In fact, the fifty Welsh firms featuring on this year’s list, despite being only an average of twelve years old, will have collectively created nearly 10,000 jobs since they were started, which is an incredible achievement.
When the Fast Growth 50 project was launched back in 1999, its inspiration was a similar, but far larger, initiative since 1982 run by Inc magazine.
Indeed, the Inc 500, which identifies the 500 fastest growing firms in America, is a truly inspirational list that not only demonstrates incredible entrepreneurial feats within the World’s largest economy, but also gives clear pointers as to how future business practice is developing in key sectors.
The 2012 Inc 500 list was released earlier this month and the data for the companies featured is fascinating for those of us studying the characteristics of fast growing firms.
Whilst, the overall turnover of all Inc 500 firms in 2011 was $15.8 billion and they employed a total of 46,609 people, the median annual revenue of $8.9 million is relatively modest, as is the median employment of 36 employees (which is similar for this year’s Wales fast growth 50 firms).
More relevant is information on how the companies have achieved fast growth, especially in terms of accessing funding that, at least in the UK, is of major concern to many small businesses.
The surprising finding from Inc is that external funding is not as important to growth as expected - 77 per cent of the founders of the five hundred fastest growing businesses in the USA set up using only their own personal savings, with two thirds needing less than $100,000 to get started.
And whilst 34 per cent stated that access to external capital has been essential for growth, 42 per cent have not utilised external funding in developing their business. In fact, three quarters of companies have financed their growth over the past three years largely through cash flow from operations.
This seems to fly in the face of the popular belief that successful companies require external capital to fuel their growth. This is an important lesson for many entrepreneurs in that, contrary to popular belief, self-funding does not equal slower growth.
Whilst external capital does play a part in a number of growing firms, it can also have its problems such as ownership dilution, loss of control, and management team distraction. In fact, the entrepreneurs questioned for Inc magazine consider the biggest obstacle to growth is not finding money but actually finding good people to help the business grow, which is a vital lesson for governments in supporting businesses to expand.
Whilst entrepreneurship is increasingly seen as a young person’s game, those businesses in the USA that achieve substantial growth are managed by entrepreneurs who are overwhelmingly middle-aged white males, although they had, on average, started their first business at the age of 27.
But despite the fact that the majority of these founders are above the age of 45, they saw themselves as innovators who love launching companies and developing products. Also, unlike many entrepreneurs in the UK, they are very hands on with social media with a third directly involved in writing their companies’ tweets and Facebook updates.
The sectoral make up of the fastest growing firms in the USA also has important lessons for governments that are still tending to follow a “picking winners” policy. Rather than the high technology sectors beloved of policymakers, the fifty fastest growing firms in the USA are overwhelmingly located in traditional sectors such as advertising and marketing, consumer products and services, government services and financial services.
As various research studies continue to show that a small number of businesses create a disproportionate percentage of jobs in the economy, there are lessons to be learnt from such firms.
Given this, I urge anyone with a real passion for entrepreneurship and growth to read the stories behind such performances, regardless of whether the companies are found in the Inc500 or the Wales Fast Growth 50.
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