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ZERO EMPLOYEE BUSINESSES

Interim report of phases 1 & 2

31 January 2006
Zero Employee Businesses: Interim report

ACKNOWLEDGMENTS

We gratefully acknowledge the support received for this project from the following
sources:

• The Qualifications and Curriculum Authority (QCA) for their support on behalf
of the UK Qualification Regulatory Bodies.
• Rachel Davy at QCA for her management of the project.
• Members of the SFEDI Research Advisory Group and Lead Body (RAGLB)
for their input to this project.
• The people and organisations who participated in our survey and interviews.

YOUR VIEWS
This is an interim report that will inform a future policy paper on how we
can better meet the learning and development needs of zero employee
businesses. Your views on the report and any further information would
therefore be particularly welcome. Please use the feedback form at the end
of the report or send comments to david@stratagia.co.uk.

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CONTENTS

1. BACKGROUND AND CONTEXT 3

2. INTRODUCTION 4

3. METHODOLOGY 5

4. DESCRIPTIVE STATISTICS 7

5. LEARNING NEEDS AND PROVISION 14

6. CONCLUSIONS 20

7. RESEARCH SOURCES 22

THE QUESTIONNAIRE 23

FEEDBACK FORM 27

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1. BACKGROUND AND CONTEXT


This report forms part of the SFEDI Standards, Qualifications and Achievement
Strategy for Business Enterprise Learning and Skills which is in its third phase.
Earlier work involved:
• OCR leading a research project, along with SFEDI, to gain an
understanding of current positions and;
• SFEDI producing and disseminating a working draft of the strategy. This is
downloadable from www.sfedi.co.uk and was also the subject of
dissemination events.

It was recommended that more would need to be done to gather evidence and
intelligence to further develop this draft strategy. In order to achieve this there
must be some minimal segmentation of the four million entrepreneurs running
business enterprises. This report focuses on what is thought to be an oft
overlooked component of the business community: zero employee business
enterprises. These are defined as:

“Sole proprietorships and partnerships comprising only the self employed,


owner manager(s) and companies comprising only an employee director.”

This is the definition used by the Small Business Service (SBS) and the one that
will be used throughout this report.
Later in this report we will see that official statistics estimate there were over 3.1
million such businesses in 2004 and that this number had grown substantially
over the previous five years. The vast number of these businesses makes them
crucially important for our strategy for achievement and we should base future
policy on expectations that their number and importance are likely to increase.

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2. INTRODUCTION
This report outlines the findings of the first two stages of the proposal to develop
the SFEDI Standards, Qualifications and Achievement Strategy to cover zero
employee businesses. The following areas were assessed in broad terms:
• Characteristics of these businesses.
• Current skill needs.
• Current provision for learning and development.

This has been addressed by:


• An initial review of literature.
• Consultation with SFEDI Lead Body and Research Advisory Group
(RAGLB).
• Analysis of the available statistics for this segment.
• A survey of a wide range of organisations and groups.
• Expert interviews.

The findings will emphasize the size and diversity of this segment of businesses.
They should therefore be seen as a preliminary contribution to developing an
adequate understanding of these businesses and their learning and development
needs. This report will inform the development of the wider sector strategy. We
hope this will be used to help all stakeholders improve the support available to
aid the learning achievement in those businesses and, through continuing
assessment of needs and evaluation of provision, extend our knowledge and
understanding of zero employee businesses.
It is important to note in this context that zero employee businesses is a statistical
label and is not a term that would be recognised or used by these businesses.
They will define themselves in many ways. For some the terminology will be
sector-specific: freelance, sole trader, independent consultant. For others their
self perception may be expressed in other ways that are not completely
synonymous with a lack of employees, such as home-based business. It is
crucially important that relevant terminology is used when seeking to
communicate with these businesses.

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3. METHODOLOGY

Initial review of literature


An initial review of literature was conducted to identify relevant information and
statistics. The literature search began with the SBS website’s
(http://www.sbs.gov.uk) statistics and research section and the National Statistics
website (http://www.statistics.gov.uk).
A web search was used to find publications and web pages that mentioned
businesses with no employees. Many different search terms were used: ‘zero-
employee businesses’, ‘businesses with no employees’, ‘enterprises without
employees’, and so on. The vast majority of hits produced by these searches
were organisations reporting and reproducing the latest SBS press releases; very
few hits produced new information.
The academic literature was investigated through searches of the online
databases Web of Knowledge (http://wok.mimas.ac.uk/) and Ingenta
(http://www.ingentaconnect.com/), and the Institute for Small Business and
Entrepreneurship (ISBE) conference abstracts.
The findings of the initial literature review were presented to members of the
SFEDI RAGLB on the 29th November, 2005 for comment. Members were invited
to provide, or identify, any further information they were aware of.
This review of literature made clear the almost complete lack of research into
these businesses, beyond that contained in the official statistics. This
demonstrates that we are working in an oft-overlooked area.

