Understanding why prime growth firms are the small businesses that tend to be most likely to be motivated by growth…
Prime Growth is actually a growth based classification standard that was developed by SMB Intelligence in 2018. Taking into account the development stage, growth scale and format, it essentially is used in order to categorize firms pertaining to their growth priorities. What findings reveal is that the motivation factor for a prime growth firm does tend to be growth over lifestyle considerations.
What exactly are prime growth firms?
So, to better understand, prime growth firms are either independents or small chains, representative of employers who do have a commercial location(s), and are consequently at a seed (new) or expansion (high growth) development stage.
They are in fact, according to this classification standard, those small businesses most likely to be motivated by growth and as a result open to suggestions and solutions for achieving said growth. If successful, they likely will experience significant growth and in the process create jobs. Generally speaking, only 1% of small businesses are classified as prime growth.
How to define growth motivation
Growth motivation simply refers to how likely an owner is to want their particular firm to experience substantial growth. This is their motivating factor, versus lifestyle issues. Growth motivation sees quick revenue increases and the addition of new jobs versus incremental growth which is more about gradual revenues increases.
Why is this important
As only 1% of companies are considered prime growth, it stands then that the majority of small businesses are motivated by lifestyle considerations. Recent surveys range, suggesting that for instance, 33% of business owners were focused on growth. Another survey showed that only 25% of owners wanted to grow their business as large as possible. Whereas, over 50% of small business owners explained that lifestyle considerations were first and foremost, such as “being my own boss” and “flexibility over schedule” as a primary reason for starting their firm.
So what is the big question
Why are prime growth firms currently most likely to be motivated by growth?
Employer firms are more apt to be motivated by growth
If you do choose to have employees, this suggests that you also have a desire to create a firm that can grow beyond simply what you as an owner can produce yourself. You are also willing to take on more financial risk. And additionally, you are apt to pursue larger opportunities in industries that require employees to operate.
Companies that have a commercial location are more likely to be motivated by growth
Taking on a commercial/office space also suggests your willingness to take on additional financial risk in the name of your small business. Again, this speaks to your commitment to operational complexity—far more so than a work from home business would have. It also signals a desire to pursue larger opportunities that require a commercial location.
Small businesses at an expansion development stage are more likely to be currently motivated by growth.
Those owners at the seed stage are in the process of launching a new firm and are thus pretty likely to be motivated by growth versus lifestyle considerations as they are starting from scratch and have nothing to do but grow.
Owners at the expansion stage have now established a sustainable firm and are looking to bring together those resources that will allow them to scale their success through expansion, rather than focusing on merely maintaining where they are now.
There are the other stages to consider, yet firms in these stages are likely more focused on incremental growth, breaking even, or just simply maintaining the status quo, as the vast majority of firms do not experience substantial growth, even over a three year period.
Firms with high digital engagement tend to be more motivated by growth
It stands to reason that prime growth firms are also those that are highly digitally engaged ones. They’ve taken the time and expense to have a robust digital presence. And often those firms will show 4 times the revenue growth as those with lower digital engagement, those otherwise more focused on lifestyle benefits. They are also three times more likely to add new jobs to the company.
What about traditional small business segmentation? Aren’t factors such as industry, revenues, and company size, for instance, determinant of growth?
Traditional small business segmentation can provide some helpful insight, but it has been shown that the development stage is more a determining factor of growth motivation than traditional indicators.