Small businesses in Israel: How many and just who succeeds?
It is an accepted fact that in most countries, small and medium sized enterprises (SMEs) make up over 95% of the economy. Israel is no exception to that rule. What makes Israel a case study to analyse is many a successful high-tech starts up has emerged from this grouping.
Just recently there have been several articles on the subject in the Hebrew press. I have pulled the numbers together and they reveal much.
According to CofaceBdi, of the 0.5million enterprises in the Holy Land, 51.5% are self employed or 1-person companies. A further 172,000 have up to four employees. Barely, 3,582 employ over 100 people.
To show how emphatic is the role of the small operation in the economy, 110,625 set ups have annual revenues of under 100,000 nis (almost $30,000). By way of comparison, the average wage is about 9,000 nis per month.
There are probably two key areas where small businesses suffer. The first is the level of bureaucracy and / or paperwork. Here the banks have made big improvements in recent years. And last week, the government announced that receiving a business license should become an issue of weeks rather than 12 or more months.
The second issue concerns local taxes. Most municipal authorities fix rates without any due consideration for SMEs. They are seen as fair game rather than a way to generate life into a suburb. For example, a business may have to pay for a sign outside their shop, fire license for the premise, and even a security tax. And if you are a food outlet, you have to add in the costs of supervision from “both” the Ministry of Health and the local rabbinate. There is even a by-law, still enforced, not allowing to prepare dough and bake on the same premises.
It is worth considering that Israel is a country of immigration. Many entrepreneurs were born overseas. Thus they have a problem with both the language and also a lack of understanding of the local corporate culture of mentality. This will be especially true in centres such as Jerusalem, where the sector of business mentors and coaches is rightly prevalent.
A positive note was struck by a report from the department for small businesses within the Ministry of Economics. In 2016, there was a 28% increase in the number of SMEs reporting an increase in profits. Just as significant, there was a 2.6% increase in the total number of businesses, an encouraging indication of the future growth expected in Israel’s economy.