4 Families of Small & Growing Businesses (SGBs)

April 10, 2019 by in Models
This Segmentation Framework from the Missing Middles Report by the Collaborative for Frontier Finance (Omidyar Network / Dutch Good Growth Fund [DGGF]) proposes that segmenting the SGB market into multiple “missing middles” will help to more effectively diagnose the distinct financing needs and gaps faced by different types of enterprises – and in turn, will enable the industry to better focus on scaling the financing solutions that are most needed to empower these enterprises to meaningfully contribute to inclusive economic growth.

1. High Growth Ventures: Are SGBs that pursue disruptive business models and target large addressable markets. They represent a very small percentage of the total SGB population.

2. Niche Ventures: Create innovative products and services that target niche markets or customer segments.

3. Dynamic Enterprises: Operate in established “bread and butter” industries—such as trading, manufacturing, retail, and services—and deploy proven business models. Many are well established and medium sized, having grown steadily over a substantial period.

4. Livelihood Sustaining Enterprises: Are small, opportunity-driven, family run businesses that are on the path to increased formalization and incremental growth.

The methodology employed combined perspectives from leading SGB investors on how they segment the market; analysis of enterprise-level quantitative data from multiple SGB investors; and behavioral analysis of entrepreneurs using human-centered design techniques.

These four families came into focus after looking at SGBs through three distinct variables:

  1. Growth and scale potential: An enterprise’s prospects for future growth, potential to reach significant scale, and the
    pace/trajectory of growth.
  2. Product/service innovation profile: The degree to which an enterprise is seeking to innovate in its core product or
    service offering or to disrupt the market in which it operates.
  3. Entrepreneur behavioral profile: Attitudes of the entrepreneur with respect to key dimensions that impact decisions
    on external finance—notably, risk tolerance, impact motivation, and growth ambition.

Additional Graphics Related to Model:

Financing Gaps & Ideas for Action
Product-Market Matrix
Enterprise Growth Curves
Entrepreneurs’ attitudes and behaviors toward risk, growth, and problem solving
Synthesis of the four segment families and their core characteristics
Summary of SGB family risk-return mismatches or gaps, ideas for action, and promising solution examples
Segmenting and sub-segmenting the dataset of SGBs

View full report here

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