Review of statistics
In order to gain a more detailed picture of the general characteristics and nature
of zero employee businesses, data was acquired from the following two sources:
1. The Labour Force Survey (LFS) Spring 2004 dataset. We had hoped to
use LFS data from 2005 but unfortunately crucial questions for our
analysis were not asked in that year.
2. The Small Business Service Annual Small Business Survey 2004.

These datasets were analysed to give the required information for both zero
employee businesses and micro businesses (businesses comprising 1-10
employees). This process not only gave us information on the characteristics of
zero employee businesses, but also showed the extent of the similarity and
differences between them and micro businesses. More information on these
research sources can be found in section 7 and the results of this analysis can
be found in section 4.

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The survey
A survey instrument was produced to address the questions that were not
adequately covered in the existing statistics. A copy of the questionnaire
accompanies this report. This was sent out to approximately 200 contacts at the
following organisations on 15th December, 2005. Contacts were invited to pass
the survey on to anybody they thought may have information or views on zero
employee businesses.
• Sector Skills Councils • ISBE Board Members
• Standards Setting Bodies • Awarding Bodies
• Trade Bodies • SFEDI Centres of Excellence
• Federation of Small Businesses • SFEDI RAGLB members
• Enterprise Northern Ireland / • National Federation of
Invest Northern Ireland Enterprise Agencies.
• Forum of Private Businesses • Education and Learning Wales
• Welsh Management Council • Scottish Enterprise/HIE
• Prime • Chartered Society of Designers
• Home Business Alliance • Prowess
• InBiz

Based on the findings from this first questionnaire, it was noted that there was a
distinct lack of information about current provision for zero employee businesses.
A second, shorter questionnaire asking for information in this area was therefore
sent to, or interviews were sought with, the following organisations/groups;
• Learning and Skills Councils • Representatives from a number
of specific occupational groups
• Scottish Enterprise/HIE
identified has having a large
• ELWA proportion of zero employee
businesses, such as designers,
• Enterprise N Ireland/Invest NI hairdressers etc.
• Awarding bodies
• Institute of Business Advisors

The summarised results from the surveys and interviews can be found in section
5.

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4. DESCRIPTIVE STATISTICS
In order to give a more accurate picture of this segment of businesses, statistics
for the UK from the SBS (2004) show that:
• there were just over 3.1 million zero employee businesses in 2004;
• they represented 71.7% of all enterprises and 12.1% of all employment;
• they have an annual turnover just shy of £190 billion;
• their legal status, in terms of percentage of employment, is as follows:
o Companies 38.2%
o Partnerships 62.7%
o Sole proprietorships 87.9%
The number of business enterprises has increased rapidly in recent years. Based
on this trend, which can be seen in Graph 1, numbers of zero employee
businesses seem likely to continue to increase over the coming years.
3.5
Millions

3.0
Number of enterprises

2.5

2.0

1.5

1.0

0.5

0.0
1997 1998 1999 2000 2001 2002 2003 2004
Year

Graph 1: Number of zero employee businesses, 1997-2004. (Source: SBS Statistics, 1997-2004)

General characteristics
In terms of general characteristics, zero employee businesses do not differ
significantly from micro businesses. Just under three quarters are male (74.1%),
their average age is approximately 45 years and 94.9% are white British and 3%
are Asian or Asian British.

