From Jim Flowers:A recent Small Business Administration study provides startling data about business formation and economic growth.
- In the US, only 2-3% of all firms are high-impact companies (extraordinary revenue growth plus expanding employment).
- Almost all the new jobs are created by high-impact companies.
- Only 7% of high-impact firms have more than 20 employees; and they create about 2/3 of all the new jobs.
- 0.2% of US businesses create 2/3 of the new jobs!
- 93% of the high-impact companies have fewer than 20 employees; and this group creates about one-third of all new jobs.
- Very small companies create about 1/3 of all new jobs.
- Surprise: The high-impact firms are NOT typically fresh start-ups.
- Less than 3 percent of high-impact firms counted in 2006 were founded within the previous four-year period.
- It can take years for the growth mechanism to mature.
And, by the way, almost all net job loss is coming from big companies.
What does this mean for regional growth and economic development?
My conclusion is this.
- Encourage the formation of new companies, particularly those built on 21st century technologies and market trends.
- Support small companies as they work through their risky formative years.
- Understand that this business-farming process must be a permanent way of regional life, not some quick fix to a downturn.
- De-emphasize recruitment of large industrial relocations. Over time, they are more likely to decline than to grow.
Here’s the good news for the New River Valley of Virginia and beyond: we have a great start on building a truly entrepreneurial region. With Virginia Tech and the Virginia Tech Corporate Research Center as a hub, we are poised to make the entire NewVA regiona model for 21st century technology-based economic development.
Jim Flowers is the director of VT KnowledgeWorks, writes the blog So you want to launch a business..., and is the author of MOXIE and other fundamental entrepreneurial concepts.
VT KnowledgeWorks is a unique growth enhancement program open to entrepreneurs in the New River Valley of Virginia and beyond. Acceleration center and incubation facilities are located in the Virginia Tech Corporate Research Center in Blacksburg, Virginia.
VT KnowledgeWorks sponsors include Attaain, Inc., BB&T, Handshake 2.0, Harris Office Furniture, Hodges, Jones & Mabry, P.C., Latimer, Mayberry & Matthews IP Law, LeClairRyan, Science Applications International Corporation (SAIC) and The Becher Agency (TBA).