BECs to create jobs, enterprise?

Amhran Nua · 27-09-2010 06:45AM #1

I recently came across this interesting concept, the Business Employment Co-operative (BEC), which would provide a far more fitting solution to long term unemployment as reclassified in 2008 to avoid paying people their full PRSI contributions than workfare or the much maligned wpp. Important stuff in red:

Business and employment co-operatives (BECs) represent a new approach to providing support to the creation of new businesses. The first BEC was started in France in 1996, since when a further 55 such enterprises operating in 100 locations across the country has sprung up. The idea has also been adopted in Belgium, Sweden, Quebec, Morocco and Madagascar.
Like other business creation support schemes, BECs enable budding entrepreneurs to experiment with their business idea while benefiting from a secure income.

The innovation BECs introduce is that once the business is established the entrepreneur is not forced to leave and set up independently, but can stay and become a full member of the co-operative. The micro-enterprises thus combine to form one multi-activity enterprise whose members provide a mutually supportive environment for each other.

A BEC thus provides budding business people with an easy transition from inactivity to self-employment, but in a collective framework. Intending entrepreneurs pass through three stages:
First, they remain technically unemployed but develop their business idea under the wing of the BEC;

Next, if it looks like being a success, they become a ‘salaried entrepreneur’ with the security of a part-time employment contract;

Finally they become a self-sufficient business, sharing in the ownership and management of the co-operative.

BECs allow a small business person to achieve control over their working life, but with the support of a group of people who are facing the same problems and want to pool their enthusiasm and expertise. They help to overcome one of the most discouraging features of becoming self-employed – isolation. They thus lower the bar for becoming an entrepreneur, and open up new horizons for people who have ambition but who lack the skills or confidence needed to set off entirely on their own – or who simply want to carry on an in dependent economic activity but within a supportive group context.

BEC clients are in all sorts of activities from cookery, industrial cleaning, furniture restoration and organic horticulture to violin making, jewellery, translation and web design. At the end of 2005, the 90 sites in the BEC network numbered 2,618 supported entrepreneurs plus 1,138 salaried entrepreneurs (including 60 member entre¬preneurs), with a combined turnover of €16.5 million in 2005. Two-thirds of entrepreneurs start off as unemployed, two-thirds are aged between 30 and 50 and 53% are women.

This sounds to me like exactly the sort of solution the government should be throwing our tax euros behind with gusto, ideal for situations where you have an otherwise highly or medium skilled and motivated workforce with nowhere to put their skills. Take it one step further and put governent funding behind these BECs as well as setting up a legislative framework for their existence (all you can have these days is pretty much a limited company), and let people use what they know to build their own enterprise.

MrDarcy · 28-09-2010 11:51AM

I had an idea for something very similar and I posted it up here recently and like everything else in this country it gets sneered at. I think it's a very good idea OP and it could be specifically adapted to work very well here and create jobs in Ireland.

The one thing though I would have concerns about would be the proposed management of any such organisation, by any public body such as the County Enterprise Boards, FAS, Enterprise Ireland or any other public sector organisation.

It would be great if a nationwide network of enterprise creation hubs could be set up across the country, say if it worked along the lines of the Credit Union network, where it is funded and governed by members, thereby keeping out the useless and incompetent state bodies that are associated with enterprise creation but actually create no jobs.

I also thought before that such an organisation could work along the lines of BNI, (Business Network International), bringing together businesses that can trade with each other and support each other.

I think the key to getting something like this in place is gaining local members around the country, and keeping the likes of the CEB's and other government QUANGO's out of the way, so that some progress can be made.

Amhran Nua · 28-09-2010 02:25PM

Some good points there MrDarcy, I like the idea of the credit unions getting involved from the start. Another possible addition to it is the idea McWilliams was floating a while back, taking experienced but unemployed businesspeople and giving them equity in startups in exchange for their knowledge, apparently it worked wonders in Argentina. The more of these ideas that get stitched together the better an environment for entrepreneurship in Ireland we can build.

You would need government support for it though, at minimum to create the legislative framework to allow these entities to exist beyond simply being limited companies, and I'd aim for office space (not incubators) and advertising, often the biggest costs in any new enterprise.

MrDarcy · 28-09-2010 04:04PM

Amhran Nua wrote: »

Some good points there MrDarcy, I like the idea of the credit unions getting involved from the start. Another possible addition to it is the idea McWilliams was floating a while back, taking experienced but unemployed businesspeople and giving them equity in startups in exchange for their knowledge, apparently it worked wonders in Argentina. The more of these ideas that get stitched together the better an environment for entrepreneurship in Ireland we can build.

