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3 Thinkers

3.1 This section looks at those considering starting their own businesses in more detail in terms of how serious they are, the kinds of businesses that they envisage starting, their experiences of trying to gain finance, and their motivations for wanting to be entrepreneurs.

3.2 It should be noted that a relatively small sample size for Thinkers in Scotland does restrict the amount of analysis that can be undertaken (178 in 2005, and 182 in 2003). Therefore it is not possible to analyse questions based on very small sub-bases, for example those in the questionnaire concerned with the experience of gaining finance. It also means that many of the differences are not statistically significant. It is recommended that the England report be consulted for these questions.

Seriousness of intent

3.3 Chart 7 shows that 36 per cent of Thinkers say that starting their own business, buying into an existing business or becoming self-employed is something that they have 'given serious thought to and which will almost certainly happen at some stage in the future'. A further 25 per cent say that this is serious, but only likely (not certain) to happen; 31 per cent say it might possibly happen; whilst 6 per cent have not given too much thought to the idea, but might like to do it some day.

3.4 In comparison with 2003 there has been a significant increase in the proportion of Thinkers in the top box (serious thought, will almost certainly happen), up from 22 per cent to 36. This increase has not been replicated in England.

3.5 Those who say that this will almost certainly happen or is likely to happen are classified as 'Serious Thinkers'. The proportion of all Thinkers in Scotland who are Serious is 61 per cent - up six percentage points on the 2003 figure (but not a statistically significant rise). The proportion of Serious Thinkers in England is 55 per cent.

3.6 Thus it would seem that, although there are fewer Thinkers in Scotland compared to England, those that are Thinkers are more determined to make it work.

Chart 7: Thinkers: Level of seriousness

3.7 By age, the Thinkers who are most serious about starting a business or becoming self-employed are the 16-34 year olds (66 per cent). By contrast, older Thinkers aged 35+ are less serious (55 per cent). By gender there is no difference.

Timescale for starting businesses

3.8 24 per cent of Thinkers in Scotland are considering starting businesses or becoming self-employed now or in the near future, 30 per cent will do so within the next two years, and 35 per cent further in the future. Another 11 per cent only have a vague idea of when they will do so. There is a pattern here with age. Only 41 per cent of Thinkers aged 16-24 intend to start their businesses in the next couple of years, compared to 57 per cent of those aged 25 or over.

3.9 In comparison with England, more Thinkers in Scotland are wanting to start their businesses now or in the near future (in England the figure is 19 per cent).

New and existing businesses

3.10 The vast majority of Thinkers in Scotland (79 per cent) intend to start their businesses from scratch. This is also the case in England.

3.11 Others intend to become partners in businesses they have not previously worked for (13 per cent), buy existing businesses they have not previously worked for (8 per cent England), become partners in businesses they currently work for (5 per cent), or buy a business they already work for (management buy out - 6 per cent). Taking on or inheriting a family business (2 per cent) and management buy-ins (2 per cent) are the other means of starting their own businesses ¹³.

Motivations for Thinkers

3.12 One of the main objectives of the Household Survey is to understand what motivates people to start new businesses, and whether they are doing so to take advantage of opportunities ('pull motivations'), or out of necessity because they have no better choices for work ('push motivations').

3.13 Thinkers and Doers were asked whether they agree or disagree ¹⁴ with a number of attitudinal statements which have been asked since the inception of the Household Survey. This first Section examines the 'pull motivations' for Thinkers:

'Pull' Motivations

Table 5: Pull motivations for Thinkers

Base = All Scotland Thinkers (n=178 [2005]/173 [2003]). Figures in bold are statistically significant changes

3.14 Overall, motivations for Thinkers have changed little since the 2003 (or indeed 2001) surveys. Once again 'freedom', 'wanting to be one's own boss' and 'financial gain' are the main motivations. However, new attitudinal statements were included in the 2005 survey which have also proved to be popular claimed motivators, specifically those relating to social and environmental responsibility. There are also some interesting differences in the motivations of Thinkers according to sub-groups for some of the statements, which make a more detailed examination worthwhile.