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Location
In terms of percentage of total enterprises, the figures are reasonably uniform
across the UK, ranging from 68.0% in Northern Ireland to 71.5% in England.
Based on the data from the LFS a high proportion of the zero employee
businesses were from the South East (32.0%, 17.1% not including London) and
South West (11.0%). There appears to be only moderate difference between
micro businesses in terms of region (Graph 2).
Percentage
0 2 4 6 8 10 12 14 16 18

Tyne and Wear


Rest of North East
Greater Manchester
Merseyside
Rest of North West
South Yorkshire
West Yorkshire
Rest of Yorkshire and Humberside
East Midlands
West Midlands and Met. County
Region

Rest of West Midlands


East of England
Central London
Inner London
Outer London
South East
South West
Wales
Strathclyde
Rest of Scotland
Northern Ireland

Zero Employee Businesses Micro Businesses

Graph 2: percentage of zero employee and micro businesses by region. (Source: LFS, 2004)

Industry
Again, based on percentage of total enterprises, the figures range from 17.9% in
the hotels and restaurants sector to 86.6% in the construction sector.
However, based on the LFS dataset, the number of zero employee and micro
businesses in each sector varied more substantially (Graph 3). From this data it
would appear that the main sectors zero employees fall into are:

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Zero Employee Businesses: Interim report

1. Construction
2. Real estate, renting and business activity
3. Wholesale, retail and motor trade
4. Other community, social and personal
Percentage
0 5 10 15 20 25 30

A:Agriculture, hunting & forestry


B:Fishing
C:Mining, quarrying
D:Manufacturing
E:Electricity gas & water supply
F:Construction
G:Wholesale, retail & motor trade
H:Hotels & restaurants
Sector

I:Transport, storage & communication


J:Financial intermediation
K:Real estate, renting & business activ.
L:Public administration & defence
M:Education
N:Health & social work
O:Other community, social & personal
P:Private hholds with employed persons
Workplace outside UK

Zero Employee Businesses Micro Businesses

Graph 3: percentage of zero employee and micro businesses by sector. (Source: LFS, 2004)

Home based and family businesses


The SBS dataset shows a higher proportion of zero employee businesses are
family owned compared to micro businesses (73.4% vs. 65.1%). The LFS tells us
they are also twice as likely as micro businesses to be situated in the owners
home, or use their home as a base for the business (72.3% vs. 34.8%).

Obstacles to start up and business success


When recent start ups were asked about the biggest obstacles to starting their
business, the main answers from both zero employee and micro businesses was
obtaining finance and cash flow. Other obstacles were given more moderate
values (Graph 4).

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Zero Employee Businesses: Interim report

Percentage
0 5 10 15 20 25 30

Obtaining finance

Cash flow
Obstacles to business start-up

Availabilty/cost of suitable premises

Competition in the market

The economy

Regulations

Taxation, VAT, PAYE, NI, business rates

Shortage of managerial skills/expertise

Recruiting staff

Keeping staff

Zero Employee Businesses Micro Businesses

Graph 4: Cited obstacles to start-up for zero employee and micro business. (Source, SBS)

The businesses were also asked what the biggest obstacle was to the success of
their business. Here the main answer given by zero employee businesses was
regulations (12.6%), followed by the economy (9.1%), taxation (8.4%) and cash
flow (7.5%).

Sources of advice
The SBS Survey of Small Businesses asks recent start-ups about any advice
they may have sought to help them through the start up process (Graph 5). There
seems to be more of a tendency for zero employee businesses to seek informal
advice, from friends and family for example, compared to micro businesses who
seem more likely to use more formal sources of advice, such as accountants,
banks or lawyers. It is also worth noting that the main answer given by zero
employee businesses was that they did not seek advice from anywhere when
starting their business (27.1%).

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Zero Employee Businesses: Interim report

Percentage
0 5 10 15 20 25 30 35

Informal advice only (friends, family, etc.)

Local or government support agency

Accountant

Bank
Source of advice

Legal advice (solicitors/lawyers)

Internet

Previous owners

Inland revenue

Somehwere else

Nowhere

Zero Employee Businesses Micro Businesses

Graph 5: Sources of start-up advice for zero employee and micro business. (Source, SBS)

Membership of Business Organisations


The SBS also provides data on memberships to business organisations. This
makes it clear that the majority of zero employee and micro businesses are not a
member of any business organisations, although this is significantly higher for the
zero employee businesses (71.2% vs. 57.5%). The two organisations that zero
employee businesses are likely to be a member of are trade associations
(13.4%) and the Federation of Small Businesses (13.3%).

