Pathways to entrepreneurial growth: The influenceof management, marketing, and money

Candida G. Brush a,*, Dennis J. Ceru a, Robert Blackburn b

aBabson College, The Blank Center, Wellesley, MA 02457, U.S.A.bKingston Business School, Kingston University, Kingston-upon-Thames, Surrey KT2 7LB, UK

1. The challenge of growth

At the beginning we decided, ‘‘All right, let’sgive ourselves 10 years here. In 10 years, if itdoesn’t work, we will have amassed enoughexperience to sort of go back in and grab a

job someplace else.’’ So we just hit 10 years andin some ways it is still a puppy with big paws,but I think we have a clear idea of where wewant it to go now. We’ve learned how to growthe company, learned how to get through the

Business Horizons (2009) 52, 481—491

www.elsevier.com/locate/bushor

KEYWORDSEntrepreneurialgrowth;Patterns of growth;Management decision-making;Growth strategies

Abstract Business growth is considered a worthy goal for firms and a measure ofentrepreneurial success, as well as important for economic development. Why somefirms grow and others do not, though, remains a subject of debate. Of the smallproportion of firms that do grow, it is often assumed that they follow a similar growthtrajectory and/or encounter certain stage thresholds; however, the evidence base onthis is wanting. The new study of business growth presented here provides an in-depthanalysis of 19 New England-based firms. Our findings reveal that fast-growing compa-nies exhibit different rates and patterns of growth: some display rapid growthtrajectories (Rapid Growth Pattern); some, slower,moremeasured rates (IncrementalGrowth Pattern); others, episodic periods of quick growth followed by sharp retrench-ment (Episodic Growth Pattern); and, while no firm actively chose to stop growing,some reached points of stagnation (Plateau Growth Pattern). We found that three keyfactors–—management, marketing, and money–—affected company growth acrossthese patterns. While not every factor was critical at each moment of growth foreach firm, every entrepreneur cited the relative importance of each factor at sometime during the growth of their firm. Thus, fast-growing firms do not grow in the samemanner, at the same rate, or with the same outcomes. This article has implications forthose seeking to understand the processes of development and patterns of fast-growth businesses.# 2009 Kelley School of Business, Indiana University. All rights reserved.

* Corresponding author.E-mail addresses: cbrush@babson.edu (C.G. Brush),

dceru@babson.edu (D.J. Ceru), r.blackburn@kingston.ac.uk(R. Blackburn).

0007-6813/$ — see front matter # 2009 Kelley School of Business, Idoi:10.1016/j.bushor.2009.05.003

downturns.–—Advertising and design firm

Right nowwe’re struggling to get the thing builtand costs are still high in the construction

ndiana University. All rights reserved.

482 C.G. Brush et al.

business. We need to continue to explore merg-ers and acquisitions with other organizations,try to find compatible strengths in broadermarketplaces, or find new strengths in existingmarketplaces, new leadership. We’ll look forsmaller firms to buy because it is expensive tobuy firms, and I’m not sure that we’re quiteready, willing, and able to make that invest-ment. We’ll merge with like-minded organiza-tions if we think we can triple the valueproposition, not double it.–—B2B services firm

Growth is generally agreed upon as a worthy goalfor most firms. It is widely celebrated in themedia–—consider, for example, the Top 100 Inc. 500/5000Companies; the Fortune 100 Fastest Growing Com-panies; and so forth–—and is considered a measure ofentrepreneurial success (Davidsson, 1991). Whilenot all firms choose to grow (Ginn & Sexton, 1990;Rosa, Carter, & Hamilton, 1996; Wiklund, Davidsson,& Delmar, 2003), analysts suggest that some growthover time is desirable for continued survival(Delmar, Davidsson, & Gartner, 2003). Yet, it hasbeen long recognized that the decision to grow isusually the choice of the entrepreneur, whose ex-pectations for the size and scope of the business atstart-up ultimately affect the growth potential ofthe business over time (Cassar, 2007; Stanworth &Curran, 1976; Wiklund et al., 2003). A wealth ofliterature describes the various approaches togrowth: expanding geographically, adding moreestablishments, targeting new markets and custom-ers, adding products/services, or mergers and ac-quisitions. Accompanying these strategies areprescriptions for enhancing the marketing mix ofgrowth firms: raising prices, increasing marketing,improving distribution, or revamping the product.

