In order to gain a better understanding of economic growth and how to make money, various models have been created by economists – all of which aim to measure such growth, how the growth process operates and what factors determine it. They range from descriptive models, some of which focus on the stages of growth or development through which an economy evolves, to formal models, which emphasise factors that are either external to the economic system (e.g. technological sophistication) or internal (e.g. the level of savings).



Although different in many respects, these approaches do share certain common characteristics. First and foremost, they concentrate on large, established firms rather than SMEs. Second, they assume that large firms constitute the real locomotive of economic growth. Third, they are preoccupied with the link between national conditions (e.g. legal institutions) and the impact these have on the performance of firms.

When we focus on the conventional model for national economic growth, we are immediately prompted to ask – why is entrepreneurship absent from this model? Alarmingly, it is because it is accorded a role as part of the secondary economy in the micro-, small- and medium-sized firm sector. These firms are considered to provide a supporting role as suppliers of goods and services to the established firms in the primary economic sector. This is essentially a subordinate role.

Clearly therefore, little understanding is provided by the model with regards to the specific contribution entrepreneurship makes to economic growth and little guidance is given on how to enhance the level of entrepreneurial activity.

We need to begin with the assumption that the role of entrepreneurship is critical to economic growth, and recognise that:

• Entrepreneurial activity is shaped by Entrepreneurial Framework Conditions – to include training in entrepreneurship and the availability of start-up financing.

• The level of entrepreneurial activity is a function of the degree to which individuals recognise the entrepreneurial opportunities available and that they have the capacity, motivation and skill to exploit them.

• The interaction between perceived entrepreneurial opportunities and the entrepreneurial capacity to pursue them will lead to a greater number of start-up efforts, new businesses set up and more jobs. As more firms and jobs are created, there may subsequently be greater business failures and job losses, i.e. business dynamics which usually accompanies economic growth.

• Economic growth is partly determined by the intensity of business dynamics.

Instead of focussing on large, established businesses and the associated secondary role of smaller businesses, we need to look at the entrepreneurial sector itself, and the conditions that shape it and its direct economic consequences. If we are to properly understand economic growth, both perspectives should be looked upon, as:

• it would reflect the contributions of both large established and new entrepreneurial firms;

• it makes clear that existing firms can be a significant source of start-ups;

• it presents the context in which the entrepreneurial sector operates.

The point about small businesses is that entrepreneurs can move quickly in the market and set up niche businesses. These type of firms – which offer a product or service focusing on one specific aspect or customer base within an industry – are growing at a rate of 20 per cent to 25 per cent a year. Some popular niches these days include specialised pet products, beauty salons/spas, travel agencies, back-office services, technical/online support and business coaching.

Niche startups are good in that they offer entrepreneurs a chance to focus all their branding and marketing in one area and expand on those core customers as the business grows. After all, when you try to be everything to everybody, you wind up being nothing to anybody – and that's the problem with ventures that are too broad.

In addition, the advantage of starting a niche business is the ease of identifying your potential customer base, since you are targeting only certain buyers. In fact, niche ventures have a 25 per cent better chance of surviving over 10 years than more general types of companies.

Niche businesses are easy to start and easy to defend from competitors. By finding a niche where you can build your own unique stronghold, you can attract and maintain customers who will pay top dollar for your goods and services.

A niche is just not a small market. For example, a niche is not just serving a small community: a niche requires a commonality of needs among customers. So, a niche would be selling to the boat owners in a small community, not selling general products to that small community. Thus, a niche has more easily identifiable customers.

Obtaining financing for niche ventures can also be easier. Compared to more general businesses, there is less competition to deal with, which makes you a more attractive candidate when seeking investors.