Adding business consulting sessions to an already intensive training programme doesn’t affect firm performance in the medium run.
Women-owned micro firms are offered 108 hours of general business training, including sessions on personal development, business development, management and productivity improvements. Some of them are also offered three months of consulting support combining group and one-on-one sessions.
- To improve entrepreneurial skills
- To increase the adoption of basic business practices
- To increase business size
CAPLAB (Centre of Services for Labour Training and Development), CELATS (Latin American Centre for Social Work) and INPET (Institute of Promotion of Solidarity Development)
This intervention was tested in a region where micro firms run by women tend to be smaller, less productive and less profitable than those run by men.
Women that own a family business. Participants are on average 43 years old, have 10 years of schooling and 30 per cent of them are the head of their household. They dedicate an average of 48 hours a week to their businesses and an additional 22 hours to household chores. Half of them have had an active loan during the last year, mostly for their businesses. Only 16 per cent have previously received any type of business training.
Businesses are very small, generating on average US$200 a week. A quarter of the businesses have incomes of less than US$40 a week, 68 per cent are dedicated to retail, 16 per cent to food processing or manufacturing and only 7 per cent are in the service sector.
- General business training: Thirty-six three-hour group sessions held three times a week over a period of three months. Sessions focus on explaining the best practices associated with successful microentrepreneurs and cover three modules: personal development (self-esteem, social skills and life planning), business development (plan new businesses or process innovations in current ones, marketing and sales strategies, and costing) and management and productivity improvements (customer care, safety and hygiene of production processes and production workshops). The training is provided by highly experienced professionals and costs about US$341 per participant.
- Business consulting: A combination of individual and group consulting sessions for an additional three months. The sessions cover the same three modules as the general training. During those sessions self-help groups and investment groups are encouraged and supported. In the consulting sessions, the support is more specific and tailored to the characteristics of the individual businesses and their needs.
Some entrepreneurs are offered:
- The general training only
- The business consulting component on top of the general training
A third group doesn’t receive any support.
- Firms that received the consulting sessions and the general training registered increased adoption of recommended business practices compared to those which only received the training. This effect was particularly significant for larger firms.
- Among those that only received the general training, only firms with higher sales volumes increased the adoption of recommended practices in the longer run.
- The most common practices adopted were bookkeeping and paying the business owner a fixed salary instead of taking money out of the business depending on household needs and business capacity.
- Firms offered any of the support schemes were, on average, more likely to participate in business associations a few months later, but the effect only persisted for those firms offered the consulting complement.
- Firms in all support schemes increased their use of formal credit. Credit from informal rotating savings and credit associations only increased for those that received the consulting session, which promoted and supported those associations, but it decreased for those only offered the general training.
- Accessing the general business training increased business sales by over 15 per cent two years after the programme, regardless of the consulting complement.
- For smaller firms, the effects on sales showed earlier but vanished over time. The effects on larger firms took longer to develop but were greater and more persistent.
- The effects on sales showed earlier, from four to seven months after the programme, for those receiving the consulting complement.
- None of the schemes affected the number of employees or capital significantly. If anything, the number of employees was slightly reduced and capital slightly increased.
- In the short run, firms that received any of the support schemes registered increases in productivity, although these gains had vanished two years after the programme.
- Productivity gains only persisted for firms owned by highly educated women and those with higher entrepreneurial traits who received the consulting complement.
- By itself, an intensive training programme delivered by experts can unblock the managerial capacities of microentrepreneurs and help them to grow their firms.
- The training component provides a good return on investment. The cost is compensated for in just three months by the extra sales generated by the training.
- Given that sales effects converge for those that do and don’t receive the consulting sessions, the extra costs associated with this component don’t prove to be cost-effective, on average.
- The consulting complement might be particularly suited to entrepreneurs with higher education and entrepreneurial traits. They are the ones who benefit the most from it in terms of improved business performance.