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Support the business start-up : useless ?

by

Alain Castonguay

March 1, 2019 09:30

Photo : Unsplash | Bram Naus

The government of Québec continues to support a broad ecosystem of organizations that support the promoters in the different stages of the life of their business.

However, the number of entrepreneurs continues to decrease, as shown in our folder on entrepreneurship, published in the edition of January-February the Journal of the insurance. Is it that the State aid serves to something ?

The ministry of Economy and Innovation (MEI), Alexandre Vézina is responsible for the Management of the support to entrepreneurship and niches of excellence. This department is responsible for the implementation of the government action Plan on entrepreneurship (PAGE).

The PAGE covers the period 2017-2022, and it comes with an envelope 345,7 M$ spread over the five years. This does not include the amounts that are awarded to MRC who have taken over part of the mandates related to the economic development previously allocated to the local development centres and to regional conferences of elected officials, structures had been abolished by the government Couillard in 2015.

It is important now to better assist entrepreneurs to complete their project, ” continues Alexandre Vézina. “We want to equip them better, support them, train them, he says. The PAGE does not focus on the financial tools, but on the cover, ” he says.

The rate of intention to entrepreneurship has been a net increase, but the passage to action is not very high, ” he says. “People do not feel that they are fairly supported. It is a bit of a leap into the void, to move from the status of employee to that of entrepreneur, ” says Mr. Vézina.

“We want to reach the whole of the life of the entrepreneur, start-up, growth, and transfer. This is the type of measures that we wanted to put in place, ” he says.

The team of Mr. Vézina ensures the monitoring of the action plan, which will be re-evaluated after five years, with an update of the indicators on an annual basis. For example, for the measurement 10 pertaining to the transfer, the PAGE aims to raise awareness of 25 000 entrepreneurs in five years, while supporting 12 000 sellers and buyers.

Dandelions

The potential of entrepreneurs emerges of itself, regardless of the conditions, according to the professor Étienne St-Jean. The intervention of the State in terms of entrepreneurship support should be better targeted, according to him.

“One of my colleagues compares entrepreneurs to dandelions. Regardless of the support, they will start their project anyway. Dandelions grow everywhere, you will have a nice fight against them, they will start anyway. Even in the economies of the soviet bloc in the past, you could find entrepreneurs of the hidden that were doing business, ” said Mr. St-Jean.

Holder of the research Chair on entrepreneurial career at theUniversité du Québec à Trois-Rivières, Mr. St-Jean is a regular member of the national Institute of research on SMES. He is also a member of the canadian team of the Global Entrepreneurship Monitor (GEM) as a responsible of Quebec. “There are traits of personality, people naturally have what it takes to be an entrepreneur. They will become, they have the support of the State or not, ” he continued.

For him, the number of entrepreneurs is a relative factor. “You have 150 000 or 200 000, if [companies] to merge or if they are acquired and that the new companies that emerge grow, this is not bad news “.

He gives the example of the microbrewery and The devil’s Hole, regarded as the jewel in the crown of the beer in the Mauricie region, which was recently bought by Molson-Coors. “The operations are maintained. The jobs are still there. The business is still growing. This represents a contractor for less. One cannot consider it as a loss. “

According to Mr. St-Jean, the real challenge of Québec SMES is the shortage of labour resulting from the ageing of the population.

Reviews

The report of the GEM also finds that there is not always of a causal link between the magnitude of the sums invested and the results achieved, ” says professor St John. “There are a lot of elements that influence the desire of people to become entrepreneurs. The aid measures are only one factor, ” he says.

The GEM follows the established entrepreneurs, and their number remains very stable. According to Mr. St-John, he starts a larger number of projects, but the majority only makes it limp along. Sponsors often keep their jobs to meet their personal needs. “At a certain moment, they decide to close the business in realizing that their project is not viable,” he says.

“The investments made in the businesses, at the local level, where are we five years later ? Is it that there has been a growing business ? Businesses have closed ? You do not ask these questions. This is not evaluated in a rigorous manner. If there are any reports on it, I didn’t see them, ” he says.