Underpinning this literature is an assumption thatsales of entrepreneurial ventures will gradually in-crease as the business expands, creating a risingsales curve over time. In other words, growth isassumed to be normal and follow a normal curve.For more aggressive growth strategies, the curvepeaks quicker and creates a sharp angle (think‘‘hockey stick’’); for slower growth strategies, itpeaks later. Although there is no consensus regard-ing the number of stages involved, most assume thatthere are contextual dimensions influencing theprocess, especially age, size, and industry growthrate (Hanks, Watson, Jansen, & Chandler, 1993).However, most practitioners would probably agreethat there is nothing ‘‘normal’’ about growth pat-terns, as each business takes its own pathway todevelopment; moreover, the academic literaturehas not studied the various pathways in great detail.

As part of a cross-national research project spon-sored by the UK Government’s Department for Busi-ness Enterprise and Regulatory Reform (BERR) andHer Majesty’s Treasury (HMT), we interviewed in2008 19 U.S. entrepreneurs from the Boston areaand 21 entrepreneurs from the Southeast UK, all ofwhom ran companies which grew 60% or more insales between 2003 and 2007. While this researchinvestigated a variety of factors influencing growth,in this article we focus on decisions and activitiesaround management, markets, and money, andconfine our discussion to U.S. companies. The lifecycle literature suggests that the growth phasetypically involves major decisions around manage-ment, money, and markets (Bates, Jackson, &Johnson, 2007; Churchill & Lewis, 1983; Greiner,1972; Miller & Friesen, 1984). For example, a domi-nant management style, formalization of planning,budgeting, and operating systems are frequentlyreferred to as key to achieving growth (Churchill &Lewis, 1983; Flamholtz, 1986; Griener, 1972). Mar-ket considerations such as geographic expansion,market orientation, diversification, and product/market scope comprise a second set of majorvariables (Miller & Friesen, 1984; Scott & Bruce,1987). Finally, there is themoney. Growing venturesneed capital to grow; hence, considerations aroundsources of finance, cash generation, budgeting, andfinancial controls are central issues (Flamholtz,1986; Scott & Bruce, 1987).

Our study found no single or common growthpathway, and the vast majority of fast-growth com-panies did not proceed according to a normal curve.On the contrary, we found what can be depicted asfour typical growth patterns for fast-growth enter-prises. The remainder of this article presents a briefoverview of the methodology for our study, and adescription of four predominant pathways we ob-served for fast-growth firms highlighting manage-ment, money, and marketing (Bates et al., 2007).We close with some implications from this study.

2. Background of the study

Drawing from Dun & Bradstreet and Financial Anal-ysis Made Easy (FAME) data bases, a list of more than600 fast-growth firms within a 40 mile radius ofBoston was compiled. Businesses were selectedfrom information technology, financial services,business and professional services, electronics, en-gineering, and architecture sectors. This allowedthe exploration of a variety of experiences butwithin a limited range of sectors, especially giventhe influence of sector on growth (Van Stel & Carree,2004). We identified those companies that had

Pathways to entrepreneurial growth: The influence of management, marketing, and money 483

Figure 1. Four growth pathways

achieved real sales growth of 60% over the previous3 years. In practice, businesses with nominal salesgrowth of 75% over the previous 3 years were in-cluded; this avoided asking respondents to makereal sales growth calculations, taking inflation intoaccount. It is acknowledged that a relative measureof sales growth is easier for smaller, rather thanlarger, firms to achieve given their lower startingpoints (Delmar, 1997). Steps were therefore takento include small- and medium-sized enterprises(SMEs), as well as micro firms, in order to developan understanding of growth issues faced by differentsized firms. Owner-only businesses were excluded.The businesses studied employed 3-250 people,were at least 3 years old, and were legally indepen-dent rather than being subsidiaries or owned bycorporations. We arranged a 120 minute, face-to-face interview with the CEO of each of the 19companies and, when possible, audio-recordedthe discussion. Quotes utilized in this article wereculled from these interviews.

Despite restricting the sample to those report-ing a 75% sales increase in the past 3 years, re-spondents reported a variety of sales trends. As acentral component of the interview process, re-spondents were asked to draw a line graph indi-cating sales trends over time. Although the specificfocus was on the 3 year period immediately prior,some participants were able to provide a longerhistorical perspective. Focusing on the line graphs

enabled further questions about the drivers ofsales trends. What were the particular activitiesundertaken by business owners, and other keyactors with whom they engage, that contributedto the development paths plotted? Initiating andmanaging business growth successfully is not sim-ply about undertaking one particular activity wellwhile paying little attention to others. Creatingbusiness ideas, accessing key resources, mobilizingthem effectively, and maintaining close customerrelations are all essential tasks that enterprisesmust perform consistently if they are to achievesustained growth.

