“A hard thing is done by figuring out how to start.” – Rand Fishkin, SEOmoz
This research is a part of Erasmus+ project “Create for Region” that was running in Latvia and Lithuania from March 2017 till November 2018. Before that this project was running as a student business project competition from 2014 to 2016. At that time the project showed its ability of promoting youth entrepreneurship and gained widespread public recognition and awards in Latvia. At the same time the project revealed a number of alarming facts – low interest of young people in developing business in the regions and the fact that the majority of young people abandoned the desire to implement their business ideas once they faced their first difficulties.
Organizers of the previous project wanted to use their experience and knowledge to explore the following factors in the next project that would be run from 2017 till 2018:
- young people’s motivation to start a business in the regions
- young people’s approach to developing their business ideas
- young people’s approach to variety of problems and overcoming obstacles in the implementation of their business projects.
To do so, at least 200 young entrepreneurs from Latvia and Lithuania were studied within two years of the project. The research used 2 questionnaires and interviewing methods in both countries. In this summary are lined up results from survey about young entrepreneurs in Lithuania counties and small cities.
The research was designed within Erasmus+ project „Create for Region”. The target population for the survey was the young entrepreneurs from small cities in Lithuania.
The research was performed in 2 rounds:
- Round 1: 125 respondents; period: April 2017 – May 2017
- Round 2: 50 respondents; period: October 2018 – November 2018
Profile of respondents (click on the table to enlarge)
Respondents were from different small cities in Lithuania: Skuodas, Marijampolė, Kaišiadorys, Mažeikiai, Elektrėnai, Utena, Pasvalys, Kėdainiai, Vilkaviškis, Alytus, Plungė, Telšiai, Biržai, Jurbarkas, Anykščiai, Šilalė and many others.
The same respondents were invited to take part in Round 1 and Round 2. 40% of first survey (Round 1) participants didn’t participated in the second survey (Round 2).
Start of the business:
As we can see, on the 2017 the expectations were based on active selling, as short purposes of business (40%).
Expectations for future: goals in 1st year. Results of research in 2017 (Round 1) (click on the table to enlarge)
Other goals were also mentioned: return debts, new branches, create a workplace for myself, increase a number of employees, try to survive, constant number of clients, stability of business.
Expectations for future: goals in 3 years. Results of research in 2017 (Round 1) (click on the table to enlarge)
Other goals were also mentioned: improve quality of products; develop business; attract new clients, create new products; provide competitive services.
The survey shows, that youth are afraid to have unprofitable business and the main result of business see, as reaching the set profit (26 %). The other answers how that for company development they need more people, so the second important goal is to engage more people to business (26%).
Work alone or with others. Results of research in 2017 (Round 1) (click on the diagram to enlarge)
53% respondents started their business alone, 27% in team and 17% in a pair. Also, it was mentioned some other options: with family; specialists when needed; hiring employees only for seasonal work.
Mostly these businesses are small, in the field of service sector. 45% respondents started business with personal savings up to 5000 EUR.
Sources of funding business, Results of research in 2017 (Round 1) (click on the diagram to enlarge)
The motives to start were different for the respondents: some of them started from their hobby, some with the help of subsidiary from Labour Office or support of municipality, youth entrepreneurship programmes, some – just have created a job place to themselves.
73% respondents mentioned that personal freedom is the most important while doing business, 53% – want to earn more than in another company, 58% – like issues, 24% – like to create new things.
Motives to start business. Results from survey in 2017 (Round 1) (click on the diagram to enlarge)
For participants was given the question about investments, asking them “how much funding do you need for business to start sufficient sales”? The respondents stated that in their opinion – sum of investments needed is 5001- 25 000 EUR, by opinion of 47%.
Why to choose small city for the business?
62% of respondents’ place for business is homeland. Native environment helps them to know potential clients and market.
