What’s Stopping You From Building a Billion-Dollar Business?

IBF Entrepreneur Online –

Few Canadian SMEs plan to grow into giant corporations, according to a new report. Here’s why

hat would it take to turn your company into a billion-dollar empire? Is it even something you’d aspire to? If the answers are “a lot” and “not really,” respectively, you’re not alone.

In a new large-scale study prepared by the Waterloo, Ont.-based Centre for Digital Entrepreneurship and Economic Performance (DEEP Centre) in partnership with Business Development Bank of Canada, the Canadian Digital Media Network, Export Development Canada and Industry Canada, researchers painted a portrait of what it takes to grow a mega-corporation in Canada today.

The study’s main focus was on analyzing the 169 public Canadian-headquartered companies with annual revenues topping the billion-dollar mark. The research included several interesting findings, namely that there are more billion-dollar businesses in energy and utilities than any other sector, and that most giant businesses are headquartered in Ontario or Alberta.

However, the report also included an intriguing qualitative analysis of fast-growing private small firms (with annual revenues ranging from less than $1 million to upwards of $30 million). Smaller growthcos do a lot of things right, the authors assert. They’re optimistic about their prospects. They “catalyze growth” by identifying innovative (and lucrative) niche opportunities, especially in tech. They prioritize international expansion early on; in fact, some of the entrepreneurs with whom the researchers consulted said they had their first major successes overseas, well before gaining traction within Canada. Perhaps surprisingly, they’re well-funded; according to researchers, most of the smaller companies interviewed reported having access to “significant” angel investments and venture capital (often from U.S. investors, especially in later-stage financing rounds).

But the researchers also suggest that most are unlikely to build billion-dollar empires. “Canadian entrepreneurs may lack the entrepreneurial zeal and assertiveness required to grow large ventures,” the report reads. “Despite general optimism about their own growth prospects, there was a shared sentiment that Canadian entrepreneurs need to shed their inhibitions and be more assertive—even aggressive—in pursuing bold ideas to change the future.” Researchers had no numbers to back up this finding, but point instead to ample anecdotal data to support this impression, including an increasing tendency for Canadian startups to sell to larger firms instead of expanding aggressively on their own.

Another major factor stopping Canadian SMEs from growing into giants is talent—specifically, a scarcity of employees with the skills to build a billion-dollar business. “Canadian startups don’t feel constrained by access to finance, but they do feel constrained by a lack of access to sophisticated management talent with deep experience in implementing go-to-market strategies,” said Anthony D. Williams, president and co-founder of the DEEP Centre, in a statement. Furthermore, many firms reported difficulty competing with larger, more established firm for high-end engineering and tech employees. And others were reluctant to implement the systems and controls needed in large-scale operations, for fear of losing the innovative corporate culture that made them a success so far.

So, what does it all mean? Are Canadian companies destined to stay on the small side? It certainly doesn’t have to be so. The researchers added a set of recommendations meant to help smaller Canadian companies grow more quickly and aggressively. Here are a few highlights:

• Brand Canada’s entrepreneurial hubs better. Within Canada, people know Toronto, Vancouver, Montreal and Waterloo to be significant entrepreneurial clusters. Outside of Canada, that’s not so much the case. If business, government and academic leaders can strengthen Canada’s brand as a destination for entrepreneurial investment and growth, more money and—crucially—more talent is likely to follow.
• Make government support programs navigable. Canadian governments at all levels do a great job of offering programs to support and enable fast growth—but they’re not always especially user-friendly. More streamlined interfaces that allow entrepreneurs to both identify government help and access it would greatly accelerate their growth, the researchers find.
• Get wealthy Canadians to invest in growing homegrown companies. Too many growing firms rely on foreign investors for growth capital, with may result in earlier exits. Tax credits that reward high-net-worth Canadians for investing in Canadian companies are just one way to get more companies here thinking bigger, the researchers argue.

The report, titled Canada’s Billion-Dollar Firms, was published on July 9th.

Source: Profit Guide