Meet the new breed of fast-growing companies that are nimbly navigating Australia’s patchwork economy.
A staggering 42 members of the Smart50 class of 2011 have not appeared on the list before, the biggest turnover in the five-year history of the list.
Those companies arrived with a huge bang, with their average growth rate during the past three years an impressive 97%, well above last year’s average growth rate of 60%.
They did it through careful planning, innovation and a huge focus on investing in their people.
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Total revenue on the list was $357.8 million, down sharply from $741 million in 2010 as a result of the large number of new companies on the list.
Between them the companies employ 2096 people and they added 892 new staff in the 2010-11 year.
The average age of the founders of the 50 enterprises on the list was 37 and 40% of the businesses were started with less than $25,000. On average the firms on the list have been operating for 5.88 years.
Leading the pack is the inspiring SCO Recruitment, which was rescued out of liquidation by Larissa Robertson and posted average annual revenue growth of 428% over the past three years.
That operation is part of a major trend among the Smart50 of 2011 – there are seven companies from the recruitment and training sector, including Selmar, Aspect Personnel and LSA Recruitment Group.
Aside from the big group of recruitment companies and the usual collection of online marketing firms, it is a diverse bunch.
There are two agribusiness companies – berry company Amazonia and Australian Fine Leaf Herbs – together with financial services groups and manufacturers including Nu-tank, Ecovation and Bull Motor Bodies.
Despite their diversity a number of common characteristics emerged among the class of 2011. Here are 10 big trends:
Organic growth is the focus
Despite the impressive growth rates produced by the Smart50 there were no big acquisitions or mergers boosting revenue and for the moment at least organic growth is the focus.
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“We aren’t planning any big moves, just steady incremental growth at around 40-50% per annum,” says Sandy Dunn founder of Assetivity.
“This growth will come from expanding the services that we provide to our current clients and providing existing services to new clients in the industry sectors that we work in.”
Part of the reason for focusing on organic growth might be scarcity of capital, which remains an issue for companies such as Altus.
“We have a huge number of opportunities and we take advantage of as many as we can,” founder David Lundberg says.
“But at the end of the day accessing enough capital to do so in a timely manner is the one area of our business where we can lose sleep.”
They are working hard to improve internal systems
Many of the businesses on the list have come of age in a period of huge economic uncertainty and it showed as they remained focused on staying lean and improving internal systems and processes to ensure growth remains sustainable.
“We are being very focused on efficiency and costs internally,” SCO Recruitment’s Larissa Robertson says.
“We have increased spending on marketing and growth but have made sure that any cost that can be screwed down has been screwed down.”
It was similar story from Nu-tank founder Kaylee Boccalatte: “We watch the figures in all areas extending from leads generated, leads converted, production and delivery to ensure that the company maintains at the least break even point.”
They are working hard to include staff
As well as living through the GFC many companies in the Smart50 lived through a skills shortage and are almost fanatical about engaging staff in the business.
Matthew Sampson, the 25-year-old co-founder of Aspect Personnel, believes in involving his team as much as possible.
“I have found that the best way to motivate my staff is to include them in as much of the business operations and decision making as is commercially viable,” he says.
“By consulting employees and involving them in the development of Aspect it has given them a sense of ownership of the company.”
They are using technology to drive their businesses
Technology is the great leveller – cloud computing, crowd sourcing and the app revolution are just three trends benefiting these nimble firms.
Technology is also giving the Smart50 the chance to improve internal processes and systems, which is happening at Marble Group.
“To be ahead of the game we need to consistently move in the right direction by being at the cutting edge of technology, with an overall focus on having seamless systems through the business with the likes of online timesheets, the latest recruitment software and the most advanced IT infrastructure to be able to support this,” co-founder Lee Corbitt says.
They are building the profiles of their businesses and themselves
Like most small business owners the Smart50 have become accustomed to doing lots with little when it comes to marketing. One of the cheaper forms of marketing is thought leadership – but it’s also one of the most effective.
Grace Chu of FirstClick Consulting has established a formal thought leadership program to build her business.
“We have participated in quite an aggressive campaign to raise our profile in the industry through speaker engagements, editorial profile pieces and networking,” she says.
“We are now in a position where we are regularly invited to speak at the country’s most significant search and digital marketing industry events and stand up next to some of the most prominent brands in the country and the world.
“Our business has been built purely on referrals and recommendations and this marketing activity has had enormous impact on the level of referrals we have received.”
They are not worried about the carbon tax
Most of the Smart50 appreciate that the carbon tax will increase energy costs but beyond that they are not fazed, with a number welcoming moves to address climate change.
“We would prefer to stand up and take responsibility for the environment and if the decision is to enforce a carbon tax we happily accept it,” FirstClick Consulting’s Grace Chu says.
Dave Slutzkin, chief executive of Flippa.com, can see some opportunities.
“If it diverts attention from old industry to innovative new industry we expect it’ll make it easier for us to attract capital and talented staff,” he says.
“We’re looking forward to the economy moving in a smarter direction.”
They take ideas generation seriously
Small companies are naturally innovative and if you want to compete with the big guys in Australia innovation is a must.
But that doesn’t mean you don’t need to work at how you generate, capture and act on ideas and the Smart50 are taking that aspect very seriously.
Melbourne-based IT group Odecee is a great example. It has worked to build what it calls an “innovation machine” run by co-founder Oscar Huseyin, who has the formal title Head of Innovation and Learning.
At Fidarsi Furniture co-founder Neil Singh has adapted Google’s 20% model.
“We often find the team sitting at the water’s edge frantically scribbling, drawing or locked in animated discussion about new initiatives, many of which we have successfully implemented or are further developing together,” Singh says.
They are divided on the need to exit
Private companies have notoriously struggled with exit planning and the Smart50 is fairly divided between those who have made it a priority and those who say they are simply too young to start thinking about an exit just yet.
On behalf of every SME adviser we’ll pass on this bit of advice – if you haven’t thought even vaguely about your exit plan do so, because it may change the way you run your business, or as Nicole Kersh of 4Cabling says: “It will help you sleep better”.
“In our case it’s more a succession plan than an exit plan,” she says.
“We regularly relook our exit plan to make sure it’s applicable to our current situation. It’s always good to know your exits and have a plan B.”
They are focused on Australia
This is a kind way of saying that most of the Smart50 continue to ignore exporting, with just six companies earning more than 10% of their sales from overseas.
That is understandable given the high Australian dollar and the state of global markets but there are still concerns that local firms are missing out on lucrative markets.
One of the exceptions is software group PaperCut International, which has increased export sales by a massive 270% since 2009 and now generates more than 75% from overseas.
The company recently established an office at Portland in the United States and is setting up an office in Britain.
They can deal with stress
When asked about the best tip for budding entrepreneurs many Smart50 members mentioned the need to deal with stress, indicating that handling the highs and lows of business is very much a competitive advantage.
“The key to overcoming the stress of starting a business is to have a positive attitude and faith in the business model, and in your ability to find the right people and the right clients to kick-start the business,” says FirstClick’s Grace Chu.