The Vital Entrepreneur: EY Reveals What Sets High-Impact Entrepreneurs Apart and What it Takes to Grow a Truly High-Performing Company
Palm Springs, Calif, 12 November 2013
2013 EY Entrepreneur Of The Year™ companies model the unique strengths that private, public, family, sponsor-backed and women-led companies must acquire to outperform
High-impact entrepreneurs are the power behind the economy, creating jobs and improving the way the world works, learns, interacts and lives. To help understand what makes these high-growth, high-impact companies tick, EY, in collaboration with the Ewing Marion Kauffman Foundation, released a paper today at the EY Strategic Growth Forum®, “The vital entrepreneur: High impact at its best,” that examines various factors of outperformance, including how high-impact entrepreneurs differ from one another and how they operate, grow and compete.
The U.S. Small Business Administration (SBA) indicates that just 5-7% of all businesses are high-impact, and yet these businesses create most of the new jobs in the U.S. In fact, according to a 2012 Endeavor report, in a single year, the average high-impact entrepreneur will generate 30 more jobs than the average comparable company. A look at some of these companies, more than 650 EY Entrepreneur of the Year™ 2013 finalists, reveals how they are surpassing benchmarks for high impact entrepreneurship by a large margin. They particularly excel in the areas of revenue growth, with median sales growth of more than 30% per year in each of the last two years, and headcount, with the average headcount of more than 30% per year in each of the last two years.
“High-impact entrepreneurs are the beating hearts of a vital and vibrant economy,” said Herb Engert, Strategic Growth Markets Leader for Ernst & Young LLP. “At EY, we have had the privilege of getting to know some of these entrepreneurs through our Entrepreneur of the Year program. We have learned that those you might call ‘super-impact’ – surpassing the benchmarks of high impact by a big margin – do so through their vision, passion and will to succeed.”
What makes these high-impact companies hum? EY outlines some of the many qualities that set several types of entrepreneurs apart.
- Private companies – Private companies are the dominant force in high-impact entrepreneurship, and they represent 88% of the U.S. EY Entrepreneur Of The Year finalists With exceptionally fast historic growth – 33% in revenue and 26% in employment, these private companies are united by their relative freedom to operate. They have the flexibility to make investments – which may call for near-term sacrifice but have long-lasting benefits – free from short-term public market pressures and competitors’ access to disclosed information.
- Public companies – Public company finalists, firmly established global players, display the operational rigor that every entrepreneur can and should emulate. These companies are focused on the future – they see the next transformation coming, and they begin preparing for it well ahead of time. The strength of public companies is their ready access to capital and the organizational discipline and focus that must accompany having publicly traded securities.
- VC-backed companies – VC is still one of the best options to fund the early and scale-up stages for innovators that are disrupting incumbents and creating new market niches. Among the EY Entrepreneur of the Year finalists, these companies have grown the fastest, with median revenue growth more than twice that of the other finalists and headcount increases at a rate of 50% higher than the overall group. VC-backed companies, with their high-risk / high-reward innovations, challenge incumbents, create new markets and often redefine what consumers seek and how business gets done. Playing a big role in catalyzing innovation, venture capitalists not only mentor entrepreneurs that are creating the jobs of tomorrow, but they also provide access to valuable networks and offer the wisdom they have gained by investing in numerous enterprises.
- PE-backed companies – Private equity continues to be a relevant ownership model for many high-impact entrepreneurs because it encourages outperformance through an emphasis on efficiency and strategic improvements, even in the harshest economic climate. PE helps entrepreneurs establish stronger companies with more aggressive growth strategies, access to a wider range of capital, a greater geographic footprint and stronger opportunities for organic growth. Today, market conditions have forced PE firms to adapt to a buy and hold strategy, spending ample time and resources on making substantive improvements to their portfolio companies and, thus, enhancing the value of their investments.
- Family-owned companies – What sets the family-owned finalists apart is their astounding resilience. With self-reliance and middle-of-the-road growth strategies -- grew revenue by 14% and jobs by 11% -- they are able to survive nearly any crisis – economic or otherwise and serve as stable anchors to their communities. By self-funding their growth, family businesses have the space and time to diversify and make thoughtful investments. Their challenge is embedding ongoing reinvention and renewal within their cultures.
- Women-owned companies – Women entrepreneurs face well-known challenges to scaling and becoming market leaders. The highest-impact women entrepreneurs have overcome – or simply ignored – these barriers to find their stride toward the bold growth of high-impact companies. Additionally, because these companies are generally smaller, they are also more agile. This means they can react quickly to market forces and seize market share from older, slower counterparts. While only 11% of the EY Entrepreneur of the Year finalists are women-owned businesses, these companies pack a punch. Among the 11% of the EY Entrepreneur of the Year women-owned company finalists, many have shown revenue growth of more than 20% per year and job growth of 18% for each of the last two years.
While start-ups get much of the attention and are critical to building a healthy entrepreneurial ecosystem, it is high-impact entrepreneurs who are the power behind the economy.
“To create and maintain economically stable communities, it takes a diverse blend of high-impact entrepreneurs,” said Bryan Pearce, EY Americas Director, Entrepreneur Of The Year. “The capital markets need them. The economy needs them. And most of all, our communities need them. Our Entrepreneur of the Year 2013 finalists exemplify the best traits of these high-impact entrepreneurs, flourishing with vitality and new ideas and creating a positive ripple effect in our economy.”
About the Kauffman Foundation
The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that works with partners to advance entrepreneurship in America and improve the education of children and youth. Founded by late entrepreneur and philanthropist Ewing Marion Kauffman, the Foundation is based in Kansas City, MO. For more information, visit www.kauffman.org and follow the Foundation on www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.
About EY Entrepreneur Of The Year™
EY Entrepreneur Of The Year is the world’s most prestigious business award for entrepreneurs. The unique award makes a difference through the way it encourages entrepreneurial activity among those with potential and recognizes the contribution of people who inspire others with their vision, leadership and achievement. As the first and only truly global award of its kind, Entrepreneur Of The Year celebrates those who are building and leading successful, growing and dynamic businesses, recognizing them through regional, national and global awards programs in more than 150 cities in more than 50 countries.
About EY’s Strategic Growth Markets practice
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