Poverty knocks at the door of many Dutch entrepreneurs

Macroeconomically, the Netherlands has emerged from the corona crisis well. With the gradual abolition of the corona measures, the economy recovered more vigorously and faster than previously thought. That does not apply to small businesses in the Netherlands, which are still suffering from disappointing business results as a result of the lockdowns. This is apparent from the annual report of the Small Business Index for 2021, published today, a survey by Qredits, ONL and Applied University of Utrecht that is conducted every quarter among more than 1,000 entrepreneurs.

The lockdowns of the past year have taken a toll on small businesses. In particular, turnover, net margin, willingness to invest and solvency were far below the level of before corona in 2019. This naturally applies especially to the catering, retail and cultural sector. But healthcare and business services – which were not directly affected by the lockdowns – also performed below average. The type of market of companies makes a difference. The operating results of B2B markets were significantly higher than those of B2C markets.

Only 4 in 10 entrepreneurs above marginal income

The consequences are alarming to say the least. A growing number of firms are developing into fringe businesses. Many entrepreneurs were forced to draw on financial reserves, such as accrued pension and private savings. At the same time, the annual report points to a sharp rise in corporate and private debt, which most entrepreneurs cannot repay. Poverty knocks at the door of many entrepreneurs; even with the support of a partner income, only four in ten entrepreneurs earn more than a marginal income. ‘The public thinks that business owners earn heaps of money. They underestimate the large numbers of entrepreneurs that earn (far) less than minimum wages (60%). Hopefully their renumeration will improve in 2022, yet my estimates are that one in five of the firms are not viable’, shares Lex van Teeffelen, professor of the research group Financial-Economic Innovation.

"The public thinks that business owners earn heaps of money. They underestimate the large numbers of entrepreneurs that earn (far) less than minimum wages"

Digitisation seems to make little difference

The annual report points to some striking conclusions from the four quarterly surveys from 2021. It is striking, for example, that digitisation of companies has not yet had a positive effect on the net margins of small businesses. This is evident from the second quarter survey of 2021. Strikingly enough, the use of too many applications seems to actually worsen business results. Since many entrepreneurs have only just started digitisation, this theme will also remain an important point of attention in future studies. ‘In our next round of research we also focus on the duration that entrepreneurs work in a digital setting. Digital investments need time to have a positive impact on firm performance. Yet international research indicates that proper implementation and supporting and training employees are best predictors for success when it involves new technologies. Also one investment round does not suffice, more rounds are necessary to keep up or lead in competition’, mentions Van Teeffelen.

Entrepreneurs get lost in the maze of grants

Despite the low entrepreneurial wages, grant applications have halved compared to 2015, according to the third quarter survey of 2021. The cause is sought in the dizzying diversity of grants. Entrepreneurs seem to get lost in the maze of local, state, national and European grants. Many entrepreneurs – especially those with staff – are therefore prepared to enlist the help of an advisor, who can point out all the interesting and relevant grants for them, on the basis of no cure, no pay. ‘Our results show that tax deductions are much better known and used more often. Who is enthusiastic about pumping around taxpayers' money through laborious subsidy applications and assessments?  Perhaps a one-stop shop, where it becomes clear for which subsidies you are eligible, can improve things’, shares Van Teeffelen.

Sales training is part of the solution

The annual report is not all negative. For example, the fourth quarter survey finds a strong positive relationship between entrepreneurs' sales skills and their short-term growth expectations. The more sales-able the entrepreneur, the higher the growth expectation. However, 62 percent of business owners say they are inept or untrained when it comes to selling. Sales training as part of the solution can change this.

‘Small entrepreneurs need to rely on their flexibility and inventiveness. Be creative and find good examples. Visit other entrepreneurs more often to see how they do it, ask, be curious. This often results in new ideas or solutions that you have not thought of yourself.’


All in all, the annual report is not very optimistic. Which solutions can turn the tide? The report lists three. First of all, solvency can be enhanced by converting tax debts into subordinated loans. Secondly, entrepreneurs will have to be proactively supported, for example with compensation, coaching and training in the field of sales and finance. Finally, the viability of some companies will also have to be honestly looked at. Due to today's tight labour market, now is perhaps the time to guide entrepreneurs to better paying jobs. ‘Be realistic. If you don't generate enough income, quit your business. There are more than enough opportunities to earn a living as an employee.’

About the Small Business Index

This is the fifth quarter and the first annual publication of the Small Business Index, a joint initiative of Qredits, ONL for entrepreneurs and the Digital Business & Media Knowledge Center of Applied University of Utrecht. Entrepreneurs without staff and small business entrepreneurs represent 95.5 percent of all entrepreneurs in the Netherlands. Together they account for almost a quarter of all corporate profits and a third of corporate employment. This index has been developed as a barometer for this underexposed group, the results of which are published four times a year.

Want to know more?
Download the report SmallBusinessIndex on ResearchGate.

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