What does it take to build one of Canada's Fastest-Growing Companies? Do you need a top-secret software product, a bullpen full of MBA grads or a hotline direct to Bay Street
The answer, of course, is none of the above. When PROFIT studied the growth
and success of the companies on this year's PROFIT 200 ranking, we found a consistent set of values and tactics throughout the list. And most of these can apply to companies operating in any sector, anywhere in the country.
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Whether you're trying to innovate your way out of a declining niche or looking to get the most from your staff, these five essential strategies could be your secret formula for attaining higher growth and profitability—no MBAs required.
1. Take on the world
Harness the truly amazing potential of selling beyond Canada's borders
Given Canada's limited markets, exporting is the natural path to growth. Increasingly, the innovations and solutions being developed by the PROFIT 200 are finding homes far from our shores. Trading internationally has never been easy, but it's an essential tool for firms that want to reach their full potential. One measure of this: PROFIT 200 companies grew their exports more than twice as fast as their domestic revenue from 2005 to 2010.
At Toronto-based Varicent Software Inc. (No. 4 on this year's PROFIT 200), which develops software that manages performance-based compensation such as sales commissions, Canada accounts for just 6% of its sales. The company was built to serve the U.S. market, which generates almost 80% of sales, so president and CEO Dan Shimmerman considers "exporting" to be sales outside the U.S. and Canada. Exports to Europe and Asia now account for 15% of the company's $30 million in total sales and are the fastest-growing part of the business.
Varicent was drawn into exporting overseas by U.S.-based multinational clients who wanted to extend Varicent products' productivity benefits to colleagues in Asia and Europe. But when Varicent decided to chase these trade opportunities, says Shimmerman, it made some classic mistakes.
"We used a 'spray and pray' approach," he says. "We'd just attack these regions, thinking we would land the business and figure it out later." Shimmerman soon realized his firm had bitten off more than it could chew. Varicent needed carefully selected partners in each region—you can't just parachute in someone from Canada. And your sales reps have to speak the language. For a firm that prides itself on customer service, dealing with language and time-zone differences proved disastrous. After suffering setbacks in Europe and South America, and firing Varicent's first director of foreign sales, Shimmerman devised a new plan: focus.
Today, Varicent's U.K. office concentrates on working with customers in Europe who feel comfortable operating in English; it has pulled back from less accessible countries such as Turkey. The firm is working with a trusted partner in Latin America to crack the Mexican market. And, while Varicent works with selected systems integrators in various cities to promote and manage its services, it also has its own staff sprinkled around Asia, mainly in home offices, to work with specific clients. The most important lesson Shimmerman has learned: getting things done overseas—such as having to fire and replace someone—takes a long time, so you can't let problems fester. "If you realize the plan you've worked out isn't working, fix it fast," he advises. "The ramifications of having a flawed formula are much worse in foreign markets than in North America."
Shimmerman recently finished a six-week tour, meeting with customers in 50 cities in Europe, Asia and Latin America. But he doesn't go there to sell; rather, he updates clients on new developments and probes for their experiences with his firm and its products: "I'm focusing not on what we do well but what we can do better. I gather information and bring it back home for the team to hear." Export growth is full of hassles, but it's worth it, says Shimmerman: "If we're going to accomplish our goal [of $100 million in sales within three years], we have to be a global company."
Dwight Gerling agrees that the key isn't just landing the fi rst sale but providing the service that keeps clients coming back. As managing director of Toronto-based DG Global Inc. (No. 66), he visits Japan and other Asian countries three to six times a year to build relationships with the commodity traders and food processors who buy his food-grade soybeans and other commodities. "The Asian culture is all about relationships," he says. During his visits, Gerling will tell clients about changes in the marketplace and discuss their evolving needs, such as helping them select a better soybean if they want to start producing tofu as well as soy milk. "They appreciate me coming over," he says. "People see me more as a friend than just as a business partner."
Gerling learned the soybean business as a commodity trader for Maple Leaf Foods. He started his own company in 2005 to leverage his connections and make better, faster decisions now that he no longer needed the approval of a corporate boss. In five years, his dedication to customer service has helped increase sales by 878%, to $81 million per year. Persistence also helps; Gerling once sat outside an office in Southeast Asia for three hours waiting for a top decisionmaker to return. As a reward for Gerling's patience, he got a few minutes to pitch his services. The next day, the firm placed its first order; it is now DG's biggest client.
