GROWTH NO GUARANTEE OF SUCCESS AS 1 IN 5 FAST TRACK BUSINESSES FAIL

August 1, 2011 by SAP News 0

Flexibility is the X factor in decade of economic change says report from SAP and Delta Economics

London, UKSAP UK & Ireland and Delta Economics have today announced findings showing that only 47% of companies that featured in the Fast Track 100 rankings at the start of the decade are still in business today.  The report, which examines the fortunes and performance of the UK’s fastest growing companies since 2001, finds that a business’ ability to be flexible to change has emerged as the key factor for long term success.

Since 1997, the Fast Track 100 published by The Sunday Times, has been the definitive guide to those small and medium sized businesses that have excelled in their first phase of commercial growth.  Using this sample of 900 businesses as the basis for further analysis, SAP commissioned Delta Economics to assess Fast Track company performance over the past 10 years.  Key findings of the survey released today, are:

  • Short term growth does not always link to long term success Over half (53%) of the companies from the Fast Track 2001 no longer trade. Of these businesses 1 in 3 have been acquired (33%).  Overall, 1 in 5 businesses from that year have since been either liquidated or put into administration.
  • High growth companies are growing slower over time – Average growth rate of businesses that featured from 2001-2005 is 29.2% versus average growth rate of businesses from 2006-2010 is 25.5%.
  • Manufacturing gradually disappearing – Whilst seven manufacturing businesses were in the 2000-2001 Fast Track, 2008 saw only two, with zero the following year.
  • Retail stands firm – With 13 retailers in 2000/2001 and 21 retailers in 2009/2010, retail peaked in 2005 with 26 (over 1 in 4) entries.  The shift to online e-tailing has seen this industry consistently featured in the Fast Track across economic peaks and troughs
  • A nation of recruiters? – In 2009/10 one in five of the Fast Track 100 were recruitment businesses, significantly skewing this sectors contribution to national GDP, and suggesting that there is still a dynamic jobs market. 

“We wanted to answer two questions,” said Dr.  Rebecca Harding, CEO of Delta Economics, who was commissioned to analyse the data.  “What happens to really successful early stage businesses in the UK over time, and what makes already successful businesses exceptional?”

As part of the analysis, the research took the top 20 performing businesses for each of the past 10 years of the Fast Track 100 and benchmarked key attributes present in each business year.  These were management, innovation, niche, timing and flexibility.  Each of these attributes is assigned a score to create a scorecard for each to enable researchers to see which attributes are more prevalent over time.

“The first thing to note is that high growth is not a trend that’s easy to replicate year on year, as shown by the business failure figures from the sample,” continues Dr. Harding. “But from the benchmark analysis, the key ingredients for longer term success in this and wider studies seem to be innovation and the capacity to be flexible and nimble to change as well as sound financials and investment.”

The recent financial crisis and resulting recession has clearly made it difficult for companies in certain sectors. Sectors such as financial services, engineering, distribution and building and property have all struggled to make an impact in the Fast Track post 2007.

John Antunes, Director of SME and Channels, for SAP UK and Ireland, said; “It’s really interesting to plot macro events against UK Fast Track performance over the last decade as you start to see how certain sectors have struggled or thrived in what has been a truly turbulent time. In our experience of working with high growth small and medium companies, many of them hit a wall where they need a more grown-up approach to how they manage their businesses. Often it’s not just about selling more or having an amazing idea that flies, but running your business better, more consistently and transparently.”

Ross Marshall, co-founder of twice-featured Fast Track 100 business Your Golf Travel, ranking 15th in 2009 and 6th in 2010, commented; “Since launching in 2005 Your Golf Travel has grown exponentially, achieving growth of over 158% to reach sales of £27 million in 2010.  It’s been a turbulent time economically, and in order to survive and grow successfully the business has had to be flexible in its approach and adapt as required from year-to-year.  Your Golf Travel has found a niche and built a strong business around that, but the need to be innovative, reactive and flexible has kept everyone involved with the company alert throughout.  It’s not just about achieving strong sales – it’s about properly preparing our business for growth to stay ahead in the market.”

You can download a copy of the full report, ‘A Fast Track Decade: Analysing 10 Years of High Performance’, by clicking on this link. An SAP commissioned infographic charting some of the key results from the report is also available for download.

Footnote: Tech Sector analysis stated in a previous release of this information has been amended due to the publication of the Tech Track 100, a specific publication for IT sector businesses, from 2005 onwards.

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