It takes a generous amount of business savvy and a whole lot of guts to build a sustainable business today. Even long-established firms risk being paralyzed by rapidly shifting business trends, a lofty loonie and an increasing talent shortage. But the leaders of PROFIT’s 9th annual HOT 50 ranking of Canada’s Emerging Growth Companies have proven that they’re not afraid to take risks; nor is there much that can hold them back. They’ve not only found the right recipes to grow their fledgling firms in the face of uncertainty, they’re thriving in it.
This next generation of entrepreneurial stars are less than five years old but shows the business smarts of companies many times their age. They have achieved average two-year revenue growth of 756%, with all of them at least doubling their sales over the past two years; five of these winning businesses have recorded growth rates in excess of 2,300%. And despite the up-front costs and market anonymity young companies endure, fully 74% of this year’s HOT 50 turned a profit in their most recent fiscal year. What’s their secret? Among the popular factors cited by the HOT 50 as being crucial to their expansion: strategic sales and marketing, a focus on narrow niches, industry contacts and the ability to attract and retain top talent. Entrepreneurial experience may also play a part, given that 54% of this year’s CEOs have started other companies in the past.
While high-speed growth unites the HOT 50, a quick look at their companies reveals an incredible range of products and services — from model-train manufacturers (Rapido Trains, No. 4 on the 2008 list) and organic-ingredient distributors (N2 Ingredients, No. 43) to oilfield construction (CerPro Energy Services, No. 47) and online auction management (Auctionwire, No. 12). As diverse as their industries are, the entrepreneurs writing each company’s success story share a number of similar qualities, the most important of which might be their ability to find startup and growth capital. The HOT 50 ranked chartered banks first as the most popular external source of financing, at 64%, followed by friends and relatives, at 34%.
Another key to success has been their ability to attract and retain the right employees. Bad hires can cause problems in any company, but they can be deadly for startups. (see Built for fast.) It’s no surprise, then, that the HOT 50 use a wide array of sophisticated HR tools to help build up their troops, including open-book management (50%), employee share-ownership plans (38%) and even psychological testing (12%).
When asked what attributes have been crucial to their success, these entrepreneurs say they leverage such qualities as persistence (cited by all HOT 50 leaders), big-picture thinking (98%) and an ability to evaluate and manage risk (96%). Their ambition and drive provide a glowing example of how Canadian entrepreneurs can smooth out the ride over a bumpy business landscape.