Desire to grow
Zero employee businesses were asked why their organisation did not have any
employees. The main answers given to this question were:
• Not enough work to require employees 36.3%
• Prefer to work on my own 25.8%
• Use family 16.4%
• Too expensive 12.3%
• Use casual staff when needed 8.5%
• Employment regulations 4.8%

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Zero Employee Businesses: Interim report

Less than half of zero employee businesses have a business plan (47.8%)
compared with nearly two thirds of micro businesses (65.2%). 63.1% of zero
employee businesses expected they would still have no employees in a years
time.
Furthermore, when asked if they intended to grow their business over the next 2
to 3 years, over half of the zero employee businesses (52.4%) said they did not,
compared to just over a third of the micro businesses (34.7%). The top two
reasons cited by zero employee businesses for not wanting to grow were:
• I am happy with the size we are 48.2%
• I am looking to retire/close down business 22.3%

Education
In terms of their highest qualification, there appears to be little difference between
the zero employee and micro businesses, but a number of differences when
compared with the highest qualifications of all working people, classified as either
employees or the self-employed (Graph 6). The majority of business owners
have at least an A-level or equivalent, with only 11.7% of zero employee
businesses not having any qualifications at all. According to the SBS survey just
over a quarter of zero employee businesses have completed a recognised trade
apprenticeship (26.5%).
In addition, only 6.0% of zero employee businesses were working towards a
qualification at the time of the LFS survey.
Percentage
0 5 10 15 20 25 30 35

Degree or equivalent

Higher educ
Highest Qualification

GCE A Level or
equivalent

GCSE grades A-C or


equivalent

Other qualifications

No qualification

Zero Employee Businesses Micro Businesses All Working

Graph 6: Highest qualifications of zero employee and micro businesses. (Source: LFS, 2004)

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Zero Employee Businesses: Interim report

Training and Development


The SBS informs us that the vast majority (82.8%, compared to 66.7% of micro
businesses) of zero employee business said none of their managers had
received training and development to improve leadership and management. Also
78.8% of zero employee businesses have not funded or arranged any training or
development for themselves in the past 12 months. This is compared to 70.7% of
micro businesses.
The LFS also gives information on job related education and training (JRT) that
the business owner has undertaken in the past thirteen weeks. 11.7% of zero
employee businesses had undertaken JRT in the past 13 weeks, compared to
13.8% of micro businesses.

Previous work experience


The majority of respondents, according to the SBS, were either working full or
part time as an employee before they started or took over the business (79.8% of
zero employee businesses and 82.5% of micro businesses). 12.6% of zero
employee businesses were self employed before they started the business. The
remainder were either unemployed or in education/training. The reasons they
gave for starting the business in the first place are given below (Graph 7).
Percentage
0 5 10 15 20 25 30

Independence, own boss, etc.

Financial reasons, make money, etc

Difficulty finding employment, redundancy

Difficulty finding suitable employment

To develop an idea

To develop a hobby or skill

Continue family tradition

Social enterprise, not just make money

Exploiting a gap in the market

Career progression

Zero Employee Businesses Micro Businesses

Graph 7: Reasons for starting the business. (Source: SBS)

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5. LEARNING NEEDS AND PROVISION

Respondents
We have received 20 completed questionnaires and interview responses from a
range of organisations. These include:

• Engineering Construction Industry • Chartered institute of purchasing


Training Board and supply
• Skillsmart Retail • Skills4Auto
• Irwin Grayson Associates • Wales Management Council
• Institute of Leadership and • Association of Ceramic Training and
Management Development
• Federation of Small Businesses • Construction Industry Training
Board
• The Solution Organisation
• National Childminding Association
• E-Skills UK
• Creative and Cultural Skills
• East Yorkshire Secretarial Services
• Southend Enterprise Agency
• ECJ Associates
• Institute of Business Advisers

Based on the three sections of the questionnaire, fourteen have given


information they may have, all have given their views and many gave other
sources or contacts which have been followed up. A summary of the responses is
given below. It is worth noting at this point that further responses will be built into
the final report and that we have not been able, to date, to acquire information on
the extent of provision as this is not systematically recorded or readily available,

Characteristics of zero employee businesses


Although there seems to be a large number of home-based zero employee
businesses, the importance of recognising the diversity of their objectives and
locations is made clear. It was also thought that a distinction needs to be made
between zero employee businesses and micro and small firms with employees
when considering policy or standards writing. This is consistent with our statistical
findings on the important differences between these two categories of business.

Terminology
Our research has identified that the term “zero employee business” which is used
throughout this report, is not recognised or preferred by many of the businesses
to which it is referring. This is because many do not necessarily see themselves
as businesses. They are overwhelmingly deploying particular professional, trade

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or other occupational skills and will typically categorise and see themselves from
this perspective. There is a huge diversity to this group and the terminology used
by them varies greatly. This is a point that should be taken into consideration by
anybody considering engagement with this group.

