FOREWORD
BY PROFESSOR
LYNN MARTIN
The North West of England is home to 427,000 small enterprises. At the
Centre for Enterprise we are very experienced in supporting entrepreneurial
behaviour across different types and sizes of organisations. We are also
passionate about research, and even more passionate about taking research
and turning it into practical knowledge for the region’s businesses.
Of course, business growth is high on the political agenda given the
economic downturn since 2008, with job creation among SMEs expected to
help drive economic recovery. We were delighted to be commissioned by
PSP to undertake research exploring the potential of small businesses to
support economic recovery. Much of our current research is about business
growth, in particular understanding the behaviour and “mind-sets” of the
most dynamic high-growth business leaders. The focus of this report is
rather different. It is about how North West business leaders themselves
think businesses can drive and sustain economic recovery and job creation.
Our research emphasises the important contribution of many kinds of
business, some but by no means all of them achieving exceptional increase
in turnover and employment. Many do not fit that high growth model at all,
including family businesses and social enterprises driven by strong values.
The report shows that businesses in the “micro” category (with fewer than
ten employees) can be agile and proactive, making an input into the
economy that belies their size as measured by formal employment.
1
Foreword by Private Sector
Partners (North West)
During the past decade Private Sector Partners (PSP) has represented in
excess of 140,000 businesses, employing 1.3 million people in the Region.
PSP established in 2002 encompassed a wide range of trade associations
across many industries as well as broad spectrum representative bodies
including the Confederation of British Industry, Federation of Small
Businesses, Forum of Private Business and Engineering Employers
Federation. It represented more than 140,000 business and 1.3m employees
in the North West, its key purpose being to devise, promote and sustain
initiatives concerned with economic growth in a market economy and
provide a fair-minded but challenging foil for regional governmental
structures.
Fundamental to PSP has always been the recognition that 98% of businesses
in the NW, and indeed in the UK, are small. This then reinforces their
importance for any economic recovery, a sentiment strongly echoed by
Government.
We felt it was vital for there to be a clearer understanding of the breadth
and depth of SMEs, and their potential in terms of growth and support for
the economy, so that the business support can be geared to give maximum
benefit for companies and the economy as a whole. This therefore is the
basis for the research which MMU has carried out on our behalf,
‘Exploring the Potential of the North West’s Small Firms
to Drive Forward Economic Recovery’.
It is worth noting that PSP is more strongly focused on generating policy
ideas from research than are Universities and these differing approaches
should be borne in mind when reading this report.
Miranda Barker
Holly Bonfield
Directors of PSP North West
2
EXECUTIVE SUMMARY ............................................................................................... 4
High Growth and the realities of job creation ........................................................ 4
Research approach: Business owners as experts ................................................... 4
Measures of Growth Identified by Small Business Owners .................................... 5
Jobs and Employment ............................................................................................ 5
Ways that Small Businesses Contribute to Job Creation ........................................ 6
Introduction ............................................................................................................... 8
Review of evidence .................................................................................................... 8
Problems of Defining and Categorising Business Growth .......................................... 9
What is Known about How Firms Grow? ............................................................. 14
Sustaining Growth................................................................................................ 15
Alternative Conceptualisations of Growth ........................................................... 16
Summary of evidence .......................................................................................... 20
Research Approach and Data Collection .................................................................. 20
The Perspectives of Business Owners ...................................................................... 23
Rationales for business start-up........................................................................... 23
Rationales for growth and the growth process .................................................... 28
Alternative growth patterns ................................................................................ 34
The Role of Networks ........................................................................................... 36
Flexible employment ........................................................................................... 38
Approaches to employing .................................................................................... 42
Discussion ................................................................................................................ 45
Conclusions .............................................................................................................. 48
References ............................................................................................................... 52
3
EXECUTIVE SUMMARY
The potential of small businesses to support economic recovery and growth
is high on the political agenda. In their recent mid-term review, the
Coalition Government assert that ‘this Government believes that the private
sector, and SMEs in particular, is the crucial driver of jobs and growth for our
country’ (HM Government, 2013). On the whole, research evidence tends to
support confidence in the ability of small businesses to regenerate local
economies and create jobs. This is the report of a short research project
funded by Private Sector Partners North West in 2013 to gain insights into
the potential of small firms in the region to generate value and create jobs in
the context of a declining public sector. The emphasis was on utilizing the
knowledge of small firms themselves to advance understanding of ways they
can deliver on such potential. The research consisted of three interlinked
0tasks: a review of published evidence, an on line poll, and two facilitated
workshops on the realities of small business growth.
High Growth and the realities of job creation
The potential for a few ‘high growth’ businesses to generate a
disproportionately large proportion of jobs has been widely reported. It is
increasingly clear, however, from an emerging body of statistical evidence
that exceptional high growth businesses are only part of the story. The
literature indicates that rapid high growth is often not sustained or
sustainable. There are many ways of generating new economic activity that
do not fit the high growth firm model. Examples include firms that
emphasise quality rather than expansion (sometimes called small giants),
flexible forms of quasi-organisation, and clusters of interconnected but
interdependent enterprises.
Research approach: Business owners as experts
Our original empirical research explored the variety of ways that small
businesses are contributing to economic recovery in the North West. We
did this by asking business leaders about their business experiences and
ambitions, firstly via an on-line poll and then to share their thinking with us,
and each other, in facilitated workshops. Some supplemented this
information with more detail in one-to-one interviews. Forty-six owners of
Small and Medium Sized Enterprises (SMEs) with fewer than fifty employees
told us about how their businesses had grown and / or planned to grow.
Some of them had already achieved very high growth or were on a
trajectory to do so. But it was important for the breadth of the insights we
sought not to limit the study to this group. Participants included owners of
4
micro businesses (with fewer than ten employees). There were also sole
traders who do not employ at all as well as family businesses and social
enterprises.
Measures of Growth Identified by Small Business Owners
Participants in the study who had undertaken targeted growth programmes
explained how their businesses had benefited, in some cases quite
dramatically, in terms of increased employment and turnover. Business
owners, however, described a variety of other measures of growth that
reflected personal aspirations, including collaborative working, concern for
their local communities, and long term commitments to their businesses
and employees. Most of these self-defined measures of growth fell outside
standardised indicators of increased annual turnover and/ or number of
employees. Some alternative means of growth they identified were:







Forming temporary alliances to undertake large projects
Forming partnerships to increase capacity
Building networks
Diversifying into new or related markets
Creating new small businesses, portfolio entrepreneurship
Creating a reputation for excellence and quality
Supporting local communities for example by sourcing supplies
locally
Jobs and Employment
Employment is an important element of economic regeneration, but simply
recording the number of employees fails to capture the complexity of the
labour market that small business owners described to us. Project-based
working, freelancers, sub-contracting and other forms of non-standard
employment were contributing to a vibrant, flexible labour market that may
fall below the radar of policy makers. Twelve of the 46 participants in the
poll had more than one business. Some business owners prefer to start a
new businesses rather than grow their existing one. This form of portfolio
entrepreneurship adds to jobs created although each individual business
may remain in the micro category and thus not appear in high growth
figures.
There are businesses in the region growing by developing a reputation for
excellence and quality. This was articulated, for example, by an owner who
told us, “We set out to be good first and grow as a consequence....that then
is more secure growth”. In the words of another, “I have been very keen to
grow the business slowly, it is important to me that every job is sustainable”.
5
This generates stable, long term employment and underpins skill
development. Businesses concerned with supporting local communities are
often able to offer work to marginalised workers and job quality was a
priority for many of the business owners. Some of these businesses
described themselves as non-profits or social enterprises. Insistence on
social purposes and ethical contribution, however, was by no means
confined to social enterprises.
Ways that Small Businesses Contribute to Job Creation






Support a freelance labour market
Generate sub contracted jobs
Create stable employment
Create high quality jobs
Offer employment to marginalised workers
Setting up new businesses rather than growing current ones.
All these themes are expanded in the report using business owners’ own
words. In addition, four case studies highlight very different routes to
making an economic and social contribution in the region. These are: A
successful high growth entrepreneur; a social entrepreneur who act as a
catalyst to animate collaborative working; a family business taking tentative
steps towards employing; and a micro-business with more than 100 nonstandard workers, now expanding into the region from outside.
This research emphasises the many ways in which the region’s SMEs are
making contributions to the economy and to their communities. Only a few
firms that took part in the study have achieved the rapidly expanding sales
and employment that meet formal definitions of high growth. That was not
surprising. But although alternative concepts of growth increasingly feature
in the academic literature, the researchers had not anticipated the sheer
variety, energy and creativity of businesses revealed in this report.
Lord Young’s 2013 report Growing Your Business calls for actions to help
micro firms to move forward. This research suggests that such action should
be as much about supporting an enabling environment as targeting
individual firms. We would argue it is this enabling environmental which
helps to facilitate business creativity in terms of growth and therefore in
contributing to their community and to the economy.
6
From the in depth discussions and research done by MMU, on behalf of
Private Sector Partners NW:-

It is evident that the business community needs Government to
envision the economic value of businesses in a new way - and to
learn how to support, foster and grow them in all their forms.

Economic potential should not be ring fenced using a narrowly
defined measure, but should include all those SMEs that have the
potential to support the economic recovery by employing, putting
cash back into local economies, or by fostering the growth of other
SMEs by driving new collaboration, product development and joint
delivery of contracts.

