David Grayson outlines the roles for government in helping small business. Many national governments have established their own business advice agencies. One of the most substantial and long-established is the US Small Business Administration - created in 1953. It provides financial, technological and management assistance to Americans wanting to start, run and grow their own businesses. In 1998, it provided management and technical assistance to more than one million small business owners. The SBA's portfolio of business loans, loan guarantees and disaster loans - worth over $41 billion - makes the SBA the US's largest single financial backer of small businesses in the USA. (www.sbaonline.sba.gov).

Business - especially small businesses - is inherently suspicious of government and is, therefore, wary of any business advice services provided by government. Whatever the objective quality of the advice, there will always be the suspicion that information given in confidence to a business adviser will somehow find its way into the hands of tax and regulatory authorities. Conversely, business support organizations that are clearly seen to be run by and for business are much more likely to win the confidence of small business clients.

Beyond sound and stable macro-economic policies and a reasonable regulatory framework for business, the most effective government contribution is, therefore, to engage business people in the provision of its own business information and support services.This involves government in a number of roles:

Funder: pump-priming and providing core funds for services that are desirable for improving business performance but which small businesses are unable to pay for - or certainly unable to cover the full cost. Specifically, funding services where there is market-failure.

Cajoler and catalyst: to bring different organizations together and to provide a forum where they can agree on common standards and services. This may sometimes involve banging heads together or rewarding good collaboration between business organizations that are being asked to work together.

Champion: to encourage quality and continuous improvement; encouraging benchmarking between business support organizations and establishing an authoritative accreditation and certification system to ensure quality - either through voluntary self-policing or statutory means.

Stimulator: to help business organizations develop a long-term vision of how the external environment is changing, how this will affect small companies and, therefore, to help business support agencies respond both in terms of what they do and how they provide it.

The growth of the Internet and growing use of new information and communications technologies by small businesses, means that Governments can provide a great deal more information on-line - and - in particular - can publicise regulatory requirements for different categories of smes through the Internet. The SBA website, for example, allows small businesses to identify regulations affecting them. Singapore's Productivity and Standards Board (www.psb.gov.sg), and its Trade Development Board offer substantial information via the Internet - as part of the overall Singapore Government "thinking island" strategy (www.ecitizen.gov.sg). TheBritish Government plans for a Small Business Service (due to start in Spring 2001) include strong emphasis on e-commerce, and making advice and information available electronically.

Additionally, government has its own unique channels - for example, embassies around the world - which can provide additional advice and support for businesses wanting to trade internationally. The UK government-supported network of one-stop shops for small business support - the Business Links (www.businesslinks.co.uk)- and the US network of Manufacturing Extension Centers specifically designed to help small manufacturing businesses (www.nep.nist.gov) are both based on local partnerships of existing publicly funded/subsidized support services under local business leadership. In the case of Business Links this has involved chambers of commerce, Training & Enterprise Councils, local enterprise agencies and local councils.

These one-stop shop initiatives have a number of aims:
Raising the quality of service to small businesses.
Bringing together a range of different organizations' services.
Developing new services.
Reaching more businesses.
Changing the primary focus for publicly supported business development agencies (from an almost exclusive emphasis on the self-employed and micro-enterprises towards a greater balance, including a concentration on companies that have the aspiration and the potential to grow, recognizing these will include some start-ups).
Proactively going out to find this new primary target audience.
Reducing the duplication between agencies and thereby freeing up resources for new service development.
Moving from producer-led to customer-focused activities.
Hollowing out from government a range of services to business that were previously run by government.
Anchoring business support more firmly into a coherent economic development strategy for a locality.


A key innovation has been the introduction of Personal Business Advisers (PBAs) in the UK Business Link system and 'Engineers' in the US Manufacturing Centers. Analogous to account managers in an advertising agency or a relationship manager in a corporate finance house, these are the gate-keepers to a range of help both from within the centers and from commercial services nationally and internationally. A census of 500 PBAs working in the UK Business Links showed that 89 per cent of them had previously run their own business or worked in a small business. They bring a wide range of sectoral expertise to the network.

Video-conferencing
In the UK the government has quite consciously funded state-of-the-art information technology for Business Links because the fast-growing small businesses that it wants to attract know the value of fast communications and market intelligence. Business Links is offering video-conferencing facilities into some major UK embassies and consulates to help small companies make direct contact with customers and suppliers. This will become part of a set of integrated international trade services.

