ADVICE

Small biz key to economy

Posted 1/21/13

Uncle Sam wanted to know: What kinds of companies are America’s true growth generators? Is it corporate giants like Apple, Amazon or GE? Is it startups? Is it relative newbies such as Facebook.

After some exhaustive research, the answer was clear: “None of the above.”

The real economic spark plugs in the U.S. are not big public companies. They are small, privately held, fast-growing firms that already exist. These “high-impact” businesses are defined as firms whose sales and employee count have at least doubled over a four-year period.

That’s about 350,000 businesses and the research shows they tend to be a bit younger (but still average 17 years old) and a whole lot more productive than others. And they’re not just a bunch of high-tech firms, either. They exist in relatively equal shares across all industries – and get this – even declining and stagnant ones! No single industry dominates.

Here’s another key finding of the U.S. Small Business Administration: This relatively small group (less than 10 percent of all U.S. companies) of privately held, small firms accounts for all (not most, but ALL) net job growth in the U.S. economy. These high-impact businesses are also largely immune to ups and downs of the business cycle.

But surely these must be the “bigger” small business, right? Wrong again. The vast majority (94 percent) of high-impact businesses have just one to 19 employees. Another 5.5 percent come in at between 20 and 499 employees, and a scant 0.5 percent have more.

Edward Hess, professor and executive-in-residence at the University of Virginia’s graduate business school, has studied high-impact businesses for years and has an insightful new book called “Grow to Greatness: Smart Growth for Entrepreneurial Businesses.” He offers these lessons:

• Don’t grow yourself into trouble. Many small businesses flame out when they try to grow too quickly, as growth outstrips people, processes and controls. Cash flow is critical. Growth requires investment ahead of cash receipts. “Entrepreneurs must understand they might not be able to afford all available growth,” said Darden. Avoid the “grow or die” myth. A better approach is “improve or die.”

Next Page
No comments on this story | Add your comment
Please log in or register to add your comment
Calendar
PBN Hosted
Events

Only a few seats remain for PBN's Manufacturing Awards Dinner and Ceremony, Thursday, April 24th, at the Bryant University Bello Center. Don't hesitate. Register today!
  • Business Women
    Accomplished. Confident. Wicked Smart. Nominate women you know who deserve speci ...
  • 40 Under Forty
    It's the 10th Anniversary of 40 Under Forty, and PBN is planning a special event ...
  • Healthiest Employers
    Enrollment now open for the 2014 Healthiest Employers Program. Please take a mom ...
Advertisement
Purchase Data
Book of Lists
Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  •  
  • Purchase an e-File of the entire Book of Lists database
  •  
  • Purchase a printed copy of the Book of Lists
  •  
    National
    Local
    Latest News