But you can never take a client for granted. Asian customers, in particular, rely on relationships and take errors seriously. "You have to deliver what you promise," says Gerling. "If a deal goes bad, they'll never forget it. A lot of Canadian companies don't realize that it's very difficult to get that trust back." Last November, a client had concerns about a container shipment just as Gerling had returned from a trip to Asia. He promptly got back on a plane for a 26-hour flight back to fix the problem.
Even in a globalized world, there's still room to deliver unmatched service, says Gerling. A few years ago, an Asian client asked if Gerling could arrange an extra soybean shipment; the client's bulk freighter had been delayed, so it would have to shut its plant temporarily in a few weeks if it couldn't get an order delivered sooner. Within three days, Gerling found a faster ship and came up with 178 container loads, arm-twisting Ontario soybean suppliers and hiring four trucking firms to convey the containers around the clock to Toronto, from whence they moved by rail to Vancouver. "It sounds easy, but there were 101 moving parts in that deal," says Gerling.
Still, that's part of his advantage as an independent trader. "The people I work with are all family businesses," he says. "Most big companies are 9-to-5ers. They couldn't come close to doing what we did." DG's services also include a website with a private log-in area in which clients can get more information on the soybean market or track their shipments. The site has required little investment and takes only five minutes a day to maintain, says Gerling, but, he adds, "nobody else in my market does that." It's not just a service to clients; it also saves his six-employee firm plenty of time and tens of thousands of dollars a year in courier costs.
2. Embrace Transparency
Open your books so staff know the score—they'll adopt a winning mentality
Communicating clearly, openly and consistently with your employees is a powerful business-building tool. PROFIT 200 companies are leaders in sharing with their staff the state of the firm's finances, key goals and progress toward achieving them. They also build information-sharing exercises into their schedules so their staff know what they need to do better every day if the company is to achieve its goals.
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Endo Networks Inc. of Oakville, Ont. (No. 65) is typical of most PROFIT 200 companies in that its employees' knowledge and creativity are essential to its success. Endo uses kiosk-based computer games to engage retail shoppers and office tenants in marketing offers and surveys. You know those annoying people who greet you inside a store and try to sign you up for a credit card? Endo displaces this tired sales pitch with a touch-screen computer game that gets customers to disclose just enough personal information to help the retailer customize its marketing pitch. It's more fun and engaging than the traditional method—and several times more effective as a sales tool. That has helped spur Endo's sales growth from $1.3 million in 2005 to $12.7 million in 2010.
"We don't hit people on the head with a clipboard," says Endo president Peter Day. The firm applies sales-force automation technology to field marketing, a service that requires intelligence, subtlety and strategy. Endo relies on its 38 employees to put their all into developing new and more powerful solutions for its clients. And that means Day has to be an expert on motivation.
At quarterly town-hall meetings, he shares essential operating information with all his staff. The key performance indicators (KPIs) include revenue, budget targets, profit margins and client-satisfaction scores. Digital signage in Endo's offi ce updates staff on the number of field events conducted (in the thousands per year), number of consumer interactions and reports from mystery shoppers' random audits of field teams. "It's exciting, motivational and loyalty-building to see the KPIs in a timely manner," says Day. "And every time we have a significant win, it's immediately blasted to the whole team, so everybody gets to share in the pleasure."
Since Endo's employee-compensation plans include many of these KPIs, Day is trying to create a "sports team" culture in which everyone roots for higher scores. "Even with our technology-development team, part of their bonus depends on what's happening in the field," says Day. "That's teamwork—everyone has to do well. I want my employees to be Endo superfans."
In many companies, employee performance is still rated as "good, keep it up." That wouldn't work in sports, and it doesn't fly at Endo. "I'm trying to eradicate subjectivity everywhere in the organization," says Day. That way, if an employee is underperforming in, say, budgeting or customer satisfaction, both employee and manager share the same documentary evidence and can work on a plan for improvement.
After Day's lively, 90-minute town-hall meetings, Endo holds a lunch to which suppliers are invited. But fear not—Day makes clear which numbers can be shared publicly and which shouldn't be. Still, if some of the latter sort do slip out, he doesn't fret: "They're leaking to another group that we want to be Endo superfans."
