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Home > News > Growing bu...

Growing businesses, not start-ups, need support the most

Support for start-ups is all well and good, but it's proven, growing mid-sized firms which truly deserve recognition, encouragement and support.

The Government revealed to much fanfare today that it has provided £100m worth of funding via its Start Up Loans scheme to 20,000 budding entrepreneurs.

This forms part of a larger focus by the Government, campaign groups and the media on very young businesses with often exciting, occasionally wacky, big ideas which they want to turn into successful enterprises.

Many are frustrated that Britain has yet to found its own Facebook or Google – an ultra-high-growth scalable businesses which emerges from nothing in a short period of time with multi-billion dollar revenues and a presence in the everyday lives of millions of people.

Supporting these seedlings of entrepreneurship is understandable, but the reality is that growing, proven and profitable mid-sized businesses are the real key to a sustainable economic future for Britain.

CBI figures show that mid-sized companies, with revenues between £10m and £100m, account for just 1 per cent of all businesses in the UK, but are responsible for 22 per cent of revenue and 16 per cent of jobs. Research from GE Capital forecasts mid-sized firms to grow by 6.1 per cent this year, twice as fast as the wider economy.

The CBI estimates that if mid-sized firms were better supported they could generate an extra £20bn-£50bn of economic value for the UK.

The challenges faced by mid-sized firms are significantly more complex than those for start-ups or small lifestyle businesses. Research from Nicola Horlick's Money & Co found that mid-sized firms (employing 50-249 staff) face an average funding gap of ~£70,000.

The funding requirements of small companies can often bet met with personal or family money, unsecured credit or schemes like Start Up Loans. For a mid-sized business, which may still have difficulty accessing bank funding, these piecemeal funding options aren't going to be sufficient – although admittedly some alternative funders are stepping up to the plate. 

Growing a company also means taking on more staff, and needing the skills to manage them effectively. As the company gets bigger, its leader needs all the support they can to keep a handle on where the business is going and to find staff with the right skills, culture and attitude to maintain effective growth.

While smaller firms have smaller staff requirements and larger corporations have the resources to create a substantial recruitment operation, mid-sized companies are stuck in the middle of the two.

This problem of being stuck in the middle applies to many aspects of business, from compliance to taxes, governance and exporting. Many of these issues are less complex for the smallest businesses and much easier for large companies to deal with, while mid-sized firms are left with a disproportionate challenge.

I recently spoke with David Harrison, a successful serial entrepreneur who sold Positive Solutions, an IFA firm, for £130m back in 2002.

He pointed out that rather than having access to relatively easy grant money, start-ups should put their money where their mouth is and prove they have a genuinely good idea.

He said: “Successive governments have always tried to jumpstart entrepreneurs and innovation, but innovation can't be taught. I'm not a nature versus nurture freak but I do believe that if you want to do it, you will do it.

“Development agencies are wasting money giving money to people who are still in university or just out of university who have got “a good idea”.

“If it's a good idea you'll back it yourself, you'll put your own money into it or borrow money from family and friends and get it going to a certain stage where it's obviously a good idea because it makes a profit.”

I would echo that sentiment. While there's a chance that the Start Up Loans scheme and similar local initiatives could unearth Britain's first Google or Facebook, I find it hard to believe that such a good idea held by an entrepreneur with the mettle to deliver it wouldn't emerge anyway.

Ultimately, letting aspiring entrepreneurs loose with a few thousand pounds can create the seeds of a business, but growing, established and mid-sized businesses are the ones that need the support to make a real difference to our economic fortunes.

 

Source: Real Business

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