Podcast 52 Transcript: PROFIT 100 Part 1

Ian Portsmouth: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada's small businesses. I'm your host, Ian Portsmouth, the Editor of PROFIT Magazine and we've developed this podcast in cooperation with BMO Bank of Montreal.

PROFIT recently released a 24th Annual PROFIT 100 ranking of Canada's fastest growing companies and despite the recession, these entrepreneurial overachievers are doing just fine. The average company in the top 100 recorded 5-year revenue growth of 2,262% and was profitable last year. And if you dip below the top 100 to the companies that we call the next 100, you won't find a single business that is less than 4 times bigger now than it was 5 years ago. What makes these companies tick so well and what can you learn from them? We'll answer those questions by speaking with the leaders of three of Canada's fastest growing companies and we'll do that in two consecutive episodes of the Business Coach. Randy Litchfield is President and co-founder of Inbox Marketer, an email marketing company based in Guelph Ontario. Inbox Marketer achieved 2008 sales of $3.4 million and ranked 98 on this year's PROFIT 100 with 5-year growth of 902%. Boaz Shilmover is President of Arte Roofing and Construction based in Calgary, Arte provides roofing and waterproofing services to commercial and residential clients. The company placed 170 on the 2009 PROFIT 100 with 5-year revenue growth of 422%. It generated revenue of $6.6 million in its most recent fiscal year. Finally, Kevin North is the President and CEO of Dyadem International, a developer of risk management software used in the process and manufacturing industries. Based in Richmond Hill Ontario, Dyadem recorded sales of $14.7 million in 2008, an increase of 357% from 2003. That performance earned Dyadem 192nd place among Canada's fastest growing companies, the class of 2009. To all three of you, welcome to the Business Coach Podcast.

Guests: Thank you, thank you, thank you.

Ian Portsmouth: So Randy, I just wanted to start with you, given your role in creating the PROFIT 100 twenty-one years ago as the editor of Profit Magazine. I should probably start the interview by asking why you believed the ranking of Canadian growth companies was needed and what your goal was for the program?

Randy Litchfield: We started it twenty years ago, it was, of course, a natural extension of the mandate of the Magazine which is always to, you know, study entrepreneurs, promote entrepreneurship in Canada. And if you look back at the way Canada was then, it was a more corporate bureaucratic culture than it is today. And so this was really a way to provide some methodology and rigor in actually analyzing winners in the entrepreneurial community and study how they did it, extracting lessons and sharing them. It created a vibrant story that, you know, certainly resonated among entrepreneurs at the time. And, you know, I was just flabbergasted to attend th event last week and just to see how this has expanded in that time.

Ian Portsmouth: Well, you are the first editor of Profit Magazine ever to end up on the PROFIT 100 and I hope for my own sake, that you are not the last.

Randy Litchfield: I hope so too.

Ian Portsmouth: Kevin, let's start with you. When did you start your company and what opportunity did you see that prompted you to start your business?

Kevin North: Yes, Ian, I actually didn't start the company, I was there pretty early on and we started as a company that did a very specific risk assessment piece for the Oil and Gas Industry that was driven by very specific regulation out of the U.S., essentially they were regulations that we were trying to adhere to in the early 90's anyways where addressing OSHA PSM which was looking at protecting employees from industrial accidents. So, and actually just making sure that people's processes were safe. When I took over the company a few years ago, it was really about leveraging some of those technologies, bringing them to other industries, looking at risk management as a whole and start putting in some early feeds for enterprise risk management. We all know about socks in 2002 and the whole advent of that entire market. We were looking at things from the operational side and also from the quality side and tried to the discreet manufacturers to look at their own inherent manufacturing risks that they had because we certainly knew that product recall was amongst one of the biggest problems in any discreet manufacturers and we felt that we could leverage our technologies to help those companies design out their risk, design out their failures and ultimately bring a better product to the consumer.

Ian Portsmouth: Boaz, you're in a similar situation than Kevin in that you were not the founder of your company. So first tell us when did your company start and how did you become involved in it?

Boaz Shilmover: My company was originally founded by my father in 1980 and was re-incorporated again in 1998. I got involved 2002, prior to that, I was in the Oil and Gas sector and I always looking for a new opportunity and approached my father at that time. The business at that time was really a one-man operation run from my father's home and much of the work was sub-contracted out focusing on the residential market. I thought this was an opportunity to walk into something that had a base, had a platform where I could build a larger operation as a way I saw it and cap it into a new strategic direction.