We made overhead transparencies of the hand-drawn growth charts and, after several iterations ofoverlaying the transparencies, four trends emergedfrom the U.S. sample. We labeled these the rapid,incremental, episodic, and plateau patterns (seeFigure 1). Some firms experienced gradual growthover a 3 year period, while others experiencedexplosive growth over the period following a phaseof low and/or stable sales. Others experienced highgrowth followed by a degree of decline, yet stillachieved sales growth of 75% over the 3 year studyperiod.

As we examined these patterns further, itbecame apparent that not only does growth followdistinctively different trends, but also that growthis primarily influenced by management, marketing,and money.

484 C.G. Brush et al.

3. Factors affecting growth

3.1. The management

Business owners vary in their business objectives and,specifically, in their growth aspirations. Generally,the vastmajority of business owners prefer to remainsmall, and of those that seek growth, most seekmoderate rather than rapid growth (Acs, Parsons,& Tracy, 2008; Ginn & Sexton, 1990). Growth aspira-tions, like growth performance, are subject toadaptation over time as owners’ experiences of own-ership, the market, competition, and other businesslife cycle considerations shape their business goals.Indeed, some authors have suggested that growthaffects the motivations of owner-managers to seeksubsequent growth (Delmar & Wiklund, 2008). Be-cause our sample was identified based on a history ofhigh sales growth, we asked respondents about theirintentions when they started/joined the business:whether growth thus far was as planned at start-up,ahead of plan, or behind plan. It is worth noting thatthe degree towhich business performancewas in linewith owners’ expectations depended very much onthe nature and scale of those expectations. Forinstance, highly ambitious owners might be morelikely to fall short of expectations precisely becausethey aimed so high. This is in line with previous workstudying over-optimism of entrepreneurs (Mehta &Cooper, 2000). Conversely, owners seeking modestgrowth might be better able to achieve their goals.

In our study, four businesses achieved growth asthey planned, while seven achieved growth fasterthan planned. Nearly all of the companies had aplan; only one did not. Respondents’ reasons forachieving growth as planned related to quality ofhuman resources, consciously managing the rate ofgrowth, and carefully managing customer relation-ships. For those firms that grew slower than expec-tations, customer cut-backs and the decline in theU.S. economy were the major causative factorscited. Those firms that reported managing or con-trolling their rate of growth were driven by clearrationale. These may not necessarily be regarded asa lack of ambition, but the opposite: some owner-managers wanted to grow their business at a ratedeemed appropriate, for example, on the grounds ofsustainability. Rather than risk aversion, this may beinterpreted in a positive way as managing risk withthe aim of securing long-term growth.

3.2. The market

3.2.1. Market developmentAll businesses face the challenges of finding custom-ers, communicating product features, pricing

products and services attractively, establishingeffective distribution channels, implementing salesand marketing efforts to win and retain clients, andundertaking continued product development to sus-tain sales (Hisrich & Peters, 1997). Business ownerspursuing high sales growth pay particular attentionto these issues because of their need to generateincreasing levels of demand from new and existingclients.

The fast-growth enterprises we studied ap-proached marketing and advertising in a slightlydifferent fashion. In the majority of cases, compa-nies segmented and targeted their markets verycarefully, then employed direct selling combinedwith a secondary web-based strategy as the meansto identify, sell, and maintain customers. One com-pany identified customers from the Fortune 500which had responsibility for hazardous waste sites;another two financial services firms identified theirclients based on size of business and geographiclocation, allowing targeted personal selling andrelationship building.

For many information technology (IT) companies,there was no existing market for their proposedproducts. Much of these firms’ early efforts there-fore consisted of interaction with potential clientsand industry actors to discuss whether the proposedproduct(s) would meet an unsatisfied, thoughlatent, market need. When there is no marketout there whose demands wait to be satisfied(Sarasvathy & Dew, 2005), companies must convinceclients they have a requirement or need that theproposed product or service can satisfy. While this isthe case–—to some extent–—with regard to all goodsand services, the challenge is particularly acute inrelation to novel, innovative products for which nomarket yet exists. In these circumstances, firms aremarket creators; this appeared to be a familiarcharacteristic of fast-growth firms. Pioneers haveto incur the costs of constructing market demandwith no guarantee they will be successful; followerscan wait to discover whether such efforts are suc-cessful and then attempt to exploit the marketopportunities created at lower cost. In addition, ifthere is a regulatory aspect, there are additionalcosts incurred in achieving governmental approvalsand in developing and implementing technology.