'I want the freedom to adopt my own approach to work'

3.15 Although there is very strong agreement with this motivation among all demographic sub-groups, older Thinkers are more likely to count this as a motivation than the young.

'I want to make more money than I am currently earning'

3.16 Young people are more motivated by money than older people. Whereas 100 per cent of 16-24 year old Thinkers agreed with this statement, only 77 per cent of 45-64 year old Thinkers agreed.

'I want to challenge myself/prove I can do it'

3.17 This is much more likely to be a motivation for women than men (95 per cent agreement compared with 86 per cent). There are no significant differences according to age, although in England more young Thinkers agreed with the motivation than did older Thinkers.

'I have always wanted to be my own boss'

3.18 Men in Scotland are more likely to be motivated by this factor than women (77 per cent compared to 72 per cent).

'I want to do something that helps or supports other people'

3.19 This was a new statement in the 2005 survey, which proved to be a strong claimed motivation.

3.20 Female Thinkers in Scotland (85 per cent) are significantly more likely to agree with this statement than male Thinkers (69 per cent).

'I want to fill a gap in the market'

3.21 In comparison with the 2003 survey there is significantly more disagreement with this statement as a motivation among Thinkers in Scotland. Nevertheless 68 per cent agreed, 5 per cent more than was the case in England. There were no significant patterns according to age or gender in Scotland, although in England older Thinkers were more likely to agree than younger ones.

'I want to make an idea or innovation happen'

3.22 Younger Thinkers are more likely to agree with this statement than older ones (89 per cent agree among 16-24 year olds, compared to 61 per cent among 25-64 year olds).

'I want to be able to work from home'

3.23 This is more likely to be a motivator for women where agreement in Scotland is at 72 per cent, compared to 60 per cent for men. Overall agreement is 5 per cent greater in Scotland than England. Whereas in England older Thinkers are more likely than younger ones to cite this as a motivation, this is not the case in Scotland.

'I want to develop a hobby(or some other activity I'm already involved in) into a commercial enterprise'

3.24 Older Thinkers are more likely to agree that this is a motivation (68 per cent of 45-64 year olds) than younger ones (44 per cent).

3.25 Disagreement with this statement rose by nine percentage points on the 2003 survey, which is nearly, but not quite, statistically significant.

'I want to do something that helps or supports the environment'

3.26 Whereas over six in ten (62 per cent) Thinkers across England concurred with this statement, it was only mentioned by 54 per cent in Scotland.

3.27 In England there was no discernable pattern in the agreement with this statement according to age. In Scotland, however, younger Thinkers are actually less likely than their older peers to agree (36 per cent of 16-24 year olds agree, compared to 61 per cent of 25-64 year olds).

'I want to do my line of business better than my previous employer'

3.28 Perhaps surprisingly given their lack of experience, this is a much stronger motivator for 16-24 year olds than it is for older age groups (70 per cent compared to 40 per cent of 25-64 year old Thinkers).

'I want to follow the example of someone I admire'

3.29 There is also a clear pattern with age here, with 66 per cent of the 16-24 year olds being in agreement, compared to just 32 per cent of the 25-64 year old Thinkers.

'I want to continue a family tradition'

3.30 Only one in six Thinkers across Scotland agree that this is a motivation.

3.31 The youngest age group are again more likely to be in agreement with this statement (30 per cent) than any of the other age groups.

'Push' motivations

3.32 The 'push' motivations are those relating to dissatisfaction in employment, discrimination at work and unemployment. Most of these were asked of sub-bases, e.g. those currently unemployed, or those in employment. Therefore, in order to get an overall picture, the figures in the table below have been rebased on all Thinkers ¹⁵.