You would need government support for it though, at minimum to create the legislative framework to allow these entities to exist beyond simply being limited companies, and I'd aim for office space (not incubators) and advertising, often the biggest costs in any new enterprise.

Yeah that idea was also excellent I thought, connecting up established business people with start out entrepreneurs. I failed not once but twice when I started out, many if not all of the lessons I learned were obvious afterwards.

One thing I found (after my first venture), was that I had managed to pick a business idea that was not really at all suited to my personality, and the further I got into it, the more I actually hated it. When it eventualy ended in a way that I had little control over, a large part of me was actually relieved.

There are really so many things to think about when starting out, and often it's the little things that are not financially related, that end up catching you out at some stage. I have a degree in management that I secured before I ever went out on my own and I can tell you that it was a great qualification but there is a world of difference between doing it in theory and doing it in practice.

I do agree that some kind of state support would be necessary but in order for the idea to work it would have to be kept firmly away from the kind of useless beaurocrats that the likes of the County Enterprise Boards have on their panel, politically appointed gullies who literally haven't a clue about job creation.

EDIT: I meant to say that the idea of the Credit Union aspect to the concept was that the organisation would take that model and basically set up some kind of an "Enterprise Credit Union", under the CU legislation as it currently exists. The way it would work would be that as a member, you could borrow but you'd have to secure your lending with shares and you are also personally responsible for the debt.

I know this would create a preliminary problem which would be, well what do you do when every member wants to borrow, where do you get the lending money from??? That's where experienced business people could come into the organisation and also become shareholders but purely for investment purposes.

I had envisaged something like this as not being unlike the Freemason's (I know this sounds stupid until you think about it for a minute!), where you come in as an apprentice and you work your way up through the organisation over the years, through various degrees. Imagine coming into the organisation as an "apprentice" and after one year of preparation and lodging into your shares, you can borrow up to say a limit of 3 times your shares to a maximum limit of 10K. By this stage your business plan has been dismantled and put back together again by people who have experience. When the business plan is viable, you can be given office space and support services in an incubator unit..

Amhran Nua · 28-09-2010 04:20PM

You might set it up in such a way that you could have education (especially distance and e-learning) -> develop idea -> salaried -> self sufficient and cut FAS out of the loop as well as the city and county enterprise boards. So if say someone wanted to learn a new skill, and produce a business from that, they could do it all under the aegis of the one group. This might also be handy in pointing the budding entrepreneurs in growth and export directions.

It would be nice if the public could directly invest in these businesses as well, while we're wandering off into the territory of easy to do but probably will never happen, from the salaried level onwards, via their credit cards and the internet, purchasing stocks to put capital into the businesses. It would neatly solve any problems with potential fraud since all the businesses could come pre-vetted. I'd certainly put a hundred euros a month into a variety of business ideas.

MrDarcy · 28-09-2010 04:29PM

Amhran Nua wrote: »

You might set it up in such a way that you could have education (especially distance and e-learning) -> develop idea -> salaried -> self sufficient and cut FAS out of the loop as well as the city and county enterprise boards. So if say someone wanted to learn a new skill, and produce a business from that, they could do it all under the aegis of the one group. This might also be handy in pointing the budding entrepreneurs in growth and export directions.

It would be nice if the public could directly invest in these businesses as well, while we're wandering off into the territory of easy to do but probably will never happen, from the salaried level onwards, via their credit cards and the internet, purchasing stocks to put capital into the businesses. It would neatly solve any problems with potential fraud since all the businesses could come pre-vetted. I'd certainly put a hundred euros a month into a variety of business ideas.

What I was thinking as well, based just on one of the lessons I learned previously, was that it would have been helpful to me if I had been forced into a position from the absolute outset, where I had to share my financial trading information with other people who were helping me in a very open and transparent wat. I know instinctively this would give rise to competitive issues and data security issues, but I think this is one of the places where start out entrepreneurs make huge mistakes, not getting good accounting discipline bedded in from the outset.

Before you know it you have a debtors book that's out of control, you don't know where you stand in relation to the liquidity of your business, and next thing you know you are borrowing from Peter to pay Paul.

I think something like this could create many jobs, it could be a bit like Dragon's Den (without the camera's), where in order to get accepted into the organisation, your busines idea/concept must make sense, the business model must be low cost in relation to entry to market, basically it must "tick certain boxes"...

