So what are Gazelle Tracks™ and what are “Gazelles.” Before we answer that, let’s discuss a few pertinent questions.
Where to we grow from here? Who’s growing who, and how? Who’s touting who, and why? Who will be driving growth over the next two to five years. And more importantly how and while.
We’re looking into the market sectors that provide the greatest growth potential within each of more than a dozen cities. For starters, we’ve profiled, in some level of detail, a couple major metros that we’re intimately familiar. In most cases, there are at least six to eight market sectors that are major growth drivers. In addition, there are cultural, governance, demographic, educational, and locational trends that help determine the rate of growth within a particular city or region. In addition, these issues may also help to shape what industries represent the strongest growth potential.
But now for Gazelles Tracks™. Companies that grow consistently at a rate of 50 percent or greater annually are referred to by some as “cheetahs.” Companies that grow consistently at a rate of 20 percent or better annually are considered to be “gazelles.”
So what makes a gazelle a gazelle? The answers may surprise you. First, since we’re also discussing “Growing up KC” in the Alpha Board discussions, and we’re also at least initially focused on Midwest based companies and markets it’s helpful to know that fast growth, new and high tech, are not always necessarily correlated.
It’s the belief of many that the new companies, the start-ups, high tech companies, and coastal companies are the ones that are driving growth. While there is an element of truth in some of this, the realities of gazelles might surprise you.
First, a typical way to evaluate regions of the country on the occurrence of high growth companies, is based on the “percentage” of companies in the region that are in the category of high growth, or gazelles. Three percent or greater (of all companies falling into the high growth category) is a large, and quite impressive number. Midwest markets are NOT voids for gazelle performance.
According to a major study by the Small Business Administration, Johnson County, Kansas, Jackson County, Missouri and St. Louis County, Missouri all scored well on the measure of the percentage of companies in the region that qualified as gazelles. The reason why is just as interesting.
First, gazelles really don’t show significant correlation between the volume of growth and the industries or SIC codes that the companies represent.- What gazelles do typically represent are the following:
- Gazelle companies and high growth companies tend to be scattered across essentially any and actually most industries.
- Gazelle companies represent the most effective, most well-managed companies, not only on an overall basis, but more specifically within their industries.
- Gazelle companies are typically smaller companies, with often less than 100 employees.
- Gazelle companies are typically privately and/or closely held companies.
- Gazelle companies tend to be very well established, often well within their second decade of life.
- And clearly gazelle companies account for a significant portion of not only economic growth, but also job growth.
What are some relevant conclusions of the analysis?
- This means that while technology companies can be high growth, SBA found little evidence that participation in technology industries was the key driver of growth.
- A strong work ethic, commitment and focus of Midwesterners and Midwestern leadership style are strong components for achieving gazelle growth status.
- And, for areas like the urban core of Kansas City and other cities that struggle with blight, all hope is not lost. While KCMO has lost a significant number of jobs, in raw numbers as well as to the more suburban communities, some, if not most of this job loss is confined to the largest companies.
- Gazelles are clearly growth and employment drivers, but when they are located, in the case of KCMO next to larger companies who suffer greater layoffs, they cannot always offset the regional job loss.
- The SBA study indicated that because most gazelle companies are well established and typically more than 10 years old, economic development dollars funneled toward start-ups, were not always the wisest investments for long term job growth.
- It means that leadership of the companies, and how and who runs the companies are critical element for growth.
- And, one final note. Because gazelle companies tend to be smaller companies, the 50 percent employment size cut-off for Obamacare, and the growth distortions being created by this government mandated cut-off could bode very poorly not only for job growth, but for economic growth in general, until that issues is addressed.