The major threats facing these businesses


The major threats to zero employee businesses appears to be Government red
tape and legislation and a lack of available funding or difficulty for these
businesses in trying to getting hold of the funding that is available. The majority of
the other threats mentioned are sector specific, such as the extended school
agenda for childminders, and large corporate retailers in the retail sector.

Growth
One respondent noted that the business development standards tended to
assume that growth would be expressed in terms of employment. There is
therefore a gap for people who do not want to grow in this way. This also applies
to provision. An example was given of a business advisor who may have a
significant potential for growth in turnover without requiring employees. To do this
they would have to reposition themselves in the market place, moving away from
low fee work to doing higher fee work directly with businesses. It was thought that
this could apply across zero employee businesses and was not specific to
advisors. Such non-employing growth would be beneficial to the individual and
could have advantages for their client base and the Chancellor.

Their learning context


The general feeling is that these businesses use the skills and experience they
gained earlier in their career. Setting up the business creates the opportunity to
use them in a way that allows more freedom and independence. As seen in the
statistical data, many people will have appropriate occupational qualifications.
However, in sectors such as retailing, these skills are unlikely to be backed by
formal qualifications.

Appropriate learning provision


There was a consensus over what good learning provision for zero employee
businesses and the person delivering the learning, should be. The key points to
emerge were:
Type of provision:
1. Just in time, not just in case provision.
2. Short, sharp, brief sessions – bite-size chunks.
3. Low cost or cost free.

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4. There is no one-size-fits-all answer. Provision should be tailored to solve


the specific problems of the business.
5. Must be flexible – weekend and evening provision, local, modular.
6. Distance learning options, such as online learning/CD ROMs.
7. Values the life experiences of zero employee business owners and
encourages networking to aid learning from others.
8. Good web site support with papers/additional texts/course content.
Characteristic of the person delivering the learning:
1. Has credibility and the trust/respect of the organisation.
2. Has knowledge of, and can empathise with, the characteristics/issues of a
single person organisation.
3. Must have had practical, hands on experience, not just academic.

There were mixed opinions about e-learning. It’s capacity to be just-in-time and
available when where convenient could be a major benefit. However, some
suggest it is not appropriate, that learners should be encouraged to come
together and learn from one another. Another suggests zero employee
businesses will not have the time to complete e-learning.
There was a need to conduct research into businesses where English is not there
first language and how they would prefer to receive learning and development.
One respondent thought coaching would be the most effective method of
promoting growth in turnover for these businesses. However this required highly
skilled coaches, not just re-branded advisers. It has to be recognised that there is
a different skill set involving communication, driving people and securing
attitudinal change.

Should provision for those considering, starting and running such a


business be integrated into other programmes, such as degrees?
Although the majority of respondents said yes to this question, there was a mixed
set of comments, including:
“Yes, as the inclusion opens up the horizons of young people as they determine
their career.”
“Only if this is a specifically anticipated requirement of delegates. Otherwise
programmes should be generic to the requirements of their stated audience.”
“Probably. It would be sensible to make the knowledge and information more
widely available which might prevent problems and difficulties for many who go
down this route.”
“Yes, because if training is already taking place it should be easier to introduce
new forms of training in this way.”

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“Yes – often those studying begin their business activity before their course ends
and need these skills up front. Also, once learners have moved on from full or
even part time education it is harder for them to find the time or funding for such
training.”
“Possibly, if one can separate what entrepreneurs ought ideally to learn before
they actually start in business, but since every business is different, this may be
difficult.”
“…there are many skills required to run a business which are useful if not
important in effectively running a life! For example cash flow, budgeting,
accounts, marketing!”
“No. But they could and should lead into further acquisition of knowledge. How
that is done is up to the participant to decide helped by the deliverer.”
“It is only relevant if that is the path the client wants to take.”
“Yes, once they have a clear understanding of the basics.”