At Calgary-based Evoco Inc. (No. 140), president Alice Reimer turns transparency into a standup routine. The firm, which develops real estate management software for high-volume retailers such as Staples, Home Depot and Wal-Mart , holds a meeting every Monday in Evoco's lobby at precisely 9:21 a.m. All 56 employees attend, standing for 20 to 30 minutes to hear team leaders provide status updates on their groups' projects, as well as about any big wins or key barriers encountered during the previous week.
Continuing the sports metaphor, Evoco's transparency cycle also includes a kickoff meeting early each year at which managers discuss specific goals for the company and for each department. Using these numbers, the leaders develop personal goals and objectives for each staff member. Reimer says managers review these goals at least twice a year, but remain open to any questions or concerns from staff. "You have a question? You want to talk about anything? We share openly with our teammates," she says. "That has helped us not only to retain but also to attract some outstanding folks."
3. Become a skills factory
Focus on staff training to make every employee a first-line player
Talent is scarce—and will become more so as the job market recovers further. So, growing companies must find the right formula for keeping their most effective employees happy. Increasingly, PROFIT 200 firms are investing substantially in their employees' professional development. By offering various forms of skills training, they're keeping their top talent challenged, engaged—and around.
Winnipeg-based Broadview Networks Inc. (No. 162) sells and manages IT infrastructure for mid-sized and larger organizations in Manitoba and Saskatchewan. President Michael Orloff says the company's growth—267% over the past five years—stems from seven core values that guide Broadview and its people: sustainability, unity, service excellence, strategic advice, accountability, balance and mastery. The last of these is key, because the tech world changes so fast that employees who don't continually expand their skills will leave their clients underserved or at risk.
That's why Broadview has adopted a training program, or road map, for every one of its 20 employees. This extends well beyond a typical tech company's certificate training from its vendors, to include sales training, customer service, accounting and general career topics. "We're always looking to grow the skills of everyone in the company," says Orloff. (Displaying collegial spirit, even he has taken training for programming, HR, business development and strategic planning—although, he admits, "I'm definitely at the lowest end of the scale of accomplishments.") These personal development road maps are included in each employee's career plan and discussed at every quarterly employee review.
Broadview also has invested more than $20,000 in a test lab in its office that simulates a client data centre. This gives employees a place to study technical applications, saving them from having to fly to Toronto or Calgary to find similar facilities. And suppliers have contributed systems worth more than $20,000 to equip the lab with the latest technology, says Orloff: "It's an absolute differentiator for us."
But the bottom line is the effect this training has had on Broadview's staff. Turnover is "extremely low," says Orloff. After nine years in business, he can still remember the one time he lost an employee to another job: "He went to work for an oil and gas company. We couldn't compete."
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Orloff says Broadview is developing a reputation as the best in its market—"and the best people work here." Besides the pride employees feel in knowing that they're expanding their skills and enhancing their employment value, says Orloff, the training makes staff more confident and thus less stressed: "If you're not confident, you have to work twice as hard to impress a customer."
Toronto-based Cirrus Consulting Group Inc. (No. 81) helps doctors and dentists run their practices more effectively through management training and systems consulting, and by helping them negotiate lower office rents. "We're retooling the delivery of health care from the ground up," says Cirrus CEO Jeremy Behar. To do that, Cirrus requires smart, experienced staff who are willing to learn how to run better medical practices and know how to communicate. People like that are hard to replace.
To encourage employee retention, Cirrus promotes ongoing training and development, manager/employee mentoring, guest speakers and team scrums in which employees role-play to practise what they've learned. Behar recently hired two senior executives, a VP of operations and VP of sales, to put more oomph into inside training. The two often tape management seminars provided by Cirrus professionals, then review the tapes afterward like avid hockey coaches, looking for opportunities to trim the message or fix the body language. Behar himself regularly attends staff seminars to offer his own feedback.
To stay in front, Behar says, all 31 employees must be well read in subjects such as business, psychology and personal finance. That's why, he says, "I send a lot of books to people." The centrepiece of Cirrus's office is "The Drucker Room," a library of management books named for Peter Drucker, the godfather of effective management. Behar also encourages employees to order online any books they want, provided they donate the books to the company library once they're done with them. Last year, Behar spent about $5,000 on books—less than the tab for many training sessions.
