Advising Entrepreneurial Students
5.0 Can new graduates start successful new ventures?
Graduates are able to start new ventures, but it is quite rare. Most do something else first, for a variety of reasons.
5.1 Why do many of them hesitate?
5.2 What dilemmas will an entrepreneurial graduate face?
5.3 If it so difficult being an entrepreneur and starting a new business, why do they do it?
5.4 What do we know about how graduates start businesses?
5.5 What business challenges do they face?
5.6 Implications for the Careers Adviser
5.1 Why do many of them hesitate?
Many students are enterprising individuals, and can potentially start up a new business or other type of venture. However only a tiny percentage of students actually start a business immediately after graduating. Others go initially into employment, or further study, as a stepping stone to later independence.
The reasons the initial hesitation may be about personal or financial factors, or to build up experience. It may also be due to lack of self-confidence, or lack of encouragement or reassurance, but there may be others who are potential entrepreneurs but are not properly aware of the career options open to them. Any student who has entrepreneurial tendencies but misses the chance to use them is an unfulfilled opportunity – a loss to themselves, and a loss to the community.
It is possible that the low number of those starting a business is still due to lack of support and guidance, despite the efforts of the 'enterprise agenda' in many HEIs. Your Careers Service has a role to play in trying to ensure that such opportunities are not lost and that any hesitation is for good reasons, not bad.
5.2 What dilemmas will an entrepreneurial graduate face?
A graduate who embarks on setting up a new venture will immediately face some of the many dilemmas that will arise during their future entrepreneurial lives.
You can help them to be aware of these dilemmas, and to think how they will cope with them. This should help them decide how they should best capitalise on their entrepreneurial capabilities in the early stages of their career.
5.3 If it so difficult being an entrepreneur and starting a new business, why do they do it?
Almost every survey of people starting businesses finds that the main driving force is a desire for independence and autonomy. Not far behind is the satisfaction of starting a business, and capitalising on a perceived opportunity.
But succeeding is not easy. About 70% of new businesses close down within 3 years. However, it should be emphasised that not all of these are failures. Most will have been closed down for good reasons, and will have been a great learning experience, even if the material reward has been limited. .
Fortunately ‘to get rich’ is one of the lesser motivations. Most people don’t get rich, and if they work out their income per hour they may get a nasty shock.
| Why Start Your Own Business?? | |
| Autonomy | 67% |
| Personal satisfaction | 45% |
| To make money | 29% |
| Use skills and strengths | 19% |
| Create something | 10% |
| Inspirations to Start a Business. | |
| Personal interest or hobby | 52% |
| To use craft or skill possessed | 49% |
| From work experience | 34% |
| From university course | 29% |
| Graduate Enterprise scheme | 26% |
| Family business | 23% |
National survey of post-graduate – 1991. Universities of Huddersfield and Sheffield
Although these surveys, which were prepared as part of Graduate Enterprise, were done a good while ago more recent surveys of a wider population confirm the same trends in motivations and driving forces.
| What is the main motivation for running your own business? | |
| Be my own boss | 45% |
| Make money | 13% |
| Create a more secure future | 11% |
| Work by myself | 7% |
| No alternative/ avoid unemployment | 7% |
| Family tradition | 6% |
| Respect/status | 1% |
| Other | 8% |
NatWest/SERTeam quarterly survey of small business in Britain, Q2 2006
This survey also brings in other issues, such a family tradition and difficulties in finding traditional employment.
5.4 What do we know about how graduates actually start businesses?
a) Recent Research
A recent research report commissioned by the NCGE investigated a small sample of 15 graduates who had successfully started up their own businesses. They identified a number of issues relevant to careers advisers.
i) Only two of the fifteen had used the Careers Service, though they may have unknowingly had contact with some of their activities or events. This raises an issue about student perceptions of the role of the Careers Service.
ii) The idea to start a business emerged over a period of time, in many different ways. It was not the neat step-wise process often described in business start-up books. This makes it difficult to suggest what specific advice should be given. Instead the adviser needs to identify the issues the student is currently grappling with, and help accordingly.
iii) Business success seemed to depend mainly on two factors:
b) Time-scales to starting a business
Although very few graduates start a business straight after graduating (for good reasons, in most cases) a lot more do so later in their career, typically when they have built up more knowledge, skills and credibility. The measurement of Enterprise schemes by short-term results may seriously under-estimate the impact they have.
5.5 What business challenges do they face?
The exciting thing about working with graduates is that some of them have really innovative ideas. On the other hand their experiences of business may be quite limited, leading to over-optimism and insufficient understanding of the business issues they will need to deal with - eg selling the product, managing staff, understanding accounts and VAT, dealing with health & safety inspectors, negotiating with the bank, etc.
More mature graduates are usually more realistic in their ideas, and understand better the challenges and barriers they will face.
Typical problems faced by new graduates starting a business include:
- dealing with regulatory bodies - eg Food Hygiene regulations
- managing cash flow - eg having to chase customers hard to pay on time
- building their credibility - eg with the bank and with suppliers they would like credit from
- raising finance if their business has high up front costs - eg fitting out premises or tooling up for production
- selling the product - not many graduates are natural salespeople, and don't realise how difficult it is
None of these are insuperable, as the many successful graduate start-ups show. However, often they need a good business adviser/mentor to help them to plan ahead, to break the business down into manageable steps, and to deal with the issues when they arise.
Click here for examples of graduate start-ups
There no reason for students to hesitate about starting a business if the circumstances are right, especially if they select the self-employment option, rather than being too ambitious. Research suggests that you, or some-one you signpost the student to, should help them think about the viability of the business idea, and how their current skills and attributes match what will be needed.
However, in practice, many students will actually start their business some time after graduating. You should be aware of this and still be prepared to help the students to be aware of entrepreneurial career options but for future, rather than immediate, use.