Amhran Nua · 29-09-2010 10:50AM

Look at this, a couple of lads kicking around a few ideas on the internet for a few hours come up with a more detailed and probably more feasible job creation strategy than the entire Irish government put together after three years.

MrDarcy · 29-09-2010 01:27PM

Amhran Nua wrote: »

Look at this, a couple of lads kicking around a few ideas on the internet for a few hours come up with a more detailed and probably more feasible job creation strategy than the entire Irish government put together after three years.

Your dead right, what bugs the absolute sh*t out of me in this country is how so much political lip service is paid to what is really a simple task. Get entrepreneurs sitting down and thinking and working together. Next thing you know you've an unbelievable dynamic going around the room and things are happening, idea's are emerging, progess is taking fight.

I'd love to know how much money those spastics down in government buildings spent on the PR work for that 300K job strategy yesterday. I'd say it was hundreds of thousands of Euro, how many dozen jobs could that create if it was used to support the creation of small businesses???

hinault · 29-09-2010 01:41PM

Very interesting thread.

Excellent contributions.

Welease · 29-09-2010 01:53PM

This is the type of initiative I was talking about in the other thread..

A simple scheme which allows people to use their talents and go back to work..I have no issue with us running a defecit if the money was being used for scheme's to encourage growth.. real growth, not just education and then a void...

In addition, we should also be looking a) the costs of starting up.. what can be done to make this easier and b) the cost of failure.. what can be done if things go wrong.. a system where banks require personal guarantees for loans, and bankruptcy legislation which keeps you down and out of the game for 12 years are a hinderance to quantified risk taking..

MrDarcy · 29-09-2010 03:49PM

The one thing I want to say is that I've never seen passion in such abundance as when you have a few people in a room teasing out a business idea. You quickly see people getting on their feet and getting animated about their idea. It's an amazing thing to see someone who passionate and convicted within their own particular business idea.

Another very valuable side-benefit from something like this is that it is a very effective way of diffusing the inherent fear that is out there when it comes to putting a business idea into action. We all suffer from it, maybe it's the national pysche that is the root cause of the well known reluctance to "go at it", but one thing I found in the past is that when you are regularly surrounded by people who are as like minded as you, it is a much easier task to take the big jump, knowing that next week you have access to people who you can bounce ideas off and share problems with.

The alarming thing is that this idea under discussion here is not rocket science, it is so fundamentally obvious that you'd wonder why it is not something that is in place already...

hinault · 29-09-2010 06:56PM

The Co-operative concept is an excellent concept and has been proven to have worked.

Consider the origin of what is now Kerry Group, Glanbia and Avonmore.
Each of these quoted public limited companies, commenced their respective existences as farming co-operatives.

From inception each stakeholder has a beneficial interest in making the co-operative concept work.
Pooling resources such as raw materials, labour and enterprise each co-operative grew and became ultimately public quoted company's.

Welease · 29-09-2010 06:57PM

MrDarcy wrote: »

The one thing I want to say is that I've never seen passion in such abundance as when you have a few people in a room teasing out a business idea. You quickly see people getting on their feet and getting animated about their idea. It's an amazing thing to see someone who passionate and convicted within their own particular business idea.

Another very valuable side-benefit from something like this is that it is a very effective way of diffusing the inherent fear that is out there when it comes to putting a business idea into action. We all suffer from it, maybe it's the national pysche that is the root cause of the well known reluctance to "go at it", but one thing I found in the past is that when you are regularly surrounded by people who are as like minded as you, it is a much easier task to take the big jump, knowing that next week you have access to people who you can bounce ideas off and share problems with.

The alarming thing is that this idea under discussion here is not rocket science, it is so fundamentally obvious that you'd wonder why it is not something that is in place already...

Well you see thats part of the problem... We run sessions like you described all the time (min. once per month).. and people are enthusiastic as they will share in the benefit of whatever great ideas come out..

With regards to the implementation of a plan like the original post, there is little or no incentive for our civil servants to start looking at other innovative models on how we could modify our business process's/legislation to allow new business's to flourish.. so they don't..

I would love to see incentive programs in the PS to encourage just these sort of ideas and radical thinking..

MrDarcy · 29-09-2010 07:26PM

Welease wrote: »

Well you see thats part of the problem... We run sessions like you described all the time (min. once per month).. and people are enthusiastic as they will share in the benefit of whatever great ideas come out..

