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Study identifies five invisible forms of growth by small businesses

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The study, commissioned by Private Sector Partners NW and undertaken by Manchester Metropolitan University Centre for Enterprise, highlights five “invisible forms of growth” by small businesses. This could inform improved targeting of government policies and business support to develop the potential of small firms.

Much business support for small businesses is currently focused on high-growth companies employing more than 10 people and usually defined by their achievement in increasing turnover or employee numbers by 20 per cent over three years. It is claimed that this exemplary minority of just 6 per cent of all UK firms account for more than 50 per cent of job creation.

The study highlights evidence that the growth potential of these ‘high growth’ firms may be overstated and reflective of fast, rather than sustained growth. It points to an alternative, more nuanced picture, reliant on additional growth indicators to turnover and job creation. 

This is illustrated by five additional models of growth and types of business, which are:

1. Virtual Organisations
These may have few direct employees, but they form alliances and build networks to undertake large projects and increase capacity. This supports a freelance labour market and generates sub-contracted jobs.

2. Small Giants
Leaders at small giants consciously avoid fast growth, focusing instead on building reputation and quality standards. Such businesses create stable employment and quality jobs.

3. Sustainable Businesses
Sustainable businesses create long-term stable employment with little job churn.

4. Portfolio Entrepreneurs 
These involve small business owners diversifying into new or related markets and developing multiple ventures. Many jobs may be created overall, but the individual businesses could remain n the micro category and, hence, not register under traditional measures of high growth.

5. Social Enterprises
The final category’s focus is on making a difference to the community and creating employment for marginalised workers and high quality jobs.

“The potential of small businesses to support economic growth and stimulate employment is high on the political agenda, so it’s crucial that government policies to underpin small business growth are carefully aligned to deliver the best return on investment,” explains Professor Lynn Martin, director of Manchester Metropolitan University Centre for Enterprise.

“Exceptional ‘high growth’ businesses are only part of the story and there are many other ways of generating new economic activity that do not fit the traditional model.”

The study combined interviews and workshops involving 60 small firms in North West England with a review of published evidence from academic and policy oriented literature. The aim was to listen to the views of small businesses to understand the different ways in which they contribute to the economy.

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