Table 6: Push motivations for Thinkers

Base = All Scotland Thinkers (n=178)

'I would be more likely to start my own business or to become self-employed if I had been out of work for a period of time'

3.33 There is a difference between the genders regarding this motivation, with 48 per cent agreement amongst male Thinkers, and 60 per cent agreement among female Thinkers. This result differs from England where more men agreed than women.

3.34 Older Thinkers are much more likely than younger Thinkers to agree with this statement. The agreement among 16-24 year old Thinkers is 31 per cent, rising to 61 per cent among 25-64 year olds.

3.35 The fact that agreement with the statement is stronger among men and older Thinkers appears to be linked to work experience. Indeed, 63 per cent of Thinkers who are currently in full-time employment agreed with the statement, compared to 58 per cent of those in part-time employment, and 33 per cent of the other Thinkers asked this question (students, housewives and househusbands, retired).

'I would be more likely to start my own business or to become self-employed if I were to be made redundant'

3.36 Agreement with this statement follows a similar pattern to agreement with the previous one. More men agree with the motivation (53 per cent) than women (36 per cent), as do the older Thinkers (56 per cent of 25+ year olds compared to 20 per cent of the 16-24 year olds).

3.37 As is the case with the previous statement, overall levels of agreement in England and Scotland are broadly the same.

'I am dissatisfied in my current job'

3.38 The biggest trend pattern here is again by age. Only 10 per cent of 16-24 year olds agree with this statement compared to 37 per cent of those aged 25-64. 45 per cent of those in full-time employment agreed, compared to 42 per cent in part-time employment.

'I want to get away from the discrimination at my current place of work'

3.39 This was a new question in the 2005 study. Compared to Thinkers in England, those in Scotland are both more likely to agree with the statement, and more likely to disagree (in England 19 per cent agreed, 43 per cent disagreed ¹⁶).

3.40 Whereas in England there is some evidence that older people were more likely to agree with the statement, this is not the case in Scotland.

3.41 There is no significant difference in the levels of agreement between men and women in both England and Scotland.

3.42 In England there is some evidence that ethnic minority Thinkers are more likely to agree with this statement than the White British. In Scotland there are far fewer people from ethnic minority backgrounds generally, and subsequently fewer ethnic minority Thinkers. Even so, over half of the non-white Thinkers ¹⁷ in Scotland agreed that this statement is a motivation, a finding which is statistically significant in comparison to White British groups.

'I would like to start my own business or become self-employed because I have had difficulty finding suitable paid employment'

3.43 More than half of those agreeing with this statement are aged 16-24. Most are male and have achieved SVQs of levels 1-3 as their highest qualification.

3.44 In summary, 'pull' motivations are stronger than 'push' motivations.

External factors

Knowing other entrepreneurs

3.45 Knowing somebody who already is, or once was, an entrepreneur does seem to affect whether people want to try their hand at starting their own business.

3.46 Seventy-seven per cent of Thinkers in Scotland know somebody who already is, or was an entrepreneur. This compares with 67 per cent of Avoiders and, perhaps surprisingly, only 66 per cent of Doers.

3.47 These figures compare with 84 per cent of Thinkers in England who know an entrepreneur.

3.48 The entrepreneurs most likely to be known by Thinkers in Scotland are parents (31 per cent), friends (27 per cent), other relatives ( i.e. not parents, partners or siblings - 27 per cent), brothers/sisters (19 per cent) and partners/spouses (6 per cent). Of these, having parents or friends who are/were entrepreneurs seems to have the most influence on respondents being Thinkers.

3.49 The figures are very similar to those seen in 2003 when 74 per cent of Thinkers knew an entrepreneur.

3.50 In general, the more serious a Thinker is, the more likely they are to know other entrepreneurs. Eight-three per cent of the Serious Thinkers know an entrepreneur, compared to just 69 per cent of the other ('Ordinary') Thinkers.

Preparations

3.51 Overall, 72 per cent of Thinkers In Scotland have done something by way of preparation for starting their business or becoming self-employed. This is about the same percentage seen in the 2003 survey.