Ian Portsmouth: That's great. And Randy, where did you get the idea for Inbox Marketer?

Randy Litchfield: Well Inbox was actually the second company I founded and you know, actually my career started in publishing. In a way, I've always been in publishing. I was in print publishing with Profit Canadian Business Magazine. The company I founded in the 90's was an internet publishing company. We published bidding opportunities and sold them to contractors worldwide. I am now in email publishing. So I have always been in publishing so it was natural to kind of look at the email space. So when we founded Inbox in 2002, the email world was still pretty wild and woolly, still is in many ways, but in the beginning, everybody could do it, and corporations thought so too. It was a matter of sending, you know, thousands of messages out in Microsoft Outlook. But soon, it became necessary to really apply the methodologies of direct mail and that's what we did. So, you know, we tract and analyze and measure responses and optimize messaging and, you know, deliverability as a key concern now. So you really do require a lot of infrastructure and expertise to get millions of messages from a client out and in the inbox. And so, it's very difficult to do that without that experience.

Ian Portsmouth: And Randy, you are in a fast changing industry that works in a fast changing business environment. Can you tell us, and especially the start-up entrepreneurs out there, how your company has deviated from your original plan or vision for it?

Randy Litchfield: Well, we've always followed the leads of our clients I guess but what happened in our industry is the online kept expanding, you know. So, we started in email but we were, you know, inevitably dragged into doing a lot of web application as well. We recently launched a mobile marketing division because that's really one of the latest trends and latest requirements. So we found ourselves getting into different aspects of marketing but always online. So, it's really a combination of the market itself changing, us monitoring those changes and also listening very closely to our customers.

Ian Portsmouth: Boaz, when you joined your roofing company, you must have had an idea for it and you had to sell your father on it. Have things worked out the way that you had planned?

Boaz Shilmover: Yeah, it worked out actually better. The idea originally when I came in was to move it towards more the commercial contractors that offered various building envelop services as opposed to the residential roofing contractors that it was. This actually allowed me to leverage a lot of my father's strengths who's a very technical individual in terms of knowledge of the construction. So as opposed to him having to focus on the day-to-day operations as I was able to take that focus away from him, to leverage his knowledge to go after the commercial market which allowed us to really go from a two-man operation and sub-contracted work to an operation of seventy individuals, we're offering various service lines as it pertains to the building envelope to roofing and waterproofing.

Ian Portsmouth: And finally, Kevin, how have things changed since you took the helm?

Kevin North: Well, I think what we have done is being able to capitalize on some key markets that have done very well in the last few years and relatively speaking survived the recession better than others in the industry. We moved into medical devices and pharmaceuticals heavily. So we have a risk management message there that is really really specific and dead on to a lot burning FDA regulations. So we are now no longer a company that really relies on just one sector, that being the Oil and Gas sector to make our revenue numbers. We really now become a cross industry, risk management software company that really cannot be subject or victimized by the particular pitfalls of any given industry.

Ian Portsmouth: So, it sounds like in each of your cases, things have gone favorably, you've encountered more opportunities than you have challenges. But one big challenge in the elephant in the room right now is recession. How has recession impacted your companies and what have you done about it? Randy, let's start with you.

Randy Litchfield: Well, I guess the way it impacted us, it's removed some of our growth, you know, by virtue of being on the PROFIT 100, we've had a tremendous growth over the last 5 years. Growth this year, instead of, you know, the usual 40% for us, it's probably maybe 5 or 10%. Personally, that's not a problem for me, we needed a breather and it's just a good way to take stock, get even closer to your customers, listen to the marketplace. And we're not shrinking, we are growing but we are growing at a saner pace right now.

Ian Portsmouth: Kevin, have you seen the same benefits from recession as Randy?

Kevin North: Yeah, we definitely been slowed down by the recession and to be very honest with you, I mean a lot of companies would look at our, so far, year-to-date quarter over quarter revenue increases from last year and they would say, well, he deserved a little bit more than growing slower. We're actually growing at about a 28 to 30% click from last year's numbers. So that may seem pretty good for some companies right now in this economy and I definitely, you know, we're pleased with that growth which was what we had told our Board for our 2009 budget and outlook. Yet, if you look at traditionally, our traditional run over the last 2-3 years was certainly much higher, you know, we were growing at worst case scenario 50% a year. So, it's not unexpected, you know. We were doing what we thought we would do and the recession is treating us the way we thought it would treat us. But I guess we are somewhat benefiting from the more introspective opportunities that a recession allows for when you can focus in and you're looking at your company and look at the internal mechanisms and you're not just, you know, hiring twenty-five thirty people this week, you know. It does give you an opportunity to get some perspective. Yet, at the same, you know we are growing at still a very decent click.