Étienne St-Jean dedicates a large interest in coaching and training entrepreneurs. He is leading a study entitled : “Support or laissez-faire ?” on the effect of the guidance and the training of entrepreneurs, including training offered through the network Entrepreneurship in Québec that offers the program Launch a business. “Without doubt, it is the program that brings together the greatest entrepreneurs in Quebec, nearly 4 000, or even a little more “, he explains.

The medium model does not exist

Many authors speculate on the relevance of the intervention of the State, ” adds Etienne St-Jean. Investing in human capital is certainly not useless, but it should not, hoping to flush out ” the unicorn that will make drool with envy the investors “, he notes.

“The jewels of the economy were able to benefit from the support of institutional investors to foster their growth. These are certainly not the measures supporting the start-up that created these success stories, ” said Etienne St-Jean.

His colleague Claudia Pelletier, the INRPME, is a specialist of the sector of information technology, and she is very critical of the digital Strategy put in place by the previous government. The proposed strategy is to upgrade all SMES, but there is such a diversity of SMES, with a wide variety of needs that ” this strategy does not make sense. According to her, the government completely misses. They make a bad diagnosis because they have in mind a model type of SMES that there is little to no, ” said Mr. St-Jean.

This is the same criticism being that it feels in looking at the PAGE. “I also have the impression that the typical entrepreneur does not exist. Those that we want to have, that we have in mind, and that we want to multiply, there is not that much. It was full of contractors who are something other than this model, ” he says.

“The average entrepreneur, this is not the one that is described in the PAGE, he insists. The average entrepreneur, it is almost always a small company, often a contractor, hybrid, often a self-employed worker, where he has only one or two employees, it has no ambition of growth. “In many cases, turnover depends mainly on the dynamism of a other enterprise of which it is a sub-contractor.

Of FLS across Quebec

If the interest in entrepreneurship has grown a lot in a decade, the move to action does not occur as well, acknowledges Éric Desaulniers, general manager of the Fonds locaux de solidarité (FLS) to the Fonds de solidarité FTQ.

“We must continue to work on the entrepreneurial culture. For the past ten years, there has been more effort, even if there were before, and it bears fruit, because the desire to undertake has increased, ” he says.

One of the measures of the PAGE regarding the creation of 35 new FLS in the MRC or territories where it did not exist. The announcement was made in July 2017. Since then, the team of Mr. Desaulniers has created eight new local funds.

To create a FLS, the MRC needs to invest 150 000 $. The government has allocated$ 3.5 Million to help 35 MRC to put two-thirds of this fund. The MRC already have local investment funds which also serve as a tool for economic development. Among the new FLS, the most recent were created in the Gaspé (MRC de la Côte-de-Gaspé), in the Abitibi-Témiscamingue region (MRC de la Vallée-de-l’or) and Lanaudière (les Mills).

The balance sheet of the investments made in 2018 is not yet known. In 2017, the FLS have funded 370 projects to the authorized amounts of$ 10.2 Million. We are talking about an average amount on a per-folder 27 460 $. The total value of projects was$24.4 Million.

On average, the duration of the investment period of the FLS is five years. Sometimes, for the files larger, the duration of the investment can be ten years, but it is more rare. The direction of the FSL does not intervene with businesses. All the folders are scanned by the MRC or the NPO jurisdiction.

Mr. Desaulniers has worked in a local development center as early as 1998. “The people were only beginning to make the investment. We didn’t know it. It was of the capital stock to $ 50,000 and were expected to pay five years later, without any return, ” he says. “In 2018, it is no longer there at all,” he continued.

On a quarterly basis, the MRC sends the list of investments, with the risk assessment, which is reviewed at least once per year. We do not expect an annual yield of 20% of the portion of the FLS, but it has to be to compensate for the losses incurred by the closures or failures, ” says Desaulniers.

25 000 companies in Quebec

The Journal of insurance revealed in its edition of January-February that Quebec has lost 25 000 entrepreneurs. What are the solutions to counter this trend ? Find out more by reading our folder in our print edition !

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