Motives to start business in regions. Results of research in 2017 (Round 1) (click on the table to enlarge)
“It‘s my land, my people, and even it is saying „in your own country – you will not be a forerunner“, but it is not necessary to be.” (Julita from Skuodas). “Knowledge about the native town gave me a possibility from the first time to create a product which would be demanded by city and profitable” (Kasparas from Utena). “Alytus is a city where I was born and grew up. In this city, I feel free because it is a young and green city. It provides perfect opportunities for young business to grow and develop” (Lukas from Alytus).
Some respondents identified lower development of city regarding business proposals and fulfilment of local people’s needs. “It was successful as it was no competition” (Šarūnas from Marijampolė); „Nothing similar was in Pasvalys“ (Vaiga and Benas from Pasvalys).
What was the most difficult?
From the Round 1, results showed that even 63% of respondents thought that lack of funding is the most crucial obstacle for successful business.
Obstacles and difficulties are expected in order to make successful business project. Results of survey in 2017 (Round 1) (click on the table to enlarge)
According to the research in 2018 (Round 2), the most popular reasons for difficulties were lack of knowledge and experience (average: 9,6 out of 10) and lack of financing (average: 9,3 out of 10).
The most difficult factors (average, out of 10). Results from survey in 2018 (Round 2) (click on the table to enlarge)
After comparing respondent answers in first survey and second survey (Round 1 and Round 2), that initially respondents thought that their biggest obstacle would be lack of funding, but after one year, 67% respondents acknowledged that biggest obstacle lack of knowledge and experience. It means that although business funding is very crucial, but the most important is knowledge/experience in business while running business/implementing business projects.
“It was not easy, the beginning was difficult, I had a fear of what people will think about that, if I can do it, if I am enough resistant, maybe it is not necessary. These doubts had a big impact on and stopped me but I am a really big optimist and think if you don‘t try – you would not know” (Julita from Skuodas).
As other reasons were mentioned seasonality and some specialties of the business, gap from education to practice.
What support do they plan to use?
68% of respondents plan to use some business support opportunities. So young entrepreneurs expect some support for their businesses. The most popular options are EU financing opportunities (49%) and credits (27%).
Plans to use business support. Results of survey in 2017 (Round 1) (click on the table to enlarge)
Surprisingly, most of respondents who marked “other” mentioned they do not know anything about business support or they have low knowledge about that. Moreover, 32% respondents do not mark any options, that means that they are not planning to consider any option of business support.
According to Round 2, only 18% respondents used some of business support and 82% respondents have not used any kind of business support yet. It confirms once more time that young entrepreneurs have a lack of knowledge about available support for young business.
Achievements
Respondents are devoting more time to their business. Percentage changed from 58% to 64% respondents spending their full time for their businesses. Also, 22% respondents highlighted that even they have part time for their business project, however they spend more time than one year ago. 14% respondents stated they are spending less their time to their business development.
Respondents are forming teams. Although 48% respondents still are working alone, 26% respondents mentioned that number of members in the team increased, and only 8% respondents stated that their team became smaller.
Businesses reach stability. Although 50% respondents do not achieved results as they expected, but also 32% respondents mentioned that their businesses run as they expected. So, they stated their goals were too optimistic. Only 14% answered that their business develops better as they expect before (Results of survey in 2018, Round 2). However, 44% respondents are glad that incomes became bigger than expenses and 16% respondents’ businesses are expanding comfortably. Also, 24% respondents have their first sales and these cases can be considered as potential for business success. Only 6% respondents mentioned that things are getting harder and 2% respondents stated that results are too small. These respondents who pointed they like to overcome challenges (Round 1), 57% reached their goals in one year (Round 2).
After comparing respondents answers in the survey (Round 1) and follow up survey (Round 2) we identified that 33% of those who didn’t had any prior business experience reach their 1-year target in business while 67% didn’t. Of those who had business experience 48% reach their targets while 52% didn’t. Based on that we can assume that having prior business experience helps set more attainable goals or give better opportunity to reach them.
Also, while comparing surveys (Round 1 and Round 2), 86% respondents, those business ideas came from job experience, reached their results in one year. It means that previous experience/knowledge is very important in business development.