With regards to the implementation of a plan like the original post, there is little or no incentive for our civil servants to start looking at other innovative models on how we could modify our business process's/legislation to allow new business's to flourish.. so they don't..

I would love to see incentive programs in the PS to encourage just these sort of ideas and radical thinking..

I think once you let a civil servant next nor near something like this, it immediately becomes a Quango and without any delay whatsoever, you'll find the whole thing lurching from one mind zapping beaurocratic debate onto the next.

Welease · 29-09-2010 07:44PM

MrDarcy wrote: »

I think once you let a civil servant next nor near something like this, it immediately becomes a Quango and without any delay whatsoever, you'll find the whole thing lurching from one mind zapping beaurocratic debate onto the next.

lol probably true... but they do need to be involved in the wider sense so we can change the environment to at least be less of a barrier to growth..

I had an interesting conversation with a mate yesterday (slightly different topic from the plan above, but maybe it's somewhat linked).. he has run a small building company for about 20 years (and his Dad ran it before him).. In the boom the expanded out and employed about 20 guys.. They ran a sensible business, no bad deals, no developer crap and as a result no bad debts, they stuck to what they do very well, one off builds and extensions.. Unfortunately with the downturn he has had to let all the lads go in order to keep himself and his family afloat (and pay the business expenses on equipment)..He has done all of this successfully, and is now turning away work because he doesnt have enough time..

His dilemma.. He feels he neither has the time or funds available to start doing all the paper work and legalities involved in hiring again.. He felt that taking on one person to help out involves just as much paper work and overheads as when he had 20.. and if he is taking care of those overheads noone is out the creating the business he needs in order to pay the bills.
It's easier to pay those lads cash in hand on the black market when he needs them that to go through legitimate channels.. even though he would prefer to start rehiring..

There's something very wrong with that picture when we have so many unemployed.

(I will confess I have not been involved with hiring in Ireland for a long time having mainly been involved with business abroad, so can only relate his complaint)

Amhran Nua · 30-09-2010 09:49AM

Could this be the thread that saves Ireland?

Probably not, if only because our public representatives are too busy polishing the parish pump to get re-elected. Nevertheless lets briefly correlate:

Final goal:
Create a network of nationwide enterprise hubs based on the Business Employment Co-operative model which has proven successful in several countries. The idea of this scheme would be to provide an easy transition from inactivity to self employment.

A primary phase might be entrepreneurship educational schemes outside of the FAS framework, aimed at giving people real skills they can use to start their own businesses. This would include basic business accounting discipline.
They remain technically unemployed but develop their business idea under the wing of the BEC. Take experienced but unemployed businesspeople and give them equity in startups in exchange for their knowledge and contacts. At this stage the business plan has been dismantled and put back together again by people who have experience.
If it looks like being a success, they become a "salaried entrepreneur" with the security of a part-time employment contract. In addition, shares in the company can be sold to the public via an online credit card facility, up to say two fifths of the company; if even 1% of the population put €100 a month into those new companies, you'd have a budget of a million euros a week to invest. Open it up to foreign investment in Europe and the US and there is no limit to how high the numbers can run, as well as bringing in capital from other countries. At a certain point the entrepreneur can take out a loan up to three times the amount of investment and money they put in themselves from the BEC hub credit union, although they remain personally responsible for the loan. Office space and advertising funding might also be supplied prior to this point.
Finally they become a self sufficient business, sharing in the ownership and management of the co-operative, or optionally going it alone.

Legislative and governmental groundwork:

Create a specific entity beyond a limited company in Irish corporate law, the BEC.
Change the rules for certain unemployment benefits to fit the BEC model.
Reduce the complication involved in hiring new people as PAYE employees, which has benefits beyond this concept.
Create a new classification of debt, enterprise debt, with much more lenient terms than the traditional Irish bankruptcy structure.
Tax incentives for public investment in the BEC companies, say no taxes at all on profits made from shares in these companies for a period, and make them a tax deductible write off.
Prior to the company becoming self sufficient, have a reduced tax rate for company income.
An initial government advertising campaign and funding to provide an incentive for the BECs to be set up, with very limited ongoing involvement. This funding could be taken from the enterprise boards and other services which are no longer required, or whose usefulness is reduced.

I've probably missed a couple of things there, but thats the overall picture. Any other ideas?

