there are underlying forces in society that combine to make these issues more prevalent for MEB owners.

5.79 For illustration purposes, one case is provided of how one MEB owner felt that they were a target for organised crime.

"We are constantly having our windows smashed and just our business computers being stolen. ---Six times since October and so we have two special CID task forces and we have surveillance cameras belonging to the CID in the house. So we are a target for organised theft and it's a real issue for us and we put our house on the market because of that. So it's a kind of jealousy thing and we have to manage that. It's the biggest problem here."

5.80 Crime or security was also considered to be an issue in rural environments, but without resources (from local businesses) that would be required to invest heavily in security, basic protection such as CCTV was often absent. However, this would probably apply to all small business owners in such areas. The incidence of crime and the experience of MEB owners seemed to be particularly acute outside the main cities with references, in a small number of cases, to targeted attacks on business and personal property. This may have reflected the lower levels of security and/or policing in such areas. Whatever the reason, such levels of crime compounded the problems such business owners were coping with, representing a drain on resources, adding to survival issues and making business growth and diversification more difficult.

5.81 The concern with crime could be built on by agencies seeking to engage with MEB owners, a targeted policy in this area could lead to greater engagement with sources of advice and support.

Racism

5.82 Underlying such experiences for some MEB owners was reported (covert and overt) racism. This may have expressed itself for example in higher targeted crime, but more subtle forms were also reported which affected that nature and practice for MEB owners in doing business. One MEB owner, referring to the nature of doing business, particularly in Scotland, claimed that they suffered from a bias against doing trade with other Scottish companies, leading them to look for business in England.

"To be honest I'll tell you doing business in Scotland is more difficult than it is doing business in England. When I approach companies in England I'm judged on my company and my companies performance when I try and do business in Scotland the first thing I'm judged on is possibly my colour but definitely they say to me 'well I've been dealing with Jock for 30 years why should I stop dealing with him to deal with you, even though you can offer me better product you can offer me better price and everything' but in Scotland that is a big big problem. Scottish companies want to deal with other Scottish companies and they want to deal with white Scottish companies they don't want to deal with Asian Scottish companies."

5.83 Some MEB owners admitted that it was " more difficult to do business", but approached this with a stoic acceptance that such attitudes were only to be expected and that they had to work harder to achieve success because of such barriers. It was in the nature of dealing with customers or suppliers where different forms of racism materialised. In a small number of cases, reference was made to the effect of changing a name on doing businesses and the beneficial effect of removing the perception, for example, of dealing with an Asian business.

5.84 The combination of these barriers and difficulties meant that for some MEB owners, in some localities, the realities of doing business, of their experience and their everyday lives meant that they were forced to adopt coping strategies, adjusting to different markets, to greater costs and to surviving rather than achieving successful diversification and growth. Against these experiences must be placed the diversity and richness of successful diversification and growth, across different sectors and in different localities, which is a much more common and typical experience for MEB owners in Scotland.

Summary

5.85 In this chapter, the key findings from the programme of over 40 face to face interviews with MEB owners across different localities and sectors in Scotland have been examined. The remarkable vitality and diversity of MEB owners in Scotland and their real experiences of doing business, in some cases in hostile environments, have been described. The main findings have focused on key issues that MEB owners face in the development, growth and survival of their businesses. The key findings of the interview analysis include:

• Business development and growth has been achieved through remarkable resilience of MEB owners in traditional sectors in the face of increased competition. Also MEB owners show high personal drive and ambition to achieve business growth by exploitation of new market areas and the introduction of additional value-added approaches to traditional sectors. A mixture of motives that account for business start-up are indicated regarding personal decision-making on business entry, however, the strong drive found behind the growth ambitions of MEB owners is also reflected.

• In the key area of finance, the qualitative findings reinforce the quantitative baseline analysis indicating a dependence on personal and informal community sources for finance. There is a marked reluctance to approach institutional providers, even with 2 ^nd generation owners. Causes of this reluctance are complex, but these factors are creating barriers against the development of closer relationships between minority ethnic business communities and the banks. There is some indication that greater attempts on the part of commercial banks to employ more minority ethnic staff could improve relationships and increase the business that they secure with MEB owners. Developments in Islamic banking could also be important and have potential for breaking down barriers in Scotland.

• The interviews confirm that the role of social capital, although important, can be a two-edged sword and it may act as a barrier to the ambitions of younger and 2 ^nd generation MEB entrepreneurs. It does, though, fulfil an important complementary role to that of informal finance, acting as a source of learning as well as providing a sounding board for business issues and problems. It will be important for both mainstream and specialised agencies to ensure that their role and services can build upon and complement the role of social capital rather than replace it.

• Human capital, whilst variable, is important and MEB owners tend to be well-educated. Although the quantitative baseline analysis indicates limited management qualifications and training, the interviews reveal that when training is available, as in Glasgow, then this will be taken up by MEB owners. Support and advisory agencies can assist in providing advice on preparation of business plans that meet the requirement of formal institutional providers of finance such as the commercial banks and in their role as referral mechanisms and channels of communication. Establishing engagement and trust will be crucial to this role. Whilst there is evidence of innovation and successful diversification, support agencies will need to build upon this success.

• The lack of awareness and, more importantly, basic knowledge of the level and type of services provided by the mainstream agencies should be a major focus of concern. It seems that there are a number of degrees of the nature of this lack of awareness and knowledge. These range from the relatively basic lack of awareness through attitudes that see support agencies as not relevant, to deliberate strategies to by-pass support agencies.
• Additional issues of diversification, crime, security, insurance and racism further highlight and reinforce the diversity of MEB experience in different sectors and localities in Scotland. There is no doubt that for some MEB owners in some sectors and in some localities, such issues are an acute everyday and common occurrence. While some MEB owners noted the erosion and decline of their acuteness, there is little doubt that they are still evident and real issues for MEB owners in Scotland.

• Finally in conclusion, Scottish MEB owners' experience and development is particularly diverse, making it difficult to generalise about their experiences. It is clear, however, that Scottish MEB owners have exploited new growth markets, they have been resilient in traditional markets, they have achieved success in the face of adversity, have been innovative, ambitious and growth-seeking. At the same time, though, it is arguable that the potential of at least some MEB owners is also being constrained through the by-passing of mainstream sources of support and formal sources of external finance. In addition, there could benefits from the encouragement of greater participation in training and business-related seminars.