Can we afford to lose our sole traders?

Unemployment is officially now at nearly 2.5 million (7.9%), but that’s not the full story. Many thousands more are without work. They are not on the dole figures and they don’t as yet cost the nation any quantifiable cash, but there is a cost, a significant one, that may be hard to define, but which will be felt in the very near future. These are the self-employed, the folks who decided to ‘go it alone’ or ‘get on their bikes’ and set up rafts of micro businesses. Many are facing ruin.

A micro business is, typically, a one-man band – trainers, journalists, freelance salesmen, home helps, mobile mechanics, plumbers, electricians, management consultants, among many more. They have worked on the fringes of mainstream business, mopping up spare capacity, often providing lower cost alternatives to better-known corporates. For many of them, work has dried up and they are, in fact if not officially, currently jobless.

Any official help?

There was a summit in Glasgow on the effects of the economic downturn, designed ‘to better support individuals and business facing hardship due to the economic downturn’.  It brought together the Minister of State for Welfare Reform, the Education Minister, and representatives of various trade unions and others. That was two years ago. Since then what has happened?

At about the same time, a Think Tank called Race on the Agenda concerned itself with the effects of the downturn on minorities. Racial minorities. Mervyn King has spoken of the mounting misery in households facing the biggest decline in their living standards since the 1920s.  But spare a thought for two groups whose misery is even more palpable: middle class dole claimants and the self-employed who have no work.

No one is immune

Talk to a former middle manager who has had to clear his desk and surrender his gleaming company car. In the good times, he mortgaged himself to the hilt and entertained at home, living up to the image of a successful businessman. Now, aged 50 or more, he has little prospect of a job. When his savings dry up, he’ll wonder whether he should stack shelves in the supermarket or offer to do odd jobs like painting and decorating – anything to bring in some cash. Some even take up mini-cabbing. A colleague of mine called for a minicab one evening and was embarrassed when the man who turned up used to be his senior in previous years, a man he used to call Sir.

It’s pretty much the same for the sole trader whose work has dried up. Competition is fierce for whatever work there is, and price cutting is sharp. Everyone is uncertain where the point of balance lies – the point at which they are disregarded because they are too cheap and therefore cannot be any good.

The real cost is to self esteem. When you sit at your desk all day, every day, trying to market yourself and no one buys, you rapidly start to doubt yourself. One new business getter for management consultants, wondered if he had any value in the market place. He started to describe himself as a one-trick pony that no one wants. As one who has made and lost a fortune in the past, he has what it takes, and he’s a highly skilled wheeler-dealer, but he was last seen looking for a job. Back in full-time employment.

Sadly, it’s a vicious spiral. When work stops coming through the door, you have to swallow your pride and go looking for it. But you are already feeling rejected by the market and past customers, so you put off writing those prospecting letters or picking up the phone. Fear of rejection is a paralysing force. And when you are working as a sole trader, there is no one to bolster you, remind you of your strengths, encourage you to keep trying.

Huge fund of potential

The number of people in this situation is very large. In 1999, there were 3.7m firms in Britain. Two thirds of them were sole traders. By 2007, that proportion had risen to three quarters of the 4.5 million firms. It was just before the start of the economic slowdown and the drying up of credit, and those 3.3 million sole operators turned over a massive £1,440 billion.

That’s a considerable amount of wealth creation, even if it is not mainstream. It derives from a huge bank of energy, drive and creativity. The more successful ones go on to create jobs and build larger firms. They are known as entrepreneurs. Steve Jobs of Apple, Bill Gates of Microsoft and Sir Richard Branson are examples of sole traders turned entrepreneur. In the current economic wilderness, such people are a threatened breed.

Why are they important? Because their drive comes from doing the things they love, and that’s so much more important than just doing a job for a salary. Steve Jobs once said, “The only way to do great work is to do what you love.” We need people who do great work. Sole traders are, in effect, CEOs — men and women with the drive, tenacity and creativity to solve problems and deliver successful outcomes rather than going through the motions.

Can the nation afford to lose them?