To kick off this week I want to take things to the macro level regarding entrepreneurship, politics and media. It is a topic we seldom talk about as we promote entrepreneurship here at ArcticStartup from the bottom of our hearts each and every day. I want to stress the importance of growth companies in our economies, as it is something that isn’t given too much column space in the more traditional media. This is also one of the reasons ArcticStartup was founded – to give more coverage to growth companies and help them achieve more.
The topic in itself is very simple so we don’t need to back it up with passion, all we need to do is look at the statistics. I’ve gathered some statistics from the Swedish statistics bureau (SCB) and the Confederation of Finnish Industries (CFI). While these only represent the systems in Finland and Sweden, I’m sure this can be extrapolated to other regions in Northern Europe with some adjustments. In this economic era, I’m focussing on the employment contribution these companies make to our economies since it is usually thought to be the most effective form of social welfare available.
The categorisation of enterprises is slightly different in these countries. In Finland there are 4 main categories in the CFI statistics; micro (less than 10 employees), small (11-49 employees), medium (50-249 employees) and large (over 250 employees) while in Sweden there are 9 categories in total. If we look at the number of employees the large companies have on their payrolls, in Finland the 612 companies (employing over 250) pay the salaries for 38.1% of the workforce. In Sweden, the 1761 companies that employ 200 or more people pay the salaries of 59% of the workforce. According to these statistics, Sweden is structured with slightly larger companies than Finland.
Nevertheless, in both Finland and Sweden there are around 60% and 40% of the workforce, respectively, working in smaller companies. The CFI states that Finnish small and micro enterprises (up to 49 employees) pay the salaries of almost 45% of the workforce and these companies represent 98.8 % of all companies in the business registry. In Sweden, the companies that employ up to 49 people account for almost 24% of all companies registered and employ almost 30% of the workforce. This further clarifies the structure of these two economies and highlights the importance of smaller companies in our economies.
If we look at the employment effect of smaller companies in Finland after the millenium, the CFI has said that these companies are responsible for 80% of the new jobs being created. These companies are also responsible for a large part of the productivity that has supported the growth of the economy at large. So how much potential is there? A lot more. Only 3% of companies in Finland fall into the category of growth companies (growth rates of more than 10% per annum). What if we were able to double this? What would be the effect on employment and the prospects for our economy after that?
So why are we trying to get a point across here? We need a change in the focus of politics in Northern Europe. While there is a lot of good being done in all the countries in Northern Europe we still see a lot of things happening that definitely should not. Take a look at the attempt to abolish the tax benefits small company workers have in Estonia, for example.
We’ve only touched on the tools to improve the business environment for small companies. While at least in Finland, we used to focus a lot on the well-being of the larger companies (which in itself is very short sighted politics) there was a lack of focus on the improvement of business conditions for smaller companies. To make Northern Europe an attractive place to do business, we need to turn down the volume on the large companies and max it on the smaller, more vibrant companies.
I’m not talking about putting in simple tax benefits here and there, I’m talking about radically changing the way we think of and support our economies. This applies not only to politics, but the media too – not forgetting each and every one of us individually. When we hear stories of entrepreneurs doing business, give them the respect they deserve.
Entrepreneurship is the most effective economic influence on our future well-being.