In the eyes of many, "gazelles" are coveted.
Gazelles is the name adopted in the 1980s by researcher David Birch of Cognetics, to describe fast growing companies. According to Inc magazine:
'Some years back, David Birch of the research company Cognetics conferred that name on fast-growing companies, thereby distinguishing them from the "mice" on Main Street and the "elephants" on the Fortune 500. The name stuck.'
Economic development organizations, non-profit entrepreneurship programs, venture capitalists and other groups jumped on the bandwagon. Gazelles were in. If you wanted to see jobs, economic growth and high investment returns, gazelles were what you had to focus on.
On one level, that's pretty obvious, right? Fast growing businesses are the ones that are going to bring the biggest returns, presumably add the most jobs, become a larger part of the economy, faster -- when compared with slower growing companies.
It's hard to argue with that.
But one thing that's always bothered me with the focus on gazelles to the exclusion of slower-growing small businesses, is that it ignores the life cycle of so many smaller companies and startups.
You see, it simply takes time for most businesses to grow.
In my experience a lot of startups are not fast growers immediately out of the gate. Many businesses remain small for years until they reach some critical mass, the business matures and becomes efficient, and growth explodes.
I've long contended that it's much easier to accelerate growth later on when you have more customers, more revenue and more cushion. During the early years of a business, it can be a challenge just to survive each month.
A new study out by the SBA's Office of Advocacy proves just how much time it takes to get to be a fast growing business. The study, entitled "High-Impact Firms: Gazelles Revisited" (PDF), highlights a group of businesses that they call high impact firms. This study found that high-impact firms, which are high revenue and high employment growth firms, are on average 25 years old!
If high impact firms on average are 25 years old, what do you think those businesses were like before they got there?
They weren't necessarily high growth out of the gate. They may have been growing slowly, building their businesses a step at a time. Some years they moved forward and some years they went backwards. But overall they were on a forward path. In many cases it just took them a while to grow to that level. (See page 40 of the study for more about what the companies were like in the years before they became fast growing.)
And that brings me to my point: this study is a strong argument in favor of the Small Business Administration and its support of small businesses and startups that are not yet high growth. Adopting a long-term point of view, society should be supporting businesses that eventually may grow to become these gazelle or high impact firms. It would be short-sighted just to focus on those businesses that currently are high growth.
Venture capitalists are not anytime soon going to be investing in startups that take 25 years to become high growth. They can't afford to wait that long. So I don't expect VC firms to get excited by businesses that take a long time to get their running legs.
And economic development organizations trying to pump up their local economies may need to see results well before 25 years are up. So I can understand them wanting to focus on companies that will bring jobs more quickly to an area.
But the SBA is in a different boat. As a Federal agency, it can and should be looking out for the long-term. Supporting small businesses in the early years and giving them a good foundation to grow in later years can pay off in those firms becoming high growth later on.
And as a business owner, this study is uplifting, too. If your company is 3 or 5 or even 10 years old, and hasn't achieved high growth, don't assume that will never happen. As this study shows, the high growth phase takes time.