Entrepreneurs optimistic despite accumulating problems

Josette Dijkhuizen, emeritus professor 'Duurzame Inzetbaarheid van Ondernemerschap' (Sustainable Entrepreneurial Deployment ) at Tilburg University: “Entrepreneurs are optimistic by nature. Even in these uncertain times, faced with many challenges, they are mostly happy. In 2021, we were in the middle of the corona pandemic, which would explain the lower grade given at that time."

Individual differences

Naturally, the averages do not represent individual entrepreneurs' feelings. Four out of 10 entrepreneurs indicate their business continues unchanged, and 1 in 7 says they are growing. Personal services entrepreneurs (7.5), IT and media (7.4), and logistics (7.4) give the highest grades. However, 1 in 8 entrepreneurs is unhappy with their current situation. They feel much uncertainty when thinking about what lies ahead. Seven per cent of business owners say they are 'surviving'. Entrepreneurs in culture, sports, and recreation (6.9) and hospitality (7.1) on average rate their well-being lowest. Only half of all hospitality business owners feel they are in control of their business.  

Carolien Babonnick, one of the KVK researchers to analyse the entrepreneurs' responses, observes that business owners who are in trouble tend to sacrifice their own time and money: "We spoke to entrepreneurs who have invested their savings, taken on more working hours, or even taken a job on the side. And yet they rate their business with a positive grade. You may question how realistic such a personal evaluation is, of course."

Market developments

Entrepreneurs are most affected by high energy prices, high purchase prices, and the uncertainty surrounding the corona virus pandemic. This increasingly leads to problems. The high energy and fuel prices have the biggest impact. Four out of 10 entrepreneurs are affected by this and for 1 in 7, it causes major problems. The higher purchasing prices and uncertainty surrounding the corona virus also weigh in relatively heavy. Half of all entrepreneurs face at least 2 developments that are detrimental to their business or business management. A quarter of all entrepreneurs face major problems due to these developments. Especially hospitality businesses and companies that employ 10 or more staff are affected. 

The researchers see that the problems are not equally divided among the entrepreneurs: "Transport companies that are dependent on fuel prices face completely different challenges than an IT zzp'er, whose only worry may be a slightly higher electricity bill for hosting his servers. We also see that entrepreneurs are shortening the validity period of their quotations. Prices fluctuate per week, and this is reflected in the quotations."

Threat to the business model

The problem most cited as caused by recent developments is the increasing difficulty of finding financing. Over 85% of the entrepreneurs who have to secure financing experience problems doing so. Other serious issues that are often mentioned by entrepreneurs who it is relevant to are logistical challenges with suppliers (85%) and the lower availability of materials (83%). The aftermath of corona, including payment problems related to paying back corona support or deferred taxes (73%), are mentioned by many businesses.

Plans for the future

The main plans for the future involve increasing income and lowering costs. The focus for the coming 6 months is balancing the income and expenditure, either by increasing the price of products or services (22%), realising cost-saving measures (13%), or taking action (for example by running marketing campaigns) to find new customers (11%). At least 1 in 3 entrepreneurs say this comes with challenges. They do not know whether the price increase will be accepted, whether they will be able to find new customers, and if they can save costs. Often, this depends on external factors.

Babonnick sees that many business owners have already increased their prices, but that others are wary: "Many entrepreneurs say they already have to deal with hefty price increases in materials and parts. But they are reluctant to charge their customers higher prices, a group of entrepreneurs chooses not to do so. For instance, because they do not want to lose customers by becoming too expensive, they have fixed price agreements, or they are loyal to their customers. In the coming period, this matter will become relevant for more business owners and affect their profits."

Zzp versus SME

On average, SMEs are doing slightly better than zzp'ers (self-employed professionals without staff) at this moment. SMEs with over 10 employees are more positive about their current situation than zzp'ers (zzp: 7.1; companies 10+ employees: 7.4). More SMEs are growing, and expecting a further rise in turnover, customers, and staff.

At the same time, SMEs are being hit harder by the current developments: rising costs and the risk of lower profits. Already, they need extra financing more often than zzp'ers to stay afloat. It makes sense, say the researchers: "SMEs that employ staff are more likely to deal with several adverse factors than zzp'ers. Besides energy prices, purchase costs, and a lower availability of products and materials, they are also affected by developments on the labour market, such as staff shortages and rising wages."

On the whole, SMEs are better at charging their extra costs to customers than zzp'ers. 65% of SMEs is planning to take measures to make up for the higher costs in the upcoming period. Only 44% of zzp'ers say they are doing so. 

Dealing with adversity

“Entrepreneurs deal with unexpected events in different ways. That was manifest during the covid crisis. One business owner met the challenges head on and switched to online training sessions right away, or making delivery catering boxes, for example. Another wanted to avoid the situation, tried to ignore it, or developed different activities so as not to have to deal with the situation", says Dijkhuizen. "It is the same now: some entrepreneurs try to avoid dealing with the situation, they are really busy and hope it will all blow over. But that is not going to happen. Many challenges will be around for a while. This is the time for entrepreneurs to revise their strategy, to find partners for reducing costs, for example by joint purchasing of materials, to come up with innovative solutions, or explore new markets. Entrepreneurs and their staff will have to use all the brainpower, creativity, and readiness to act they can muster to face the challenges and make them into opportunities. That will not be easy, but doing nothing is not an option."

KVK Advice Team

The KVK Advice Team talks to entrepreneurs who struggle with the changing circumstances on a daily basis. Business owners want to know how to raise their prices, struggle to pay their deferred taxes, and wonder if their business model is still working for them. The KVK Advice Team listens to these entrepreneurs, gives them advice, and if necessary refers them to other experts.

About this research

The research was conducted among more than 1500 entrepreneurs. The results were weighed against the number of working persons, so that this sample is a good representation of  entrepreneurs in the Netherlands with 1 to 250 persons employed. This means that, just as in the Dutch business owner population, nearly 3 quarters are zzp'ers, the other businesses employ 2 or more staff.

Download the KVK research 'Ondernemen 2022' (in Dutch)