Similarly, another company providing Internetcontent delivery services reported that having amajor media organization recognized as one of themost innovative in the sector as a client was alsoa means by which new business could be won.A clinical testing company had invested in a newsoftware systembut, despite interest in its product,had yet to realize any specific benefit. Yet anothercompany noted, ‘‘our target audience is not as

Pathways to entrepreneurial growth: The influence of management, marketing, and money 485

sophisticated as what we are capable of doing, sothere is some education that has to go on.’’ In short,it appears that the challenges of fast-growth firmstranscend general contexts. The strategies of nichemarket development and building customer rela-tionships, rather than competing on price, appearto go hand in hand with being a fast-growth firm.This often involves the risk of upfront investment.The relativematurity of these firmsmeant that theyhad undergone renewed vintages of product devel-opment and were much more likely to have a devel-oped sales network.

3.2.2. Geographical diversificationFirms seeking expansion often aim to achieve this byentering new geographical markets, particularly be-yond the local area (Barringer & Greening, 1998;Iacobucci & Rosa, 2005). In some sectors, expansionmight only be possible by securing export clientsbecause the national client base has been exhaustedor is too difficult to enter. Export activity was re-ported in only five companies. This is consistent withother data showing that the majority of U.S. smallfirms tend to serve local or nationalmarkets, and thatsmall firms generally are not export-oriented, even inmore open economies such as the UK (Wheeler, Ibeh,&Dimitratos, 2008). Of the sampled companies doingbusiness internationally, most of their customerswere in global industries (e.g., bio-pharma, engi-neering design, software, advertising). In somecases, international customers were served in theU.S. On the challenge of entering new markets,different perspectives were offered:

There are always brand names in our market,but in addition to that, every market seems tohave three to four ‘‘Mom and Pops’’: locallybased organizations that never really expandbeyond that city, but which have been there fordecades and have a great reputation. That’sgenerally what we are up against on a highlevel.–—Architectural firm

I say to my guys here all the time: Just remem-ber–—every new person you meet, every newcompany you meet–—as soon as you [leavethem], they’re going to go right to the Internetand look us up. We always have to be thinkingabout what’s the next thing we can do to ourwebsite. How do we better provide informationand not let it get stale?–—Financial services firm

It might be argued that expanded export activitywill increase as firms grow in size. But, it is not simplya matter of firms diversifying sales geographically in

order to secure higher sales. First, the geographicaldistribution of the research client base was often anartifact of the date of interview: respondentsreported that in previous years, the distribution ofthe client base was quite different. Taking on newclients–—particularly those whereby the value of thesale was high relative to total turnover–—could influ-ence the geographical sales distribution markedly.Sometimes, such changes were deliberately soughtby business owners as they consciously attempted toenter newmarkets; however, on other occasions suchchanges occurred as the consequence of clients seek-ing out the business unsolicited, rather than becausethe business had targeted clients in particular loca-tions. This supports previous work from the exportmarketing literature indicating that companiesoften internationalize at customer request (Crick &Spence, 2005).

Nearly all our study companies planned to grow inthe future, and at least five were planning to makean acquisition of another company or were consid-ering a merger. In two cases, the plan was to sell andexit the business. Several planned to move into newstates geographically, while others planned to up-date and create new generations of services andproducts.

3.3. The money

All businesses require financial resources in order toreach customers and fund growth. Lack of access tocapital or availability of financing can be a con-straint on business growth (Brophy, 1997). Start-ups can be financed from founders’ own wealthand/or by accessing external sources of funding,whether from informal sources such as family andfriends, or from formal, market-based sources suchas banks, venture capitalists, and private equityfirms. Once businesses have achieved sales, furtherdevelopment can be financed using retained profits.

Some study companies sought external investorswhile others did not; the latter indicated they didnot wish to cede any control over the business, and/or that they were able to meet financial require-ments from business revenues or informal sources.Those companies that did not seek outside equitywere either self-financed, were financed from cashflow, or relied on bank financing and short-termcredit. Several had lines of credit to manageshort-term cash flow variations. Three companiesindicated that lack of capital was a constraint ongrowth, and in all cases, they were pursuing angelfinancing. As these companies noted:

Our biggest challenge is raising money; raisingmoney with angel investors, in particular.