With sales almost doubling this year, Behar hates losing a single employee, because qualified new hires take too long to find and train. But with the company's focus on training and development, he says, "Turnover is becoming less and less of a problem. You just have to do your best to make everyone feel they're being treated like a king."
4. Cultivate resilience
Keep a sharp eye on trends and be ready to leap from fading to growing markets
Things rarely go how you expect; when markets turn sour, adaptable organizations bounce back by developing new strategies around new growth opportunities. But first, they have to spot these opportunities.
Barry Jinks is the rarest of entrepreneurs— a CEO who has made the PROFIT 200 list with a second company. His previous growth magnet was Spectrum Signal Processing Inc., a producer of signal-processing hardware for clients such as HP and Nortel. When Jinks left Spectrum in 1999, he decided to go into the software business, which offers fewer hassles in inventory and production. His new company, Vancouver-based Colligo Networks Inc. (No. 160), develops systems that help people share content more easily on private databases.
Here's the problem. The first client Colligo's president and CEO decided to approach, back in 2000, was Lotus Notes, a collaborative content-management application that IBM liked so much that it bought Lotus. After analyzing the market, Jinks decided to focus on a specific professional market and selected accounting. Raising private venture capital, he built a team of people, developed a product called Workgroup for accessing Lotus Notes from mobile devices and sold 50,000 units to PricewaterhouseCoopers, plus others. Then, in 2001, the roof fell in. After the tech meltdown and 9/11 attacks, companies slashed their IT budgets and accounting firms were hard hit. As business slowed and new capital dried up, Jinks realized his company needed to restart or die.
Colligo went into maintenance mode, shrinking from 30 people to just three. Rather than build a growth company based on venture capital, Jinks decided he now had to take the slow route of building through profi ts. "I had to behave like a garage startup," he says. "But I had a real belief that what we were doing was going to matter to people."
Jinks consulted other tech experts in his network, who advised him to consider an emerging content-management product from Microsoft's ecosystem: SharePoint. Searching for a problem to solve on Share-Point, Jinks found a familiar one: there were no easy ways to access and modify documents from mobile devices.
Jinks' team started devising a demo solution, which it presented in 2005 to Microsoft and 50 of its partner distributors. Both groups said they would love to sell the product, and Microsoft contributed a five-figure amount to support its development. Eagerly, Jinks sought feedback from Microsoft and the companies that install its systems, looking for features and requirements that would make the new product a must-have. "We did a lot of research," says Jinks. In 2006, Colligo launched Contributor Pro, which put a more user-friendly face on SharePoint and put Colligo back on the growth track. With 100,000 users in 55 countries, Colligo tallied 2010 sales of $3.5 million, of which $3 million were from SharePoint products, including Contributor Pro. Jinks' team—now 27 strong—is working on new features and products to introduce later this year.
How did Jinks manage this turnaround? By accepting the facts, taking drastic action, exploring new options, seeking advice from contacts and feedback from future resellers—and, crucially, having the nerve to start over. "It was a different platform, but the need and the customer base were just the same," says Jinks. "It was great that we found an adjacent market so we could leverage a lot of what we'd learned."
"Nimble" could also be Bob Crane's middle name. "Innovation is a concept we hold dear to us," says the president of N2 Ingredients Inc. (No. 170). His Oakville-based firm buys and sells organic oils and sweeteners for food processors, but recently jumped into making gluten-free flour mixes for cakes and pancakes. N2's secret sauce? "We tend to be on the leading edge of food trends," says Crane.
He developed his trendspotting acumen by accident, while selling preservatives and dough conditioners for another company serving the food industry. Eventually, Crane realized that more and more of his sales were coming from a new category: organic food products. When his employer tried to cut back on sales reps' compensation, Crane jumped ship in 2004 and opened a business as Canada's first distributor of certified organic ingredients. He got his first order— for $27,000 worth of peanut flour—within 30 minutes of setting up shop.
With demand growing by 30% a year, Crane was able to source organic products from Europe and the U.S. and offer efficient just-in-time delivery service that larger distributors couldn't match. N2's sales hit $1 million in the first six months.
