The Prime Growth Framework for
Private Equity
Enhance your use of data & evidence to identify current expansion stage small chains (firms with up to 20 establishments that are currently adding establishments), determine which firms could be potential portfolio additions, and identify growth activity that could influence your existing portfolio analysis.
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Overview
Key Features
1. Prime Growth Classification
2. Sector Monitoring
3. The Prime Growth Briefing
4. Portfolio Alignment
5. Social Impact Insights
Gain a powerful new perspective on the small business sector
Prime Growth Classification
At the core of the framework is Prime Growth Classification, a growth-based classification standard for the small business sector. Growth-based classification uses development stage, growth format and growth scale to categorize firms rather than traditional small business segmentation (revenues, company age, company size, and digital engagement).
The purpose of the standard is to identify current prime growth firms and segment them by their current growth priorities.
Prime growth firms are independents or small chains, that are employers, with a commercial location, currently at a seed or expansion development stage (new or high growth). The Prime Growth Framework for Private Equity covers expansion stage firms only.
Growth priorities are the big picture context of an owner’s current growth plans – the format and scale of growth they are currently working to accomplish.
Why this matters
Most small business owners are motivated by lifestyle considerations, not growth1 and the vast majority are not likely to be receptive to new solutions2, do not experience substantial growth3 and do not create new jobs4.
Prime growth firms are the small businesses currently most likely to be motivated5 and receptive6, and if successful in their current growth plans, to experience substantial growth7 and create new jobs8.
When you can identify prime growth firms and determine their current growth priorities, you can more effectively find small business investment opportunities and determine which are most likely to fit your portfolio.
Traditional small business segmentation does not provide the ability to identify prime growth firms or their growth priorities, as the key indicators are current development stage, growth format, and growth scale9.
Learn more about Prime Growth Classification
1. 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. 3,4. Pugsley, Benjamin Wild and Erik Hurst. “What Do Small Businesses Do?”, Brookings Papers On Economic Activity, Fall 2011. Available online. 5. Waters, Steve. “Most Small Business Owners are Motivated by Lifestyle – Not Growth”, SMB Intelligence, May 2018. Available online. 6. Waters, Steve.”Identifying the Small Businesses Most Receptive to New Solutions”, SMB Intelligence, May 2018. Available online. 7. Waters, Steve. “Which Firm are Most Likely to Experience Substantial Growth”, SMB Intelligence, May 2018. Available online. 8.Waters, Steve. “These Firms are the Engine of Small Business Job Creation”, SMB Intelligence, May 2018. Available online.9.Waters, Steve. “Growth-based Classification vs. Traditional Small Business Segmentation”, SMB Intelligence, May 2018. Available online.
Continually monitor the small business sector to identify current prime growth firms
Sector Monitoring
SMB Intelligence uses proprietary open-source intelligence (OSINT) methods applied through a combination of machine analysis and human analytics.
We continually monitor over 30,000 real estate, editorial, public government data, social media and other sources to track planned growth activity in the small business sector. We apply Prime Growth Classification to that dataset to identify & segment prime growth firms, and then aggregate additional data points to determine key characteristics including their current job creation status, contact details and digital engagement.
We then geocode each prime growth establishment, assign a US Census tract, and use extensive public government data to determine the current socioeconomic status of the community each expansion establishment is located in.
Why this matters
Which firms are currently considered prime growth continually changes, as the sector churns with new firms entering, failed firms exiting and surviving firms moving through development stages.
Maintain a current view of planned prime growth activity
The Prime Growth Briefing
Published every two weeks, The Prime Growth Briefing is a powerful dataset that identifies current expansion stage small chains, segments them based on their current growth priorities, and provides deep insight into their current status through 60 innovative data points. We define a small chain as a firm with 2-20 establishments.
View the data points included in the Briefing.
Why this matters
Traditional small business datasets do not provide insight into prime growth firms, growth priorities, job creation propensity or growth timing10.
Effectively identify:
• Small chains currently planning to add an establishment
• Small chains that are planning high velocity expansion by adding multiple establishments at once
• The current job creation status of these firms
• When this planned growth is scheduled to take place
• The digital engagement of these firms
• The socioeconomic status of the communities the planned expansion establishments are located in
Data Validation
Published every two weeks, the Prime Growth Briefing is the most current and accurate small business dataset available. We take extensive steps to ensure the veracity of the data we provide, and to present it to clients in a transparent manner. We use both internal and third-party validation tools, and all contact information is accompanied by validation status. Detailed methodology for community economic and social status is available upon request.
10.Waters, Steve. “Growth-based Classification vs. Traditional Small Business Segmentation”, SMB Intelligence, May 2018. Available online.
Segment prime growth firms by expansion scale & speed
Portfolio Alignment
The Prime Growth Briefing groups prime growth firms into four segments based on their growth priorities.
Growth priorities refer to the big picture context of an owner’s current growth plans – the format and scale of growth they are currently working to accomplish. When you can determine current growth priorities you can better identify which firms are most likely to fit your portfolio.
The four segments:
Expansion – Initial
Existing, expansion stage firms, currently planning to expand their single establishment firm into a small chain by adding a second establishment.
Expansion – Emerge
Existing, expansion stage, emerging small chains with 3-10 establishments, that are currently planning to expand by adding an establishment.
Expansion – Advance
Existing, expansion stage, advanced small chains with 11-20 establishments, that are currently planning to expand by adding an establishment.
Expansion – Velocity
Existing, expansion stage firms, that are currently planning rapid expansion by adding multiple new establishments at once.
Deliverables
Datasets
The Prime Growth Briefing
The Briefing is published every two weeks and delivered in CSV format via email.
View the data points
Strategic insight
Prime Growth Classification User Guide
A guide to understanding how and why to use Prime Growth Classification, delivered in PDF format.