Innovation

Overview: Sights for sore eyes

Written by Jim McElgunn

The PROFIT 100 is a very tough club to join. It’s not enough to have posted a hot year or two, because the ranking of Canada’s Fastest-Growing Companies is based on revenue growth over five years. And a rate of expansion that would make most CEOs pretty pleased — say, doubling your sales over five years — wouldn’t get your company anywhere close to cracking this list.

Making just the tail end of this year’s PROFIT 100 — our 20th annual — required an explosive growth rate of 627% from 2002 to 2007. Even a business that grew its revenue by 1,000% over the past five years wouldn’t have placed among Canada’s top 60 firms. Clearly, it takes something exceptional to rank among the entrepreneurial elite of the PROFIT 100.

In some cases, it’s a product superior to that of vastly bigger rivals. Toronto-based Kaboose Inc. (No. 3 on this year’s PROFIT 100) became the world’s largest online media company focused on families — outpacing such media titans as Disney and Viacom — by offering more than 100,000 Web pages of trusted content to help parents plan their family life. Its 2007 sales of $35.5 million were up a blistering 6,440% over five years. And CV Technologies Inc. (No. 9) generated stellar 3,632% five-year growth, to $42 million in 2007, by applying the rigours of Western product-testing methods and quality control to the commercialization of traditional Eastern herbal remedies. The Edmonton-based company scored a smash hit with Cold-fX, which overtook the global pharmaceutical giants’ established brands to become Canada’s top-selling cold and flu medicine.

In other cases, a company has vaulted into the growth elite by devising precisely the right niche product. Mississauga, Ont.-based PointClickCare (No. 41) reached $12.9 million in revenue in 2007, a five-year increase of 1,531%, by crafting management software designed for the needs of long-term care facilities. Richmond, B.C.-based LIJA (No. 83) grew its sales by 719% over five years, to $6.2 million in 2007, by satisfying female golfers’ hunger for something stylish to wear on the links. And by developing management software customized for auto-repair shops, Montreal-based V2V Technologies Inc. grew its annual revenue from $313,000 in 2002 to $1.2 million. That performance was good enough for five-year growth of 319% and a place near the middle of PROFIT’s annual Next 100 ranking. While the Next 100 companies may be the runners-up, they could never be called also-rans, with five-year growth rates ranging from 260% to 620%.

Sometimes what makes a firm exceptional is the stick-to-it-iveness it brings to the pursuit of its business vision. Garda World Security Corp. (No. 50) has been relentless in its drive to expand into the big leagues of its security-services sector. Its string of 25 acquisitions has yielded 2007 revenue of $1.2 billion, up 1,268% over five years. The Montreal-based company now ranks second in North America in cash handling, behind only Brinks.

The firm that tops the 2008 ranking, Kids & Company Ltd., has also been relentless in pursuing its vision of a cross-Canada network of childcare centres for corporate employees. The Markham, Ont.-based company has doggedly built its position as the leader in its niche even at the price of enduring years in the red. It attained revenue of $13.7 million in 2007, up a stunning 12,639% over five years, and forecasts it will double its revenue and break even next year. (Read our No. 1 profile: A need for speed.)

This sort of drive has yielded outstanding performance for the PROFIT 100 as a whole. Their combined sales reached $12.4 billion in 2007, while the average PROFIT 100 company boasts five-year revenue growth of 1,800%. If you think they couldn’t possibly trumpet their bottom-line performance as well, you’re dead wrong: on average, their 2007 net income was 11.8%.

While the PROFIT 100 share a common experience of hyper-growth, their lines of business are all over the map. Not surprisingly, you’ll find plenty of software developers, IT consultants and digital marketing agencies among the 2008 PROFIT 100. But you’ll also find a legion of old-school enterprises, including a builder of affordable houses, a retailer of hot tubs and billiard tables, a developer of board games and a franchisor of student summer-painting firms.

Perhaps even more surprising is how fast these companies are growing in each area of the economy. Average five-year sales increases surpassed 1,000% in every one of the sectors and subsectors that the PROFIT 100 companies operate in, led by a red-hot 3,939% in consumer services.

