Innovation

Canada's Fastest-Growing Companies

The firms on this year’s PROFIT 500 are a breed apart: they dominated their markets, employed thousands and grew exponentially at a time the economy stagnated. Here’s what makes them tick

Written by Mira Shenker

The past five years have not been particularly kind to Canadian business. On New Year’s Eve 2007, a loonie would have bought you US$1.01—close to a multi-decade high that had killed many export-intensive companies and hurt a great many more; five years later, the coin would be worth exactly the same. Adding insult to injury has been all the currency volatility in between, with changes of up to 20% in a single month. There was a recession, too—although you could be forgiven for thinking that we’re still in one, given the snail’s pace of the recovery.

Against this backdrop, “spectacular” is an appropriate word to describe the performance of the firms on PROFIT’s 25th annual ranking of Canada’s Fastest-Growing Companies, now known as the PROFIT 500. In that same five-year period (2007-12), the average PROFIT 500 company grew its annual revenue by 710%. If you’ve done your math right, you know that’s a multiple of 8.1 since 2007. And if you’re really keen, you’ve already determined that the average PROFIT 500 company outperformed the Canadian economy by a factor of 44 in that time. The total 2012 sales for the firms on our list: $25.2 billion.

Canada’s Fastest-Growing Companies have been hyper-prolific employers as well, adding 46,780 brand-new, full-time equivalent positions to their payrolls since 2007. That’s 94 full-time jobs for each business on the list—a stat thrown into sharper relief when you consider the average PROFIT 500 company had only 68 full-time staff at the start of this five-year span.

Clearly, the companies of the PROFIT 500 deserve to be celebrated widely, and studied by all those politicians who promise that their policies will stimulate growth. The PROFIT 500 are themselves an economic action plan grounded in innovation, entrepreneurship and stick-to-it-iveness.

But why do these overachievers matter directly to you and your business? If you’re lucky, a few of them could be future customers or business partners. If you’re not so lucky, they soon could be your competition—or they’re already taking a bite out of your lunch.

And if you’re the type of entrepreneur who looks beyond your own advisors and industry for practical insights into seizing the opportunities and overcoming the challenges of the day, then Canada’s Fastest-Growing Companies can serve as exemplars of how to succeed in an ever-challenging and always changing economy.

We can say that with confidence because there’s a good chance you’ll find a PROFIT 500 enterprise in the same line of work as your business. Canada’s Fastest-Growing Companies operate in a huge array of industries, from high-tech to no-tech. Consider the top five companies alone. Leading the pack, with five-year revenue growth of 49,908%, is Avigilon Corp., a producer of high-definition surveillance systems. Avigilon’s sales topped $100 million in 2012, up from barely $200,000 in 2007—growth that founder and CEO Alexander Fernandes attributes bluntly to offering “a better product at a lower price than anyone on the planet.” Learn more of the story behind that statement in the profile of Avigilon.

Next on the list is Mood Media Corp. (41,364% growth), a provider of in-store media that made the

news a couple of years back for its acquistion of Muzak, the Kleenex of elevator and mall soundtracks. It’s followed by EcoSynthetix Inc. (9,676%), a manufacturer of biopolymers—essentially, “green” plastic; TerraPro Group Inc. (7,730%), which rents temporary roadways and work-surface platforms, mostly to the natural resources industry; and PiiComm Inc. (4,164%), an IT company that has built its success on three pillars: sales (of both hardware and software), develop- ment (of enterprise software) and a service desk that manages mobile devices for customers.

Profiles of all 500 firms—grouped by business sector—are here. Among them you’ll find 79 companies involved in the delivery of IT products and services; 59 that manufacture or distribute business products; 42 construction companies; and 35 software developers. Fully 45 specialize in marketing and media; 28 offer HR services; and another 41 provide a wide array of services to business that don’t fit into any other category—ample evidence that the outsourcing economy is alive and growing. The rest of the PROFIT 500 play in consumer products (29 firms); financial services (24); retail (20); food processing and distribution (18); natural resources extraction and services (18); consumer services (17); transportation and logistics (16); education and certification (14); communications (8); and the making or distribution of pharmaceuticals and nutraceuticals (7).

A look back at PROFIT 500 No. 1s From the Past 25 Years

You’re also likely to find a PROFIT 500 winner in a town near you—if not in your town. Canada’s Fastest-Growing Companies hail from Newfoundland to Vancouver Island, and from as far north as Yellowknife, home of Det’on Cho Corp. (No. 276 on the list), a mining-services firm owned by the Yellowknives Dene First Nation that generated sales of $82.8 million last year.

Unsurprisingly, 364 of the PROFIT 500 are headquartered in Canada’s six largest urban centres, including greater Toronto (187 firms), Vancouver (60), Montreal (46), Calgary (42), Edmonton (24) and Ottawa-Gatineau (19). Clearly, companies can and do benefit from locating in large, high-density communities in which resources, partners and customers are plentiful. But more than a few PROFIT 500 firms prove that fast growth can take root anywhere, including Luseland, Sask., Heckman’s Island, N.S., and Baie-Comeau, Que.—each of which has one company on the list.