These firms are just as valuable, just as worthy of support, as any
other. It is important to build these businesses up so that they can
make their maximum contribution to the economic recovery, and
national business support mechanisms need to be geared to support
them wholeheartedly in this.
7
Introduction
There are high expectations that small firms can create new employment in
English regions affected by public sector reductions. The aim of this report is
to offer new insights into the potential of small firms in the North West to
contribute to economic recovery.
International research evidence tends to support confidence in the potential
of small firms to play an important role in creating jobs and regenerating
local economies. Many studies demonstrate that a few rapidly growing
firms generate a disproportionately large share of new jobs. It is
unsurprising that those success stories have attracted intense interest from
policy makers and researchers. Yet there are concerns that too narrow a
focus on the very few exceptional small firms that grow big produces an
incomplete picture of the economic and social contribution of small
firms more generally. This report is about the potential ways in which
Small and Medium sized Enterprises SMEs (with fewer than 50
employees) can contribute to economic recovery in the North West.
Very impressive high growth of a few individual businesses is part of the
story but very far from all of it.
“…too narrow a
focus on the very
few exceptional
small firms that
We begin with a review of published evidence about high growth and
various kinds of business growth that do not fit standardised high
growth criteria. We then turn to what we learned from over 40 business
owners who gave us their time to explain their own experiences of
growth.
grow big produces
an incomplete
picture of the of
the economic and
social contribution
Review of evidence
Since the coining of the term ‘gazelle business’ by David Birch (1979,
1987) more than three decades ago, the phenomena of the high-growth
firms (HGFs) has continued to capture the imagination of policy makers
and the business community. The idea that there is an exceptional type of
business that experiences high growth and, collectively, that these
businesses account for the most significant persistent employment effects in
the economy (Department for Business Enterprise and Regulatory Reform
2008) is an attractive one.
The contribution of high growth firms to job creation can be measured in
two ways. Firstly the number of jobs created by high growth firms can be
expressed as a percentage of the total number of all jobs created by all small
firms. A second measure expresses the number of high growth firms as a
percentage of all job creating small firms. The widely cited report from
8
of small firms more
generally.”
NESTA (2009) uses both of these measures to suggest that while high
growth firms accounted for just six per cent of businesses with 10 or more
employees, the so called ‘vital six per cent’, they were responsible for more
than half (54 per cent) of new job creation among firms with 10 or more
employees in the three years before 2008. This headline figure of 54 per
cent attracted the attention of policy makers and provided the rationale for
focusing resources on a small number of high growth firms in order to
stimulate economic recovery.
The celebrated 54 per cent figure excluded firms with fewer than 10
employees. Once the contribution to job creation of these micro
enterprises was included in the analysis the percentage of new jobs
created by high growth firms fell to 43%. Nevertheless this is still a
considerable contribution and it is unsurprising that recognition and
support for the small number of businesses with growth potential has
attracted interest, given the enormously disproportionate level of job
creation they are believed to account for (NESTA, 2009, Acs and
Mueller, 2008, Mitusch and Schimke 2011, Parsley and Dreessen,
2003, Moreno and Casillas, 2007, Freeman, 2013). Enthusiasm for the
concept of gazelles amongst policy makers, however, is not without
criticism. According to a report from the newly formed Enterprise
Research Centre (ERC) based at Warwick University:
“… it is unsurprising
that recognition and
support for the small
number of businesses
with growth potential
has attracted interest,
given the enormously
It appears that policy makers have been running somewhat
ahead of the evidence – HGF-orientated policy has been
enthusiastically promoted, even though it is accepted that the
evidence base is very weak (Anyandike-Danes et al, 2013,
p.21).
disproportionate level
of job creation they
are believed to
account for.”
In the following sections we examine definitions of high growth and
evidence for how firms grow. Recent work in the field, we note,
suggests that the situation is more nuanced, and the realities of job
creation more complex than the notion of the “vital six per cent”
would suggest. We then we to calls for growth that is sustainable
rather than fast. Finally, we consider some alternative forms of
growth that do not fit the ‘gazelle’ model.
Problems of Defining and Categorising Business
Growth
Despite huge interest in the phenomenon, there is no universally
accepted set of measures of high growth. Definitions of HGFs are
9
numerous and fall into two main categories: by percentage of total firms or
by volume of growth. This is a problem because these inconsistencies, and
the lack of comparable data, hinder our ability to understand the
phenomenon. The European Commission (2011) acknowledge “that the
actual classification as high-growth firms may be influenced by the choice of
growth-indicator” (p.5).
It was in response to the impossibility of comparable studies that EurostatOECD developed a unified definition of a High Growth Firm as one that
experiences average growth rates in employees, or turnover greater than 20
per cent per annum over a three year period, where the firm has a minimum
of 10 employees at the beginning of the period in question (OECD-Eurostat,
2007). This definition was a result of consensus among experts.
Defining High Growth

Ddes
There is no single definition of ‘high growth’

The most widely used definition is the one developed by the OECD and
Eurostat which states that :

High Growth firms are those with an average increase of at least 20% in
turnover or number of employees over three consecutive years, with at
least 10 employees in the first analysed year.

This definition excludes firms that are either:
o too young (less than 3 years old)
o too small (fewer than 10 employees)
The minimum size of 10 was a pragmatic compromise on the basis that a
higher threshold would exclude too many businesses, whereas no threshold
at all would be too inclusive, with a business growing from one to two
employees categorized as HG. What has become known as the ‘OECD
definition’ has gained traction and is used by the European Commission. In
the UK it is familiar from Department for Business, Innovation and Skills (BIS)
reports. As a standard definition it has the important advantage of making
longitudinal and international comparisons possible.
Yet estimating the contribution of HGFs to overall job growth is complex and
the spectacular success of the six per cent of firms with ten employees or
more that are high growth by the OECD definition tells only part of the story.
10
This has been shown through analysis of firm dynamics and job creation
recently undertaken at the Enterprise Research Centre at Warwick
University (ERC) (Roper and Hart, 2013; Anyandike-Danes et al, 2013). These
authors make the key point that the apparent contribution of HGFs to job
creation differs markedly depending upon which firms are included in the
data. The enormously disproportionate level of job creation commonly
attributed to HGFs presents a somewhat misleading picture as a result of
excluding micro- businesses (i.e. those with fewer than ten employees). This
is important because the trend since the late 1990s has been for more
people to work in micro businesses, including single employee firms.
Another notable exclusion is firms less than three years old at the start of
the period under consideration. ERC’s analysis of the Office for National
Statistics (ONS) UK longitudinal business dataset from 2007-2010 shows
that the contribution to job creation of HGFs looks much smaller than the
celebrated 54 per cent when micro firms and newly founded firms are
included in the data. Indeed taking account of them, as Roper and Hart
(2013, p 7) comment, “gives a rather different impression of the dynamics of
growth”.
Measuring the Contribution of High Growth Firms to Job Creation

Estimating the contribution of high growth firms to overall job growth is
complex. The spectacular success of the six per cent of firms with ten
employees or more that are High Growth by the OECD definition tells
only part of the story.

The contribution of high growth firms to job creation differs markedly
depending on which firms are included in the analysis

Research suggests that when micro enterprises with fewer than 10
employees and new firms less than 3 years old are included, the
contribution of high growth firms to job creation is much smaller than the
54% proposed by NESTA.
11
Measuring the Contribution of High Growth Firms to Job
Creation 2007-2010
Table 1 below summarises the relative contribution of high growth and non
high growth firms to job creation for the three -year period 2007-2010.
The figures are based on the total number of firms, including micro
enterprises and firms less than three years old that contributed to job
creation in the three year period. The table reports each category of firm
as a percentage total job creating firms and also the number of jobs created
as a percentage of total job creation. The analysis differs from that used in
the NESTA ‘Vital Six Percent’ report because it includes both micro business
with fewer than ten employees and new businesses less than three years
old.
Table 1 shows that HGFs (by the OECD definition) comprised only one per
cent of all job creating firms when micro businesses and new businesses are
included in the data set (Roper et al, 2013; Anyandike-Danes et al, 2013),
rather than the six percent reported by NESTA. This very small group of
HGFs certainly made a disproportionately large contribution to overall job
creation, with responsibility for more than a fifth (22 per cent) of new jobs.
However, other non-high growth firms with ten or more employees in 2007
comprised six per cent of all job creating firms in that period and were
responsible for exactly the same proportion (22 per cent) of new jobs as the
HGFs. These non high growth firms were defined as job creators because
they had more employees in 2010 than 2007, but failed to be classified as
‘high growth’ because they didn’t meet the 20 percent growth in turnover or
number of employees stipulated by the OECD definition.
Micro-enterprises (with fewer than 10 employees in 2007) and so omitted
from conventional analyses of contributions to growth, comprised more
than a quarter of all job creating firms. They were responsible for 15 per
cent of jobs created. A high proportion (61 per cent) of job creating firms
were newly founded in 2007 or later. They were responsible for more than a
third (34 per cent) of new jobs. Table 1 suggests, in short, that job creation
occurred in firms of all sizes and ages. Whilst HGFs were important job
creators they were responsible for under a quarter of jobs created between
2007 and 2010 when micro firms and new firms are taken account of
(Anyandike-Danes et al, 2013). Roper and Hart (2013) also comment that
the proportional contribution of HGFs to job creation fell significantly post2005 in the UK.
12
“…High Growth
Firms (by the OECD
definition)
comprised only
one per cent of all
job creating firms
when micro
businesses and
new businesses
are included in the
data set…”
“…whilst small
firms are high job
creators, they are
also responsible for
higher job
destruction and
thus net job
creation figures tell
us nothing about
the persistence of
jobs.”
Table 1 Relative Contribution of HGFs to Job Creation (2007-10).
Category of Firm1
Age of Firm
Definition of
growth
% of Job
Creating Firms
% of Jobs
Created
Non High Growth
Small firms & larger
firms (10 or more
jobs in 2007)
Born before 2007
and alive in 2010
More jobs in 2010
than 2007
6
22
Young firms
Born between 2007
and 2010
More jobs in 2010 than
2007
5
5
Some jobs in 2010
61
36
27
15
1
22
100%
100%
Alive in 2010
New firms
Born after 2007
Alive in 2010
Micro enterprises
Fewer than 10 jobs
Born before 2007
and alive in 2010
High Growth
High Growth Firms
Born before 2007
and alive in 2010
at least 10 jobs in 2007
and 20% average
annual growth
between 2007 and
2010
TOTAL
Source: ONS Business Structure Database. Adapted from Anyandike-Danes et al, (2013: 27)
Research carried out for the Federation of Small Businesses (Urwin et al,
2008) drew attention to the propensity of analyses of the employment
contribution of small firms to capture only the immediate,
contemporaneous effects. In a similar vein Anyandike-Danes et al (2013)
argue that what is missing from much of the focus on HGFs and job creation,
is consideration of job destruction and churn. They note both that whilst
small firms are high job creators, they are also responsible for higher job
1
The ERC report distinguishes six category of firm:






