What encouraged me to write Wake Up and Sell the Coffee is the need to help more entrepreneurs not just start a business but to survive and grow. I noticed that so much of what is written and talked about relates to start-ups, not what comes later. The journey beyond survival and on towards growth gets little coverage.
Looking at the figures, out of almost 250,000 businesses that started in 1998 only roughly one-third survived to 2008. The odds are not great, but if you can start from the right place then your chances of success may be greater. Merely encouraging more start-ups is not enough. We need more of these businesses to survive and go on to become high-growth companies. We need quantity and quality.
It is high-quality businesses that survive long enough to become high growth ones, evidenced by the fact that 70% of high-growth companies are at least five years old. Most businesses start small and stay small – they lack ambition, potential or competencies to grow beyond this. Only 1.5% of start-ups reach 20 employees. High-growth companies represent only 6% of all UK companies employing ten or more people.(1)
High growth is not about vanity. These businesses are proven to be more resilient through recession and account for a disproportionate share of job creation. In the period 2007 to 2010 the number of UK businesses growing at over 20% per year remained broadly similar to that in the periods 2002 to 2005 and 2005 to 2008.
In these periods, insolvency rates for high-growth firms were approximately 2.5% compared with 4% for non-high growth businesses.(2) It is the tiny number of UK firms experiencing high growth (around 12,000 businesses, or just 6% of those employing more than ten people) that account for more than half the growth in jobs. Between 2005 and 2008 the average high growth UK company almost tripled their headcount.(1) High-growth firms attract and retain the best talent and advance society.
1 ‘Measuring Business Growth, High growth firms and their contribution to employment in the UK’, NESTA (October 2009).
2 ‘Vital Growth: The Importance of High Growth Business to the recovery’, NESTA (March 2011).