Still, each company must overcome challenges specific to its sector. Yet a striking number of the hurdles they face are common to all industries. Every business on the PROFIT 100 — indeed, every entrepreneurial company — must grapple with the puzzle of how to attract and retain top-notch employees. (See Best HR practices: Building the ultimate workforce.) Another universal challenge is where to find the capital you need to thrive — and how to avoid the cash-flow crunches that threaten to put you out of business. (See Financing solutions: Crossing the cash chasm.)

In outright defiance of the lofty loonie, the PROFIT 100 have overcome the perennial challenge of — and seized the massive opportunity in — penetrating foreign markets. Fully 75% were exporters in 2007, a big jump from 42% in 2002. Last year, their sales outside our borders totalled $7.9 billion. And they sold not only to the Americans but to customers around the world. Long-standing Canadian export markets led the way, with 39% of the PROFIT 100 exporting to the U.K., 35% to other countries in Western Europe and 31% to Australia. But considerable numbers of companies ranged much further afield, with, for instance, 24% exporting to Africa and 23% to the Middle East.

The chief executives behind PROFIT 100 firms range in age from 27 to 67, with an average of 43. A substantial share (28%) were born outside the country, almost triple the foreign-born share of Canada’s population at the time the average PROFIT 100 CEO was born. An overwhelming 94% are male — although this year marks the first time a female-run firm has been No. 1. The annual compensation of these chief executives averages $398,000. And when it comes to federal politics, blue rules: when asked who they’d vote for in the next federal election, 71% who revealed their preference named the Conservatives, versus 23% for the Liberals, 4% for the Greens and 1% each for the NDP and the Bloc Québécois.

Although hypergrowth is commonly associated with small businesses, an impressive number of PROFIT 100 companies have revenue in the hundreds of millions or even billions of dollars. Kudos to them, because running with gazelles is no small feat for relative elephants. Burlington, Ont.-based Evertz Technologies Inc. (No. 90) added almost $175 million to its revenue over five years, reaching $201 million in 2007, for five-year growth of 673%. That was quite a coup for a company that has been in business since 1966, and reflects Evertz’s great success in recent years selling high-definition TV equipment to networks such as NBC, CBS, Fox, CTV and CBC. Another firm that has made the leap from sizeable to huge is Inter Pipeline Fund (No. 57). The Calgary-based company’s revenue soared from $96 million in 2002 to $1.14 billion in 2007. That 1,092% jump was thanks in large part to an acquisition that made it Canada’s biggest oil-sands pipeline operator.

And then there’s Waterloo, Ont.-based Research In Motion Ltd. (No. 30). The BlackBerry producer is in a league of its own, having entered the five-year growth cycle with annual sales of more than US$300 million and expanding by 1,859% since then. More remarkable is that RIM is making its eighth appearance on the PROFIT 100, tying the record set six years ago by BCE Emergis Inc. Simply stunning is that RIM’s growth has accelerated so dramatically as of late that its 2008 ranking is 35 places higher than its position in 2007.

This burst of growth — its sales doubled to US$6 billion in the year ending March 1, 2008 — is above all attributable to the success of the BlackBerry’s massive push into the consumer market. At the same time, RIM has been careful not to neglect its base of corporate clients. In May, it announced the scheduled summer release of the BlackBerry Bold, RIM’s first product for 3G wireless networks (translation: faster data transmission and a raft of new business-friendly advanced services). RIM’s deft move to cement its hold on core customers while in hot pursuit of new markets is exactly the sort of savvy strategy that makes the PROFIT 100 such an exclusive club.

How we found them

The main source of candidates for the PROFIT 100 was a self-nominating ballot published in PROFIT, L’actualité and Canadian Business magazines and on PROFITguide.com, plus mailings to previous entrants, qualifying public companies and prospects identified through the media and other public sources. Calls for entries also ran in Maclean’s, PROFIT-Xtra and PROFIT-Xchange. Finally, almost 20 organizations publicized the nomination drive directly to their members or customers.

Companies were ranked by five-year revenue growth; qualifying companies’ revenue was verified through financial statements, and their chief executives were interviewed by PROFIT. The information in PROFIT and on PROFITguide.com is the only data PROFIT will release on the PROFIT 100.

Originally appeared on PROFITguide.com
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