MrDarcy · 30-09-2010 11:08AM

Amhran Nua wrote: »

Could this be the thread that saves Ireland? Probably not, if only because our public representatives are too busy polishing the parish pump to get re-elected. Nevertheless lets briefly correlate:

I have a friend who is on the dole for the last year or so, he is going on a Back to Work Allowance now which lets him keep his dole in full for 12 months and half of it for the following 12 months, so there is state support there in some form or another if you are starting up a business, or maybe it would be more accurate to say that there is state support for a "person" who is entering self employment, albeit that there is a very obvious lack of support for the business entity itself.

But the other point that I wanted to make was that with web technology, information and an organisational structure for a movement like this could be deployed and managed easily enough I think. If you look at the NI website:

http://www.bni.eu/ireland/

They have used the internet to a large extent to grow and manage the network. The model they have involves members of each chapter generating business for each other and passing that business around within the local chapter, in an economy with a chronically depressed consumer mindset, the incorporation I think of this element of their model into what we are discussing here, I think would be hugely beneficial. In the absence of a credible leader of the country leading people out of this depressed mindset, right now every single sale is important and an engine for sales such as this I think would be absolutely invaluable at the moment.

EDIT: I agree with everything above except this:

Amhran Nua wrote: »

Legislative and governmental groundwork:

* Create a specific entity beyond a limited company in Irish corporate law, the BEC.
* Change the rules for certain unemployment benefits to fit the BEC model.
* Reduce the complication involved in hiring new people as PAYE employees, which has benefits beyond this concept.
* Create a new classification of debt, enterprise debt, with much more lenient terms than the traditional Irish bankruptcy structure.
* Tax incentives for public investment in the BEC companies, say no taxes at all on profits made from shares in these companies for a period, and make them a tax deductible write off.
* Prior to the company becoming self sufficient, have a reduced tax rate for company income.
* An initial government advertising campaign and funding to provide an incentive for the BECs to be set up, with very limited ongoing involvement. This funding could be taken from the enterprise boards and other services which are no longer required, or whose usefulness is reduced.

I don't think any real progress could be made on these kind of things until such a time as the organisation had a critical mass of people behind it. I think a certain amount of acceptance is necessary of the fact that this government (and probably the next one as well), are not on the same page as entrepreneurs, they are speaking a different language. There is a public sector, "committee driven" culture within this government, they don't understand what action or a call to action is, they are used to meetings for the sake of meetings, as opposed to discussion as a requirement for action.

Look at the Credit Union movement, they have little or no influence at government level and they have members in every village, town, city and street in Ireland, they are pretty powerless at keeping the government from bringing their business transactions out of the eye of the eye of the Irish Credit Bureau.

I think the whole thing could be kicked off under existing statutory provisions, I wouldn't be getting into trying to change the statute book on this one for a while, action action action is my view of it...

Amhran Nua · 30-09-2010 12:56PM

MrDarcy wrote: »

The model they have involves members of each chapter generating business for each other and passing that business around within the local chapter, in an economy with a chronically depressed consumer mindset, the incorporation I think of this element of their model into what we are discussing here, I think would be hugely beneficial.

While the internet should be a keystone element of any project like this, in particular the educational elements, what the business networks have are interlocking complementary marketing and sales arrangements, which are fine as far as they go, but if you combine that with the BEC concept you end up with something like the Japanese Keiretsu model, corporations arranged around a central bank, the business networks on steroids. Its almost exactly the same blueprint they used to achieve the "economic miracle".

Not that I have any particular objections to the idea, under the direction of MITI the Keiretsus were absolute titans of the business world, but I think we might run into anticompetitive legislation pretty quickly.

MrDarcy wrote: »

I don't think any real progress could be made on these kind of things until such a time as the organisation had a critical mass of people behind it.

Agreed, having sat on numerous committees and been presented with proposals which literally rivalled the Lisbon treaty for wordy obfuscation (at the local authority level no less!), its unlikely that the clear, decisive action needed to put these ideas into motion exists at any level.

However, with the legislative adjustments in place, you have a marvellously perfect, unrivalled environment for entrepreneurship regardless of how badly the economy is doing, a dream come true for small businesses. I can't come up with any realistic means to make it easier. With that said, its important to include the legislative adjustments and additions from the outset, so that the bar is set, and there is something to aim for.

MrDarcy wrote: »

I think the whole thing could be kicked off under existing statutory provisions

It could, but it would be far from optimal. Aim high and you won't fall too far short.

BECs to create jobs, enterprise?

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