Tomorrow’s Entrepreneur: Targeting Growth And Impact
New fortunes created by the next wave of Elite Entrepreneurs will come from some unexpected industries as business owners target growth and positive impact.
While technology, retail and finance accounted for nearly three-quarters of Elite Entrepreneurs’ revenues four years ago, a new wave of business founders are seeking revenue growth and social impact goals in a markedly more diverse range of industries, according to the new 2018 BNP Paribas Entrepreneur Report.
The annual survey, now in its fourth year and produced in association with Scorpio Partnership, found a surge in the importance entrepreneurs accorded to achieving positive social impact in their business and investment strategies.
Slowing growth in these traditional wealth-generating sectors has prompted entrepreneurs to cast their nets wider, with accounting, culture-based sectors and export-import forecast to achieve the biggest revenue gains in 2017.
“Year-on-year comparisons highlight there has been a sharp decline in industry concentration over time,” states the BNP Paribas report, which surveyed more than 2,700 entrepreneurs worldwide. In 2013, 72% of respondents reported revenues in just three sectors - technology, retail and finance. Fast-forward four years and now no single industry accounted for more than 10% of respondents’ activities. The top sectors for future revenue growth are expected to be accountancy, targeting 22% growth; arts, media and sports (10.9%); and export-import (10.2%).
Revenue growth with positive impact
Foremost in the minds of these new wealth creators is the focus on achieving positive social and environmental impact, which has risen dramatically in importance, with 39% of business owners now using it as a metric of business success, compared to only 10% two years ago.
As well as seeking new sectors in which to operate, Elite Entrepreneurs have steadily reduced their relative exposure to their own businesses, as they seek greatest impact through their investments. In the first year of the BNP Paribas report, respondents said a quarter of their wealth was tied up in-house. Today, that has fallen to 17%.
Instead, entrepreneurs have diversified their wealth across multiple asset classes – on average, real estate and cash each account for 14% of portfolios, while fixed income (12%), stocks (11%) and private equity (9%) also have notable weightings. Socially responsible investments (SRIs) total 7% of Elite Entrepreneurs’ investment portfolio with an additional 5% allocated to angel investing, reflecting the importance given to social impact projects by entrepreneurs. A total of 29% expect to significantly increase the percentage allocated to impact investments in the next five years, while 34% expect to expand their investments in new start-up companies during the same period.
This underlines the critical role that entrepreneurs believe new businesses play in achieving positive local and global impact. A total of 80% believe that entrepreneurship is the most effective means of creating positive impact. In terms of investing in other companies, four-in-ten respondents have done so through investment funds, 29% via private equity, 26% with equity funding and 21% in other start-ups. Venture funding (19%), angel investments (16%) and crowd funding (15%) also scored highly.
While the most bullish sectors in terms of revenue growth in 2017 are relatively staid industries such as accounting, trading, energy and medicine, business founders are nonetheless captivated by the potential gains their companies could achieve through new technologies whilst also helping society.
Among respondents, 70% said they were excited about the prospects for virtual reality (VR) and HealthTech, while 67% described artificial intelligence (AI) in similar terms. Likewise, biometric payments garnered enthusiasm among 62% of entrepreneurs, big data 59%, self-learning computers 58% and self-driving vehicles 57%.
So why are our business founders enthusiastic about these innovations? Primarily, they believe these technologies can positively impact society and bolster profits.“There’s massive potential,” said Alice Hall, co-owner of Britain’s Pink Boutique, an online fashion firm that she founded from her living room in 2012 and today employs 76 staff, shipping 4,000 garments daily. “From things like VR, which allow people to try on clothing at home before they buy it, to specialized lockers for home deliveries and even drone delivery, there are some great new technologies coming in to play,” the 29-year-old adds.
Broadly, entrepreneurs expect virtual reality to aid the transition towards a virtual office, making communications more efficient and reducing the time, expense and energy expended in travelling for work, which also achieves a positive impact on the environment.