High Growth Firms born before 2007, alive at 2010 at least 10 jobs in 2007 and
20% average annual growth between 2007 and 2010
Smaller Non-HGFs firms born before 2007, alive in 2010 with more jobs in 2010
than 2007, with at least 10 jobs in 2007, but not a high growth firms
Larger Non-HGFs firms born before 2007, alive in 2010 with more jobs in 2010
than 2007, with more than 10 jobs in 2007, but not a high growth firms
Young Firms born during the period 2007-2010, alive in 2010 with more jobs than
in 2007.
New firms – born after 2007 and alive in 2010 with jobs in 2010
Micro enterprises – non-HGF (fewer than 10 employees)
13
destruction and thus net job creation figures tell us nothing about the
persistence of jobs. Anyandike-Danes et al (2013) suggest that a greater
focus on ‘growth trajectories’, is needed to understand both how new jobs
are created and what determines their survival rates.
What is Known about How Firms Grow?
Interest in the mechanisms through which firms grow, especially how firms
achieve high growth, has attracted the attention of academics for several
decades. Debates range from seeing growth as a one-off act, the result of
serendipity or random processes (Storey, 2011) to the result of strategic
management (Wright and Stigliani, 2013).
Numerous research studies have used large scale, national and international
data sets (Heshmati, 2001, Delmar et al, 2003, Wiklund and Shepherd, 2003,
Moreno and Casillas, 2007, Parker et al, 2010, Morrison et al, 2003, Roper,
1999, Barringer et al, 2005) to attempt to identify the key variables that
explain high growth. However, the heterogeneity of growth firms has meant
consensus has not been reached.
In Greater Manchester a survey of 2,425 businesses by Wiseman and Balodis
(2012) found very little difference in identified drivers and barriers to
growth between growth firms and non-growth firms. More than four fifths
(81%) of all business said that they had engaged in innovation in the last
three years, and 80% said they planned to in the next three. With regard to
the number of workers, there was a slight increase in the percentage of
firms reporting an increase in staffing levels staffing levels in 2012, up from
16% of firms to 17%. However, during the same period there was a
doubling of the percentage of firms that had decreased in size.
Table 2 The Manchester Business Survey 2012: Changes in staffing
Source:Wiseman and Balodis, 2012
Manchester Business Survey – Changes in staff in the
last 12 months
2011
2012
Increase
16%
17%
Decrease
8%
16%
Stayed the same
73%
65%
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What is clear is from the discussion above is that growth can be episodic and
difficult to achieve and maintain. Despite attempts to profile the typical
HGF, for example through interest in high technology small firms, growth is
found in all sectors, sizes and ages of firm. Barringer et al., (2005) contend
that growth, is a process that should be managed like any other business
challenge. Delmar et al (2003) note that the demography of the firm and
how patterns of growth are affected over time are under researched. This is
supported by St-Jean et al (2008), who demonstrate that business growth is
not a linear process but characterised by patterns of uneven growth over
the lifetime of the firm. All of this adds up to a picture of spasmodic
growth, which may be hard to sustain, with the associated potential for job
losses as well as gains.
Sustaining Growth
As the literature discussed above shows, high growth can be fragile and a
focus on exceptional growth masks the complex dynamics of both growth
and decline. Recognition of this has led to an interest in the concept of
sustainable growth.
In a recent report from Demos Finance, it is argued that rather than focus on
speed of growth, emphasis should be on sustainability of growth:
‘Very few companies go on and grow consistently
for a sustained number of years. As businesses get
larger it becomes ever more challenging to
maintain high growth rates, while the tendency
towards mergers and acquisitions can complicate
our ability to tease out underlying growth rates.
Some top-line growth can be at the expense of
sustainability of growth, so how should we measure
‘good’ growth as opposed to absolute growth in the
short term?’ (Freeman, 2013, pp.71-2).
This question of how to measure ‘good’ growth is left unanswered in the
Demos report, but must be given further consideration if sustainable growth
is to become accepted.
Some critical voices demur from notions of small businesses as engines of
growth for others reasons. Harrison (1994) went so far as to argue that the
apparent strength of small businesses as economic drivers is largely illusory.
What was really going on, claimed Harrison, was large organisations
outsourcing and transferring risks to separate, usually smaller suppliers,
while maintaining control over their resources. As Down (2010) explains:
15
“Despite attempts
to profile the
typical high
growth firm, for
example through
interest in high
technology small
firms, growth is
found in all
sectors, sizes and
ages of firm.”
‘If a large corporation out-sources 50 per cent of
its activity, reducing the numbers of people it
employs directly by half as well, it might create a
number of new enterprises (or create new
business for existing ones) ........On the surface
this looks as though both more wealth and more
jobs have been created, but it might mean that all
the corporation has done is shift the more costly
and risky elements of its activity to other parts of
the global economy’.(pp.8)
In this analysis the focus on job creation has been at the expense of both the
sustainability and quality of employment that arises from it. Insecure
employment, low pay, reliance on ‘top up’ benefits and poor opportunities
for training and progression are amongst the concerns.
Alternative Conceptualisations of Growth
There is an emerging sense that some companies do not fit the prevailing
model of business growth, either because they choose to remain small, or
do not grow in the conventional sense of employing more staff. To ignore
this economic activity because it does not sit within one influential growth
model is to miss significant wealth activity that is occurring in firms of all
types. For some international commentators this implies that support
should shift from individual firm interventions towards creating an enabling
environment (Welter, 2009. As one prominent UK academic recently asked
in the light of overwhelming policy focus on HGFs, “what about the majority,
are they really no-hopers because they stay small or mediumsized?”(Hamilton, 2013). Several alternative concepts of growth are
discussed here which may be followed very successfully by the apparent “no
hopers”.
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ALTERNATIVE CONCEPTS OF GROWTH

SMALL GIANTS: business owners choose to avoid growing too fast,
getting too big, or spreading out too much geographically in order to
concentrate on excellence, reputation and making a difference to their
local communities.

PORTFOLIO ENTREPRENEURSHIP AND DIVERSIFICATION:
business owners develop multiple ventures to run alongside each
other, or diversify within the same sector.

VIRTUAL ORGANISATIONS AND INFORMAL NETWORKS:
business owners pool expertise and resources in order to offer their
customers a common service that would be beyond the capacity of
any individual participant. Frequently used to tender for large
contracts.

CLUSTERS: owners of interrelated and interdependent business
cluster in a specific geographic area. Cluster members gain
competitive advantage through economies of scale, flows of
information and well-developed infra structures.

ECOSYSTEMS: a critical mass of activity by a number of small firms
that develops informally. Business owners form symbiotic
relationships that generate mutual advantages for members.

