In two weeks time, we will be completing the search for this year’s fastest growing firms in Wales and with a record number of number of new entries likely to be on the 2015 list, it will be yet another demonstration of the growing vitality of entrepreneurial businesses and their contribution to the Welsh economy.
Given the massive contribution of growth firms to both wealth creation and employment, it is not surprising that there is a growing interest around the World in supporting the further development of these businesses.
Recently, the Business Development Bank of Canada (BDC) has announced a new initiative to help “high-impact companies”. This follows a new study analyzing the management needs of high-impact firms i.e. those that are increasing their turnover by more than 20 per cent a year.
One of the biggest challenges faced by Canadian entrepreneurs running such firms is the need for more management capabilities to grow further, especially in defining the right strategy to expand into new markets, scaling up their operations and professionalising their management team. Indeed, optimizing operations to improve efficiency and developing overall business strategies are the most important challenges facing high-impact firms.
Not surprisingly, another concern is that of financing with high impact firms often having funding needs that are more difficult to meet than your average business, usually because of rapid growth. In addition, attraction and retention of talent amongst the workforce, especially in recruiting specialised labour, is a major problem, especially in finding the right people to scale up and expand the business.
As a result of this research, the BDC has decided to intervene to support and develop high growth firms and therefore the Canadian economy. However, the provision of such support is not new and as the Access to Finance review for the Welsh Government showed, the BDC is not only involved in providing finance to Canadian firms but has provided specific consultancy services for over thirty years which, together with funding, provides a real boost to growing firms.
This, of course, is very different to the approach taken by Finance Wales that has moved away completely from the ‘money with management’ strategy that gave it such real potential to make a difference when it was first established.
But the BDC is not resting on it laurels and is now creating a new unit, called BDC Advantage, which will be dedicated to specifically increasing the competitiveness of high-impact firms. It will work in collaboration with private sector intermediaries to facilitate high-impact firms’ access to other services that exist (or need to be developed) in the entrepreneurial ecosystem.
It will do this in three ways.
First of all, it will create a team of highly-experienced individuals who can help entrepreneurs assess the needs of high growth firms and provide advice on a long-term and objective basis.
Secondly, it will develop a service offering specifically tailored for such high-impact firms, drawing on the key competitiveness challenges that it identified in its study. This offering could include formal management training, peer-to-peer networking, and other highly-tailored non-financial services. More importantly, it will not only draw on its own expertise but that of expert third party organisations.
Finally, the BDC will expand and improve its financial offerings to meet the specific needs of high-impact firm as well as providing specific financial services adapted for high impact firms such as patient capital, flexible payment schedules, and instruments that do not dilute their equity.
So do we need something like this in Wales?
With the average age of the Fast Growth 50 firm being around 12 years old, many will have outgrown the services that are currently being provided by public sector business support services, most of which is targeted at younger firms. Whilst we may not want another Welsh Government body to support businesses, there is already one organization that could do this job in Wales if it wanted to.
And whilst some may think I would be the last person to recommend this, I see no reason why a refocused Finance Wales should not undertake the challenge of backing high growth firms.
Like the BDC, it could establish a small specialist unit that could reintroduce its ‘money with management’ approach to supporting fast growing Welsh businesses and thus utilise the skills within the organisation to focus efforts on those small cadre of firms that have a real impact on the economy.
In doing so, it could be the catalyst for bringing together high value added support from the public and private sector to directly help those high growth firms that have a massive potential to create jobs and prosperity in the Welsh economy