Ian Portsmouth: Boaz, you have the fortune of being in one of Canada's fastest growing provinces, Alberta and you are in the Calgary market. How has recession impacted your business?

Boaz Shilmover: Oddly enough, it's been positive and I say that for several reasons. Our company has always focused predominantly on a cash position and our production capabilities, not ever trying to get ahead of itself. And last year, when I was at the PROFIT CEO Summit, one of the guest speakers was an Ecotrends economist who was giving fair warning of, I guess, the tsunami that was coming. And when I got back to Calgary in June, I took that to hard end. We immediately shifted our direction in terms of the majority of the clients that we were targeting, shifting in from the condo market to ultimately the government and institutional facilities. We have reaped rewards of that because ultimately, year to date, we're up by 58% and with contracts on our books, if we can keep our production capabilities, we'll be up by 70% at the end of this year. The lost of other companies in terms of the unfortunate layoffs that they had to go through have been our benefit further because roofing and waterproofing has never been that an attractive industry for professionals. We are now seeing that we have been able to hire CET's and civil engineers come on board and strengthened our operations. In fact, I see us going through this recession strongly and coming out of it even stronger.

Ian Portsmouth: Well, congratulations on that. A very very quick pole. Feel free to speculate rapidly. When do each of you think the economy will bounce back if not in your specific market then generally? Let's start with you Randy.

Randy Litchfield: I am certainly pessimistic on the economy acted generally. I think the U.S. is just going to be a persistent drag on world growth. I mean, most markets are in depth to that. So the depth problem thereabout, the consumer and commercial and government public sector levels is huge, it's not going to go away over night. So I really see a three to five year kind of period of reduced growth. I don't think things will get much worst than they are now.

Ian Portsmouth: Boys, what's your view?

Boaz Shilmover: You know, I don't know is the best answer. What I do know is that when the economy is running all cylinders, we tend to plan based on that happening for the long run. I believe the same has to happen when you are in a recession, operate your business and adjust its model to operate within that environment. Whether that's going to be six month, a year or three years, this way you can operate profitably and successfully and just be prepared for when that turn around comes and take advantage of it.

Ian Portsmouth: And Kevin, when do you see things bouncing back?

Kevin North: You know, I am one of the people that think that we have actually hit rock bottom, I am sure I am not the only person, I mean, there are a lot of us that believe that we've already not only hit but probably, we're passed that rock bottom. But, you know, on the recovery side, I don't see a recovery and I say, I think the beginning of our recovery to look at Q2 in 2010. And one of the things that I am noticing, I think there's … people are still waiting for that piece of good news and there are some, I think, some denial in certain sectors going on and I think what we have to do as a market and as an overall economy, I think we have to start living with a few negative quarters, we have to become numb to sort of the negative marketing consumer trends data and there's got to be that realization that we are in this as opposed to the expectation at any given day, we're going to wake up in the morning and boom, we're out of it. I think the market has to somewhat be less reactive to the trends and economic report data of the public sector especially. And I think at that point, when we will live with it for a while, I think we'll slowly start to, you know, begin our next steps for recovery which again, I see in maybe, you know, Q2 2010.

Ian Portsmouth: Thanks gentlemen. That's all the time we have for part 1 of this 2 part series on the 2009 PROFIT 100 ranking of Canada's fastest growing companies. Randy Litchfield is President and co-founder of Inbox Marketer, an email marketing company based in Guelph Ontario. Boaz Shilmover is President of Calgary based Arte Roofing and Construction. And Kevin North is the President and CEO of Dyadem International which is headquartered in Richmond Hill Ontario.

So that's' it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com, profitguide.com and iTunes. If you have any comments or suggestions about the podcast, please send them to me at ian.portsmouth@profit.rogers.com. I hope you will listen to part 2 of this special two-part series.

And until next time, I am Ian Portsmouth, the Editor of PROFIT Magazine, wishing you continued success.