GROWTH CATALYSTS: small businesses that support and develop
growth either financially or by establishing networks and umbrella
organisations.
Small Giants: Burlington (2007) identified successful businesses from a wide
variety of sectors whose leaders consciously choose to avoid growing too
fast, getting too big, or spreading out too much geographically. These ‘small
giants’ are widely admired for providing excellent goods and services, and
making a difference to the communities in which they operate. They choose
to maintain this quality by limiting the volume and rate of growth.
Characteristics of small giants are stable employment and low job churn,
strong community links and consistently excellent products or services.
17
Portfolio entrepreneurship and diversification: Portfolio entrepreneurship
involves small business owners developing multiple ventures to run
concurrently and is a form of business creation generally associated with
experienced entrepreneurs (Westhead and Wright 1998; Erikson 2003;
Westhead, Ucbasaran et al. 2005). Experience in incubators, such as MMU’s
Innospace, and research elsewhere suggests that portfolio entrepreneurship
may be more widely used by less experienced entrepreneurs to allow
businesses to remain small and focussed, whilst their creators establish new
businesses to rung alongside them (Beaven, 2012). Diversifying within the
realm of an existing venture is a form of portfolio entrepreneurship that
supports the sustainability of the existing business. This is seen a lot in farm
enterprises (Hildenbrand and Hennon 2008), where retail, holiday
accommodation, food production and other associated ventures can help to
secure the future of a farm.
Virtual organisations and informal networks: These are forms of organising
work that support small companies bidding for and fulfilling larger contracts
than they might be able to do otherwise. It is a form of working that is the
norm in sections of the creative industries where micro enterprise and
informal organisation of work is very common (Davis and Scase 2000).
Informal and flexible forms of quasi-organisation are a response to
environmental flux within the sector (Clancy 1994), and such work often
takes place within temporary alliances (Summerton and Kay 1999) and
changing organisations. Examples are rife in, for example, the gaming sector,
where a group of micro enterprises may work together to fulfil a contract,
presenting a face to the client of a larger company. A company specialising
in code writing, another in designer and a branding specialist may work
together temporarily to fulfil a contract, never formalising any partnership
and dissolving the alliance when the contract is over. This is so prevalent
that Bilton (2007) suggest that the very concept of a cultural organisation
may be flawed and that, therefore, attempting to map the creative
industries through its formally constituted organisations is, prosaically, ‘like
trying to measure the bubbles on the surface of a boiling pot’
Handy’s (1995) model of the virtual organization, united by mutual trust and
facilitated by information technology, has been highly influential. Virtual
organizations enable small firms and ‘portfolio’ individuals to pool expertise
and resources in order to offer their customers a common service that
would be beyond the capacity of any individual participant. Lipnack and
Stamps (2000) described the characteristics of the work that takes place in
such organizations as:
18
‘Where independent people and groups act as
independent nodes, link across boundaries, to work
together for a common purpose; it has multiple
leaders, lots of voluntary links and interacting levels.’
Clusters: A cluster is a concentration of interconnected and interdependent
businesses and institutions within a particular geographic location. Clusters
are said to offer competitive advantages to individual businesses through
economies of scale, good information sources, and well-developed
infrastructure. This set of precepts has been highly influential, particularly
through the work of Michael Porter (1995) in the United States. Porter
argued that government and community organisations should avoid direct
intervention and focus instead on providing an environment conducive to
business, based on his model of inner cities with untapped competitive edge
attractive to entrepreneurial opportunity spotting. This approach was
imported to the UK in the form of City Growth pilots in London and
elsewhere, on the basis that cluster activity (eg food parks and cultural
businesses needing cheap accommodation) can take root in cities including
areas of deprivation. These initiatives had some successes in attracting
private investment and generating local business coalitions, but the bulk of
investment derived from the state at the national and EU level (Blackburn
and Ram, 2006).
Ecosystems: Less formal still are the ecosystems of business that grow up
around a critical mass of activity by a number of small firms. Moore (2006)
talks of “intentional communities of economic actors whose individual
business activities share in some large measure the fate of the whole
community”. Selander et al (2010) similarly identify “cooperative
environments in which symbiotic relationships are formed to create mutual
value for members”. Whilst research has tended to focus on high growth
potential areas, such as the iTunes ecosystem, the concept is more widely
seen and can be similar to a cluster, whilst not necessarily in a geographic
location.
Growth Catalysts: Traditionally interest in growth catalysts has focussed on
venture capitalists and their role as “scout and coach” for emerging
companies. Researchers have recognised that this joint human capital can
have a significant impact on growth, and this has been concentrated
particularly in new high growth technology based firms (Colombo and Grilli,
2010). There are examples, however, of other types of growth catalysts, for
example social enterprises supporting and developing a network of microsocial enterprises.
19
Summary of evidence
In this short review, we have highlighted recent literature in which leading
experts have questioned the evidence base for some influential ideas of the
exceptional HGF. High growth, they note, can be episodic and
unsustainable. Moreover, most data sets relating to HGFs ignore micro
enterprises (with fewer than ten employees) although such firms also
contribute to job creation. There are ways of generating new economic
activity that do not fit the high growth firm model. Examples include
firms that emphasise quality rather than expansion, and individuals who
start multiple businesses or diversify within one business. There are
geographically based clusters of firms coming together for competitive
advantages as well as many forms of flexible alliance and temporary
collaboration to create mutual value for individuals and firms.
“There are ways of
generating new
economic activity
that do not fit the
high growth firm
model.”
Research Approach and Data Collection
It is well established in a wealth of published literature that
entrepreneurship can generate both ‘private’ value for the individual and
wider social benefits for the local economy. We wanted to generate better
understanding for what these processes look like from the perspective of
business leaders currently active in the Northwest of England. Our review of
evidence was followed, therefore, by original research with small businesses
leaders. There were two distinct but inter-related components to the study:
an on-line poll and facilitated workshops.
We designed and administered an on-line poll in summer 2013. This was
based on the Delphi technique, which is widely used in policy studies. It is a
way of gathering views of experts on a given topic. Typically, experts in this
context are senior civil servants, elected politicians and high profile business
people such as CEOs of large companies. For this research we took the view
that the ‘experts’ are owners of small business active in the region. The
participants were selected purposively, meaning they were chosen on the
basis that we thought they would be able to make a contribution based on
their special knowledge and experience. We therefore contacted businesses
we know either to have already achieved high growth, or to be ambitious for
it. Many but not all of these had been participants in various growth
programmes offered at the university. However, it was very important for
the breadth of insight we wanted not to confine the respondents to that
group. We wrote to micro businesses (defined as those with fewer than 10
employees) including sole traders who do not employ at all, as well as to
SMEs with between 10 and 49 employees. We wrote specifically to
20
businesses in sub groups such as social enterprises, co-operatives, family
businesses, and residents in a start-up incubator, stressing that their
contributions were important to us. We felt this was necessary to maximise
the range and variety of insights because our experience suggests that
owners in these groups can be inclined to see ‘growth’ as something that is
only relevant to others.
RESEARCH METHODS

ONLINE ‘DELPHI’ POLL of 46 high growth and non- high growth small
businesses. Respondents were invited to write as much or as little as they
wanted on six topics:
o
o
o
o
o

reason for business start-up
experiences of and, rationales for growth (or non-growth)
future plans
views on the regional economy
things they were proudest of in their businesses.
INTERACTIVE WORKSHOPS in Manchester and Bootle with high growth
and non-high growth businesses, most, but not all, of whom had participated
in the poll
o Small groups discussed and reflected on meanings and varieties of
growth.
o Data were generated by participants using flip charts and post it notes
to capture their experiences and ideas and experienced researchers
taking notes.

