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Why Small-Biz Expansion Depends on a Few High Fliers

And contrary to the all the tech and green-energy hype, no particular industry has a monopoly on growth, either. Studies have found that high-growth start-ups have made up a slightly higher percentage of companies in fields such as oil and gas extraction, industrial instrumentation and social services in recent years. But the opportunities for growth exist almost everywhere. Promoting growth in only a few key industries means missing out on possible success stories elsewhere.

According to a research paper published by the SBA, High-Impact Firms: Gazelles Revisited, many state and regional economic programs don't address directly the needs of companies with high growth potential. State economic-development offices focus instead on appealing to large corporations, hoping to attract a manufacturing plant or corporate headquarters. Many states also do a good job of encouraging would-be entrepreneurs to get started by sponsoring education programs.

But such initiatives miss an important middle step: support and guidance for the small businesses that are already up and running but need an extra boost of funding or mentorship to keep growing. The companies that want to expand should have be able to get ready access to the tools they need, whether it's legal advice, assistance with exports and imports or financing options.

The McKinsey paper also notes that it shouldn't be up to state and local governments alone to promote small-business growth. Larger, established businesses also can play an important role, by working with start-ups that have potential as suppliers and by mentoring young leaders. Too often, managers in large corporations look at entrepreneurs as potential competitors rather than potential partners. By looking the relationship in a different way -- what problem can this new, young company help me solve? -- large businesses can be part of the ecosystem that encourages growth.

"Growth" may be a generic, catch-all term. But there are very specific ways business leaders, economic-development boosters and local politicians can help make it happen for promising start-ups.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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