Respondents are learning from mistakes by doing. They mentioned many challenges during the period of the research. However, young entrepreneurs put all their efforts to solve the problems. Such as how to get license for alcohol when you are only 18 years old or how to find solutions better for the client. In many cases, young entrepreneurs use creative thinking – for example, how to use old furniture when you have limited budget to buy new ones; or generating new ideas to overcome seasonality of the business. Some respondents had support of mentors, some respondents had great support from their families and friends, some from other businessmen working in the same field (they are working as partners). Many respondents stated that they have learned a lot during this year (even from their own mistakes) and they had great experience and practice while developing their business project.
Continuity of the business. 40% of respondents expected to have their first profits in the period of up to 3 months from the business start. It shows that young entrepreneurs expect immediate results from the business (Results of survey in 2017, Round 1).
64% mentioned they thought that to run business would be much easier than they expected (Results of survey in 2018, Round 2). These and many factors, mentioned before, showed that young entrepreneurs were more optimistic about their businesses one year before. 12% respondents mentioned that their motivation to develop business was higher.
However, 62% of respondents confirmed that they are ready to continue their business projects they start recently (Results of survey in 2018, Round 2). 44% respondents consider themselves as resistant, 30% respondents highlighted opportunity to try and what will happen will be considered in the future, 8% are planning to change their business idea and only 6% are considering to quit their business (Results of survey in 2018, Round 2).
So, we can state that, despite the fact, that young entrepreneurs can be described as optimists (especially in the beginning of the business development), and they are enough resistant in order to overcome business challenges.
Recommendations from young entrepreneurs
According to young entrepreneurs, the most important factors in business is belief in business idea, personal resistance and hard work.
Some recommendations from young entrepreneurs:
“If you imagine clearly and you are quite brave to talk about it, it will happen” (Mantas).
“I think regions could be our starting point, where we can develop, create to offer our services.” (Vaiga and Benas from Pasvalys). “What do we need to do? Delete the words „What do we need to“, leave „do“ and put huge exclamation mark instead of question mark.“ (Loreta from Skuodas). “Do it in good quality, do it with a smile, form the heart and what do you like” (Julita from Skuodas).
The survey showed the mostly young people started their business in their native cities but they had a lack of experience and knowledge in business management. The most popular motive to start the business is personal freedom. Before starting the business, young entrepreneurs thought that it would be easier… and resistance is the most important personal trait in doing business.
Results of research in Latvia
In parallel to research in Lithuania similar research was done in Latvia, where similar questions were asked to young Latvian entrepreneurs, who were planning to realise their business ideas in regions. The only difference was that all those youngsters were participants in competition „Create for Region” where they created teams in order to realise business ideas during 2 years and compete among each other by such criteria as paid taxes, attracted investments and created new jobs in counties by their realised business ideas.
The aim of those parallel researches was to identify in which ways competition as a process helps to realise business ideas in regions.
In initial survey participated 81 youngster and in secondary research 19. The average age was similar to Lithuanian research group. A bit more women were participating in survey (48%). Some other notable differences and similarities:
- Among participants in competition there were much less those, who were planning to work full time on business idea (8,6%)
- The main reason for doing business in regions was access to resources and other geographical advantages (42%), not so much just a local patriotism and desire to live and work there (37%)
- Almost half of participants in the contest started their businesses with minimal funding available -46,7% had funding less than 1000 EUR.
- Surveys in both countries showed that there is no significant advantage of having previous experience and knowledge in order to realise business ideas, which means that entrepreneurs’ character is the main driver to success.
By comparing survey results in both countries, it is reasonable to assume that competition as a process helps to attract those who are not ready to work full time on their business ideas. It is also excellent tool how regions can attract business ideas from people who are not living or working there. Competition helps to connect in an easy and effective way youngsters with business ideas and municipalities.
Be a young entrepreneur in your Region!
Create for your Region!
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The project “Create for Region” was financed with the support of European Commission’s “Erasmus+: Youth in Action” administrated in Latvia by the Agency for International Programs for Youth. This publication reflects only the author’s views, and the Commission cannot be held responsible for any use which may be made of the information contained therein.
Project No. 2016-3-LV02-KA205-001389