Engaging zero employee businesses in learning


Although engagement with this group is considered very difficult, it would appear
the first stage of engagement is to persuade them of the benefits of learning. One
respondent said the only way to do this is on a one-to-one basis, through door
knocking and similar direct contact. Also, in order to engage with them effectively,
the provider must be aware of their needs and demands, and the provision must
be appropriate to these, e.g. flexible, low cost etc (see above). One respondent
said:
“What we need is real engagement and discussion with zero employee
businesses to identify their needs, and then deliver to their specification.”
A major issue, as one respondent saw it, is in changing attitudes. People may
have personal aspirations but this is not always translated into business
aspirations. They may, for example, develop a degree of complacency and
comfort and be happy to stay where they are. Supporting non-employment
growth would require them to adopt a very different set of attitudes and confront
new challenges.
Established businesses would also be more resistant to taking up offers of
support, especially from publicly funded sources. If they were to invest time and
effort with someone offering support they wanted to know that there would be a
return to the business. To achieve this they would have to be convinced that the
person delivering the support was going to be good enough to help them do
better than they already were. This means high quality and will not come cheap.

Accreditation and qualifications


The majority of responses thought that zero employee businesses are not
interested in accreditation and qualifications. For example:

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“Achievement recognition is bottom line only. For zero employee businesses to


want their learning achievement recognised with a piece of paper, it is
tantamount to admitting the business will not work and they will need the piece of
paper to help them look for work afterwards.”
“Forget qualifications. Forget credits. Forget policy frameworks. Think people.
Think needs as expressed by them. Think delivery that helps them succeed in
the way they want to succeed.”

Implications of such a strategy for Sector Skills Councils (SSCs)


Respondents were asked to consider the implications of their views on the
learning needs of zero employee businesses for Sector Skills Councils. One
reoccurring point was that they should provide funding and resources for the
learning activities. The following points were made about the roles of SSCs:
“Trying to create strategy for a disparate, large number of small organisations.”
“If nothing else how do they engage with such businesses and how do they
operate their skills provision flexibly so it benefits the breadth of sizes of
businesses from the one man band to the multi national organisation.”
“The starting point will need to be good, accurate information as to the
requirements and demands of such businesses.”
“Sector skills councils know nothing about zero employee businesses and are
not interested. We are starting to get comments that SSC programmes are only
suitable for firms with 10 or more staff.”
“They should stop thinking that strategies and standards frameworks are the
answer to individual needs. They have a place, but for most zero employee
businesses they will be largely if not wholly irrelevant.”
“It needs to be developed within each sector as although there are generic
issues facing the one man organisation there are also network and practical
issues relating to individual sectors.”

The risks of such a strategy


There was a concern that such a strategy would create more legislation which
would bring more burden on the business. The main risk highlighted by several of
the respondents is in attempting to develop a strategy for zero employee
businesses and having it fail due to factors such as insufficient resources. Getting
it wrong will put these businesses off participating in learning and development
activities in the future.

Current provision
There was a great deal less information given about current provision for this
group of businesses. It was felt that zero employee businesses were largely off
the policy radar and seem to be seen as unimportant in terms of their contribution

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to meeting policy objectives. One respondent said you do not really see any of
this provision at the moment, at least in the publicly funded area.
Some provision was identified, although is should be noted none of this provision
is specifically targeted at zero employee businesses:
• There would seem to be a few courses available in the retail sector for
micro-shops, although take up is low due to a lack of funding.
• Courses are also available for childminders, many of whom would be
considered zero employee businesses, including the CACHE Certificate in
Childminding Practice. In the six months from April to September, 2005,
NCMA enrolled 1953 students on the initial unit of CACHE Certificate in
Childminding Practice, 119 on the second unit and 59 on the final unit.
From January 2006 the qualification has been revised to become the
Diploma in Home-based Childcare and remains a level 3 qualification on
the QCA Framework.
• ELWA fund a workforce development programme that allows businesses
to access advisor support. The learning plan developed would sign post
them to learning provision including further education. This programme
has only been running for six months so there has been limited take up,
although a number of the participants were zero employee businesses.
This provision is not marketed to zero employee businesses as they are
not considered a priority group. There are no specific plans or policies for
this group of businesses.
• The Scottish Enterprise Network funds a “Start your own business”
programme plus Skills Workshops (in Bookkeeping, Marketing etc.). Take
up is approximately 300 per annum partaking in all parts of the
programme. They estimate that approximately 80% of these are zero
employee businesses. They also do not have any plans or policies for new
or extended provision for this group of learners.
• The Institute of Leadership and Management list a number of NVQ level 2
and 3 qualifications aimed at people starting or think of starting a
businesses. They further stress that these qualifications are largely
irrelevant for zero employee businesses. It is the benefit derived from a
learning programme that matters.
• NCFE launched The Business Gym in October 2005. This is a one day
event for newly established businesses that examines the personal impact
of running a business. So far 70 businesses have attended, approximately
50 of which were zero employee. They stress that one of the major
problems is getting funding as zero employee businesses tend not to see
the benefit of such training until they have attended.
6. CONCLUSIONS
Based on the descriptive statistics and survey results, a number of conclusions
can be made about the nature of zero employee businesses, their skills needs
and current provision for this group.

