Discuss the Aphorism "Small Firm Growth Being the Only Measure of an Entrepreneur’s Success".

3343 words 14 pages
Business growth is a good goal for most firms in general and is given great weight by the society. This could be seen with the list conjured up by the media, such as ‘Forbes Fast-Growing Companies’ and ‘Inc Fastest Growing Companies’ lists (Hupato 2011). The reason small firm growth has been prioritised by policy makers and the society is mainly due to its contribution to the economy (Bridge, O’Neill & Martin 2009). Small firm and entrepreneurship have so often been linked together, and it has become common to acknowledge that all small firms are established by entrepreneurs. Hence, the terms such as growth, success and performance are often linked in the research of entrepreneurial success (Reijonen & Komppula 2007).
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In this world of constant returns, the consumer’s demand for the product or services determines the limit on the firm’s growth. Sales figures easily reflect both short-term and long-term changes in the firm, hence measuring the growth and performance. However, there are two reasons that deviate sales as business growth yardstick. Firstly, the typical downward sloping demand curve is not applicable in practice. Just as a habitual entrepreneur starts more than one business, a firm can also have product differentiation (Hart 2000). Hence, it is difficult to determine the demand and cost curves in imperfect competition market condition. Secondly, sales are not an accountable measure during first few stages of the business cycle. During the seed and the start-up stage, employment and assets may grow more extensively before any significant sale has been done (Fitzsimmons, Steffens & Douglas 2005). In this context, assets are in the form tangible ‘fixed’ assets and intangible assets such as of entrepreneur’s knowledge asset, the reputation of the firm (Bridge, O’Neill & Martin 2009) and quantity of registered patents. Hence, business growth could not be measured by sales alone.
Looking from another dimension, a firm’s profitability could be suggested as an important measure of growth for the simple reason that