Speaking of geography, many of Canada’s Fastest-Growing Companies are strictly local or regional businesses, and 65% of all PROFIT 500 revenue comes from domestic customers. Still, these companies did tap foreign markets for total sales

of $8.7 billion last year. In 2012, the average PROFIT 500 exporter generated 43% of its sales abroad; some 60 companies did at least 90% of their business in foreign markets, and six firms had no Canadian customers. And if you need more proof that going global can put a business in the fast lane, consider this: total sales growth of the average exporter far outstripped that of the average non-exporter over the past five years: 830% versus 512%.

Where are these enterprises finding buyers away from home? On all continents save Antarctica, in both established and emerging markets. Still, the U.S. is the PROFIT 500’s major trading partner, generating revenue for 90% of the exporters on the ranking. Filling out the top five destinations for PROFIT 500 goods and services are Western Europe (25% of companies), the U.K. (24%), Australia (19%) and the Middle East (16%).

See Export Excellence

None of this is to say that exporting is the easy path to success. PROFIT 500 exporters cite a wide array of challenges to selling internationally. The current value of the Canadian dollar has slowed some  of these globetrotters, but not to the degree you might expect. Instead, exporters talk of after-sale challenges, especially in the areas of logistics, customs and tax compliance—even when working in the U.S.

PROFIT 500 Success Profile: Exporting Canada’s Education Brand

Another great challenge for the PROFIT 500: funding their growth. Few of these companies have enjoyed sufficient cash flow or profits to finance breakneck growth entirely by themselves; only 14 have not accessed an external source of financing over the past five years. Among the rest, founders play a surprisingly important role. The average PROFIT 500 company is 14 years old, putting them well past the start–up stage, in which founders often are the only source of capital. Yet, 366 of the firms on the list tapped their founders for additional funds over the past five years.

Perhaps equally surprising is the importance of the chartered banks to the PROFIT 500. Big banks don’t like risks, and lending to high-growth companies is about as risky as you can get in the banking game. Still, 340 of our growth leaders have counted on domestic chartered banks for money in the past five years. (The most-used bank among them: RBC, with 153 current PROFIT 500 clients.) Leasing is the next most popular financing source (202 firms), followed by the Scientific Research & Experimental Development tax credit/rebate program. The companies on the list also funded their growth by just about any means available, from venture capital and public markets to credit unions, credit cards and commercial paper.

See Paths to Growth Capital

Helping the PROFIT 500 through all of their challenges is their employees. When these companies’ chief executives were asked to identify the key drivers of their success, “our people” was the most common answer. That’s a trite response, for sure, but when you distil business to its essence, it really is the product of the hearts, hands and minds assembled in the pursuit of customers. With better people, you dramatically increase your odds of success. Canada’s Fastest-Growing Companies use many tools to build, guide and retain winning teams. Their most common people-management practice is formal training programs, used by 92% of these companies, followed by individual performance bonuses (85%) and formal performance appraisals (80%). Open-book management (49%) is another key method for managing PROFIT 500 employees.

Read 6 Innovative HR Strategies

How will Canada’s Fastest-Growing Companies continue to grow? Almost seven in 10 told PROFIT they would consider acquisitions over the next two years, and 31% said they might enter into a merger. The need for continued product innovation and market diversification was a common refrain in the interviews that PROFIT conducted with the chief executives of these companies. And despite past success in building winning teams, these CEOs repeatedly cited “finding more good people” as a key challenge. The PROFIT 500, true to their entrepreneurial nature, are looking ahead rather than resting on their laurels. And why not? Anticipating market needs and developing a plan to address them is what made these firms the top growth companies in the nation.

HOW WE RANKED THEM

All applicants were ranked by five-year percentage revenue growth, generally from 2007 through 2012. PROFIT shortlisted companies based on revenue figures supplied on a short self-nominating ballot, then verified revenue claims and eligibility through phone interviews and reviews of applicant-supplied financial statements. A minimum revenue requirement of $2 million in the most recent fiscal year (e.g., 2012) applied to all companies; growth rates were calculated using a base-year (e.g., 2007) minimum of $200,000. Franchisors were ranked on their corporate revenue only, not system-wide sales. Visit the FAQ page for full eligibility criteria and more details on the ranking procedure.

We solicited self-nominations with a ballot published in PROFIT and on PROFITguide.com, with supporting promotion through the PROFIT Report enewsletter and PROFIT’s social-media channels. We also solicited entries with ads in Canadian news and business publications, including L’actualité, Canadian Business, Maclean’s and Atlantic Business; with targeted mailings to Canadian growth companies; and with various forms of outreach by the organizations.

DID WE MISS YOU?

We can’t rank your company if you don’t apply! If you feel your business should have been on this year’s list or has a good chance of making next year’s, be sure to let us know. Simply complete the short ballot-request form, and we’ll be sure to send you an entry form early in 2014.

View the complete PROFIT 500 rankings

View the rankings by industry

View the rankings by region

Did you miss out on this year’s PROFIT 500?

THINK YOUR COMPANY MIGHT EARN A SPOT ON THE 2014 LIST OF CANADA’S FASTEST-GROWING COMPANIES? REQUEST A BALLOT FOR NEXT YEAR’S PROGRAM.

Originally appeared on PROFITguide.com