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Commentary: Safe Growth Is Real Key to Job Creation

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We hear a lot about job creation and how critical it is to our nation’s economic health and future. But who are America’s job creators? Are they the nation’s richest individuals? Are they big public companies? Hot start-ups?

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The answer is: none of the above. New research sponsored by the Small Business Administration: “Accelerating Job Creation in America: The Promise of High-Impact Companies” by Spencer L. Tracy, Jr., shows that almost all net U.S. job creation in recent years came from existing private, high-growth companies.

If we are really going to get serious about job creation, policymakers and communities should focus more on nurturing existing private, high-growth businesses. That means doing what’s necessary to create a healthy small business environment such as encouraging investment in private business through tax incentives, encouraging hiring inside the U.S., making credit readily available, and so forth.

But it also means zeroing in on a very important issue that often gets overlooked: growth.
That’s why state governments, the Small Business Administration, chambers of commerce, economic development agencies and entrepreneurship centers at colleges and universities should increase their focus on educating existing private business owners on how to manage both the risks and the challenges presented by growth.

I led a study that looked at 54 high-growth private businesses in 23 different states. The businesses included both service and product businesses having an average age of 9.6 years and an average revenue of approximately $60 million with the range being $5 million to $350 million.

The key findings of that study allow me to offer the following facts every company should know about business growth.

1. Too often, businesses grow themselves into trouble. We know that many successful small businesses implode when they attempt to grow too much too quickly. Growth can outstrip people, processes and controls.
Cash flow management during growth periods is critical, because in many cases growth requires investments in people, technology, supplies, etc., ahead of the receipt of cash from customers. Entrepreneurs have to understand that they may not be able to afford all the available growth.

Instead of following the “grow or die” myth, a much better axiom to follow is “improve or die.” As a business grows, in most cases entrepreneurs have to scale people, processes and controls. That means not only more, but also better people, processes and controls. A focus on improvement is critical because one must maintain high-quality standards and financial controls in the haste of growth.

2. Successful entrepreneurs know when to release the growth “gas pedal.” Every private business faces the same challenges as it attempts to grow, but successful entrepreneurs learned to pace their growth.

They use what I call the “gas pedal” approach to growth. Letting up on the growth pedal to give their people, processes, and controls time to catch up. We also found that strategic focus was critical to growing safely. Focusing on doing one thing that lots of customers needed better than the competition equated to big opportunities.

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