486 C.G. Brush et al.

What I’m doing right now is a frustrating pro-cess, like herding cats.–—Educational services firm

We do everything with cash. We’ve built upequity in the firm and have taken a more mea-sured approach.–—Architectural firm

We use debt pretty heavily, so our second mar-ket was opened up with an SBA loan–—a verysmall one–—and we established revolving linesof credit that we used to cover both our sea-sonality and to help finance some growth; to-day, we are still using those. We have actuallypumped up our credit limits to almost a milliondollars at this point, and use that pretty fully.Right now, we are in the middle of trying toraise our first equity round; we haven’t, todate, but are looking to do so moving forward.–—Educational services firm

Overall, financing was found to be an important,though not significant, constraint on businessgrowth. In some cases, securing bank or venturecapital funding was regarded as a challenge, eventhough there is a developed venture capital com-munity in the Boston/New England area and manyfirms had a track record of successful prior fund-ing. The next section provides an overview of thefour growth pathways revealed by our study, aswell as the influences of management, markets,and money.

4. Pathways to growth

4.1. Rapid growth

Rapid-growth firms are characterized by fast, of-ten extreme surges in sales and revenues; thesesurges frequently far exceed the original expec-tations of the business owner. Rapid-growth firmsare able to bring the right product or service to themarket, at the right time and the right price, in anatmosphere where the overall macro and micromarket and industry forces have largely been fa-vorable. Those businesses in our study which qual-ified as rapid-growth firms faced competition, butavoided it by utilizing geographic strategies(i.e., choosing a specific locale in which to oper-ate) or niche strategies (i.e., choosing a highlyspecific product/service offering to a highly strat-ified client base). Companies exceeding growthexpectations often did so because of customerrelationships. For example, a materials and sys-tems engineering company noted:

Our first customer is–—and remains–—a largecustomer, providing strong revenues and a solidfoundation of sales. Additionally, this customerwas our strategic partner, providing 27% ofinitial funding. The partnership involved [ourcompany] acquiring a division of this partnercompany, consisting of 28 employees plus theexisting customers and revenues, thus provid-ing immediate expansion and a strong basefrom which to grow. Sales went from $1 millionto $5 million immediately.–—Design and architect firm

In another case, the CEO of an environmentalconsulting firm explained:

We now have sales that are, maybe, five timeswhat I could have anticipated. Two things [ex-plain this]: a lot of repeat and referral business.–—Environmental consultancy firm

A financial planning company noted:

Client satisfaction for this service has beentremendous, and referrals have spurred therapid growth of the company.–—Financial planning firm

As stated from the field of IT:

The two things I would cite as the source of ourgrowth have been product quality–—I know ev-erybody says that, but I have data to support it:last year, nearly two-thirds of our revenue camefrom either repeat clients or referrals–—andbeing aggressive in pushing and opening upnew markets. We’re in ten cities today; 2 yearsago, we were in five. So, we have doubled ourunit count. We have plans to continue doingthat.–—Software firm

Nonetheless, rapid growth is not without its pit-falls. Fast-growing companies are cash hungry ma-chines; the faster the growth, the greater theappetite for cash. Many struggle to find the essentialcash to fuel this fortunate expansion, and theamounts needed–—as well as the time-sensitive re-quirements of the need–—often preclude organicgrowth from internal cash flow alone. As ChurchillandMullins (2001) have noted, there is a pace beyondwhich companies cannot fuel growth organicallyand must turn to external sources of cash flow: debt(whether it be permanent or semi-permanent), eq-uity financing, owner and family financing, and jointventuring are some of the more common solutions.

But, cash is not the only potentially constrainingfactor holding back the reins on rapid growth. Find-ing qualified human resources, devoting the time

Pathways to entrepreneurial growth: The influence of management, marketing, and money 487

and effort necessary to properly train and assimilatenew staff to the organizational structure and rou-tines of the firm, and managing employment rela-tions can often take up the time of top managementin growing firms (Gilman & Edwards, 2008). Partic-ipants in our study cited the need to find properlyskilled employees as a critical factor to all stages oftheir growth, and noted that retaining an effective-ly trained workforce is one of the ‘‘stay-awake-at-night’’ factors that senior executives ponder.