Government-subsidized business support services should not and cannot replace the market, however. They are there to help owner-managed businesses to make the transition to team-based organizations, to experience the added-value that competent external advisers can bring and to help start-ups/early-stage businesses that are not yet able to pay for such services commercially. Publicly supported services can also introduce small businesses to new forms of support: for example, to help first-time and passive exporters, or to help them to understand the value of design.

This is not picking winners - but if they have worked with a businessman or woman over an extended period, experienced business advisers are usually able to spot those with the aspiration and the potential to grow.

There is a strong argument that government-backed business support agencies should be charging for some of their services. First, because this will generate net extra resources that can be ploughed back into the development and extension of services. Second, and arguably at this stage even more important, charging is about credibility, demonstrating value and setting the right culture. There is growing evidence to show that small companies value much more those services for which they are paying. If business support services are to succeed, they must be run in a business-like way and operate commercially (albeit with a clear public purpose). Both the English Business Links and the US Manufacturing Extension Centres aim to generate at least 25% of their income from clients.

International support

National support services also need to provide international business support, and the characteristics of world-class business support are very similar to those of successful international companies.

Services must be customer-focused, entrepreneurial, forward-looking, open to change and improving continuously, networked to a wide variety of external partners, their help tailored to meet the needs of individual customers rather than being based on 'schemes' with pre-determined qualification criteria.

Achieving this can be measured against a number of benchmarks:
Positive impacts on customers.
The percentage of total budget that is generated from clients' fees.
The quality of these earnings: is there a genuine increase in 'real' customer billings (not just recycling public grants).
Percentage of the primary target audience that is regularly using the service.
Numbers of clients who are repeat business.
Introduction of new clients by existing clients.
Numbers of two-way referrals with banks and management consultancies.
Percentage increase in first-time exporters and in passive to active exporters.


There are a number of international examples that can be drawn on. The German Steinbeis Foundation focuses on sectoral expertise - especially for technology businesses - by connecting small companies to a range of sectoral technical expertise in more than 370 Steinbeis Transfer Centres at education establishments and big company R&D centers. They have a pool of more than 3400 experts. (www.ste.de).The US Manufacturing Extension Centers mobilize the expertise and resources of individual partner organizations. The New Zealand TRADENZ agency is strong in integrated international trade services, helping small companies with market intelligence and so on.

In continental Europe, the Danish Technological Institute (www.technologisk.com) and the Emilia Romagna district of northern Italy have promoted and supported networking in the small business sector by building business support services around clusters of small companies in particular sectors.

There are a number of future challenges that business support services face: Finding robust measures of the impact that they have on their clients.
Reconciling the different timescales that politicians and media have for seeing results compared with the time that it really takes to change culture and practice.
Accounting properly for public funds without shackling the entrepreneurial drive and enthusiasm of business-led local partnerships.
Establishing credibility with clients as 'understanding the needs of businesses'.
Achieving the right balance between bottom-up flexibility and responsiveness to genuine local market differences, with the economies of scale and assurance of minimum quality standards that a national business support 'brand' has to have.


There is now an exciting opportunity to build on the initial success of support services such as the UK's Business Links by, for example, working with big companies to develop the capacity of their small business suppliers, by getting groups of small businesses working together to achieve quality standards (perhaps to exploit a particular overseas market or to develop staff training programs together) and through supporting the commercialization of technological innovations, either in new small businesses or through helping innovators to find licensing opportunities and joint ventures.

In particular, business support services can play a key role in building an 'infrastructure for collaboration' between government, successful technology entrepreneurs, big business, universities and centers of technical expertise. All of this becomes far easier with the advent of widespread sme usage of the Internet n

Copyright © David Grayson 2000

Business links

Wendy McCouaig and Steve Tillet both turned their business ideas into realities with the help of Business Link Kent. Wendy's project was the result of a visit to the US where the buggies for hire in shopping malls caught her eye. She decided that it would be a good idea to introduce the buggy to large UK shopping centres. Wendy had a prototype KiddyKar buggy designed and built which was given the seal of approval by her 22-month-old son Donnie (pictured left) and by Thurrock Lakeside which quickly placed the first order.

Steve (pictured right) needed finance to expand his racing seat manufacturing company, and he, like Wendy, turned to Business Link Kent for help. An adviser helped him draw up a three-year business plan and make a successful application for a business innovation grant. The grant, he said, enabled him to switch from making seats by hand to manufacturing them.