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Characteristic of zero employee businesses


Location: A very high proportion of zero employee businesses are either family
owned or home based.
Obstacles: The two major obstacles to business success are obtaining finance
and legislation and regulations. The former seems to be more of an issue,
unsurprisingly, at business start up.
Sources of advice: The use of formal advice is low in zero employee businesses,
even compared to micro businesses, with over a quarter not seeking any
business advice at start up. Nearly three quarters of zero employee businesses
are not a member of any recognised business organisations.
Desire to grow: Roughly half of zero employee businesses are happy with the
size they are and do not have any plans to grow in the next two to three years. It
should not be forgotten that this also means roughly half of those surveyed do
wish to grow and that this growth may not necessarily be expressed purely in
terms of increasing employment.
Diversity: Like micro businesses, zero employee businesses are an incredibly
diverse segment, covering a range of industry sectors with equally diverse
business objectives and locations. Despite some similarities, zero employee
businesses should be recognised as distinct from micro businesses and
standards and provision needs to reflect this.
Terminology: It has also been made clear that many of these “one-man-bands”
do not see themselves as businesses and would not recognise the term “zero
employee business”. This seems to be partially confirmed by the fact over half of
these businesses do not have a business plan.

Skill Needs
Education: Zero employee businesses do not seem to differ in a significant way
from micro businesses in terms of their qualifications.
Work experience: The overwhelming view seems to be that people start these
businesses using the skills and experience they have gained earlier in their
career, but want more independence.
Training and development: Take up of job related training and education, whether
on or off the job, is very low in zero employee businesses, substantially lower
even than in micro businesses. The survey respondents made it clear that these
businesses, generally speaking, will only seek training or information when they
need it and then they are more likely to seek advice from informal sources such
as friends and family.
Appropriate provision: There was a general consensus of what appropriate
provision would look like for this group. The points were consistent with the
SFEDI best practice principles, but stressed that the provision should generally
be of the just-in-time nature and tailored to address the specific problems of the

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Zero Employee Businesses: Interim report

individual business. This is because although there will be generic training needs,
the diversity of the group means that the needs of the individual need to be
catered for.
Engagement: Engagement with these businesses is difficult and must be done in
a way that makes clear to the individual the benefits of learning and development
and changing attitudes to training. Engagement must occur on a one-to-one
basis from somebody who is trusted and respected by the business.
Accreditation and qualifications: The overwhelming majority of respondents
implied that qualifications will be of little importance to this group and of little use.
The value of the training must be shown in the impact it has on the business in
terms of solving individual problems and providing observable benefits for the
business.

Current provision
Information on current provision is lacking, but this seems to be in relation to the
lack of provision suitable for this segment. In terms of the “ideal provision” that is
outlined above, there seems to be little, if anything that is specifically tailored to
the needs of these businesses. Many have commented that, in terms of policy,
these businesses are largely off the radar and of low priority in terms of meeting
policy objectives.

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Zero Employee Businesses: Interim report

7. RESEARCH SOURCES

Labour Force Survey – Spring Quarter, 2004, Office of National Statistics


The Labour Force Survey (LFS) is a very large Government survey designed to give
information about the number of people with jobs, the details of these jobs, the job-search
activities of those without work, and so on. The Spring 2004 Survey covers
approximately 129,000 households. A major benefit is that participants are
selected using National Insurance numbers, which means there should be no
initial selection bias. Further information on the Labour Force Survey is available
on the Office for National Statistics website at www.statistics.gov.uk

Small Business Service SME Statistics for the UK, 1997-2004.


Each year the SBS produce statistics on Small and Medium Enterprises. An
estimate of the number of enterprises, turnover and percentage of employment is
given, as well as regional and sectoral divisions. This data and further information
about the statistics can be found at:
http://www.sbs.gov.uk/sbsgov/action/layer?r.l2=7000000243&r.l1=7000000229&r.
s=tl&topicId=7000011759

Small Business Service Annual Survey of Small Businesses: UK, 2004.


