Entrepreneur Mapping:Tracking Businesses along The

Journey from Pre-Start to Start-Up to High Growth

RIU Conference 21st June 2010

•Neil Geoghegan – Corporate Resources Director•Ged Mirfin – Chief Data Officer

Content• Methodology• Business Life Cycle• High Growth Businesses• Key Questions• QlikView• Start-Ups & Growth Prospects: Environmental Factors• Star Performers: Experiential Factors• The Take-Off Period – the Importance of Critical

Business Events• At the end of the day its all about Confidence• Conclusions• Questions

Entrepreneurialism – is it really a white knuckle ride?

“The life of an entrepreneur in a gazelle company is a life of almost constant fear. Everything is uncertain. What will happen next? This means that the entrepreneurs must be able to control their fear, which few can. It’s like a downhill skier before hurtling down the precipice…the fear is there but under control.

The people who succeed are people who can tolerate the fear, the fear of awful events, and if you learn to tolerate the fear well, then you can do almost everything. As an entrepreneur you need to learn how to deal with fear.”

David BirchOriginator of the Term “Gazelle”, March 2010

Methodology• Tracking Businesses from Conception to Birth to High Growth

examining their shared characteristics• What differentiates the behaviour of owners of High Growth

Companies who have sought Business Support?• “Business Life Cycle” Tracking Key Developmental Stages of a

Business• Entrepreneur Mapping “Matching” the details of Pre-Start Enquiries

(“Thinking of Starting-Up a Business”) with:a. A Business Locationb. The Home Address Details of the Directors or Proprietorsc. Home-Based Businesses

• Enriching of Data Set with Additional Classification Systems to better understand the behaviour of Business Owners

• Visualisation of the links between the Socio-Demographic Environment where Directors and Proprietors live and Business behaviour

• Star Performers Survey provided further detailed behavioural insight

Business Life Cycle

• Focus on Start-Up and Early Growth Phase

• Focus on Businesses between 3 and 5 years old (some “shelf companies” are included) these only start up properly after being dormant for a while

• We also surveyed Mature Businesses further on in the Business Life Cycle that have been assisted by BLNW to explore the behaviour of their owners

Accelerators

Sprinters

Flyers

Take

-Off

Perio

d

High Growth CompaniesA gazelle company is an American expression for small, fast growing companies (in reference to the fact they can jump higher and run faster than their peers), that creates many job opportunities. Fast growing firms ("gazelles")

are defined as companies that have experienced at least 60% growth in employment and turnover (turnover adjusted for inflation) over a 3 year period.

Accelerators:

Young, and usually small, high growth

enterprisesYoung, start-up or spin-

out firms.“Adolescent” High-Tech

Companies.

Sprinters:

Fast-expanding Dynamic SMEs often in new

industries that generate large amounts of

Turnover. Do they also generate large numbers

of jobs at the same time?The subset of high-growth enterprises.

which are 3 but typically 5 years or older.

Flyers:

Sprinters who turn into large rapidly

expanding job creators.

Large Mature High Growth

Companies

“Early Start-up phase: Up to 3 Years”

“Early Growth Phase:3 to 5 Years”

“Exponential Growth Phase:

Years and Older”

Key Questions – How do we spot Winners (Business Flyers)?

• Can these companies help to grow our way out of recession?• How important are Start-Up Businesses to growing our way

out of a recession?• How quickly can Start-Up Businesses grow?• We run the QlikView microscope over key geographies and

ask “how important is place” when it comes to starting-up a business?

• Is “Entrepreneurialism” a “Middle Class Phenomenon”?• How do the owners of “Flying Businesses” behave?• Are you confident to push-off on the white knuckle ride?

You’re No More than 6 Qliks Away From An Answer From QlikView to Local Regional View

• QlikView Dashboard Engine is revolutionising analytics• Ability to Link Data Sources in a way simply not possible before• Allows us to focus the microscope on a list of “enterprising prospects”

analysing key “attributes”, “shared characteristics” and essential “differentiators” to better understand correlations between environment, experiential behaviour and business performance

• QlikView technology has effectively allowed us to break down the six degrees of separation (Sidney Milgram) between high growth businesses and their operating environment

• QlikView has allowed us to produce multi-dimensional League Tables and to understand the correlations between comparative ranking positions of the businesses on them

• QlikView also allows to picture the results of our analysis in a highly visual way

Customer Volumes

Attributes of Growth Prospects- Geography

1. Simple split of region reveals expected volumes for Greater Manchester.2. Strong performance from Lancashire3. Cumbrian total outperforms expectations

Growth Prospects Attributes - RES

1. Vast majority of “Growth Prospect” companies operate outside of RES Sectors2. Larger Service Sector companies in Business & Professional appears to be an area

from which people look to set up a business.3. Very Few Advanced Engineering companies are starting and thriving.