Growth-oriented entrepreneurs must also pre-pare for the rigors of rapid growth. First, they needto build a solid yet lean hierarchy of command thatfosters and enhances delegation whilst maintainingclean reporting, management, and metric-basedevaluation. Second, it is critical that they developa future-forward eye and groom heirs/successors,and develop senior second-in-commands and divi-sional leaders. One of the most difficult personalchallenges entrepreneurs of all sizes of firms face ispreparing for and handling this ultimate transitionof power, which is essential for stable and sustain-able growth.

4.2. Incremental growth

Firms which grow incrementally often do so for oneof two reasons: as a response to their assessmentand view of the business climate and the macro/micro industry and market factors in their competi-tive arena, or to suit purely personal goals for moremanageably-sized firms they can control. An ac-counting firm included in our study noted it hadplanned for a downturn and picked up other busi-nesses in response, which allowed growth to contin-ue at the rate anticipated. For its part, a medicalbilling company decided to control growth in a waythat could be managed with qualified staff andsuperior customer service, rather than opt for arapid growth rate.

Incremental growth is regarded at times as natu-ral progression, a reflection of leadership transitionas the firm matures or reaches a new stage in itsevolution as a sustainable business. Such firms willcarefully construct plans to hand over the reins in acontrolled manner, facilitating the mentoring of thenewer business owners while maintaining consisten-cy of culture, operations, and all-important clientrelationships:

I think transitioning a firm from first generationto second generation is a fascinating thing. I’mactually going to be sitting on a panel that talksabout ownership transition. It’s not ownershiptransition; it’s actually leadership transition.–—Advertising design firm

I believe there is a real difference between asecond-generation-owned president and a first-generation-owned president. Some of it is psy-chological, some of it is what’s in your gut.Every one of us probably has the ability to leavehere and start our own firm, but there’s some-thing we helped create with the first-genera-tion leader that we’re comfortable with. Thefirst-generation leader took the risk. I joined[the firm] in 1981; we were 15 people. We grewand we shrank, and we grew and we shrank, andwe sort of got used to spending time together.The job of the second-generation leader, I’vealways said, is to leverage and expand based onthe opportunities created by the first-genera-tion leader.–—B2B services firm

Other firms choose incremental growth as a nat-ural response to the competitive environment as itevolves over time. These firms may find themselvesso devoted to serving a current and essential clientbase that they can only afford to ‘‘add around theedges,’’ or bring on only one or two new clients at atime. While mostly profitable, growth in sales, rev-enues, and bottom line returns more resembles thatof slow and steady dividend paying public companiesthan that of advanced trajectory high-growth, highcapital return firms:

In this profession, you really need to continue toseek new business just at the very least to stayeven, and hopefully grow by adding incremen-tal business while maintaining existing busi-ness. Over the last 9 months we’ve probablypicked up more than a half a dozen reallysubstantial pieces of business, which has beengreat. I think this is a result of the continuingeffort [we expend].–—Financial services and accountancy firm

Employees and their orientation is another factorinvolved with creating incremental patterns ofgrowth. When companies cannot find the rightemployees, or best-and-brightest new hires simplydo not mix with the vision and direction of thecompany, growth slows and sometimes stalls as thecompany engine is re-tuned. The owner of a high-tech firm included in our study mentioned that hehad to replace a 15-person development teamthree times over within 36 months, as thetechnology it was developing outpaced the skillssets of then-current technical staff members. Al-though the teammates worked diligently on theproject, their ‘‘heads-down’’ dedication preventedthem from learning newly-needed, mission-criticalskills in a timely manner.

488 C.G. Brush et al.

4.3. Episodic growth

Growing businesses need to manage resources ef-fectively if they are to achieve sustainable growthwithout periods of retrenchment or inactivity(Macpherson & Holt, 2007). We sought to investigatethe relationship, if any, of managerial action as acausal factor for these episodic growth patterns.Analysts find episodic growth patterns–—wherebycompanies burst into a high-growth mode, only tothen suffer a period of stagnation or deflation insales, revenues, and profits–—challenging to tackle.Internal causes include the managerial capabilitiesand capacities to cope with growth, whilst externalcauses include the cyclical nature of the economy ormarket segments. Episodic growth and its causes areexemplified in the study by a lack of advancedmanagement skills in finance, marketing, or oper-ations; difficulties withinmanagement teams havingmultiple objectives, conflicting visions, or outrightdiscord; and an unfavorable business climate oreconomy. In the United States, in particular, thelate 1990s through the early 2000s were character-ized by relatively strong and sustained growth acrossalmost all sectors of the economy; thus, a risingeconomy lifted the growth opportunities for allfirms. As the boom began to wane, certain industriesfell sooner, and while most all were forced to lowerlevels of sales in the period beginning January 2008,some fell faster and deeper than others.