This publication is based on a telephone survey of over 8,000 small and medium-
sized businesses in the UK. Its main purpose is to gauge the needs and
concerns of small businesses and identify the barriers which prevent them from
fulfilling their potential. More information about this publication can be found at:
http://www.sbs.gov.uk/sbsgov/action/layer?r.l2=7000000239&r.l1=7000000229&r.
s=tl&topicId=7000000231

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Zero Employee Businesses: Interim report

A request for information on zero employee businesses


and provision to meet their learning and development
needs.
This short survey is being conducted by SFEDI as part of the development of
QCA’s Sector Qualifications Strategy for Business Enterprise and
Entrepreneurship.
We recognise that you may not be able to answer all the following questions.
Even if you don’t have any information or specific views on provision for this
group of businesses it would still be helpful to know. We are grateful for any
responses you can make. If it is easier to send us or refer us to publications or
other sources of information then please do so.
We are defining zero employee businesses as: sole proprietorships and
partnerships comprising only the self employed owner manager(s), and
companies comprising only an employee director. This definition is taken
from the Small Business Service statistics website. Information on other
potentially relevant groups, such as home-based businesses, would also be
welcome.
Section 1: Information
1 Do you have any information on zero employee or related businesses?
Yes No
If yes, please continue to question 2, if no please go to Question 9.

2 Is your information specific to a particular sector, geographical area or other


category of such businesses?
Yes No
If yes, please give details below.

3 Do you have any information that would help us characterise or describe


these businesses, for example in terms of location (e.g. home-based) or
business objectives?
Yes No
If yes, please give details below.

4 Do you have any evidence that the numbers or nature of such businesses
are changing?

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Zero Employee Businesses: Interim report

Yes No
If yes, please give details below.

5 Are you aware of any particular threats and/or opportunities facing these
businesses?
Yes No
If yes, please give details below.

6 Do you have any information to help us characterise the learning context of


these businesses, for example in terms of prior qualifications and business
experience, sources of learning and engagement with advisers and
providers?
Yes No
If yes, please give details below.

7 Do you have any information on the extent of current provision for these
businesses and its take up?
Yes No
If yes, please give details below.

8 Do you have any other information, data or knowledge you feel may be
helpful to our research.
Yes No
If yes, please give details below.

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Zero Employee Businesses: Interim report

Section 2: Your views on developing appropriate provision


9 What characterises the type of provision that is appropriate for zero
employee or related businesses, for example in terms of length of learning
programme or activity, learning objectives, learning style or timing?

10 Are there other criteria for appropriate provision for such businesses, for
example the characteristics of the person delivering the learning support?

11 Should and can provision for those considering, starting and running such a
business be integrated into other programmes, for example apprenticeships
and degrees? Why?

12 What are the essential components for a strategy for engaging zero
employee businesses in learning and recognising achievement? How does
this relate to current policy, such as the development of a unitised, credit-
based system?

13 What, if any, are the implications of such a strategy for Sector Skills Councils
and other standards-setting bodies?

14 What are the benefits and risks of such a strategy? Are these of varying
relevance to different groups of zero employee or related businesses?

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Zero Employee Businesses: Interim report

15 Do you have any other views on learning and development provision for zero
employee businesses that you think may be of relevance to our research?

Section 3: Other sources and contacts


16 If there are other people, organisations, or sources of information we should
consult for further information please give details below.

17 Please give your details below so we can assess the scope of our responses
and provide you with results from the study. This information will be treated
as confidential and neither you nor your organisation will be identified in any
reports on this work.

Name:
Organisation:
E-mail address:
Postal address:

Post code:
Telephone:

Thank you for completing the questionnaire.

Please return your completed questionnaire to david@stratagia.co.uk


If you have any queries regarding this work please e-mail David at the same
address or telephone 0845 226 1712.

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Zero Employee Businesses: Interim report

FEEDBACK FORM

YOUR DETAILS

NAME:

ORGANISATION:

TELEPHONE NO:

EMAIL ADDRESS:

COMMENTS
Please make any comments you may have about this report below.

INFORMATION
If you have any information you think may be helpful, please give details below.

OUR CONTACT DETAILS


Please return this completed form to:

ADDRESS: David Yates


Room 101, Dunston Innovation Centre
Dunston Road
Chesterfield
S41 8NG
EMAIL: david@stratagia.co.uk
PHONE: 0845 226 1712
FAX: 0845 226 1714

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