Toronto – The Toronto region requires a comprehensive scaleup ecosystem for its small and medium enterprises (SMEs) to grow and succeed, according to a new report released today by the Toronto Region Board of Trade’s World Trade Centre Toronto (WTC-T).
The report, Defying Gravity: Building a Scaleup Ecosystem, finds that despite there being a healthy ecosystem of incubators and accelerators focused on startups in the region’s booming tech sector, there is limited support and resources available for all companies, tech and traditional, that are in the scale-up phase of their evolution.
The study also finds that the Toronto region is falling behind global competitors in its ability to support SMEs in their growth journey.
For the purpose of the report, a modified Statistics Canada definition for high growth firms was used: “An enterprise with more than 10 employees at the beginning of the period and an average annual growth in employees or turnover greater than 20% per annum over a three-year period and an enterprise with 10 employees or fewer that grew by 8 or more employees over the three-year period.”
“The path to growth is disruptive as both internal and external barriers need to be overcome for firms to scale-up successfully,” said Jan De Silva, President & CEO, Toronto Region Board of Trade. “Recruiting and retaining the right talent, accessing new growth markets, and staying current with technology are some of the critical ingredients companies require to achieve high growth.”
The report notes that while high-growth firms (HGFs) make up a very small fraction of overall firms, they contribute 63 per cent of net job growth.
“With fewer than 0.1 per cent of Canadian small firms becoming mid-sized, and two per cent of mid-sized firms becoming large companies, we need to do better,” said Leigh Smout, WTC-T Executive Director. “When we support the growth of SMEs in the tech sector and traditional sectors like construction, food services, and manufacturing, we spur significant job creation and GDP growth.”
The report lists six critical talent, financial and process factors to create a healthy scale-up ecosystem for SMEs. They are:
- Executive Leadership: Firms need leaders who have the ambition for growth, determination to achieve objectives, and the flexibility to adapt along the way.
- Recruiting and Retaining Talent: Top technical, business and management talent is always in short supply. A clear purpose and development opportunities can help SMEs secure talent that can grow with the firm.
- Growing Sales: The bottom line to scaling businesses is by focusing on the top line.
- Accessing Capital: The challenge is not general availability of capital, but rather about access to the right capital at the right time with the right partners.
- Improving Process: Businesses that scale successfully find value in process mapping to find opportunities for efficiency and automation so staff can focus on strategic growth planning.
- Protecting Intellectual Property: Companies must have innovative offerings and strategies to protect their intellectual property.
The WTC-T, which is in the process of activating a program for scaleups to be launched later this year, notes that HGFs are more likely to succeed with a supportive local ecosystem, which then creates a positive feedback loop, so other companies are more likely to scale up.