21/11/2024
I have been reflecting lately on the current situation with small businesses and their ability to sustain themselves in this current economic climate. And considering the latest spate of Harley Davidson Dealerships closing there is cause for concern.
This is a not a “Woe IS Me” post but rather a reflection or perhaps even a projection of what is in store for small businesses in the future, I’ll leave you to decide.
Avoiding the obvious dilemmas of inflation and the cost-of-living crisis that everyone is experiencing there are some additional factors that seem to be slowly suffocating the growth of small firms.
The first one is the seeming lack of willingness of anyone under the age of 50 to work with their hands or do any form of physical work that might get them a little dirty or frustrated. This might be doing an injustice to all of those that are out there doing it right now and always have, but most of them are in work and continue to remain in work.
What I am talking about is trying to find (and at 63 I can say this) find a youngster to take on such work or even take some risk of working in such an environment to build something for the future. If they can’t sit in a nice warm office or behind some computer screen or get some form of instant gratification they want no part of it.
But for the sake of argument, let’s say you find a youngster willing to take a risk and willing to learn through hands on experience passed on by someone with the requisite skills, ( the master and apprentice) the next dilemma appears in the form of minimum wage? now I am not against minimum wage, in fact I fully support it, but does it really reflect what value is being provided?
Let’s take an example of a small business such as mine, servicing, repairing and customising motorcycles. Not a particularly glamours or financially rewarding example but still an example of a small steady business with significant growth potential. This is where the risk part comes in, a business which starts off small but with hard work could become much more valuable and therefore generate greater financial reward.
A business which has built a well-known brand and receive most of its work from recommendations. Ripe for expansion and growth.
To take on an apprentice (assuming you can find one) requires you to pay that employee substantially more that he or she can earn for you as a business.
Why? you may ask?
Well, it’s because they would be working on valuable vehicles/components which are highly valued by their owners and how they do the job no matter how capable they appear involves a significant safety risk when releasing the final product for use by the customer.
Sending a customer out on to the road on a badly repaired or modified motorcycle is a sure way to get someone killed.
Therefore to mitigate this risk all of the work that the trainee/apprentice does has to be thoroughly checked before release, essentially meaning the work has to be done twice and you don’t get the luxury of charging for it twice.
In a business with a ratio of Ten to One experienced and qualified staff to each apprentice then the model can work, as economy of scale works in your favour, you can bring on new talent and skills as you can sacrifice some earnings to do so as your nine other productive workers are earning the business money. I’m pretty sure this is where the apprentice program is aimed at, what I would classify as a medium to large business.
But in a small business this is not the case, often it is a one-to-one ratio and to give the apprentice the quality of training they deserve through close supervision then the productivity and profitability drops off a cliff.
It’s a kind of catch 22 scenario.
The obvious solution would be to pay the apprentice based upon the value they provide and as they gain more experience they would be rewarded accordingly.
At the start of an apprenticeship, they offer very little value but have a huge potential, after all if they gain experience and grow in confidence then they become the future of the business. Then the business grows as they grow.
The problem is minimum wage rules disable this option as the apprentice candidate understandably states why should I work in a difficult, challenging and sometimes dirty environment for £6.00 an hour when I can flip burgers at a fast-food chain for £11.00 and hour?
This is the point in my pontifications that I feel I am tumbling down the proverbial rabbit hole, I see no obvious solution so come to the inevitable conclusion that small business are slowly suffocating, the oxygen they need which is in the form of willing resource, work ethic and the ability to fund investment in training and talent growth is leaking away.
I’ll leave you to think on a solution and if you have one, please let me know?