Video interviews
o Some participants volunteered to record a short video interview during
the workshop
The poll asked just six questions plus a small amount of basic information
about the respondent’s business (e.g. sector, number of employees, year of
start-up). The questions were all open ended and respondents were invited
to write as much or as little as they chose. The topics were: reason for
business start-up; experiences of and rationales for growth (or non-growth);
future plans; views on the regional economy and things they were proudest
of in their businesses. Typically answers to individual questions were three
or four sentences long but the quantity of material varied from a few words
to several pages. There were 46 individual responses covering 64 businesses
(12 respondents had more than one business).Of those who indicated the
21
age of the business more than half said it was started since 2005. The oldest
business however was started in 1930. Sectors were varied and included
high technology, businesses services (eg marketing), retail, personal services
(eg care) construction and manufacturing. The largest businesses by
employment had 38 full time workers.
We facilitated two lively interactive workshops with selected business
leaders. These were mixed groups including established businesses that had
achieved substantial growth by conventional standards and other businesses
not in that category. Most but not all the participants were owners who
had completed the poll. The first event, held on Merseyside, included many
participants who were arts based and social enterprises as well as a few
growth- oriented businesses from other sectors. The later event held in
Manchester was more mixed with rather more HGFs but also some relatively
new starts and ‘one-person bands’ working in various forms of collaboration
and partnership.
Group discussion at the Manchester workshop
Both sessions for around 20 people were facilitated by members of the
research team who shared stimulus material based on the evidence review
and the poll. At one event there was also an external guest speaker who
talked about his own journey to high growth. We worked in small groups
(two groups in one event and three in the other) to discuss and reflect on
varieties and meanings of growth and contributions to the regional
economy. Groups reported back to the whole session. Their conversations
22
were captured by writing on flip charts and post-its, supplemented with
contemporaneous note taking by the research team. Some participants also
took part in short interviews to elaborate on statements they had made in
the groups and to comment on their responses to the event. We collected
feedback from both events and participants reported that the experience
was positive and useful. Comments included: “Useful to think about growth
and share thoughts with others” and “Useful to review and reflect on the
subject area.”
The Perspectives of Business Owners
In this section we turn to report in detail what business leaders told us
about their experiences of founding, maintaining and growing their
businesses, and how they perceive their contributions to the economy and
their communities. We make extensive use of their own words, mainly from
written poll responses but also from their spoken contributions in
workshops and short interviews. This is supplemented with more detail
about selected case studies representing very diverse forms of growth in the
boxed text. We sometimes comment on how often a particular point was
made in order to give the reader a sense of the overall data but it must be
stressed that this research was not a sample study intended to produce
statistical generalisation. It was designed, instead, to capture the range and
richness of insights business owners could offer.
Rationales for business start-up
Starting a business is often fraught with difficulties and risk of failure. If
small businesses are to fulfil their wider potential for economic regeneration
it is important to begin by understanding what motivates people to establish
their businesses in the first place. Therefore we began by asking
respondents to our poll to tell us about why they set up their businesses.
Theories of entrepreneurial motivation fall into a number of categories, but
can be defined broadly as either ‘push’ or ‘pull’ factors. Push factors
generally relate to external circumstances such as redundancy,
dissatisfaction at work, or family commitments. Pull factors, on the other
hand focus on what draws individuals to start their own business. Two
main ‘pull factors’ can be identified from the literature: a desire for greater
independence and autonomy or a concern with wealth creation.
Alongside these ‘push’ and ‘pull’ factors numerous studies have focussed on
the characteristics of entrepreneurs, including the ability to both spot and
develop business opportunities.
23
Push Factors
Dissatisfaction with Previous Employer: Respondents to our poll mentioned
a number of ‘push factors’ that had led them to start a small business.
Most commonly cited among these was some form of dissatisfaction with
their previous employer. Causes of dissatisfaction fell broadly into two
groups: a desire to escape unsatisfactory organisational cultures or working
practices and a need to fulfil individual aspirations that were thwarted
within an organisational context.
Among the first group respondents mentioned the need to escape from
large corporations, long working hours and unsatisfactory management.
The second group could be summed up as a desire not to be ‘a cog in a
machine’. Several respondents were driven by a realisation that they could
‘do things better themselves’ but would not get the opportunity to develop
their ideas as an employee. Making profit for others rather than oneself
was a factor that pushed a number of these respondents towards setting up
their own business:
‘I felt I could do it better and I felt passionately that
our industry treated staff badly, the 'norm' was to
work 12 to 15 hours a day with no payment and I felt I
could run a business that offered a better work/life
balance.’
‘I'd had enough of corporate life and working for
managers who didn't have a clue how to manage
people or make the most of my talents. I had heard
plenty of my colleagues moaning about how awful
cleaning services were and thought I could do better
by offering a premium service with staff that are paid
well I wanted the freedom of running my own
business, the challenge of learning how to do it and
hopefully the financial rewards of building an asset.’
“I wanted the freedom
of running my own
business, the challenge
of learning how to do it
and hopefully the
financial rewards of
building an asset”
‘I was making more money for my employer than I
was making myself. Don't seem fair!’
‘I could not stomach making a lot of money for 6 men
playing golf so I decided to leave and set up on my
own.’
Redundancy: Three respondents listed being made redundant among their
reasons for entering self –employment and one respondent had left the
public sector in the belief that redundancy was inevitable in the near future:
24
‘[I] was made redundant and was given the
opportunity to go into a partnership within an
established small business.’
Family commitments: The need to combine work and family
commitments was an important motivation to start a small
business for a number of our respondents. Whether this is a
‘push’ or ‘pull’ factor is difficult to disentangle. A desire for
greater autonomy and flexibility certainly acted as a ‘pull’
towards self- employment, yet there was also an implicit sense
that continuing to work for an employer was no longer feasible
after the birth of a child:
‘I set up my business as I wanted to stay at home with
my daughter when she was born instead of going back
to working 60+ hours per week for someone else.’
‘Flexibility with regards to raising a family.’
Pull Factors
A range of pull factors were mentioned as drivers of self-employment. A
desire for autonomy and control over different aspects of one’s working life
were the most commonly cited reasons. Again these fell into two broad
categories. Firstly there was a desire for autonomy and control over the day
to day, operational aspects of working life. A second theme to emerge from
the responses to our poll was a desire for control over longer term career
objectives.
Conventional analysis of entrepreneurial motivation suggests that alongside
autonomy, wealth creation is an important ‘pull’ factor. Personal wealth was
not mentioned explicitly as a rational for establishing a business by any of
our respondents, although it could be argued that a desire to make money
for oneself rather than an employer implies that personal wealth is at least
part of the motive. The wider social values such as job creation and local
regeneration are generally assumed to be an ‘external’ rather than a
‘private’ benefit of small business creation, and therefore not a driver of
individual behaviour. Our poll suggests that this is not necessarily the case.
Alongside private benefits such as increased autonomy and control a number
of respondents talked about their concern to ‘make a difference’. This
difference could have a private dimension, most notably working in a
business that was guided by one’s own personal values. However there was
a clear external element. A desire to alleviate disadvantage, improve the
25
lives of local people and generate local employment were mentioned by a
number of respondents as the principal reason for establishing their
business.
Desire to be one’s own boss: Control over the organisation and operational
aspects of day- to- day working life were a strong ‘pull’ factor for many of
our respondents. Most common among these were a desire to for control
over working patterns and hours, typically expressed as a need for a better
work life balance, although with hindsight several respondents thought that
this had been a naïve expectation, and a number of respondents believed
that businesses started for this reason were unlikely to survive:
“If you are driven by
the thought of an easy
life, spending more
time with family as
opposed to doing
everything humanly
possible to make your
business a success you
won’t stand much
chance of survival.”
‘It was very much a desire to be my own boss …..
I did also want to get a better balance to life.’
‘I believe that if you are starting a business from
scratch you must possess a strong passion and
intense determination to make it work
…………………… If you are driven by the thought of
an easy life, spending more time with family as
opposed to doing everything humanly possible to
make your business a success you won’t stand
much chance of survival.’
A number of respondents talked about the freedom to make decisions about
operational aspects of the business themselves. To some extent this
overlaps with the dissatisfactions with employers discussed above.
However, the desire to be one’s own boss was not based entirely on
negative experiences. Respondents also expressed the desire to be their own
boss in terms of moving on, and fulfilling personal aspirations:
‘I've always wanted to build something (both real
and culturally), and be in control of decisions.
When we need something, we buy it. When we
get fed up with a customer, we fire them. When
we have an idea, we often implement it very
quickly.’
‘I had a longstanding ambition and desire to set
up my own business and always had a belief that I
would start my own business and was always
looking for an opportunity to present itself.’
26
Autonomy/control: Alongside the desire to be one’s own boss at an
operational level a number of respondents referred to a desire for
autonomy over long term career aspirations.:
‘To be in control of my own career. To have the
flexibility to develop and deliver services without
restrictions. To prove to myself I could set up and
run a successful business’
‘I was driven by the desire to control my own
destiny I had the skills required to provide the
intended services No, I did not spot a gap in the
market work-life balance was not an issue I
had no other commitments I was not made
redundant’
‘A desire to be able to exercise more control over
my career choices, working hours and locations. I
took voluntary redundancy in order to achieve
this.’
‘Opportunity be become own boss and be in
charge of own destiny with the comfort of doing
something that i had previous experience in and
existing contacts.’
Desire to make a difference: The decision to start a business had a clear
ethical dimension for a number of our respondents. On the one hand this
had a personal dimension, but there was also a social element that was
expressed in terms of wider benefits to the community:
‘To feel that I was making a difference. To be
able to work to my own values rather than other
peoples’
‘ I wanted to create a business which could
potentially at some stage recruit local people and
help them develop their horizons and aspirations
and crack the glass ceiling and marginalisation
BME community members often face. I also
wanted to create an organisation where I could
create and enhance my vision to create social
development and improve lives for people
particularly living in fringe, isolated communities.’
27
‘I was aware that there was a gap in the market
and I created a niche which undertook community
development work in its stride and helped
empower and facilitate social change.’
Identifying Opportunities: Finally spotting a gap in the market was
mentioned frequently as a driver for establishing a small business. For
some this was for a product or service traditionally supplied by the private
sector, but for a number of respondents the shift from the public sector of
services such as social care had provided the impetus to start a business:
‘l saw an opportunity in the market and knew l
could make a success of it’
‘We had spent many years working for others
around the country and could see a gap in the
market in the North West for our services.’
‘There was a gap in the market for higher quality
private home care, particularly with the current
changes in the system.’
Rationales for growth and the growth process
Conventional analyses of growth, especially high growth, are underpinned by
an assumption that wealth creation is among both policy makers’ and
entrepreneurs’ principal motivation for ‘growing’ small business. This is
