Leading Entrepreneurship

Last month, the SBA released a report entitled High-Impact Firms: Gazelles Revisited. Did they really uncover anything useful?

As they reported their findings:

High-impact firms are relatively old, rare and contribute to the majority of overall economic growth. On average, they are 25 years old, they represent between 2 and 3 percent of all firms, and they account for almost all of the private sector employment and revenue growth in the economy.

Suprising, indeed! Small businesses in general get a lot of credit for thier employment, but it may be misplaced. They continue to report:

• From 2002 to 2006 there were 376,605 highimpact
  firms in the United States. This number
  increased from 299,973 between 1998–2002 and
  was greater than the 352,114 firms in the 1994–1998
  period of analysis.

• During the 1994–2006 period, firms with fewer
  than 20 employees represented 93.8 percent of the
  high-impact firms and 33.5 percent of job growth
  among high-impact firms, while firms with 20 to 499
  employees represented 5.9 percent and 24.1 percent,
  respectively.

• For the three firm-size categories analyzed, the
  average size of high-impact firms in the 1-19 size
  category was 3 employees at the beginning of the
  period of analysis, increasing almost out of the size
  category to 16; for the 20-499 firm-size class it was
  65 increasing to 209; and for the over-500 size class,
  it was 3,648 increasing to 8,041.

• The average high-impact firm is around 25 years
  old, but they are younger than low-impact firms.

• High-impact firms exist in all industries. While
  some industries have a higher percentage of these
  firms, they are not limited to high-technology industries.

• High-impact firms exist in almost all regions,
  states, metropolitan statistical areas (MSAs) and
  counties.

• Low-impact firms do not grow on average.
• Nearly all job loss in the economy in each of the
  three time periods analyzed is attributable to low-impact
  firms with more than 500 employees.

• Less than 3 percent of high-impact firms were
  born in the previous four-year period, however as
  firm size increases that number doubles to over 6
  percent.

• In the four years after a high-impact firm undergoes
  its high-growth phase, only about 3 percent die.
  Most remain in business and exhibit at least some
  growth.

• The data suggest that local economic development
  officials would benefit from recognizing the
  value of cultivating high-growth firms versus trying
  to increase entrepreneurship overall or trying
  to attract relocating companies when utilizing their
  resources.