| abstract
| - This document contains a fourth and completely new policy brief for the business creation theme of EQUAL on the subject of "building sustainable enterprises among disadvantaged groups". This policy brief is part of a series of four on inclusive entrepreneurship:
* culture and conditions;
* integrated business support;
* appropriate business finance;
* consolidation and growth. These categories are consistent with those used in the "tool for inclusive entrepreneurship" developed by the Community of Practice on Inclusive Entrepreneurship (CoPIE). On the basis of an analysis of good practice during the two rounds of EQUAL, the tool clusters the solutions tested into the four main categories above. The categories could be used in the next round of the Structural Funds to analyse the strengths and weaknesses of business support strategies at different levels and for helping the transfer of good practice. This document has been prepared (October 2007) by experts (Paul Soto) and their opinions do not in any way engage the Commission. Within EQUAL the process of starting up a business has been described as just one step on a ladder. If the ladder does not rest on the firm foundations of favourable attitudes and conditions for entrepreneurship then not enough people will even consider taking the first step to entrepreneurship. No amount of financial and business support will change the underlying situation. But similarly, if start-ups do not have access to markets and competitive technology the ladder will just lead entrepreneurs over the cliff into bankruptcy and debt In fact, the normal benchmark used at EU level is that around ten percent of businesses disappear each year[1]. This figure varies enormously among countries and improves with good business support but it remains dangerously high nearly everywhere. The situation is far riskier among disadvantaged groups and within disadvantaged areas. For example:
* Ethnic minorities tend to use their traditional knowledge and networks to set up businesses which trade within their own community. This can be a good way to start but, in the end, the market can become saturated with very similar restaurants, food shops and other such co-ethnic firms, crowding out new entrants.
* Many women entrepreneurs also find it hard to break into male-dominated business networks which can be crucial for developing contacts and clients. Entrepreneurs within deprived urban and rural areas often focus mainly on local markets. But purchasing power within these areas is low by definition, and the local economy is only capable of supporting a certain number of local service activities like hairdressers, mechanics, shops and restaurants. Social enterprises are often considered the most appropriate solution for providing services which private firms find too risky or costly to provide. However, if they are limited exclusively to these areas it makes it very difficult for them to develop any substantial degree of independence from public funding. In all these cases, business start-ups can find themselves trapped in low-margin, declining markets, competing among themselves for an ever-smaller share of the cake. In fact, the "displacement" or "substitution" effect of supporting start-ups in these kinds of markets – where every new firm supported simply takes away business from existing firms – has been one of the reasons for excluding some of these activities altogether from some business promotion schemes. The challenge, therefore, is not just to help disadvantaged groups set up more businesses but to provide them with the tools which will allow them to access some of the more dynamic parts of an increasingly globalised economy.
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