captured, as discussed above, in the widely used OECD definition by annual
turnover and number of people employed. However, high growth in
these terms can be sporadic and unlikely to be sustained over any length
of time. As a result, sustainable growth has entered the policy agenda,
widening the focus to include discussion of how small businesses might
be supported and encouraged to sustain growth over a longer period of
time. Growth however, is still measured in financial and economic
terms.
“Given the variety
and complexity of
reasons for
starting a business
it is unlikely that
Given the variety and complexity of reasons for starting a business
outlined above, it is unlikely that increasing turnover or employing
people are the only concerns for many small businesses. Therefore to
understand what ‘growth’ means to small businesses we asked
respondents to tell us about how their business had grown. For some
conventional measures of growth were important, but a range of
meanings attached to growth emerged from the data that could be
divided broadly into ‘hard’ measures relating to finance and economics
increasing turnover
or employing
people are the only
concerns for many
small businesses.”
28
and a range of ‘soft’ measures relating to quality, reputation, sustainability,
ethical and social concerns and quality of life.
We began by looking at how respondents described the process of growth.
Several people used terms such as ‘fast’ or ‘quick’ but slow growth was
mentioned more frequently. Growing slowly was described by many in
positive terms and, for a number of respondents, slow growth was a
deliberate strategy, for example, “I have been very keen to grow the
business slowly, it is important to me that every job is sustainable”. For a few
of our respondents, in contrast, slow growth was a frustration resulting from
external factors, most notably access to finance. For some growth was not a
strategic concern but rather something that developed organically as a
natural consequence of running a business. A few described a strategic
decision not to grow at all.
Fast Growth: There were respondents who described a period of rapid
growth over the last five years, even in the face of economic recession.
Maintaining future high growth was also stated a strategic priority, often
with clearly defined and ambitious indictors of success such as “double digit
growth over the next 5 years,” or, as the respondent quoted in box 1
predicts, five-fold growth in a few years. These businesses conform to the
OECD definition of High Growth discussed above and would be included in
statistical reports of the importance of High Growth Firms:
‘The Company has grown vastly over the last five
years. We have taken on 3 extra staff for admin work
and 2 part time warehouse workers. The business has
grown by looking at the weaknesses of our
competitors.’
‘I have always wanted to grow and keep growing,
there have been a few hairy moments especially in the
early years and that gave me a sense of risk
management - that is to say some things just aren't
worth doing.’
High growing SME owners talked about measuring growth in their businesses
by conventional means. There were some exceptional success stories:
‘We started off as a consulting company with just one
employee. We now have three companies with six
employees. We have grown in turnover and profit too.’
‘2 years ago I had 1 employee, I now have 18.
Turnover has been rather static at 1.5 million, however
we are on track for over 2 million this year.’
29
Some owners of high growth businesses explained how they had faced setbacks and challenges. These could be external factors such as difficulty in
putting together a team with the right skills to ensure growth.
‘I chose to grow my company because that is more
exciting that it being a lifestyle business. ….. Attracting
and retaining the right people has been a key
challenge and has also held us back somewhat.’
Others had managed to overcome more personal limiting factors, such as
lack of confidence, before embarking on a pathway to growth :
‘There is possibly a deep rooted fear in becoming too
big, maybe driven by a lack of confidence or fear of
failure……. knowledge has had to be learned through
trial and error or mistakes. However, attending
courses and having coaching has made improvements
in confidence levels and business acumen. This has
then allowed us to grow in a slightly more organized
fashion.’
James Brayshaw founded AdaptiveComms in 2003 after identifying a gap in the
telecoms services market. James has always had a strong commitment to
growing the company. He plans to continue growing his business in the future,
measuring growth through increased turnover and staffing levels:
“I will grow five-fold in the next 4 1/2 years (5 since the end of the last accounts).
I will do that by organic growth without borrowing or business acquisition.”
He has a strong belief in the ability of small businesses growth as a solution to
the current economic crisis:
“Small businesses are essential to the economic recovery. The ability to be fleet
of foot mean we are able to out manoeuvre bigger players and offer our
customers a real quality of service. At the same time flatter management
structures and being closer to the coal face mean commercial decisions can be
made very fast.”
James is proud of the business growth that he has achieved:
“Most of all I enjoy the feeling of success as despite ups and downs we continue
to grow and flourish, employing more people and creating more wealth for the
people who work so hard for us.”
Box 1 High Growth on the basis of increased Turnover and Staff.
30
Growing slowly: Despite the concern of policy makers with high
growth businesses, growing slowly was frequently seen as vital
by respondents. In total eight respondents mentioned that
they had deliberately avoided growing too fast in conventional
terms.
Growing too fast …. is one of the most common
fatal mistakes a business can make when setting
up. You must make many mistakes and overcome
numerous hurdles in order to establish a flawless
mode of operation, no amount of money can buy
that experience. If an operator is financially driven
it is very easy to see rapid expansion as quick way
to earning more money. The worst thing you can
do is over stretch yourself as it will result in a
drain on resources, letting original clients down
and you losing everything you’ve worked hard for.
As the company has expanded we have ensured
that we have the resources and infrastructure in
place to cope. The process has involved us taking
small steps over a period of time. So far we’ve
achieved the desired results.’
“If an operator is
financially driven it is
very easy to see rapid
expansion as quick
way to earning more
money. The worst
thing you can do is
over stretch yourself as
it will result in a drain
on resources, letting
original clients down
and you losing
everything you’ve
worked hard for.”
‘…….my company will remain a small company. I
want to do my very best by my employees. I like to
know them personally learn their strengths,
identify what they can contribute. I want to
understand their weaknesses and see what can be
done to help them grow and learn. I find it very
rewarding watching employees develop and learn
new skills.’
“My company will
remain a small
company. I want to do
For others slow growth was frustrating. Restricted access to
finance as a barrier to small business growth is welldocumented and was a common theme running through these
accounts. Alongside this a sense emerged that some
respondents were responding to a general ‘feeling’ that growth
was not a viable proposition in the current economic conditions,
rather than any concrete experience:
‘Constrained by lack of finances, but that is
beginning to change.’
my very best by my
employees. I like to
know them personally
learn their strengths,
identify what they can
contribute.”
‘Access to finance and a good basic knowledge of
business management slowed initial progress.’
31
‘…finance was a major constraint after 12 months
in business and developing cash flow issues. I was
fortunate to be given a loan and an extended
overdraft to prop me up.’
‘Outside issues such as the gloom in the market in
the last few years does put a damper on the
thought of growing.’
Reasons for choosing to grow slowly fell broadly into two categories. The
first focused on internal issues, most notably maintaining a reputation for
quality, a concern with job quality and retaining control over workloads.
The second related to the external environment, especially the ability to
respond quickly to change.
A desire to maintain a reputation for quality was the most frequently cited
reason for restricting growth:
‘Remained small to focus on skillset and reputation.’
‘The choices we have made are about our employees,
volunteers, service users and ensuring we produce a quality
product for our chosen markets.’
‘As a community interest company limited by
guarantee we are not able to access overdrafts or
loans. This restriction has had a massive impact on
the way the business has had to develop but this has
also given us the time to build up and sustain a
reputation for excellence and quality.’
‘The quality and sustainability of our services are
more important to me than the number of people we
employ.’
“The quality and
sustainability of our
services are more
important to me than
the number of people
we employ.”
For others a concern with job quality was an important factor in
choosing to remain small
‘All to do with control and making sure I worked on what I
enjoyed - not managing people.’
‘As an employer l take the welfare and happiness of my
employees very seriously. I am responsible for their careers;
therefore have a duty to ensure my staff are challenged,
motivated and content within their role. I am hugely driven by
32
employee satisfaction if they came to work with a negative
attitude l would feel that l had of failed them in some way.’
A desire to maintain the ability to respond quickly to changes in the external
environment was an important factor in the decision of several of businesses
to remain small:
‘Yes, small is fast and agile, responsive to the external
environment with less layers of decision-making needed.’
‘The best teams are typically small, and smart companies can
generally design and automate very lean processes.’
Organic growth: Some respondents suggested that, for them, growth was
not something they planned for, but rather a natural consequence of running
their business:
‘Our growth has been organic and steady with the
strength of our reputation being incredibly
important to us. We have also combined the
growth of our business with being mothers too.
The business started before the babies!’
‘…it’s about secure growth being big is not
necessarily good. We set out to be good first and
grow as a consequence....that then is more secure
growth.’
‘……. Now feel it's time to expand, which is
occurring naturally.’
Not Growing: From a personal perspective there were respondents who had
chosen not to grow because they wanted to retain control over their working
hours and commitments to the business:
‘I am not excessively ambitious. I am happy to
build a business that will pay my bills and my
pension and am prepared to work hard to achieve
this - but not to the exclusion of 'a life'. So having
taken on a part-time, self-employed
administrator, and knowing several outsourcing
companies who can help when busy, I am
satisfied with the size of my company.’
33
‘As an individual (Sole Trader) growth is probably
best indicated by an increase in income but, as I
control the amount of work I do in order to
achieve a good work/life balance growth is not
something I would consider to be important.’
“For us 'growing' is
‘For us 'growing' is not necessarily of huge
importance. For us it is about offering a good
quality service to our clients, earning sufficient to
live and being able to have a good quality of life
outside of the business and a facility to pursue
other personal and professional interests.’
a good quality service
not necessarily of
huge importance. For
us it is about offering
to our clients, earning
sufficient to live and
being able to have a
good quality of life
outside of the
Growing by making a difference
For some while conventional growth was important, a sustainable
business was also part of the plan:
business…”
‘I have been trading for a year now and have
grown very quickly, but with a strong focus on
quality of service. I am building a brand and not
just a business. I have diversified my services after
looking at my market and what my clients not
only need, but are searching for.’
“In our on-line poll the
most frequently
One SME mentioned ‘regrowth’ post credit crunch
mentioned mode of
‘Prior to the "Credit crunch" I had built a
"portfolio" however most of these collapsed with
the poor economy. …... We have certainly "regrown" from 4 people at the worst days of the
"Crunch" to 10 again now and are currently
looking for more staff. However, the true
measure would be enhanced profits and this is
not happening - it is simply additional salaries to
cover additional projects.’
alternative growth
during the past five
years was through
various forms of
temporary alliances.
This was invariably
linked to being able to
Alternative growth patterns
deliver larger contracts
We have discussed above the extent and rapidity of growth in the form
of increased direct employment. As we have seen from the literature,
many experts recognise ways of growing and creating value that do not
fit narrow High Growth definitions. In our on-line poll the most
frequently mentioned mode of alternative growth during the past five
years was through various forms of temporary alliances. This was
than would not be
within the capacity of
individual firms.”
34
invariably linked to being able to deliver larger contracts than would not be
within the capacity of individual firms.
‘Have developed wider network of contacts in the
core (main) work areas and also in linked wider
areas for example main areas - health and social
care business strategy and creating new ventures,
new linked area alliances with legal firms and
civic society sector to bid for larger contracts.’
‘Wish to remain small for more 'self' control and
work with an associates model with like-minded
people.’
“Where we do
suddenly find we
have a high volume of
work or are asked by
Other forms of temporary alliance included subcontracting work during
