There is a lot of information and courses on how to start and manage a business but not enough on how to grow a business. To most people, growth is the natural progression after the start-up stage without even thinking of how this growth will occur or when and whether it is desirable.
There is also confusion when defining a business in terms of size. Most newly established businesses are sole proprietorships and are micro-businesses as they would have no more than two employees but these are generally referred to as small businesses. A proper distinction between micro, small and medium-sized businesses will help to put things into proper perspective so that when we talk about growth, we know the size of business that we are talking about.
Distinction Between Micro, Small and Medium Sized – Businesses
The criteria for defining the size of a business differs from country to country. According to European Union categorization, small and medium-sized (SME) companies are defined based on the number of employees and turnover or annual balance sheet value as stated below.
Size Number of employees Turnover Balance sheet total:
- Medium-sized < 250 ≤ € 50 m ≤ € 43 m
- Small < 50 ≤ € 10 m ≤ € 10 m
- Micro < 10 ≤ € 2 m ≤ € 2 m
In the United States, the Small Business Administration sets the criteria for defining a small business based on industry, ownership structure, revenue and the number of employees. In some cases, it may be as high as 1500 employees, although the cap is typically 500 employees.
From the above, it can be seen that when people refer to a small business in everyday conversation, they are actually talking about micro businesses as not many businesses will transform from the start-up stage immediately to a small business without going through the process of growth within the micro stage except in few cases such as when an existing business lunch a start-up as it has the financial, skills and process capabilities to make such a jump.
The Reality of Business Growth
Professor Edward Hess, Professor of Business Administration at Darden School of Business, University of Virginia is a leading authority in business growth. Based on many years of extensive research, he has demystified business growth and has developed a framework that businesses can use to plan for growth, as growth that is not planned for can overwhelm a business and destroy its value. In his book entitled “Grow to Greatness: Smart Growth for Entrepreneurial Businesses”, Professor Hess outlines how to plan for and manage growth. According to him, growth does not take a linear approach. He studies popular growth beliefs and shows that the U.S. Growth Model is not supported by his research. Rather, he states “Growth is the Dynamic Confluence of Strategy, Entrepreneurship, and Values”.
His research reveals that above-average growth is not common except for high-performance Organizations. The research shows nine consistent findings listed below that differentiate high-performance organizations from others. High-Performance organizations are those that achieve consistent above-average growth.
- Simple, focused strategy—an “elevator pitch” business model.
- Structures that enable entrepreneurial behaviour—“Small company soul in a large company body.”
- Higher purpose than shareholder value/profit—Money is not enough
- Culture of relentless, constant improvement—the DNA of growth
- High employee engagement—an implied social contract; an accountable “family.”
- Customer centricity & closeness—being better is more important than being bigger.
- Humble, passionate operators who are values–based leaders—the devaluation of elitism.
- Execution and service champions—excellence every day, every way, by everyone
- An internal, aligned, consistent, self–‐reinforcing System (strategy, culture, structure, HR policies, leadership behaviour, measurements, rewards, communications) that enables, motivates and rewards desired behaviours