Includes:Builders & Building Contractors 168

Interior Building Services 289Personal Services 179

Education 103Medical Services 94

Garages & Vehicles 45

Geographic League TablesTo 20 Towns / Cities for start up

City / Town Survivors Initial Enqs Conversion MANCHESTER 489 4200 12%LIVERPOOL 363 3393 11%PRESTON 271 1920 14%STOCKPORT 152 934 16%WARRINGTON 134 910 15%CARLISLE 127 902 14%BOLTON 120 840 14%BLACKPOOL 108 839 13%WIGAN 94 789 12%WIRRAL 91 512 18%BLACKBURN 84 514 16%CHORLEY 81 594 14%OLDHAM 79 565 14%KENDAL 76 531 14%SOUTHPORT 69 450 15%ROCHDALE 65 461 14%CHESTER 58 526 11%NORTHWICH 54 311 17%BURY 52 451 12%ALTRINCHAM 48 260 18%ROSSENDALE 48 340 14%LANCASTER 47 457 10%MACCLESFIELD 47 223 21%ORMSKIRK 40 326 12%SALE 40 220 18%

League TablesTop 20 SIC Codes

SIC Code TotalUnknown 864F Construction 518N Administrative And Support Service Activities 489M Professional, Scientific And Technical 447G Wholesale And Retail Trade; Repair Of Motor Vehicles And Motorcycles 339S Other Service Activities 326C Manufacturing 267P Education 168J Information And Communication 167Q Human Health And Social Work Activities 155R Arts, Entertainment And Recreation 113I Accommodation And Food Service Activities 100H Transportation And Storage 85L Real Estate Activities 81A Agriculture, Forestry And Fishing 31K Financial And Insurance Activities 25E Water Supply; Sewerage, Waste Management And Remediation Activities 17O Public Administration And Defence; Compulsory Social Security 9D Electricity, Gas, Steam And Air Conditioning Supply 2U Activities Of Extraterritorial Organisations And Bodies 1

•Most are from unknown SIC codes

•Sole traders in the construction sector constitute a large start up group

•Comparatively low levels of manufacturing companies start up

Economic Contributions

High Growth Geography - Sales

Manchester 52Cheshire East 39Cheshire West and Chester 36Liverpool 33Sefton 33Trafford 30Stockport 28Warrington 25Blackburn with Darwen 24Salford 23Bury 21Oldham 21Wigan 20Wirral 20Chorley 19South Lakeland 19St. Helens 19Rochdale 17Bolton 15Preston 15

Top Twenty Local Authorities

MANCHESTER 108 ROCHDALE 14LIVERPOOL 63 WIRRAL 14PRESTON 33 SOUTHPORT 13WARRINGTON 25 WIGAN 13STOCKPORT 24 ST HELENS 12BLACKBURN 21 CARLISLE 11OLDHAM 18 ROSSENDALE 11CHORLEY 16 BURY 10BLACKPOOL 15 ALTRINCHAM 9BOLTON 15 NORTHWICH 9

Top Twenty Towns & Cities

20/97

20/39

•Greater Manchester has the highest return 34%•Manchester (City) has 16%•Top 5 Performing Post Codes BB2 (Blackburn 13) BB4 (Rossendale 11) M19 (Manchester 11) PR7 (Chorley / Charnock Richard 11) M28 (Worsley 10)

• Deprivation Areas – 198 • Non Deprivation Areas - 513 of which 168 are

from “Prospering Suburbs”.• “Prospering Suburbs” account for 25% 0f all high

growth start ups and 33% of high growth start ups in in Non Deprivation Areas.

• Is Entrepreneurialism a middle class phenomenon?

• Is this accentuated by the current recession?

High Growth Sales – Which Areas Generate High Growth?

Business Synapses • Does living in certain places make business decisions, easier / more

effective?

• Is it easier for certain socio demographic groups to set up and grow a business?

• Challenges in business are ubiquitous, the synaptic gap is the difference between cause and effect in the creation of a high growth company

• Business Synapse Theory suggests that the greater intensity and frequency (“busy-ness”) of Business Neurons make it easier to cross the business development gap.

• The speed of response increases proportionate to the level of business stimulation (support) activity.

• Business Stimuli can be many and varied (public and private) but it is the quality of stimulus operating within receptive settings that is the key.

Where are the busy business neurons from?

• The more the merrier. Neurons in biology speed up reactions the quality of the Neurones is important. Synapse gaps are bridged by Neurones and this bridging generates action (response)

• The optimum result is that reaction times are shortened and levels of responsiveness improved

• An absence of Neurons will cause paralysis, this is true both biologically and in business

• Business Neurons are many and varied - it is quality that is the key

• Business Support is a key element in the generation of business neurons.

