What Australia’s fastest growing companies have in common
In one of the most uncertain periods in economic and business history, the BRW Fast 100 companies have thrived. BRW’s list of the fastest growing small and medium established companies compares average annual revenue growth in the three years to 2011-12. That means the base year was 2008-09 – a 12 month period that saw the collapse of Lehman Brothers and a concrete-laden S&P/ASX 200 sink in March 2009 to its lowest in six years.
“Business conditions were very hard in 2009 and, after a brief recovery in 2010, have continued to be tough in 2011-12,” co-director of finance and IT recruiter SustainAbility Consulting, ranked 27th, Martin O’Donnell says. “This has affected demand for our services.”
The median date of establishment of companies on the list was 2006 but a brave 17 actually started on the eve of the global financial crisis, in 2008. “Within months of starting our business the GFC came into full force,” chief executive of Smith & Sons Renovations and Extensions, ranked 30th, Corey Passey, says. “We found it very difficult to find franchisees with any money to invest with us.”
Seventy-one of the companies on the list reckon there was an economic downturn during the past four years.
The fortune of Compass Health, which delivers nursing and paramedic services, was tightly linked to its clients. “We went through the 2008 downturn in the mining industry,” business development director Tony Metcalf says. “[On] December 8, 2008, we lost close to $4 million in signed contracts because the projects were simply stopped.”
But even in these hairy times, the BRW Fast 100 prospered. In 2011-12, the companies collectively turned over $1.688 billion and employed 4192 people.
There are a number of reasons for this resilience and success.
Upside in the downturn
For many businesses, the downturn was a positive experience. “The economic downturn in 2008 was the catalyst for growth in our business and it was the best thing that could have happened,” P2 Group joint managing director Paul Marsh says. P2 Group, ranked 99th, helps employers to prevent and manage WorkCover claims.
“During the economic downturn we found more organisations were prepared to invest in a strategy that significantly reduced their workers compensation costs and improved their cash flow,” he says.
Where others retreated during the GFC, the Fast 100 advanced. “It provided further opportunities to expand our business as bricks and mortar competitors reduced investment and marketing,” the chief executive of online fashion retailer SurfStitch, ranked 13th, Justin Cameron says.
But more broadly, the Fast 100 companies exhibit four traits that aspiring entrepreneurs would do well to note. As always, they rate as outstanding when it comes to spotting a niche. In fact, “saw a niche” was the most popular response (67 per cent) when asked the reason for starting up the business. In addition, they are resilient against factors – be they government or economic – that are out of their control, are not afraid of reinvention and are quick to take advantage of change.
Trendspotting to the fore
Their vision for a niche is evident from clear industry biases that crop up on the list. Recruitment is always well-represented on the Fast 100 but in 2012 there are some other curious industry developments, showing the founders can spot trends before they become mainstream.
Five companies have noticed consumers spending a lot on vanity, with three health and beauty businesses waxing, tanning and botoxing their way in to the top ten and a couple more scattered throughout the list. Well-being extends into the workplace with four businesses on the Fast 100 that provide varying occupational health services – mostly linked to the mining industry. And the number of training providers has spiked to seven from three last year. But as Will Glasgow found, although the training industry displays some innovation, many players are also reliant on (and some profiteer from) lucrative government handouts.
But government policy can give and take away. Twenty-two have been affected by the federal government carbon pricing scheme. Most are concerned about rising input costs, especially in transport but are taking steps to reduce this. “Our cosmetic lasers use a cryogenic coolant known as ‘cryogen’ that has had a substantial increase in cost due to the carbon tax,” Laser Clinics Australia chief executive Alistair Champion says. “We are currently looking at alternative methods of cooling the skin, such as air for both environmental reasons as well as economical.”
But the Fast 100 are proficient in dealing with – and sometimes taking advantage of – structural factors that are out of their control. Thirty-four have been affected by the high Australian dollar. For the importers it has been a blessing. The two gym chains on the list – Jetts Fitness and Plus Fitness – are cheering lower start-up costs for new locations due to cheaper foreign-bought equipment.
Reinvent yourself
The companies on the list are not afraid of reinvention. For some this means a name change, but also it’s about rapidly responding to changing customer demographics. “The 2011 census showed that nearly a quarter of the population was born overseas, many in countries with English not as the first language,” Intellitrain chief executive Paul Eldridge says. “From a training perspective we have to be really conscious of ensuring that we are able to look after students who can have language difficulties. We are also seeing a change in the training delivery preference from classroom to online and e-learning … Gen X and Y’s are more comfortable with online learning.”
