THE BLOG
11/15/2012 11:53 am ET | Updated Jan 15, 2013

Defying Gravity: High-Growth Entrepreneurship in a Slow-Growth Economy

You would think if there were a group of U.S. companies that collectively employ 700,000 workers and achieved 30 percent job growth and 48 percent revenue growth between 2009 and 2011, investors, economists and policymakers would want to know who they are.

We do.

The 636 companies that are finalists of the Ernst & Young U.S. Entrepreneur Of The Year® 2012 Awards are those companies.

Spread across the U.S. in industries as diverse as technology, manufacturing, consumer products and energy, these high-growth entrepreneurial companies are defying gravity. Not only have they collectively added more than 150,000 jobs in this challenging two-year period but, also, their annual rates of job growth have almost doubled -- from 9.7 percent in 2010 to 18.9 percent in 2011.

So how do these entrepreneurs defy the macroeconomic factors other companies find so challenging? Ernst & Young and the Kauffman Foundation uncovered eight key findings on how these companies defy gravity in a recent report:

1. Have a unique perspective on risk

A majority of the finalists, especially those who were founders, believed entrepreneurs were born, not made. This entrepreneurial DNA helps to explain how entrepreneurs move forward in spite of real or perceived risks.

2. Communicate vision and instill passion in great teams

Regardless of their position in the marketplace, Entrepreneur Of The Year finalists overwhelmingly cite people as their leading priority. Successful entrepreneurs have the ability to build a strong team at all levels in their organizations.

3. Demonstrate resilience and rapid recovery

Despite their success, entrepreneurs are not immune to business challenges. More than 30 percent of the finalists acknowledge having made one or more bad decisions or encountering significant difficulty in execution. So while all businesses make bad decisions from time to time, the best entrepreneurs and their teams seem to be able to set a new course and rapidly recover.

4. Embrace innovation

Entrepreneurial companies have been found to be the predominant sources of radical innovations. While older and larger companies can also be sources of innovation, all too often more-established companies resist the radical innovation that might displace their existing revenue streams in the short term. In fact, 23 percent of finalists indicated investment in research and development as a top priority for growth, with clean-tech and life sciences companies placing particular emphasis in this area.

5. Pursue what you do best

High-growth entrepreneurs also excel at focusing on the things they do best, and appropriately partner with others to carry out certain infrastructure and technology needs, administrative functions, sales channels, manufacturing and distribution, and regulatory compliance. This not only enables the high-growth company to focus on doing what it does best, but also facilitates more rapid, flexible and cost-effective scalability as the business grows. Twenty-eight percent of finalists cited a focus on performance improvement and prioritization of capital spend as keys to their success.

6. Pursue geographic expansion

The majority of finalists also included geographic expansion as part of their growth strategies. Overall, they are continuing to expand their businesses in domestic (U.S.) markets, while more than 20 percent of all but the smallest companies indicated they were expanding in developed global markets. Many, especially those with revenues greater than $1 billion, indicated they were expanding into emerging global markets.

7. Secure the right capital at the right time

The Entrepreneur Of The Year finalists have accessed a wide range of funding sources as they have grown their businesses. Nearly half reported raising venture capital, angel investment or private equity. Roughly a third cited the use of personal funds, while another quarter had accessed bank loans. The proverbial friends and family round was used by another 16 percent. Few indicated they had accessed government grants -- perhaps due to the risk and reward involved.

8. Preserve what you've built

Regardless of whether they stay to lead or leave to start their next venture, successful entrepreneurs look to preserve those company qualities and culture (52 percent) that allowed them to attract their high-performance teams (44 percent), establish their brand and reputation (38 percent), develop loyal customers (30 percent), and buoy enterprise shareholder value overall.

Role models

It may not feel like it everywhere across the nation, but compared to elsewhere in the world, America has a very bright future. To the extent that the U.S. has a solid foundation for economic growth and long-term strength, it is largely due to companies like those in the Ernst & Young Entrepreneur Of The Year Program that exhibit the ability to succeed regardless of the challenges they might face.

These entrepreneurs represent the very best of the nation's business heritage, those continuing to invest, innovate and grow regardless of external conditions. And while their stories are highly diverse, they collectively offer hope that the future of America's economy is in the best of hands.

Excerpted from "Defying gravity: High-growth entrepreneurship in a slow-growth economy," developed by Ernst & Young in cooperation with Kauffman, the Foundation for Entrepreneurship

© 2012 Ernst & Young LLP. All Rights Reserved.