High Growth In Deprived Areas - Sales

•City Regions have the largest return •Liverpool has the most growth companies from deprived areas 54%•Runcorn has the highest proportion from deprived areas (75%) with Rochdale and Nelson joint second (57%)•Average for the region 28%•Most areas have very little high growth in deprived areas •Cheshire & Warrington have only 4%, Cumbria have 11% •Greater Manchester 34%, Merseyside 48%, Lancs 24%

MANCHESTER 46LIVERPOOL 34PRESTON 12OLDHAM 9ROCHDALE 8BOLTON 7BLACKBURN 6RUNCORN 6ST HELENS 5BLACKPOOL 4NELSON 4SOUTHPORT 4BARROW IN FURNESS 3BURY 3CHORLEY 3

Top 15 Deprived Areas Towns / Cities Sales Growth

MANCHESTER 46 43%LIVERPOOL 34 54%PRESTON 12 36%OLDHAM 9 50%ROCHDALE 8 57%BOLTON 7 47%BLACKBURN 6 29%RUNCORN 6 75%ST HELENS 5 42%BLACKPOOL 4 27%NELSON 4 57%

Percentage of Total High Growth

High Growth In Prosperous Wards - Sales

•Manchester has the highest return with 62 companies•Stockport, Rossendale, Northwich and Warrington produce more than 90% of their growth companies from prosperous areas•OA Classification “Prospering Suburbs” are primary drivers for High Growth Companies

as a %ageof Total

MANCHESTER 62 57%LIVERPOOL 29 46%WARRINGTON 24 96%STOCKPORT 22 100%PRESTON 21 64%BLACKBURN 15 71%CHORLEY 13 81%BLACKPOOL 11 73%WIGAN 11 85%WIRRAL 11 79%ROSSENDALE 10 91%CARLISLE 9 82%NORTHWICH 9 100%OLDHAM 9 50%SOUTHPORT 9 69%

Top 15 Sales GrowthNon Deprivation areas

Typical Traits 172Prospering Suburbs 168Countryside 92Blue Collar Communities 32Constrained by Circumstances 22City Living 20Multicultural 5Not Known 2

Output Area Classification

Significant Contributions with employment growth

Sales of more than £400k and employing more than 10 people

High Growth - Sales of £400k+ and Staff 10+

Even Geographical Spread - only 42 businessesEasier to grow in Cumbria 16% of high growth companies achieve more than £400k & 10 people, only 3% achieve this in Greater Manchester, 6% everywhere elseVast Majority turnover less than £1m

Total Jobs in sample – approx 2500

34

5 3

High Sales Growth (£5m+) Companies Employing more than 10

Employing – 445 with sales of £125m aprox

Even Geographical Spread of businessesVery Few Companies achieve this sizeAlthough Sales Volumes are good employment is predominantly in the 10 – 49 bracket

Business Activity Matrix - Start Up Companies and Growth

< £90k £90-£400k £400k - £2,5m £2.5m+

100 - 250+ 0 0 0 2

50 - 99 0 2 0 7

10 - 49 11 13 29 6

0 - 9 1433 626 598 43

Annual Turnover

Head

coun

t Ba

nd

•There are few companies that make the leap up the high growth curve!•Turnover and Number of Employees are mutually interdependent•Growing employee base beyond 9 is very difficult and requires turnover of more than £1.0m•From start up to high turnover and employment in a 3 year window is very rare

Conclusions - Environment• Manchester good new co generation• Liverpool has the most high deprivation locations• High Class Suburbs generate most high growth companies by a

factor of 3:1• Deprived locations valiant effort – heroes! • Regeneration Areas perform well for start up activity but

struggle to achieve significant growth within 3 years• Job Creation in general struggles to get over 10 employees• Few achieve high turnover (£5m)• How long does it take to establish a significant business – is a 3

year window too small?