busy periods. This clearly generates employment and keeps money
within the local economy, but is missed by conventional measures of
small business growth
a client to do
something slightly
different we have a
‘Where we do suddenly find we have a high
volume of work or are asked by a client to do
something slightly different we have a range of
contacts we can approach to sub-contract the
work to. We have been known in some situations
to temporarily employ one of our contacts to do a
job for us - we know them, we know their
standard of work and we trust them.’
range of contacts we
can approach to subcontract the work to.”
Brian Dawe founded SAFE (Supporting Arts for Everyone) Productions Ltd
13 years ago to “give people a voice” through public artwork projects in public
spaces such as schools and hospitals. SAFE use a consortia approach to
growth, which includes supporting other people in starting their own
businesses and helping existing small businesses with growth.
SAFE acts as a “front of house” for a number of creative projects and
services offered by members of the consortium. Brian describes this
approach as a “creative hypermarket”. Working together with SAFE enables
the businesses secure funding. SAFE helps with managing projects and
managing funds to enable small businesses to grow. The consortium-based
approach allows the small businesses access to larger contracts that they
would not be able to fulfil on their own. SAFE assists individual businesses in
35
developing their own record of accomplishment through access to the core
customer.
“We are a first port of call for organisations that are seeking some sort of
creative and artistic services”
SAFE has only four members of staff, but using the consortium approach
provides a flexible workforce with access to around 35 people. This flexible
approach to employment reduces costs and benefits the smaller
organisations within the consortium.
SAFE has made use of the grounds of their premises to help the community
and discover new business ideas. The grounds are used for growing
vegetables and bee keeping. Volunteers help with food growing projects,
which promote community involvement. One of the participants is planning to
setup a new business to promote healthy eating and supply food grown and
made at the centre to local communities.
Box 2: Consortium working to join up social enterprises in the arts
In the cases mentioned above use of short term and flexible arrangements
was typically adopted to manage one-off contracts or unusually busy
periods. The creative pursuit of temporary alliances and short term
consortia as a sustained (and sustainable) way of working has been noted in
the literature, sometimes but by no means always animated by pro-active
social entrepreneurs. An example of the success of this model driven by a
social entrepreneur in Merseyside is given in box 2. One workshop
participant spoke of how inspiring this has been for his business because
“things emerge from relationships - people see it can be done”.
The Role of Networks
Networks were an important driver of growth for many of our participants.
Business owners used networks both to support and promote their
businesses. For example, the SAFE model involves working closely with
networks of other businesses, sometimes entering into formal, short-term
partnership arrangements to deliver work for clients. Other participants
talked of the benefits of informal networks through which business owners
support each other and learn together. Owners who have participated in
business growth programmes often continue to meet up long after the end
of the programme. As one workshop participant explained, “I have 24 nonexecutive directors” (referring to her fellow alumni).
36
The type of ‘closed network’ described above is made up of individuals who
know each other and share close ties. Closed networks like this were
excellent sources of support for those participants lucky enough to be part
of them. However, the downside of closed networks is that, by definition,
they are exclusive (Baines and Robson, 2001; Antcliff & Saundry 2007).
One respondent felt that his/her growth choices were constrained by a ‘lack
of access to networks and contacts with resources’. Another felt that
growth was restricted because of a lack of ‘access to networks and
infrastructure support’. Therefore, actively building this type of
network was a key concern for many participants:
“I will also continue
‘I will also continue to develop new contacts and
networks that allow me to collaborate with new
partners for sustainability.’
to develop new
contacts and
‘Size can be achieved by forming larger
networks....providing resources to deal with the
larger jobs.’
networks that allow
me to collaborate
Other respondents talked about how they used networks as a ‘key
marketing tool’. This type of informal network was ‘open’ and
consisted of a broad membership with only weak connections to each
other. Participants used this type of network to promote their business
and build a reputation.
with new partners for
sustainability.”
Business owners told us that they benefit from active networking with
regional institutions including universities, Science Parks and Local
Authorities. The public sector, however, was mentioned mainly as a
customer or potential customer. Some social enterprises were suppliers
to the public sector. One of the high growth businesses was actively
investigating the possibly of moving into public sector contracts as a
new market.
“Size can be achieved
by forming larger
networks.... providing
resources to deal
with the larger jobs.”
Participants belonged to a number of formal networks ranging from the
Federation of Small Businesses to local village community groups. One
workshop participant asserted bluntly, “businesses should get off their
bums and network”. The close ties of family and friends are the most
significant resources for some businesses. Family can be a constraining
factor associated with ‘lifestyle’ choices but also an important source of
moral support, expertise, flexible labour and finance. One owner reported
raising £300,000 from family and friends to research new technologies.
37
Flexible employment
There were businesses within the micro category by employment (with
fewer than ten full-time equivalent employees) whose business model was
built around the extensive use of non-standard workers who may be
contracted, for example, on a freelance, commission only or zero hours
basis. This can be flexible and cost effective as the owner of a consultancy
business with only 1.5 formal employees commented.
‘I find it easier to employ subcontract associates
rather than employees - gives me greater
flexibility and is cost effective - it also reduces the
risk of employing the wrong people.’
“I was the only
employee but found
Two micro-businesses reported in the poll that they used more than 100
non-standard workers. A self-employed arts practitioner with no
employees explained in one of the workshops:
work for hundreds.”
‘I was the only employee but found work for
hundreds.’
Non-standard employment contracts have of course attracted controversy
and it is beyond the scope of this report to comment on conditions from the
workers’ perspective. These businesses however, are clearly punching far
above their weight in terms of input into the economy by generating
economic activity and local spending.
One of the micro-businesses whose success is based on the use of a large
flexible workforce is mainly active in the North East and Yorkshire but now
starting to expand into the North West. The entrepreneur sees herself as a
responsible employer who takes the welfare of her commission only
workers as well as her small team of permanent staff very seriously. (See
box 3.)
Some businesses especially social enterprises also expand their work force
by involving volunteers. As one explained:
‘I recruited five individuals who have joined me on
my journey. This has also facilitated nearly thirty
volunteers.’
Work placements and volunteer opportunities were mentioned as part of
the non-financial contributions businesses can make to the region. This is
how the owner of a Biotech business explained the practice of providing
38
placements for students as a social contribution as well as a source of future
skilled staff members.
‘We provide work experience placements to at
least ten students each year and have employed
two. Also, we have decided to set up a mentoring
programme which will enable us to match
potential students with experts in their field. This
is our contribution to society along with our main
core business.’
Dynamite Pink is a sales and promotions agency for the leisure industry. The
company formed in 2007 when the business owner, Liz Whiteley, identified a gap
in the market for services. Liz has created a sustainable business model that can
be transferred to different geographical locations in the UK to expand the
business:
“The business was originally founded and created in Newcastle upon Tyne. The
real test was whether or not the devised business model would work in another
geographical location. I relocated to South Yorkshire and began trading in
Doncaster and Sheffield. I am pleased to say the business has been of equal
here as it has been in the North East. More recently we have begun trading in
Blackpool with great success. We have plans for next year for further expansion
in the area. I have proved that my business model is sustainable and
transferable.”
The business has 7 permanent office staff and 150 self-employed staff in sales
and promotions on a flexible basis. The flexible working offered by the business
often attracts students and young people. The commission-based approach is
very successful in generating new business:
“One of our unique selling points is that there is no costs to our service, we make
profit by taking a percentage of the gross profit generated from our staff sales. If
they don’t sell anything we as a company don’t make any profit and the client
won’t incur any costs. One of our marketing statements is: ‘We can make you
pots full of money and it isn’t going to cost you a penny’. This statement has led
to the growth and development of the company.”
Care of these staff is important to Liz. Taking time to help staff develop
confidence and learn new skills alongside a concern for staff welfare has
produced payback in terms of business growth.
39
“In turn the staff have become fantastic advertisers for the company, they always
tell new staff what an amazing company we are to work for and encourage
people to apply for work. Also whilst at work they do meet potential new clients
and also sell the services of company as well as their designated product.
Because they speak of the company with such high regard, enthusiasm and
positivity we have gained much new business.”
Liz believes that;
“You have to consider sustainability and the factors that largely contribute to you
company remaining sustainable. Such as; the welfare of your staff, your mode of
operation, your professional reputation and establishment as a creditable
operator. Running a successful business isn’t just about turnover, staff numbers
and profit.”
Box 3: A micro-business with a high number of commission only staff
Diversification: Two main types of diversification where mentioned by
respondents in relation to growing their businesses. Firstly, a number of
people had diversified by increasing the scope of their business, either with
new products or services aimed at their existing market, or by moving into
new markets. A second form of diversification focused on developing new
businesses, so called ‘portfolio entrepreneurship’ Diversifying into other
related activities was mentioned most frequently.
‘I set up a marketing consultancy and have
diversified in to training and event management
due to requests to use previous skills to support
existing marketing clients, or in order to work
with previous contacts.’
“We have diversified
We have diversified over the years from our
original remit of wig making to incorporate
professional make-up sales and courses. We have
also created an online forum for make-up artists
and registered this as its own company. We are
also considering an acquisition too.’
professional make-up
over the years from our
original remit of wig
making to incorporate
sales and courses. We
have also created an
online forum for makeup artists and
‘The business has developed to adapt to changes
in the available work. I have also increased the
scope of the business to include using additional
skills I have so I can adapt better to variations in
the type of work available, for instance consulting
and installation work in addition to the core
business.’
registered this as its
own company.”
40
Portfolio Entrepreneurs: Other respondents had grown by
developing a portfolio of small businesses. Again, as each of
these typically remains small this form of growth is not
captured using conventional measures.
‘In software, the idea of "Growth" is a bit strange. The best teams are
typically small, and smart companies can generally design and
automate very lean processes…….If we needed to "grow", I'd be more
inclined to set up another business’
It is notable that the consortia, flexible employers and portfolio
entrepreneurs who participated in this research are not visible in High
Growth statistics despite their contribution the regional economy.
Figure 1 below summarises the range of ways that the small business owners
who took part in the research felt that they were contributing to the local
economic regeneration.
The centre of the diagram represents conventional measures of economic
growth and the outer hexagons capture the alternative measures of growth
that were important to business owners, but remain invisible in economic
growth statistics
41
Fig 1 Ways that Small Businesses Contribute to the Local Economy
build networks
partnerships, &
temporary alliances
create sustainable
businesses
create sub contracted
jobs
reduced job 'churn'
create quality jobs
Increased
turnover &
number of
employees
create new
businesses through
diversification and
portfolio
entrpreneurship
build local
reputation for
quality services &
products
generate local
business ecosystems
Approaches to employing
On-line respondents mentioned various factors that deter employing. These
could be grounded in negative experiences from the past, and also in more
