Guiding Principles

“Income inequality is the greatest challenge of our generation, destabilizing society, increasing political polarization and hindering economic growth¹. Business can play a role reducing this inequality, and inclusive economic growth can be advanced by strengthening the small business ecosystem.

Small business is crucial to both the economic and social well-being of communities, providing half of private sector jobs², retaining wealth in local communities at twice the rate of national chains³, helping to reduce the geographic⁴, gender⁵ and racial⁶ wealth gap, and providing the local character that makes communities unique⁷.

The small business ecosystem is the network of organizations that provide the solutions businesses need to startup, survive and expand. When growth-motivated owners can access a strong ecosystem and utilize the right solutions, they are twice as likely to grow and create new jobs⁸.

Unfortunately there is often a disconnect in the ecosystem. It can be a struggle for growth-motivated owners to access the solutions they need at the right time⁹, particularly those in distressed communities¹⁰ and with underserved owners¹¹. Solution providers are challenged to navigate a massive sector where the vast majority of small businesses do not experience substantial growth¹² (or even want to)¹³, do not create new jobs¹⁴, and are not likely to be receptive to new solutions¹⁵.

It is a fraction of small businesses – new & high growth firms, that are responsible for almost three quarters of new job creation¹⁶, and are also the most likely to be receptive to new solutions¹⁷. I refer to these new & high growth small businesses as prime growth firms.

Through the Prime Growth Framework we provide government, nonprofits, investors and ethical suppliers with a powerful new perspective: the ability to identify prime growth firms, understand their current growth priorities, and determine which are in distressed / overlooked communities and have underserved owners.

By enabling solution providers to effectively engage with new & high growth firms, prioritize distressed communities and underserved owners, and deliver growth solutions that are relevant to current growth priorities, we can advance economic growth that benefits all segments of society.”

– Steve Waters, Founder & CEO, SMB Intelligence

REFERENCES

1. International Monetary Fund. “Causes and Consquences of Income Inequality: A Global Perspective”, June 2015. Available online

2. Small Business Administration. “Frequently Asked Questions About Small Business”, August 2017. Available online

3. Civic Economics. “Indie Impact Study Series”, 2012. Available online

4. Economic Innovation Group, “2017 Distressed Communities Index”. Available online.

5. Brookings Institute Hamilton Project, “Minority and Women Entrepreneurs: Building Capital, Networks, and Skills”, March 2015. Available online.

6. Klein, Joyce A. “Bridging the Divide: How Business Ownership Can Help Close the Racial Wealth Gap”, Aspen Institute, January 2017. Available online.

7. Tolbert II, Charles M. “Small, local and loyal: How firm attributes affect workers’ organizational commitment”, Baylor University, October 2014. Available online

8. Goldman Sachs. “Progress Report on Goldman Sachs 10,000 Small Businesses: Fourth Edition”, 2018. Available online

9. 81% of owners haven’t worked with local government-funded small business resources eg. chamber of commerce, SCORE, SBA etc.
Fifth Third Bank. “National Small Business Survey”, April 2016. Available online. It is difficult for wiling lenders to find qualified borrowers, and vice versa. Mills, Karen Gordon and Brayden McCarthy. “The State of Small Business Lending: Innovation and Technology and the Implications For Regulations”, Harvard Business School Working Paper 17-042, 2016. Available online. Only 25% of owners seek advice from community leaders, 12% from financial advisors and suppliers, and 8% from incubators / accelerators. UPS and Business Insider. “2016 State of Small Business”, 2016. Available online. While online lenders and CDFI’s have the highest credit approval rate and large banks have the lowest, owners are twice as likely to have applied to a large bank (48%) than an online lender (24%), and are ten times more likely to have applied to a large bank than to a CDFI (5%). Federal Reserve Bank. “2017 Small Business Credit Survey – Report on Employer Firms”, 2017. Available online.

10. Kugler, Maurice and Marios Michaelides, Neha Nanda, Cassandra Agbayani, “Entrepreneurship in Low-Income Areas”, page 1, IMPAQ International LLC for Small Business Administration, September 2017. Available online

11. Brookings Institute Hamilton Project, “Minority and Women Entrepreneurs: Building Capital, Networks, and Skills”, March 2015. Available online.

12. Approximately 80% of small businesses do not grow at all, even over a relatively long period. Most surviving small businesses do not grow by any substantial margin – most start small and stay small. Pugsley, Benjamin Wild and Erik Hurst. “What Do Small Businesses Do?”, Brookings Papers On Economic Activity, Fall 2011. Available online

13. Only 24% of owners report wanting their firm to be “as large as possible”, and more than 50% of owners cite lifestyle benefits such as “flexibility over schedule” or “be my own boss” as a primary reason for starting their firm. Pugsley, Benjamin Wild and Erik Hurst. “What Do Small Businesses Do?”, Brookings Papers On Economic Activity, Fall 2011. Available online. Only 33% of owners say their primary goal is to grow. The Hartford. “2015 Small Business Success Study”, 2015. Available online. 50% of owners started their business for non-financial reasons like wanting to be their own boss, tired of working for others, wanting to set their own hours, and the desire to pursue a passion. Only 12% of owners want to grow to staff larger than 50 people. Infusionsoft. “Defining and Achieving Small Business Success”, 2016. Available online. While 88% of owners report “increasing revenues” as their key business goal over the next three years, only 24% report wanting to add an establishment. Shopkeep. “2018 Shopkeep Small Business Pulse”, May 2018. Available online.

14. The overwhelming majority of small firms do not grow by adding employees from year to year or even over three year periods. Approximately 80% of small businesses do not grow at all, even over a relatively long period. Pugsley, Benjamin Wild and Erik Hurst. “What Do Small Businesses Do?”, Brookings Papers On Economic Activity, Fall 2011. Available online. Only 22% of small businesses are planning to hire additional employees in the next 12 months. Bank of America. “Small Business Owner Report”, Spring 2018. Available online. 22% of owners are planning to hire new employees in 2018. TD Bank. “2018 Small Business Survey”, May 2018. Available online. 71% of owners expect savings from the 2017 tax policy changes, however only 14% of those plan to use those savings to hire more employees. Bank of America. “Small Business Owner Report”, Spring 2018. Available online.

15. In a given year for a given category, only 7% of small business owners reported switching their solution provider, and 68% reported never switching. Haque, Naumi. “Small Business Owners Never Switch Suppliers”, CEB, October 28, 2012. Available online. Waters, Steve. “Why the Vast Majority of Small Businesses are Unreceptive to new Solutions”, SMB Intelligence, May 2018. Available online.

16. Startups and high growth firms account for about 70% of firm-level gross job creation in a typical year. Startups account for 20%, and high growth firms for 50%. Decker, Ryan and John Haltiwanger, Ron Jarmin, Javier Miranda. “The Role of Entrepreneurship in US Job Creation and Economic Dynamism”, Journal of Economic Perspectives Vol. 28 No. 3, Summer 2014. Available online.

17. Waters, Steve. “Identifying the Small Businesses Most Receptive to New Solutions”, SMB Intelligence, May 2018. Available online