Star Performer Survey

• Conducted a survey amongst Business Link Advisors to highlight businesses in their portfolios that they considered to be their strongest performers

• Survey designed to capture behavioural characteristics of the owners of these high performing businesses

• Unique insight into high performing businesses in receipt of direct business support

Method• On Line Questionnaire (Sharepoint) completed by

qualified business advisors in the North West of England

• 259 questionnaires were completed • Response rate of 40% of advisor population• Geographic spread of respondents was forced and

matches the locale of the advisor• Questions required advisors to choose from a list of

priority options and rank key behavioural characteristics

• Response drivers focussed on intrinsic v’s extrinsic motivations of the business owners

Questionnaire Format

Word Cloud for Responses

Drive Phase Drive Phase

Business Sectors

•Highest number of respondents from the Digital & Creative Industries and the Finance and Professional Services sectors•Energy & Environment offers the largest percentage response from the BLNW team•Advanced Engineering delivered a proportionately low response

Entrepreneurial Characteristicsa) a) Drive and ambition - Do the key personnel

of the business have the drive and ambition to succeed?

b) Control/Decisive - Are the key personnel decisive and prefer to take full control of the business (autocratic)?

c) Proactive leader - Are the key personnel proactive in their approach and show strong leadership qualities?

d) Risk taking - Do the key personnel take risks in venture opportunities even if they don't know what the outcome is going to be?

Entrepreneurial Characteristics

• Drive and Ambition and Pro-activity were more important than control or the propensity to take risks

• The risk = reward concept seems not to apply to our sample

• View risk from the position of experience – allows a more calculated approach

Innovation

a) Do the key personnel have creative ideas /new solutions?

b) Does the company culture encourage and support new ideas, creative processes and R&D?

c) Do creative ideas come from anyone in the company?

• Is from inspired leadership and empowered teams.

Market

a) Right place/right time - Has an element of luck influenced the success of this business?

b) Is it a growing market and is it favourable for the type of product/service the business is offering?

c) Does the product/service have a USP/competitive edge compared to the current marketplace?

d) Access to market - Does the business have easy access to its marketplace?

e) Import/Export - Is the business an importer or exporter and is this a key to their success?

Market• The right place right time question has a very

normal distribution, “luck” is not a factor• Growing Markets and Niche products are

important• 79% of the respondents offer a unique selling

point • 79% of respondents did not consider Import

Export activities to be important• 54% believed this strongly• Access to Market is vital

Unique Selling Point

Only 5% of the responses said that price was their USP48% believed it was quality47% believed it was market positioning

Finance

a) Are the key personnel financially committed to the venture?

b) Has the business secured investment/asset backing?

•91% of the respondents had a significant personal financial investment in their businesses•Third party finance was not a major driver

Skills

a) Are the key personnel classically trained or self taught? Do/does the owner/director/s have the necessary business management skills to facilitate innovation/process development? i.e. accounting, marketing and strategic planning.

b) Have the key personnel an established track record for success contributed to the performance of the business?

c) Do the key personnel of the business have expert market knowledge/experience with the ability to create "niche", "me too" and "new" products?

d) Does the business have a clear/streamlined structure of skilled staff that work well together and how much has this contributed to it's success?

Skills

• Skills are critical to performance• Track record and “expert” market knowledge

are as important as formal skill set• Skill and Confidence are very closely linked• Organisational skill and empowerment

complement core subject specific skills

Business Support Themes for the “Star Performer” group

Business Support Themes - Notes• Most action plans were “strategic” rather than

“tactical”.• Huge focus on skills & training• Emphasis on new premises• Marketing was a very common feature• Business Development focused on developing

opportunities, R&D and intellectual property• Most of the interventions were directed at “high

end” business processes

Different Age Profile for the respondents

•Much broader spread of age – Minority being less than three years•Only 34 (12%) were in the 3 year “start up” phase•Vast Majority older than 7 years. •Most companies from affluent areas, proportion (66%)much less than start up statistics (73%)

Sales Banding of Respondents

•Even distribution of turnover bands•More established companies have higher turnover•Maturity equals volume

Headcount Banding of Respondents

•Still an emphasis on companies employing less than 10 people•Largest band employ between 10 - 49•Much greater company count for larger companies•Maturity equals size

High Growth Companies – “The Critical Event”

Critical Events

• This is where opportunity meets hard work• Events can be planned, they can be accidental

but they are not always recognised!• Even when recognised they are not always

developed • Few fledgling entrepreneurs derive maximum

benefit form the opportunities• Many step away from the inherent risk

Critical Event – Essential Characteristics for Success

Snapshot of a High Growth Company

• Twice as likely to emerge from a Prosperous area• Will register tangible growth in its first three years• Will seek (strategic) business support• Is likely to emerge from new technology / markets• Will be a round for a while• Will be “educated or experienced” and focus on skill• Drive, Ambition and Commitment will be evident • Will make the most of critical business developments• Will have enough confidence to take measured risks• Flyers will look before they leap, but they WILL

leap.

Conclusion• We Need to prepare for the “Event” spike on the

growth curve • We need to provide the “Nurture” aspects of a high

growth company (Finance & Robust Business Process)• We need to understand how Entrepreneurial

Confidence can be bolstered, prepare them for the leap

• Pro-actively encourage partnerships and other personal business relationships

• Create critical business neurons • Questions?