To borrow a lyric from Neil Sedaka:- “Yesterday is yesterday The past is dead and gone” What matters now is the future, and what we do with it, if you want to make next year your best ever year in business, I am sorry to remind you that it will not happen on its own. […]
One of the real pleasures of being a professor of entrepreneurship over the past 20 years has been the opportunity to meet hundreds of Welsh entrepreneurs who have been making a real difference in their industry and to hear, first hand, about how they are succeeding in an increasingly competitive marketplace.
Given this, I was particularly delighted to call in last week to the Craft Centre in Corris (near Machynlleth) to see how the gin manufacturer Dyfi Distillery is going from strength to strength in its sector.
Dyfi is a finalist in the food and drink category for the inaugural Wales Start-Up Awards, which are taking place in Cardiff on September 16. With 57 finalists in a range of sectors from all over Wales, these new awards clearly demonstrate the depth of entrepreneurial talent that exists across the region in all sectors of the economy.
Incredibly, Dyfi was only established in March of this year and has already made a major impact on the fast growing gin sector.
More importantly, its story is an inspiration in a number of respects to those looking to start a new business in combining family, sustainability and, most importantly, world class ambition.
The company is the brainchild of two brothers, Pete and Danny Cameron. Pete has lived on a farm in the area all of his adult life, combining business consultancy with beekeeping and foraging. In contrast, Danny spent over 30 years in the food and drink industry, mainly championing small drinks producers.
So when they decided to set up a business, both brought their respective experience and expertise together to launch this new venture that is harnessing the best of what the local area could offer them in terms of producing a unique and world-class gin.
Whilst gin can be made anywhere in the world, the real challenge in making an impact on the industry is creating one that is genuinely individual that cannot be replicated by other producers.
And that is where Dyfi’s location in a Unesco World Biosphere site creates a real competitive advantage as the botanicals – the seeds, berries, roots and plants which give gins their unique flavours – are sourced locally from the Dyfi biosphere.
But it is not only the natural surroundings which are important to Dyfi. The brothers have also decided to question the processes by which gin is made and have adapted and modified techniques to suit their product.
In particular, two small stills have been custom-built in the USA to create a new process called precision-distilling which adds yet another competitive advantage to the product.
Unlike whisky, which can take several years to mature, gin can be made almost immediately and in the last six months, the company has launched two products. These are the Dyfi Original Gin – which is only for sale locally – and the Pollination Gin which has already been taken up by major London stores such as Selfridges.
These will be followed later this year by Hibernation Gin which will be aged in a rare White Port barrel, possibly the first time this has been done in the world.
So in just six months, Dyfi is creating waves within the drinks industry through a focus on sustainability, innovation and quality that has resulted in a new product that many are already suggesting is amongst the best being made anywhere in the world.
But there is also a strong commitment to the local area, from having the shop in Corris generating traffic for the other traders in the craft centre to the branding which directly promotes Wales internationally.
And from the reaction it has had so far to its gins, this business model that makes the most of the firm’s location means that Dyfi Distillery is rightly on its way to becoming a world class producer in its industry.
As I saw first-hand during the judging process for the Wales Start-Up Awards, Dyfi is just one of many fantastic new businesses in Wales that with the right support, could really take off over the next few years.
Given this, it is worrying that there is currently an impression being given, rightly or wrongly, that the post-Brexit focus by the Welsh Government is all about maintaining our relationship with inward investors rather than supporting indigenous firms.
Certainly, our politicians must never forget that whilst large foreign businesses do create some jobs, the vast majority of new employment comes from those homegrown entrepreneurs and innovators who are making a real impact in their sectors across the Welsh economy.
And in an an increasingly uncertain business environment, they need to be supported more than ever.
But why should new firms be supported as many do not survive five years? Indeed, isn’t it existing firms that make the biggest contribution to job creation in any economy?
Well, according to a report by the Kauffman Foundation – the world’s leading think-tank on entrepreneurship – that is not the case at all, at least in the American economy.
Its detailed research on the contribution of businesses in the USA has shown that is not the size of business that is important but the age of the firm.
Whilst many think that all small businesses are the employment engine of the economy, it is actually new and young companies that the primary source of job creation across America. In addition, they contribute significantly to the dynamism of an economy by introducing competition into markets and initiating innovation.
Studies by Kauffman have shown that whilst existing firms, both large and small, are important to the strength of an economy, neither group actually contributes to new job creation as compared to young entrepreneurial businesses.
In fact, in the period between 1988 and 2012, companies more than five years old destroyed more jobs than they created in all but eight of those years. In contrast, new businesses less than five years old accounted for nearly all net new job creation.
In fact, companies less than one year old had created an average of 1.5 million jobs per year in the USA over the past three decades.
Some would suggest that new firms are too risky as investments, but the study shows that while there is obviously failure, it happens quickly with a pattern of ‘up or out’ amongst start-ups; ie either they grow rapidly to create jobs and economic growth or they exit the market quickly when they fail.
More importantly, many of those entrepreneurs who don’t succeed the first time will try again.
Their significance to the economy is best seen in the context of their performance during the last recession. While older and larger firms shed more jobs than they created, young small firms increased their net employment by 9%.
But incredibly, it would seem that while the USA has also been seen as the land of enterprise, the contribution of new businesses, whilst being higher than older firms, is nevertheless declining – and given their job creating propensity, that is what is worrying for the US economy.
The data analysed for the Kauffman report shows that not only are the number of start-ups in the economy declining but those that do exist are creating fewer jobs – the gross number of jobs created by new firms fell by more than two million between 2005 and 2010.
Clearly, given their contribution to employment creation and innovation, this decline could be worrying for the growth of the world’s largest economy if it is not reversed.
As a result, Kauffman has suggested that US policymakers should help create an environment more conducive to business formation, such as welcoming more immigrants as they are twice as likely than Americans to start businesses, removing regulatory barriers as they represent a disproportionate cost to start-ups over time, and cultivating human capital as increased entrepreneurial activity is associated with higher levels of education.
Unfortunately, such detailed long-term statistics on new firms similar to that used by Kauffman are not available here in the UK. However, the limited data we have shows that, in contrast to the USA, at least the number of new businesses in the UK economy has been increasing in recent years.
Indeed, here in Wales it has grown by 54% in the period 2010-14, which is the fourth best performance of all 12 UK regions and above the UK average.
While that is clearly good news, there is still a long way to go as the Welsh business birth rate (the number of new businesses created as a proportion of the entire business population) is the third worst in the UK.
Therefore if, as the Kauffman research suggests, new firms are creating the vast majority of net employment, then it is a no-brainer to suggest that policymakers should continue to focus on promoting and supporting more start-ups across the economy and, more importantly, highlighting entrepreneurial success through events such as VentureFest and the Wales Start-Up Awards.