Growth Momentum in the Early Stages of Small Business Start-Ups

TLDR

This study examines growth momentum in early‑stage startups by empirically analyzing sales data from 145 new ventures. The authors analyze relationships among pre‑startup activities, intended and actual expansion actions, and early‑stage performance using sales data from 145 startups. Second‑year sales were positively linked to the breadth of pre‑startup activities and the range of expansion actions, while performance declined when owner‑managers relied heavily on their technical skills, and a persistent gap existed between expansion intentions and actual expansion.

Abstract

This article utilizes an empirical study of 145 new venture start-ups to explore a model of growth momentum as measured by sales. Of primary interest are the relationships among pre-startup activities, intended and actual business expansion activities, and early stage performance. Results indicated that the sales level achieved in the second year had a positive correlation with (i) the breadth of pre-startup activities, and (ii) the range of expansion activities. Business performance had a negative correlation with the firm's relative dependence on the technical skills of the owner-manager. In addition, the study revealed a consistent gap between owner-managers' expansion intentions and actual expansion.