From the editor: A toast to fast growth

Written by Ian Portsmouth

“Heroes for hard times, role models for the recovery.” That’s how we describe the firms featured on our 22nd annual ranking of the PROFIT 100: Canada’s Fastest-Growing Companies.

It’s a fitting label. While the latest recession stopped many businesses in their tracks, the PROFIT 100 continued to grow. Over the past five years, the average annual revenue of the country’s 100 fastest firms rose by more than 1,700% — an astounding statistic given the economic troubles of last year and, for those enterprises that sell stateside, the better part of 2008. Even better, most PROFIT 100 firms are in the black. Fully 76% of them turned a profit in 2009 — an admirable figure, given the recession and the pressure such growth rates put on the bottom line.

How did they do it? Growing through the downturn required determination, if not also a healthy balance sheet or a friendly banker. But Canada’s Fastest-Growing Companies entered the recession with two things hugely in their favour: well-differentiated products and services that customers want in good times and bad, and the ability to develop and execute effective management tactics and strategies.

Indeed, the primary goal of the PROFIT 100 program is to uncover those management practices, analyze them and suggest how they could be put to work in your business. You’ll find them throughout this year’s coverage of Canada’s Fastest-Growing Companies.

Although this issue’s contents provide ample evidence that fast growth is worth charting, I am often asked why the ranking focuses on growth rather than profitability (especially given this magazine’s name). Growth is the measure because it’s the most reliable single indicator of business success. Profit potential varies dramatically from industry to industry, and as any business owner or investor knows, it can swing wildly from year to year due to factors largely beyond management’s control. And don’t get me started on the arithmetical mosaic of accounting practices.

That said, long-term profitability should be the goal of any business. Every PROFIT 100 leader would agree. However, they also see fast growth as a means to a profitable end. Many are in emerging industries, racing to secure market share before the competition does. Most are young — the median age of PROFIT 100 firms is eight years — and they want to take the fast track to critical mass, where they can enjoy  cost-reducing economies of scale, a more recognized product and employer brand, and the ability to attract the management professionals needed to implement the systems and organizational infrastructure that allow founders to focus on the future rather than the day-to-day.

Is fast growth a risky endeavour? That depends on your perspective. Although the notion of entrepreneurs as risk-loving mavericks is deeply ingrained in popular culture, that’s not who PROFIT 100 leaders see in the mirror. They believe their products and services are exactly what people want and need, and that the biggest risk is missing the chance to supply more consumers and businesses with their stuff.

Such honourable intentions deserve a toast. May the PROFIT 100 continue to  grow — and inspire your efforts as well.

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