But when recession struck in 2008, demand for organics slowed. At the same time, other distributors started moving onto N2's turf. Crane realized it was time for another leap: "Our business isn't organic; it's being the first to see new trends in the food business." His 14 employees are always looking for new products, talking to industry leaders, scanning industry journals and stalking the trade shows for new ideas.Knowing N2's commitment to innovation, a grocery retailer had asked N2 to look into developing gluten-free baking mixes for the one consumer in 133 who can't digest traditional grains such as wheat, rye and barley. Crane saw just what he was looking for: a fast-developing market still up for grabs. He set out to seize a high-quality niche to meet growing demand as more people become aware of gluten intolerance.
N2 had already acquired a blending machine to create its baking mixes for private-label sale in supermarkets, so it was fairly easy for Crane to come up with new gluten-free formulas and begin selling them to his retail partners. The gluten-free mixes now account for 15% of N2's $15 million in sales, and Crane expects that to surge to 40% of revenue within three to five years as more retailers line up to buy. He has kept his lead in a market in which no real competitor has yet emerged. And he hasn't stopped looking for the next big thing. "Big trends," he says, "don't come along every day."
All the same, keep an eye on chia seeds.
5. Build with big in mind
Systematize your business to be more efficient today and scalable tomorrow
As your company grows bigger and more complex, you'll need standardized formulas for keeping up with your business's and employees' performance. The earlier you start implementing proper business processes and systems, the better you'll stay in touch and out of trouble.
Asked about the systems that make his company run, Kevin Higgins pulls out a thick binder marked "2011: Better, Stronger, Fitter" from a stubby bookshelf in his exposed-brick Toronto office. It contains all the top-level paperwork he needs to run Fusion Learning Inc. (No. 146), a salestraining company with 17 employees and $5 million in sales.
Higgins, the firm's president, is particularly proud of his one-sheet "Strategic Blueprint," a brightly coloured document that sums up Fusion's five key challenges for 2011: people, process, products, profi le and performance. The diagram, which Fusion updates several times a year, includes the key objective in each of the five categories (e.g., "We must achieve discipline in our processes so that we execute with excellence"), specific "stretch goals" (e.g., deliver 0% unforced turnover among Fusion's "A-rated" employees) and three key tactics designed to meet those goals (e.g., by the second quarter, sales materials will be ready seven days in advance). It's a mission statement, to-do list and accountability enforcer at a glance. Yet it's only the tip of the iceberg that encompasses all the systems and processes that underlie the sustained success of a company that this year ranks on the PROFIT 200 for the fifth time.
Systems have been part of Fusion since the company was just a little spark. "They've helped us to grow, and they've allowed us to grow," says Higgins. Without systems, he says, professional-services firms such as his can easily lose track of projects or forget where the revenue will come from. Today, everyone at Fusion has his or her own "Strategic Blueprint," customized to individual goals and objectives. Employees know what they have to accomplish this year, and how they are measuring up.
Behind those blueprints is a maze of documents and reporting systems that track everything from new clients, product development and marketing schedules to monthly financials, teamwork and employee reviews. Higgins is particularly proud of the sales force tracking systems that log how many calls each rep makes per day or week, how many proposals they send, how many first meetings they arrange and how many deals they close. Sales reps meet with their manager every Monday at 8 a.m. to review their performance for the past week and current month. "They know if they're keeping up or not," says Higgins.
But he also takes pride in the employeereview process that transforms an awkward, qualitative chore into a professional system. "In God we trust," says Higgins. "All others bring facts and data."
Fusion has developed a one-page form designed to ensure that the firm conducts every employee performance review consistently and constructively, and that it has been properly prepared for. Well beforehand, the employee's manager sends a note asking everyone in the firm to offer their feedback on the individual: what is the employee doing right ("green flags") and wrong ("red flags")? Managers use these comments to prepare their own remarks; they even have to write down the first two questions they'll ask the employee. Higgins admits this process can be trying, especially for employees leafing through pages of complaints about their work. Still, at the end of the day, both manager and employee understand where the problems lie and can collaborate on a plan to improve. (Higgins himself has agreed to work harder on "celebrating and appreciating" employees—proving that everyone at Fusion conforms to the process.)
The great thing about systems is that once they're in place, they don't take much more time to monitor or modify than having no system at all. "When you stay on top of things, your job's easier," says Higgins. "When you fall behind, that's when it gets tough."