Innovation

Overview: Role Models for the recovery

Written by Kim Shiffman

You won’t find many CEOs who say that 2009 was a great year for business. With an economy suffering from one of the steepest recessions since the Second World War, many entrepreneurial companies barely survived, let alone thrived. Laying off staff, cutting costs and delaying expansion plans unfortunately became commonplace.

Not for Avalanche Air Systems Ltd., though. The Calgary-based commercial HVAC installer had its “best year ever,” says president Rick Ball. It landed several new contracts, added staff and finished the year in the black. Sales reached $2.7 million, up 1,263% over five years, earning Avalanche 48th place on the 2010 PROFIT 100.

Avalanche Air Systems is a shining example of the business superstars on the PROFIT 100. The firms that make up PROFIT’s 22nd annual ranking of Canada’s Fastest-Growing Companies have grown their annual revenue by an average of 1,752% over the past five years. What’s more, more than three-quarters (76%) turned a profit last year. These are remarkable achievements, considering the economic conditions of the past two years.

How did they do it? By raising hard-to-find capital, building great teams and seizing market opportunities abroad. By investing in innovation, tapping niche markets and working on the business, not in the business. And by never, ever giving up — no matter how bad things looked.

Indeed, Ball partially attributes Avalanche Air Systems’ ability to grow while many competitors withered to his own dogged perseverance. “I’m a go-getter,” he says.

“I don’t stop. If it means working seven days a week, 16 hours a day, that’s what I’ll do,” says Ball, whose top priority during the recession, like that of many PROFIT 100 CEOs, was protecting his employees from losing their jobs.

But an even more important survival strategy of the PROFIT 100 was choosing to see the economic downturn as an opportunity, not a liability. Calgary-based IT consultancy TriCon Technical Services Inc. (No. 56 on the PROFIT 100) saw the recession as a chance to streamline and optimize internal operations, reducing costs through the tough times but also permanently. Toronto-based proprietary trading firm Infinium Group Inc. (No. 43) hired talented, out-of-work staff that hadn’t been available before the downturn. DirectLab Inc. (No. 28), a Blainville, Que.-based distributor of anti-arthritis supplements, took advantage of reduced advertising prices, increasing its marketing spending while competitors slashed theirs.

Of course, that’s not to say the PROFIT 100 were immune to the downturn’s negative effects. Some were forced to cut staff or halt new product launches in 2008 and 2009. And while the average five-year growth rate of Canada’s Fastest-Growing Companies is admirable, it’s down by more than 500 percentage points from the five-year growth rate achieved by the 2009 PROFIT 100.

In entrepreneurial fashion, the PROFIT 100 learned from the recession — and will be stronger for it. Concord, Ont.-based mechanical contractor Dependable Mechanical Systems Inc. (No. 9) is now laser-focused on becoming recession proof. Among other things, president Rajesh Ahuja says, he’s getting his company into the service field in order to build contracts with big institutions, which will ensure recurring revenue regardless of economic conditions.

The companies on the PROFIT 100 share the smarts to overcome and learn from adversity. Where they couldn’t be more different is in what they do. Every conceivable type of company graces this year’s list, from travel agencies to civil engineers, home builders to software developers, staffing firms to trucking companies. Even two of the industries hardest hit by the recession — manufacturing and retailing — are represented. Clearly, winning in business is less about what you sell, and more about how you sell it. Where you sell it matters, too: foreign markets are a key source of revenue for today’s top growth companies. The 71 exporters on the PROFIT 100 sold $17 billion abroad last year. Although most of that foreign income derives from BlackBerry manufacturer and Canadian business behemoth Research In Motion Ltd., the exporters on the PROFIT 100 derived an average of 48% of their 2009 sales from outside Canada, up from 31% in 2004. Not surprising, most of them exploited the U.S. market (67 companies). But they also found customers in such emerging markets as Africa (14), Brazil (15) and Russia (11).

The export markets of the PROFIT 100 are as diverse as their home bases. Canada’s Fastest-Growing Companies can be found from Victoria, B.C., to St. John’s, Nfld., and in every province except P.E.I. And for the first time since 2002, a Saskatchewan company appears on the list: Alliance Grain Traders Inc. (No. 63), a $388-million processor of lentils and other foods.

Alliance Grain Traders is led by Murad Al-Katib, a 37-year-old, Canadian-born entrepreneur who works 70 hours a week. That makes him a pretty typical PROFIT 100 CEO. The average leader of one of Canada’s Fastest-Growing companies is 41 years old, works 57 hours per week and has an undergraduate or graduate degree. Most are male, and most were born in Canada.

It’s often said what doesn’t kill you makes you stronger. Truer words have never been spoken about the firms on this year’s list of Canada’s Fastest-Growing Companies. Leading and growing a business is tough in the best of times; the PROFIT 100 have thrived in the worst of them. That’s why the lessons they should serve as a guidebook for current and future business owners in any industry. Our advice? Bookmark this and save it for the next recession.

How we ranked them

Entrants were ranked by five-year revenue growth, with revenue and net income verified through financial statements. All growth rates were calculated using base-year revenue of at least $200,000. More details about the ranking procedure and eligibility criteria can be found at PROFIT100.com. Entries were solicited through an entry form published in PROFIT and on PROFITguide.com. Entries were also solicited through the PROFIT-Xtra e-newsletter, L’actualité, Canadian Business and Maclean’s magazines, through targeted direct mailing to Canadian growth companies, and by the organizations that are thanked on page 91. The information in this issue and on PROFIT100.com is the only data PROFIT will release on Canada’s Fastest-Growing Companies.

Originally appeared on PROFITguide.com
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