For others it’s about acting on wider business trends. It may seem counter-intuitive but the Gen Y entrepreneurs Oscar Martin and Chris Wirasinha, who started the wildly successful (and wickedly funny) pop culture website Pedestrian.TV, started out in street press. “Our original business and plan for Pedestrian was quite different to what it has turned into,” Wirasinha says. “Our first product – the world’s first free DVD magazine, called Pedestrian, has transformed over seven years into the thriving online media business that we’ve created today.”
Be nimble
This nimble approach underpins much of the Fast 100’s success. The cut-off for inclusion on the list has increased to 39.2 per cent growth in 2011-12, compared with 35.5 per cent in
2010-11. The total revenue has dropped significantly to $1.688 billion from $4.098 billion – but a large chunk of that is due to the departure of Hostplus Superannuation Fund, which was ranked third on last year’s list with revenue of $2.340 billion. This year the largest business, by revenue in 2011-12, is retailer Delta Agribusiness, which turned over $180.3 million and is ranked 65th.
Proving that growth is not just for the young, the oldest company on the list is mining services provider Pioneer Drilling, which was established in 1982 and turned over more than $7 million in 2011-12, placing it 75th on the list, with average annual growth over three years of 50 per cent.
There are 71 new companies on the list, with only 29 returnees from 2011. It’s tough to sustain consecutive years of fast growth, as Leo D’Angelo Fisher found in his report on the list’s fast and sustainable.
Grow, but not at all costs
Only two businesses do not anticipate revenue growth in 2012-13 but 58 would like to grow faster. This may be a tough ask, given 45 per cent nominated “growth strategies” as their biggest issue during the past year.
But many see the benefit of taking a breath from exponential growth rates, for an equally valid path is a more steady growth trajectory. A company can move from the manic start-up phase to a more mature phase that allows for the implementation of structure and processes, co-founder of sixth placed technology consultants, Tridant, Alec Jefferey, says.
For Jetts Fitness founder Brendon Levenson, appointing managing director Adrian McFedries has allowed him to step back and focus on customer service innovations. He is one of 23 founders that have brought in a CEO or managing director. The founder of second place SCO Recruitment, Larissa Robertson, is grooming a senior management team. This will allow her to have a second child and start on a new business idea.
Serial entrepreneurs
The theme of the serial entrepreneur runs strongly through the Fast 100, even if it’s a new phenomena for some founders.
“I never thought I would be a serial entrepreneur,” former accountant Robertson says. “Whenever I heard that term I thought, ‘what a ridiculous idea’ . . . When I went into starting SCO Recruitment, I had no idea what I was doing. At that time, the idea of doing anything else was terrifying. Now it’s still a bit terrifying but it’s a lot more exciting.”
A number of the Fast 100 founders see their success as applying generic business principles and reckon they could do this in many settings. Laser Clinic’s Champion has applied his technological thinking to the “mum and dad” beauty salon industry, “but we could be selling widgets,” he says. “It doesn’t really matter what it is that you’re doing, it’s the business process that you apply to it.”
Next stop for Champion and his co-founder Babak Moini will be applying the same thinking and a similar model to cosmetic surgery practices. “Obviously there are a lot more hoops to jump through,” Champion admits.
For Richard Turner of fourth-placed solar company ZEN Energy Systems, who is on to his fourth business, the thinking is simple.
“Fundamentally, all businesses are really the same,” he says. “You buy a product, sell a product, make a margin and take off your costs. The key thing is you need to enjoy your business.”
Making an impact
This passion for their enterprises is identifiable in many of the Fast 100 founders – which is sometimes worrying, given that few have an exit strategy.But many founders are in the business of winning influence. BioPak founders Gary Smith and Richard Fine feel vindicated that although support was muted initially from manufacturers for their sustainable packaging, the business is now growing rapidly, turning over $11.2 million in 2011-12, which placed it eighth on the list with average annual growth over four years of 172 per cent.
SCO’s Robertson feels a wider responsibility to ensure that her recruitment business is a success. She also runs a non-profit maintenance business, Trim & Proper, which gives jobs to long-term unemployed people and relies on the for-profit business to share administrative functions. “We don’t actually get any donations or grants. We’re a self-funded not for profit,” she says. “The reason I’ve done it this way, is what I really believe in is that you can have a culture of capitalism with a conscience. I want to prove that you can have a high-growth, profitable business that has a positive social impact at the same time.”
*Original Article by Jessica Gardner: http://www.brw.com.au/p/sections/features/what_australia_fastest_growing_companies_pw7tfCpL2yROqoyLRDEjXN