High-impact firms – defined as those that have at least doubled their sales over a four-year period and have a high employment "growth quantifier" – account for almost all employment and revenue growth in the national economy, according to a study released by the U.S. Small Business Administration’s Offiice of Advocacy.
The study notes that such firms are found across all industries and in all geographic regions. The study finds, with some data limitations, that high-impact firms are not start-ups but are on average around 25 years old, and that they come in all size classes. The report also documents that over the periods studied, nearly all job losses came from large, low-impact firms with more than 500 employees.
Of the 376,604 high-impact firms identified by researchers nationwide, 11,006 are located in Michigan. That number represents 2.07 percent of Michigan's firms. Compared with other states, Michigan ranks No. 44 in the distribution of high-impact firms as a percentage of total firms. The top rank goes to Alaska, where 2.76 percent of all firms are high-impact firms. The lowest percentage was in the state of New York, where 1.92 all firms are high-impact firms.
In addition to having a high rate of sales growth, high-impact companies are those in which the absolute change in employment multiplied by the percent change equals a "growth quantifier" number of two or more.
Among the other highlights of the study:
During the 1994–2006 period, firms with fewer than 20 employees represented 93.8 percent of the high-impact firms and 33.5 percent of job growth among high-impact firms. Firms with 20 to 499 employees represented 5.9 percent and 24.1 percent, respectively.
Less than 3 percent of high-impact firms were born in the previous four-year period, however as firm size increases that number doubles to more than 6 percent.
In the four years after a high-impact firm undergoes its high-growth phase, only about 3 percent die. Most remain in business and exhibit at least some growth.
The data suggest that local economic development officials would benefit from recognizing the value of cultivating high-growth firms versus trying to increase entrepreneurship overall or trying to attract relocating companies when utilizing their resources.
For more information, a complete copy of the report and rankings of high-impact firms by region, state, MSA, and county, visit the Office of Advocacy Web site at www.sba.gov/advo.
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