Table 7: Preparations for business

Base = All Scotland Thinkers. Figures in bold are statistically significant changes

3.52 Researching the market or product remains the most common preparation, followed by gaining experience. Twelve per cent have spoken to a Business Adviser - an option that was not tested in the 2003 survey.

3.53 The biggest change since the 2003 survey is in the proportion working on a business plan. This has significantly declined since the 2003 survey, down 13 percentage points. The proportion looking for equipment has also decreased significantly.

3.54 Overall in England 70 per cent have made preparations for their business, about the same as in Scotland. In England fewer people have spoken to a Business Adviser than in Scotland - just 7 per cent.

3.55 Whereas Thinkers aged 16-24 in England are less likely to research their market than other Thinkers, this is not the case in Scotland.

3.56 As one would expect, Serious Thinkers are more likely to have made preparations. Indeed, 85 per cent of Serious Thinkers have made some preparations compared to just 52 per cent of the Ordinary Thinkers. Serious Thinkers are most likely to have researched the market and/or gained experience.

Future business characteristics

3.57 Thinkers were asked what their new businesses would do.

Sector

Table 8: Sector of intended business

Base = All Scotland Thinkers. Figures exclude respondents who don't know or who do not give a comprehensible answer

3.58 The majority in Scotland intend to do something which can be broadly categorised as being in the service sector. This is six per cent up on the 2003 survey and accordingly the proportions intending to get involved in other industries, particularly in primary and manufacturing, has declined.

3.59 There is a similar story in England where the desire to start up primary and manufacturing industries has declined to an even greater degree. Compared to England, Scottish Thinkers are slightly more likely to want to consider transport, retail and distribution.

3.60 At the two digit SIC code ¹⁸ level the top ten most popular industry sectors are:

• Business Services - SIC 74 (especially photography, legal, accounting, consultancy and engineering) - 21 per cent of all Scotland Thinkers
• Retail - SIC 52 (especially clothes retail) - 14 per cent
• Childcare and Medical - SIC 85 - 10 per cent
• Construction - SIC 45 - 9 per cent
• Hotels & Catering - SIC 55 (especially restaurants and catering) - 8 per cent
• Leisure Activities - SIC 92 (especially acting/music and sport) - 8 per cent
• Computing - SIC 72 - 5 per cent
• Beauty, Cleaning and Hairdressing - SIC 93 - 5 per cent
• Education - SIC 80 (especially driving schools) - 5 per cent
• Real Estate - SIC 70 (especially estate agency) - 3 per cent

Employing others

Table 9: Employing Others

3.61 Thirty-four per cent of Thinkers in Scotland say they are most likely to work on their own whilst 27 per cent will employ other people. Twenty per cent say they will be part of a team that will employ other people, whilst 17 per cent will be part of a team that will not employ other people.

3.62 Female Thinkers are more likely to think they will create employment opportunities for others than men.

3.63 These figures are almost exactly identical to those seen in England.

Location of new business

3.64 Thirty-one per cent of Thinkers in Scotland intend to start their new business from home, whilst 27 per cent will start their business in the local neighbourhood, 18 per cent in their region ¹⁹, 16 per cent in the nearest town or city centre, 2 per cent elsewhere in the UK and 3 per cent outside of the UK.

3.65 Combining the last two of these answers, 5 per cent of Thinkers in Scotland want to start a business outside of Scotland. The same percentage is seen in England where 5 per cent want to start a business outside of their own region. In 2003 only 3 per cent of Scottish Thinkers thought this, compared to 12 per cent in England.

Future customers

3.66 Seventy per cent of Thinkers in Scotland intend to sell to people within their local area, 35 per cent across the UK and 26 per cent internationally ²⁰. In England a lower proportion, 62 per cent, intend to sell in their local area, with 32 per cent wanting to sell across the UK and 22 per cent internationally.