In light of the aforementioned finding byMacpherson and Holt (2007), respondents wereasked two related questions concerning managerialconstraints: First, what were the major managerialchallenges of planning to grow a business, andactually growing? Second, did the managerial skillsavailable to the business constrain business growth?The results found that existing management capac-ity and capabilities were sometimes impediments toachieving steady growth, as the management teamsought to catch-upwith the demands commensuratewith a growing business.

Respondents openly reported a lack of manage-rial skills and experience to deal with growth, atleast during the early stages of business develop-ment. This was not merely a result of the scale ofdemands on the existing management’s skill andknowledge base. The very nature of the demandson management teams changes as businesses grow.Growth inevitably requires the expansion of thelabor force, or certainly labor input; this meantthat somebody within our study firms had to orga-nize and manage new staff or the new labor input.Hence, owner-managers reported that expansiontriggered the need for an enhanced managerialcapacity, as well as a change in their own role within

the enterprise: to behave more strategically andwork ‘‘on’’ the business rather than ‘‘in’’ the busi-ness. As these companies noted:

My problemwith the new principals is [this]: weall learn how to run and manage projects, andthen we keep going back to that because that’swhat I guess we like to do, but it’s also what weknow how to do. You put them in a principalmanagerial role, [and] they keep slinking backto getting over-involved in projects and notgetting involved with management.–—Internet media firm

I would say that we have gotten very good atmanaging our cash flows and projecting, andforecasting those on a month-by-month basis.But I would say that my personal inexperienceat equity fund raising is holding the companyback right now. I have been working at this for agood 3-4 months now, and were I either moreexperienced or someone with a stronger net-work in that, I think we would be further alongthan we are.–—Educational services firm

Such examples are not rare; indeed, included inour study was a hazardous waste clean-up companywhich suffered slower than planned growth due toits lack of capacity to serve customer needs. Thesecases illustrate that some businesses grow in bursts,rather than incrementally, because of bottlenecks inmanagerial capabilities. Having to switch roles,assimilate new information and knowledge, appointnew managerial staff, and so on contribute to agrowth pattern that is episodic rather than steady.As indicated, many respondent firms were usingcutting-edge technology. For some, this causedproblems because the technological base itselfwas unstable and not yet proven:

We had exceptionally aggressive expectations.We thought it would take off from the get-goafter a year or so of sort of a start-up phase.But, it turned out that it took much more timeto work the kinks out of the technology from thestandpoint of what we inherited. It was notreally market ready.–—Environmental services firm

Other firms displayed staccato growth because ofvacillations in customer demand. In several cases,unmet business goals were due to customer cut-backs. The causes of episodic growth were thereforemultifaceted, but were not merely a result of vac-illations inmarket demand. Internal capabilities andneed for structural adjustments, especially in themanagement function, contributed to a sporadic

Pathways to entrepreneurial growth: The influence of management, marketing, and money 489

rather than smooth growth pattern. This sometimesresulted in sales blips instead of consistent upwardtrajectory. These findings underscore the literaturethat emphasizes the absorptive capacity of a firm askey to its development and competitiveness (Zahra& George, 2002).

4.4. Plateau patterned growth

Often seen as the ‘‘end-game’’ in business growthcycles, plateau patterned growth is reflective ofslowed growth to the point of replacement salesversus new sales, stabilized revenues, and ultimate-ly declining profitability; the latter is due to com-merce standing still whilst inflation continues toerode existing assets over time. Much researchhas been focused on how large companies reachthis plateau point and the perils to their future ifthey remain in non-growth, non-innovative cycles(Bower & Christiansen, 1995). The literature focusesless on ways that smaller firms grow, in part becausefast-growth firms tend to create more innovations,jobs, and returns to investors (Acs et al., 2008).While most entrepreneurs would say that fastergrowth is more desirable, the reality is that mostfirms do hit plateaus, often due to ineffective mar-keting, static or incorrect strategy, or uncontrolla-ble economic factors. As one firm stated so clearly:

I would say that every marketing effort we’veever made has yielded nearly no results. Andit’s not that we’ve [conducted] poor marketingefforts; it’s that it’s really an introduction fromone person to the next, one client to the po-tential future client, that will almost certainlyyield work. Trying to, through some marketingeffort, force our way into one firm or theother. . .I don’t want to give the impressionthat it’s without merit. But, it has a very lowimpact on sales.–—Environmental services firm

It is important to note that our study firms gen-erally do not fit this pattern of stagnating growth,save for periods of time. Our study firms did indeedoften reach plateau patterns of growth, but this wastemporary as they then re-invigorated themselveseither through changed strategy, market tactics,orientation, or resolving roadblocks in technology,staffing, or deployment.