generalised concerns about the nature of the business and the owner’s
relationships with clients. The strongest theme was around trust in potential
employees, especially concern that they may not share the owners’ values,
perform the work as well, or meet client expectations. Negative past
experiences seem unlikely to be overcome. One sole trader reported that he
had employed five people in an earlier business and “that experience made
me determined not to employ anyone”. However, more generalised
concerns about employing are often overcome.
42
Most business owners who employ said in one way or another that they are
proud of contributing to the economy as job creators. Many, as several of
the quotations above indicate, stressed the importance of jobs that are good
quality and sustainable. On the less positive side a much repeated theme
was lack of appropriate skills among workers, but owners who wanted to
recruit were quite persistent and resourceful in attracting people to employ
in their businesses. An example is the business owner quoted in the last
section who offers work placements and mentoring to students. One owner
wrote at length about fear of being taken to an employment tribunal but
this was an exceptional not a typical comment.
Box 4: Becoming an employer
The Cake Nest is an online cake retailing business, which has been running for four years.
It was founded by Abigail Phillips and two years ago her husband Stephen Phillips joined
her in running the business. This year, following participation in a small businesses
programme for high growth firms, they decided to expand their business through recruiting
new employees. This was a new experience for both owners, as Stephen described:
“This is the first time for us, so from being employees two or
three years ago, now we’re employing people. It is kind of strange
and kind of surreal.”
Their experiences of employing new staff show the importance of evolving job roles, where
candidates identified areas of expertise that they could bring to the business rather than
following the roles initially advertised. Their first employee has “grown a position in the
business for himself”. He has helped to drive business growth by bringing expertise in the
use of social media for sales and marketing.
The couple then decided to advertise for a kitchen assistant but the advertised post
diversified into a different job role when they were able to attract a candidate who brought
previous contacts, administration and marketing experience from previous work in the
hotel industry and wedding planning. This unexpected role has given the business owners
the confidence to explore a new business area in the form of wedding related products.
A third employee has also filled the originally advertised role as a kitchen assistant.
Initially Stephen found it difficult to delegate some of the cake making to a new member of
staff but both Stephen and Abigail now value the “fresh ideas” brought to the business by
their new team. They encourage the team to share ideas though an ideas chart and
weekly meeting to discuss product development and marketing.
“Having these extra people has given
us the chance to actually produce new products”
43
The new staff add benefit to the business through offering;
“…fresh ideas, it’s hard coming up with one idea but then
coming up with the next idea is harder.”
One member of staff endorsed the business characteristics when she told the owners “I’ve
never worked in such a happy place.”
In the long term, Stephen and Abigail would like to continue to develop their staff to enable
employees to take over roles and allow the business owners to identify new areas of
diversification.
In our workshops and interviews some owners talked in more depth about
employing. One participant explained how he had been anxious that an
employee would not ‘do it as well as I would’ but had very recently taken on
a young worker to promote the business through social media. He
described the experience of becoming an employer as ‘surreal’. The original
intention had been to employ a kitchen assistant but the role changed after
interviewing this applicant who brought contacts with her that were helping
to grow the business (see boxed text). Another interviewee also explained
how he interviewed for one post and took on two. As indicated above
however employing directly is not the only way to expand a business and for
some it is certainly not the best way.
44
“…employing
directly is not the
only way to
expand a business
and for some it is
certainly not the
best way.”
HIGH GROWTH
BUSINESSES
Small Giants
Excellent reputation
Quality products and
service
Sustainable organisations
Long term relationships
Skill development
Portfolio Entrepreneurs
Diversification/expanding into new
and related markets
Figure 2 The Iceberg of Small Business Growth
Copyright showeet.com
Discussion
Figure 2 summarises the types of organisation that our interviewees
described and the patterns of growth that were important to them. The tip
of the iceberg represents conventional HGFs. Below these are the ‘invisible’
forms of growth that remain unrecorded in official statistics, but which, our
research suggests, underpin many of the activities and aspirations of small
business owners and potentially make a substantial contribution to regional
economic growth.
45
© Copyright Showeet.com
Deliberately Small
Agility/respond
quickly to change
‘invisible’ forms of growth
Virtual
organisations
Partnership/
alliances
Supporting the Local Labour Market
Mapping the different measures of growth in this way allowed us capture
the multiple dimensions to employment that are important to small
businesses, and to identify their relationship to the types of small business
identified above. The range of ways that small businesses can help to
support the local labour market are presented in Figure 3.
High Growth Firms
At least 10 emps and
20% growth in
employment in
previous 3 years
Sustainable Businesses
Create long term, stable
Employment,
reduce job churn
“…alliances gave
Figure 3: Small Business Support for Local Labour Markets
small business the
Beginning at the top of Figure3 - Networks and temporary alliances
corresponding to Handy’s (1995) idea of a virtual organisation were clearly
important mechanisms for expanding the scope and capacity of small
businesses. These alliances gave small business the capability and capacity
to tender for larger contracts, or undertake sizeable projects without
‘growing’ in conventional terms by employing more permanent staff, but
rather by subcontracting work and employing workers on nonstandard
contracts. Thus, temporary alliances and partnerships give rise to nonstandard forms of project-based employment that remain below the radar
of policy makers.
capability and
capacity to tender
for larger
contracts, or
undertake sizeable
projects without
‘growing’ in
conventional terms
by employing more
permanent staff”
46
“For those of our small
Our research suggested that those businesses that focus on
sustainability may be able to offer longer-term relationships and
opportunities to develop skills. To some extent these overlap with the
‘small giants’ and their focus on reputation and quality, underpinned by
stable employment.
businesses concerned
with ‘making a
difference’ job quality
and engaging
For those of our small businesses concerned with ‘making a difference’
job quality and engaging marginalised workers was a more important
driver than the quantity of jobs created.
marginalised workers
was a more important
driver than the
quantity of jobs
created.”
47
Conclusions
The attraction of the "vital six per cent" of classically identified High Growth
Firms is obvious in its power and simplicity. Recent quantitative analysis of
UK firms, however, suggests a much more nuanced picture. The six per cent
is actually only one per cent when new and micro firms are included2, and its
responsibility for job creation is somewhat less spectacular than has been
claimed. Moreover, these figures are based on maintenance of growth over
a three year period. Only a very limited number of HGFs hold their strong
growth rates for longer, short periods of growth may be part of a firm's
lifecycle. The original research we undertook with business owners also adds
to an impression of dynamics of growth rather different from the "vital six
per cent".
The reports that we were given by businesses in this study suggest that this
fixation on HGFs can be characterised as the "iceberg" view of the SME
population - seeing only what is obvious above the surface. Below the tip of
the iceberg lie many kinds of businesses making a contribution to the
economy and to their communities.
Micro businesses (with fewer than ten employees) are proactive and
dynamic contributors to the economy in many ways. In addition to their own
small core team they may involve an extensive flexible workforce, in some
cases more than 100 strong. Other micro businesses, including sole traders
without formal employees, create alliances and partnerships that result in
collaborative work, ranging from joint product development to collective
contracting on turnkey supply contracts for primes.
Business owners in this research told us that they find themselves both
enabled and constrained by their many social and economic relationships.
Relationships they highlighted as particularly important included family,
community, professional associates and other business owners, some
engaging with universities and local government.
Clusters, joint ventures, alliances, multi-agency partnerships, digital business
ecosystems, business networks and so on can facilitate in individual firms
punching above their weight. Government thinking about economic drivers
needs to encompass context and interactions as well as individual firms. The
research is consistent with calls for business support to shift more towards
creating an enabling environment, providing a positive program of support
to foster such development.
2
See Table 1, page 12
48
This report comes at a time when Government is more convinced than ever
that SMEs are the crucial driver for jobs and growth to secure economic
recovery. Yet it is also a time of extreme uncertainty with regard to
interventions to advance their potential. It is only two years since the
regional infrastructure for business support was dismantled in England. The
recently created Local Economic Partnerships (LEPs), of which there are five
in the North West, have been tasked with promoting business growth,
infrastructure and skills.
In order to begin to deliver on their remit, LEPs will need to identify and
engage local enterprise leaders capable of opening up routes into diverse
networks. This research suggests that it will be vital to involve some of the
region’s business leaders including pro-active social entrepreneurs and
“small giants”. Individual business leaders may be energetic networkers and
catalysts for growth by animating partnerships between businesses,
sometimes also bridging the divide between the public, community and
private sectors. These people can help businesses collectively to develop
joint working/contracting opportunities, and provide significant support for
local business communities.
Authors:
Valerie Antcliff
Susan Baines
Jacqueline Carter
Date: 3rd March 2014
49
PSP’s recommendations, from research commissioned
through Centre for Enterprise, MMU
Exploring the Potential of the North West’s Small Firms
to Drive Forward Economic Recovery
1. Widen the scope of business support beyond "high growth firms"
It is vital that government support for business is widened to foster the economic
growth of firms beyond the classic HGF six percent. Classification and clarification of
business where support resources should be invested must be assessed using a
wider band of measures of contribution to strengthening the economy.
2. Recognise non-traditional employment models
Assessments should be made of the true employment potential of all SMEs,
including micro SMEs, taking into account much more substantial pools of flexible
employees supported by many micro businesses.
3. Recognise and invest in catalyst businesses
Recognition should be possible of the impact of those SMEs, frequently “one man
bands”, acting as sector specific or geographic catalysts - those micros who as part
of their natural operation drive sector networking, development and collective
economically significant impacts. Often this type of business to business support
persists and is substantial even without public sector support, and such investment
is a quick route to see a local niche sector thrive in economic and employment
terms.
4. Support business collaboration
Sector focused collaboration will often result in joint product development, bidding,
tendering and purchasing, small investments of business to business expertise can
have truly substantial economic benefits often in advanced technology fields.
Business support methodology should be enhanced to invest in total economic
potential, supporting collaboration, and have metrics driven by the totality of its
economic impact not the turnover of a single business invested in. Evaluation
metrics and procurement policies in the public sector could be enhanced in the
same way.
5. Create business support models formulated around business communities rather than
confined by geographical boundaries
Business support needs to be designed to deliver such benefits across a wide
geographical area. Business collaboration will not respect council or LEP boundaries,
and there is not enough financial power within individual LEPs to create duplicated
systems of support in every area with the depth and business to business expertise
required. Collaboration between public sector areas, bodies and leaders is needed
to provide expert advice, geared to local specialisms and strengths but recognising
the wider needs across the business community.
In essence, SMART investment by government nationally and locally should
utilise the business to business support our SMEs already provide to each other.
The potential results of cooperation and collaboration between businesses can
produce stronger economic benefit than current public sector financial injection
alone. The business community is ready and willing to work with government, to
make this to happen.
51
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