Much is made of the importance of small and medium-sized businesses to national economies. Indeed, this week’s Queen’s Speech announcing the legislative plans of the newly-elected UK Government included measures specifically aimed at this sector. But all this presupposes that these enterprises are homogenous. Although the sector is widely portrayed as synonymous with innovation and agility, not all small and medium-sized businesses fit this billing. Businesses that just provide a living for the founder and perhaps one or two more employees obviously fulfil an important role, as do those that do not have ambitious growth targets. The ones that really excite governments and policymakers, though, are those that expand rapidly – creating jobs, wealth and tax revenues. The trick, of course, is to spot which those are and to provide the necessary support for their founders.
Among those attempting to pick such winners is the investment bank Goldman Sachs, with its 10,000 Small Businesses initiative. This was launched in the US in 2009, in the wake of the financial crisis and the associated criticism of institutions like Goldman, and was extended to the UK the following year. The idea is that suitable businesses are brought together on a regional basis under the aegis of business schools in their areas for workshops, mentoring and other networking opportunities. The highest performers are then chosen for an “ambassador” program run with Oxford University’s Said Business School. To date, just over 62 business owners have been through the Said scheme and all were invited to a reunion at the school earlier this month.
Barbara Diehl, who leads the programme for Said’s entrepreneurship centre, is highly enthusiastic, pointing to how those taking part “really open up” in dealing with their challenges and using the experience of their peers and the assembled experts to make the decisions necessary to ensure the future development of their businesses. “Some of the businesses are facing having to transform – to take the next step – but they are keen on preserving the DNA that helped the business in the first place,” she says. “Sometimes the personal challenges seem to be outweighing more practical issues.”
Participants Nick Howard and Gez Walsh are – if anything – even more positive. Howard, founder of Limehouse, a communications company specializing in corporate videos, was the first to sign up for the original UK pilot program five years ago. As somebody with an arts degree rather than a business qualification, he was initially drawn to being able to develop functional skills. But over the course of the program he has been introduced to many concepts, such as corporate governance and the social impact of the business, that would not have really occurred to him before. “It’s about taking yourself out of the business,” he says, pointing out that it is too easy to “keep your head down” and so plateau instead of continuing to grow. Walsh, who runs the bottled gas distribution company Innergy, has found being in Oxford inspirational in itself. But, in addition to the academic input, he especially values the contributions of others in similar positions to himself. “Most small business people complain about loneliness,” he says. “Suddenly, I have got 30 to 40 people I can pick the phone up and talk to and vice versa. You can’t share things with the management team because you’ve got to be the leader. You can’t show hesitation. And you can’t do that with friends.”
Both men have seen their businesses expand rapidly during their involvement in the program. Moreover, they have grown sufficiently in confidence to keep going – which is, after all, the object of the exercise. A progress report published by Goldman Sachs suggests that the program increases participating businesses’ growth by between 10% and 25%, relative to what their growth would have been without the programme. This boost to growth comes on top of the relatively high growth that the participating businesses were already experiencing. The analysis also indicates that on average, participants are increasing turnover at between 23% and 42% per year after participating in the programme, and expanding employment between 16% and 26%, depending on when they graduated. In addition, the strong revenue growth and job creation exhibited by participants continues well beyond graduation, with 88% of participants increasing turnover three years after starting the programme, and 90% of participants expanding net employment.
Given that many of the businesses come from outside the South-east of the UK, which especially since the recession has performed much more strongly economically than other parts of the country, and that preference is given to businesses (some of them social enterprises) operating in areas where regeneration is needed, this looks like an encouraging start.
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