The Netherlands’ private sector scores well above the European average for fast-growing companies, according to the ScaleUp Dashboard report published by Rotterdam School of Management, Erasmus University (RSM) and the Erasmus Centre for Entrepreneurship (ECE). The ScaleUp Dashboard is a new annual study that focuses on fast-growing companies in the Netherlands, with research led by Justin Jansen, RSM’s Professor of Corporate Entrepreneurship. But the rate of growth has dropped off alarmingly, and Prof. Jansen is calling for ambitious government policies to help fast-growing Dutch companies over the next three years.
“Research results show that fast-growing companies in the Netherlands have created 70,000 new jobs in three years – they form the backbone of our economy. To be clear, all of these new jobs are created by a segment that makes up less than 0.5% of the Dutch private sector,” Jansen emphasised.
But despite a strong starting position, the percentage of fast-growing companies in the Netherlands has fallen dramatically. “To maintain our lead, we will need to focus more on encouraging and facilitating fast-growing companies,” said Jansen.
The ScaleUp Dashboard shows that 5.4 per cent of Dutch firms with more than 10 employees are categorised as fast-growing companies because they report an annual growth of at least 20 per cent over a three-year period, significantly more than in the UK, Germany or France, “even though these countries have been singled out as Europe’s ‘scale-up nations’ over the past few years,” says Jansen. “In the UK, only 4.6 per cent of firms with more than 10 employees can be classified as fast-growing companies. In France and Germany, these percentages are even lower.”
Double turnover, double workforce
The ScaleUp Dashboard researchers made an inventory of fast-growing companies in the Netherlands. Between 2011 and 2014 these firms achieved an average increase in turnover of 119 per cent, with employment at these companies rising by 125 per cent. On average, fast-growing companies in the Netherlands expanded their workforces from 20 to 45 full-time equivalent (FTE) employees over this three-year period. In fact, it’s a challenge for fast-growing companies to attract enough ambitious and qualified new employees.
Fewer companies achieving fast growth
Jansen says the percentage of fast-growing companies in the Netherlands has fallen by more than 50% over the past seven years, an alarming statistic. Fast-growing companies now represent only 5.4 per cent of the private sector, down from 11%. “We need to halt this negative trend as quickly as possible”, says Jansen, and explained that the recent economic downturn could be to blame. Despite the Netherlands’ competitive position giving promising indicators, it’s still difficult for Dutch firms to enter new growth markets and create more added value. More recently, Dutch companies have focused on reducing costs, consolidating existing activities and raising productivity levels. This strategy has helped them to weather the economic crisis – and to slowly but surely improve their bottom line in the process – but the best paths to achieving fast growth are developing new revenue models, entering new markets and innovating products and services, says Jansen.
Encountering constraints
According to Jansen, the Netherlands’ recently announced status as one of the most competitive countries in the world is a good starting point. “But we need to realise that fast-growing companies face specific challenges that require relatively specific solutions. The ScaleUp Dashboard shows that most fast-growing companies employ between 10 and 50 people. In many cases, the companies in question are young SME firms that not only offer a solid product or service, but also aim to grow faster than the competition. These companies often encounter constraints in financing, leadership qualities, attracting new people and access to new growth markets. In other words, they have the potential to expand at a rapid pace, but find it difficult to actually realise this growth.”
An ambitious policy is crucial
Jansen described many fast-growing companies as falling between two stools. More than a third are in wholesale, retail or business services sectors, meaning they cannot benefit from programmes developed within the Dutch government’s Top Sector policy. Most recently, thanks to the efforts of the StartUpDelta organisation, there has been strong interest in setting up an ecosystem for Dutch start-up ventures. “Start-ups make an important contribution to economic activity and innovation, but we should keep in mind that launching a new company and realising double-figure growth are two entirely different games. Building on the success of existing national and regional initiatives aimed at stimulating and facilitating start-up ventures, the time has now come to further develop the Dutch ecosystem for established fast-growing companies,” he says.
“I think we should set ourselves an ambitious target: in three years’ time, the Netherlands should be home to another 500 new fast-growing companies. That’s 1 per cent of all Dutch companies with more than 10 employees,” says Jansen.
A full version of the report can be found here.