Plateau growth is thus not an irreversible deathknell for firms. It can be an opportunity for activereflection, coupled with revised and revitalizedstrategy for those firms willing and able to re-inventthemselves and propel themselves through innova-tion into a new and more profitable future. Suchfirms take their direction from both leadership vision

and market cues. The challenge is to make thistransition before the levelling trend in this growthcurve becomes a downward and final decline.

5. Implications

Our study of 19 U.S. firms finds that fast-growingcompanies exhibit different rates, patterns, and tra-jectories of growth. We stated in our introductionthat the scholarly literature abounds with notionswhich support a single, steady pathway to growth.Yet, it also includes references to firms that choosenot to grow, or to grow slowly, which remain no lesssuccessful than their faster-trajectory counterparts.What distinguishes these firms from one another arethe choices they make based onmanagement ability,capability, and accessibility. In the ability arena, wenote from our study that business owner vision,strategy, and direction are the essential first refer-ence point to chart a course for successful growthat any pace. The ability of the business owner toimplement, and then manage to, these goals oftendetermines whether the next waypoints will be closeto–—or further from–—growth goals. Similarly, capa-bility–—in terms of execution, but also asmeasuredbyan adequate, functional, and complimentary workforce–—is needed to implement tactical initiativesand achieve business milestones. Some companiesfind themselves saddledwith awork force that fails todeliver, or is in disharmony with the company cultureor business owner’s vision. Other firms suffer withunder-qualified talent or unproven technologies thatlimit their ability to act.

As we look to factors outside the company itself,we find that the time-proven micro and macroindustry, market, and economic forces act likewaves, weather, and wind in either propelling firmsforward or preventing them from sailing smoothlyalong their charted course. An inability to accessnecessary talent can slow growth, despite marketdemand for the firm’s products and services. Simi-larly, an abundance of talent, resources, or perfectproduct cannot overcome the doldrums of a reces-sionary economy when cash is tight and customer orclient spending is sparse. Mounting a massive mar-keting campaign has often been hailed as a grandoffense by many large companies in order to achievesuccess. However, our study has shown that forsmaller firms, close personal relationships, word-of-mouth referrals, repeat business, and niche mar-keting efforts prove more expedient, cost effective,and successful.

Much has beenmade of large corporate coffers, or‘‘war chests,’’ that give industrial giants theability tooutlast, out-siege, and overcome their adversaries.

490 C.G. Brush et al.

Most firms, however, achieve growth with far fewerresources. Reluctant to share control, equity israrely used outside of owners/partners/small em-ployee ownership pools, and friends and family.Access to debt financing is more difficult the smallerthe firm, and often takes the form of personalrather than business loans–—a path many chooseto avoid. Thus, our study shows limited access to,or use of, external funding, with the more commoninstrument a revolving line of bank credit usedfor periodic access. Hence, firms in our study grewmainly through organic pathways, funded throughsmall and strategic acquisitions, or conversion ofnew prospects to new sales, rather than through alarge injection of venture capital funding or externalfinance.

Our study has shown that, of the firms which doseek to grow, there appears to be a differencebetween intentions and outcomes: some displayrapid growth trajectories (Rapid Growth Pattern);some, slower, more measured rates (IncrementalGrowth Pattern); others, episodic periods of quickgrowth followed by sharp retrenchment (EpisodicGrowth Pattern); and, while no owner-managers offirms in our study actively chose to stop growing,some did reach points of stagnation, either in theirpast or at that current time (Plateau Growth Pat-tern). We found that three factors–—management,marketing, and money–—have emerged as core com-ponents, or concepts, affecting company growthacross these growth patterns. While not every factorwas critical at each moment of growth for each firm,every entrepreneur interviewed cited the relativeimportance of each factor at some time duringthe growth of their firm. Thus, firms experiencinggrowth do not do so in the same manner, at the samerate, or with the same outcomes.

Acknowledgments

The authors would like to acknowledge the supportof the Department for Business and RegulatoryReform and Her Majesty’s Treasury for funding theresearch on which this article is based. We are alsograteful to the business owners who gave theirvaluable time to be interviewed.

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