3.67 Female Thinkers are more likely to want to sell locally, whilst male Thinkers are much more likely to want to sell to other people in the UK (41 per cent male, 26 per cent female). A similar proportion of each gender want to sell internationally.

Future turnover

3.68 A third of Thinkers in Scotland cannot estimate what their first year's annual turnover will be. For the rest, the median average is £25,894. In England the figure is £24,172 ²¹.

3.69 The median does vary according to gender. Women are less likely to know how much they will earn, and those who did give a figure are less optimistic than men (men = £29,861; women = £11,250). The differences in turnover expectations may be associated with the different sectors that men and women tend to operate in.

Finance

3.70 Only 7 per cent of Thinkers have actually tried to obtain any finance for their (potential) new business in the past 12 months (same per cent in England).

3.71 Serious Thinkers are more likely to have tried to obtain finance (11 per cent) than the Ordinary Thinkers (3 per cent).

3.72 By far the most common type of finance sought is a bank loan - 44 per cent of Thinkers have sought or will seek one of these ²². Fourteen per cent will seek a grant, 7 per cent a loan from family, business partners or directors, 4 per cent a mortgage in order to purchase property and 3 per cent a loan from a Community Development Fund Institution. Six per cent are relying on their own savings ²³. These figures are roughly similar to the 2003 survey.

3.73 Nearly half of all Thinkers in Scotland in full or part time employment, and who are also 'Serious' Thinkers, think they will give up their current job when they start their businesses (45 per cent). In England this proportion is 57 per cent.

Awareness of organisations offering business advice

3.74 Thinkers were asked, unprompted, where they might go for business information, advice or guidance; whether they had used any of these sources of advice, and which sources they might be likely to use in future.

Table 10: Awareness and usage of business advice sources (unprompted)²⁴

Base = All Thinkers (n=178)

3.75 Aside from business support organisations, the source that most Thinkers are aware of for expert or professional information, advice or guidance about starting or running a business are other work colleagues or general business contacts. This is also one of the sources most likely to have been consulted already, and a likely future source. Far more Thinkers in England are likely to be aware and use this as a source as is the case in England.

3.76 Awareness levels of business support organisations among Thinkers are relatively high in Scotland in comparison with England. Whereas 11 per cent of Thinkers in Scotland spontaneously mention Scottish Enterprise or Highlands and Islands Enterprise, the equivalent figure in England is just 5 per cent for Business Links, and 1 per cent for the Small Business Service. Similarly whilst 8 per cent would use Scottish Enterprise or Highlands and Islands Enterprise in future in Scotland, only 5 per cent would use a Business Link in England.

3.77 This finding is partly explained by the fact that the Scottish organisations are longer established, but also because many of the England Thinkers are from non-White British origins, and resident in London, where awareness of Business Link is the lowest across England.

3.78 Awareness and future usage of Business Gateway is also relatively high in Scotland, with 8 per cent spontaneously aware, and 7 per cent spontaneously likely to use it in the future.

3.79 However, despite levels of awareness of business support organisations being higher than in England, they are still much lower than they were in the 2003 survey - a significant finding. Back then 21 per cent were spontaneously aware of Scottish Enterprise or the Highland and Islands Enterprise and 13 per cent aware of the Small Business Gateway.

3.80 The internet has arisen from nowhere (in 2003) as one of the most likely sources to have been used. Unfortunately we do not know which sites are being used. Much publicly provided support, e.g. by Business Gateway, is web-based. Future surveys will be refined to better track these changes.

3.81 Of those people who claimed they wanted business advice and guidance ²⁵, 75 per cent across Scotland found it either 'very easy' or 'quite easy' to get the advice they needed, whilst 25 per cent found it either 'not very easy' or 'not at all easy'.

3.82 Fifty-six per cent of Thinkers who wanted business advice and guidance felt that it 'always' or 'mostly' met their needs (21 per cent always, 35 per cent mostly). A further 23 per cent said 'sometimes', 14 per cent 'rarely' and 6 per cent 'never'. Similar proportions were seen in England.

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