Innovation

PROFIT 100 Overview

Written by Kara Aaserud

Building a fast-growing company is tough enough when times are good. You have to be a good enough manager to overcome such obstacles as attracting and retaining effective employees and outrunning cash-flow crunches; and you have to be a good enough salesperson to persuade bankers, investors and maybe even your family to buy into your dream. But when your sector gets stormy, how do you keep building your business on an unstable foundation? Show tenacity, persevere, keep the faith in your people and maintain an unwavering belief in yourself were among the most common responses we received from the weather-resistant leaders of this year’s PROFIT 100. Considering who that advice is coming from, it’s worth taking — whether you want to start a business or blast through this recession.

The firms that make up PROFIT’s 21st annual ranking of Canada’s Fastest-Growing Companies are role models of the first order. After all, they have grown their annual revenue by an average of 2,262% over the past five years (2003-08), and no company on the list grew by less than 899%. (Fully 87 recorded five-year growth in excess of 1,000%.) Despite their relative youth, extraordinary growth rates — which normally put strain on profitability — and the pressures of a budding recession, 76 firms ended 2008 in the black. (For good measure, we’ve also ranked the Next 100: Canada’s Fastest-Growing Companies, Nos. 101 to 200, which recorded growth rates from 323% to 872%.)

Factor in the strength of the Canadian dollar and the dearth of good labour during the past five years, and the growth rates of the PROFIT 100 become more eye-popping. They might have been even higher if not for the global financial crisis and economic malaise that gained momentum late last year. Certainly, most of the exporters among Canada’s Fastest-Growing Companies have been feeling the pangs of the U.S. recession for more than 18 months. But if there’s one thing this year’s entrepreneurial all-stars know a thing or two about, it’s overcoming odds.

Take Mehrdad Arjomandi. Not even the collapse of his business model six years ago could stop him from pushing his vision forward. In 1995, he founded Toronto-based MGA Computer Consulting Ltd. (No. 71 on the 2009 PROFIT 100) to provide other companies, large or small and in any sector, with IT counsel and staff. But after the dot-com bubble burst in 2001, Arjomandi found himself with an overdiversified firm whose revenue was falling fast. “By 2003, we faced a lot of problems in our industry,” says Arjomandi. “So, we focused on project management, going only after companies the government was pouring resources into. It was a major reorganization.” Now, the firm’s services are used by Fortune 500 firms and large utilities. Thanks to MGA’s lighting-fast turnaround strategy, it posted 2008 sales of $2.5 million, up 1,176% from 2003.

For others, survival has meant the opposite of narrowing your market: diversification. In 2005, Kirkland, Que.-based Targray Technology International Inc. (No. 73) expanded from producing materials for CD and DVD makers to creating inputs for solar-panel makers. The result? Sales to the solar industry now account for more than half of Targray’s US$225 million in revenue, and the firm achieved a five-year growth rate of 1,155%. (For more on Targray and other “problem solvers,” click here).

Like MGA and Targray, Canada’s Fastest-Growing Company, Allegro Mobile Solutions, is in a relatively new industry: supplying software and services for rugged-handheld computers to companies such as Loblaws, Canon and Sobeys (See “Allegro Inside,” page 36). In 1996, the founders of the Mississauga, Ont.-based firm had the foresight to know that by 2002, due to convergence of mobile applications, there would be a lack of reliable software platforms for mobile workers and the back-end systems that translate incoming data. By timing their leap into a hot market just right, Allegro’s founders positioned their company as the leader in its niche, with revenue of $17.7 million in 2008, an increase of 8,741% since 2003. “Our growth strategy was not about today, but about tomorrow,” says CEO Savino Griesi.

While Allegro marches with many PROFIT 100 firms on the leading edge of information and communications technology, this year’s list shows there’s potential in every corner of the economy, including construction, retail and — yes — manufacturing. In fact, the PROFIT 100 counts 16 manufacturers in its ranks, with an average growth rate of 2,073%. And while some firms are blazing trails in new industries or creating sectors from scratch, others are winning through innovation and reinvention in age-old businesses. One is Lloydminster, Alta.-based ICI Artificial Lift Inc. (No. 29), a maker of oil and gas production equipment, which is breaking new ground with an oil pump jack that can lift 65,000 lbs., but at a much lower cost than its competitors’. Another: Thornhill, Ont.-based Kids & Company Ltd. (No. 38) provides child care with a twist — it targets only the employees of Canada’s largest companies, thus helping those businesses attract and retain staff. As Kids & Company has discovered, the needs of businesses are myriad — and they’re willing to pay for help. Fully 36 of our fast firms ply their trade in business services, making it by far the most popular sector for PROFIT 100 companies.

Foreign markets are another key source of revenue for Canada’s Fastest-Growing Companies — $13 billion last year, to be exact. On average, the 73 exporters on the PROFIT 100 derived 53% of their 2008 sales from outside Canada, up from 27% in 2003, when they generated “only” $794 million: proof that foreign markets represent one of the biggest expansion opportunities.

Who are the men and women behind these success stories? PROFIT 100 CEOs are still remarkably young, with an average age of 43. They’re well educated; 80% have obtained an undergraduate or graduate degree. And they seem to like starting businesses: the average CEO has launched three companies, including their PROFIT 100 enterprise.

Without a doubt, the entrepreneurial elite that make up the 21st annual PROFIT 100 are as inspirational as they get. From upstarts such as Allegro Mobile Solutions to juggernauts such as Research in Motion Ltd. (No. 43), their determination in a rocky economy is a shining example of how Canadian companies — whether large or small, young or old, public or private — can win in good times and in bad.

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 based on 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 at PROFITguide.com. Entries were also solicited through the PROFIT-Xtra e-newsletter, L’actualité, Canadian Business and Maclean’s magazines, through targeted direct mailings to Canadian growth companies, and by the business organizations that are thanked on page 80. 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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