You can read this article as the start of an “Entrepreneurship 101” course, as one entrepreneur's experiences, and as a finance professional's take on entrepreneurship.
I write it as someone who, a few years ago while still a white-collar employee, suddenly found herself in the middle of the entrepreneurship ecosystem.
We all know the answer to “what is entrepreneurship?” by now. It can be defined in many ways: “a person setting up their own business”, “the venture of a person who takes on risk and starts a business for profit”, “the process of taking risks, catching innovations, seizing opportunities and bringing all of this to life”. All of these are true. In other words, there is no single, definitive answer to what entrepreneurship is. Still, I think the best answer came from Apple, widely regarded as one of the most successful ventures of recent times. For Apple, entrepreneurship is “the skill of interpreting old rules with modern innovations and putting them into action”.
As the ventures whose global success we have witnessed in recent years have multiplied, entrepreneurship has become one of the most talked-about topics. That is why the number of businesses founded in Türkiye grows year after year: comparing June 2016 with June 2017, the cumulative number of new businesses rose by about 27%. This remarkable jump is a good sign in macroeconomic terms, but the growth needs to continue. More importantly, the businesses being founded must be “sustainable”. Sustainability, which I see as one of the most important indicators in economics, can in this context be explained as businesses being able to stay alive.
“Entrepreneurship is the driving force of the economy”
According to TÜİK data, 99.8% of businesses in Türkiye are SMEs. It is worth recalling the definition of an SME here.
In its most general sense, SME stands for small and medium-sized enterprises. Size is determined by the number of employees, annual net revenue and balance sheet values. In June 2018, the upper limits of these values were changed. Under the new regulation, the upper limit for “annual net sales revenue” and “balance sheet” was raised from 40 million TL to 125 million TL, while the upper limit for the average annual number of employees was kept at 250. In other words, a business that stays below these limits each year qualifies as an SME.
So if almost all businesses are SMEs, let's look at how they create value at the macroeconomic level. According to some data, SMEs in Türkiye account for 73.5% of total employment, 56.2% of value added, 62% of total sales volume, 55.1% of total exports and 37.7% of total imports. As these statistics show, SMEs matter for themselves in microeconomic terms and create value for all of us in macroeconomic terms. These figures confirm the famous guru Peter Drucker's words, “Entrepreneurship is the driving force of the economy”, and prove the importance of entrepreneurship.
So despite the growing number of businesses in recent years, how many of them manage to survive?
If we turn to our real question — how many businesses survive despite the rising number of new ones, in short their sustainability — we are faced with some negative statistics. Unfortunately, 32% of businesses in Türkiye close in the year they are founded, and 85% within the first five years, for various reasons. For an entrepreneurship ecosystem that creates so much value, being sustainable is at least as important as existing. That is why it is so important to understand entrepreneurship well, to set out with the right analyses and to learn from the difficulties encountered.
For exactly this reason, I will keep writing about the reasons businesses close and the most important and effective ways to protect against them. Stay tuned ☺ ...
