Downturn… what downturn? Despite one of the biggest financial crisis since the Great Depression, the finalists in SmartCompany’s Smart50 awards have sailed through the last 12 months.
Sure, many of these companies have had to make adjustments, such as keeping a tight rein on costs, consolidating their product range and increasing their service levels above their competitors’.
Their ability to remain flexible means these companies are perfectly positioned for the coming recovery – and they’ve already started hiring, increasing their marketing spend and looking to acquire weakened competitors.
You can see the whole Smart50 list here.
Leading the pack on this year’s Smart50 is software company Nintex, which recorded an average annual growth rate over the past three years of 278%, with revenue hitting $10.1 million in 2008-09. It’s a particularly impressive result given over 80% of the company’s revenue comes from exporting to the crisis-hit markets of North American and Europe.
Total revenue from the companies on Smart50 was $701 million, down from the $1 billion recorded by the members of the 2008 list.
However, this year’s list has actually grown much faster, despite the difficult environment. The average growth rate for the companies on this year’s list (average annual growth over the last three years) was 91%, well up on last year’s figure of 61%.
It is also encouraging to see that a new group of companies has emerged this year, with 80% of the companies new to the Smart50. Once again, the average age of these companies is six years and as in previous years technology companies dominate, followed by property and business services firms and retailers.
The number of finance companies on this list has fallen from five to three, while the number of communication companies and construction firms has also fallen sharply.
The rapid growth enjoyed by the companies on the Smart50 would suggest that many of these SMEs have breezed through the downturn, but don’t think they’ve been lucky – most have acted quickly to contain costs and refocus their sales efforts.
Quinntessential Marketing was focused on the recruitment sector, but quickly switched attention to the HR departments of large corporate and Government departments. Sumo Salad introduced five lunch options priced at $5 to lure office workers thinking of switching to packed lunches. Hiflow Industries has avoided the deep discounts of its competitors and focused on improving services levels.
Andrew MacDonald of Mieza Consulting sums up the challenge faced by many SMEs, particularly those in service sectors: “There are numerous new market entrants as the barriers to entry are low. This is being balanced by clients who are asking for deep subject matter expertise as well as a global perspective.” It means you’ve got to pick a niche and by very, very disciplined about what you do.
Consultant and business coach Rob Nixon is a great example. His is in an extremely competitive and mature field, but by finding a particularly niche – coaching accounting professionals – he has been able to build a $5 million business.
Companies such as Sumo Salad, Hypoxia and Villa & Hut all bemoaned the difficulties of establishing credibility with lenders – in the current environment, it’s only got harder. Hypoxia and Sumo have found committed groups of private investors to help them move forward. Villa & Hut ended up brining in investment from a listed company to fund expansion.
When asked about their greatest challenge, the vast majority of companies on the Smart50 nominated staffing issues. Finding and retaining good people is always a challenge but some companies have gone to extraordinary lengths to solve their problems – Evolution Traffic Control even became a Registered Training Organisation. Indeed one of the most exciting things about the downturn is that it’s boosted the talent pool – and the Smart50 are taking advantage.
It’s notable that very few of the Smart50 have reduced spending on marketing and advertising during the downturn and as the economy recovers their pushing for even more market share. South Coast Holidays, Aussie Farmer’s Direct, Pizza Capers and Dynamiq are all planning to invest more in marketing over the next 12 months.
A strong Australian dollar and a fragile economy might not make this the best time to expand your export efforts, but that isn’t stopping the Smart50. The fastest-growing company on this list, Nintex, already exports to 73 countries, but is planning to push back into the US and Europe as these markets recover in the next 12 months.
Mieza Consulting had just formed a business partnership with PriceWaterhouseCoopers in Singapore and is looking at Japan and Korea, while VroomVroomVroom is accelerating its push into North America.
Around 60% of the Smart50 are using social media in some way – to communicate with customers and staff, to find potential recruits and to market their products. For example, Pizza Capers uses Facebook and Twitter as part of its promotional efforts; Nintex keeps its customers informed of emerging trends in Europe and North America; and CatchofTheDay has developed its own iPhone app to keep online shoppers informed of its latest deals. These companies are showing that having a social media strategy is not just a matter of looking – done well, it delivers real value.
There is only one company on this year’s Smart50 that is focused on the area of climate change: Apricus Australia, which is one of Australia’s leading solar hot water suppliers. The lack of “green” companies on the list is a surprise – this is supposed to be one of the big areas of opportunities for entrepreneurs. Perhaps the sector’s relative immaturity is hampering its development.
Entrepreneurs start companies for all sorts of reasons, but this year’s list includes a number of business owners who decided to start their own companies after becoming dissatisfied with corporate structures.
Take Paul Quinn from Quinntessential Marketing, who struck out on his own after having his corporate marketing budget cut by 75%. Or Brett Neil Saunders from Hiflow Industries, who was refused a bonus after achieving record sales because he was “too young”. The lesson for business owners is clear – if you don’t look after your best staff, they could end up becoming your biggest competitor.
The Smart50 aren’t waiting for the recovery to hit top gear – they’re already spending more on marketing, investing in new products and services and examining opportunities to expand offshore. If you want to make next year’s Smart50, you’d better get moving!
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
