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Profit
Hot 50: Unique Corporate Gifts Canada's Emerging Growth Companies
2003
2003
PROFIT HOT 50
Unique Corporate Gifts Rank: 47
INDUSTRY Promotional products distributor
LOCATION Montreal, Que.
FOUNDED 1999
PRESIDENT OR CEO Erica Mintz
REVENUE :
2000 / 2002 $301,762 / $752,326
REVENUE GROWTH % 149%
PROFIT MARGIN: 0-10%
EMPLOYEES:
2000 / 2002 2 / 6
EXPORTS AS A % OF SALES 18%
WEB SITE www.uniquecorpgifts.com
QUICK HIT Unique Corporate Gifts provides firms – including
Johnson & Johnson and Bell Canada – with corporate gifts
and promotional products, from logoed golf balls to Waterford crystal.
It doesn't target the U.S., but almost a quarter of revenue comes
from there. Why? Mintz says UCG makes a concerted effort to appear
high on Web-search results.
BEST ADVICE "If you're motivated enough, you'll find a way
to make it work."
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Against
all odds
Canada's emerging growth stars defied the worst economy in a decade.
Can anything stop them now?
By
Ian Portsmouth
It
was the best of times. The year was 1999, and the North American
economy was on the longest growth run in its history. Stock markets
were booming, and an upstart technology called the Internet had
captured the imaginations of business leaders, venture capitalists
and laypeople alike. In this milieu, entrepreneurial spirits across
Canada launched businesses. And as long as the Millennium Bug didn't
bite, many believed, success would soon be theirs.
Then
it was the worst of times. Y2K failed to sting, but the overheated
economy didn't care. Slowing growth coincided with this brainwave:
the Internet wasn't making many people money, and wouldn't anytime
soon. After another year of financial uncertainty, the sad events
of September 11 took the remaining breeze out of the economy's sails.
Then came a war, then another war, and tension between the True
North and our largest trading partner.
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Anatomy of a speed demon
How the average HOT 50 winner stacks up
Two-year growth rate: 842%
Revenue: $4.2 million
Employees: 28
Profit margin: 4.5%
CEO's age: 38
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Not to mention SARS.
And
yet the PROFIT HOT 50 — all of which were formed in 1999 or
early 2000 — thrived. The proof: average revenue growth of
842% over the past two years, with an average 2002 profit margin
of 4.5% — impressive for firms selected for fast growth.
These
renegades are the focus of PROFIT's fourth annual survey of Canada's
Emerging Growth Companies. They point the way to success in any
environment and offer many ideas on how to stay strong when the
going gets tough — real tough. How do they do it? Take a quick
look at the winners, and three key themes emerge:
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Deliver the goods
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Money matters
Top sources of funding ...
To start a business:
Founders: 48
Friends / family: 16
Chartered banks: 12
Private investors: 2
Angels: 2
Venture capitalists: 2
To grow a business
Founders: 42
Chartered banks: 27
Friends / family: 16
Private investors: 7
Angels: 5
Venture capitalists: 5
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A virtual concierge for workers in office towers. Web-based call
centres for Fortune 500 firms. Software that helps NHL scouts find
tomorrow's hockey stars, manage courier services or spot computer-network
flaws before the real trouble starts. Boarding schools for foreigners
who need to learn English, high-end beauty products and some of
the neatest board games money can buy. The vast range of PROFIT
HOT 50 products and services proves that opportunities exist across
the economy. It also demonstrates that success comes faster to firms
that can create a niche and own it, exploit an underserved market
or bring new value to old industries.
Do
any of those, and you can capture clients that fill your coffers
and help you land your Next Big Sale. Household names on the PROFIT
HOT 50 client list include Bell Mobility, Royal LePage, General
Motors, British Airways, Domino's Pizza and Microsoft, both at home
and abroad.
However,
today's breakthrough is tomorrow's buggy whip. Wise beyond their
years, PROFIT HOT 50 firms are built for long-term success. (It
helps that 24 of our 50 CEOs have started one or more businesses
before.) Our story about dot-coms that survived the dot-bomb (see
"Thrust, parry, grow") demonstrates the lengths to which
our winners can go to keep their products relevant. By spending
an average of 11% of sales on R&D, the HOT 50 hope new ideas
will keep coming.
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Export early, export often
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Worldbeaters
HOT 50 firms are seizing export opportunities, despite their youth
Average revenue from exports: 36%
Most popular markets
U.S.: 30 companies
Pacific Rim: 14
Western Europe: 14
Central / South America: 11
U.K.: 10
Mexico: 9
Top exporter:
David Ossip,
President & CEO,
Workbrain Inc.,
2002 exports: $24 million
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If there's one knock against Canadian startups, it's this: too many
firms are founded with only local markets in mind. Not the PROFIT
HOT 50, who've taken on the world from Day 1. Despite their youth,
27 of the HOT 50 sold their goods and services abroad in 2000, generating
50% of their revenue in foreign markets that year. Through 2002,
nearly 32 companies were selling abroad, with exports accounting
for 56% of their sales (see chart, left).
It's
no surprise that four out of five HOT 50 exporters say the U.S.
is their top foreign market. However, nearly half have found customers
in Mexico, Central America or South America. That foothold in Latin
American markets should serve them well as free-trade agreements
proliferate throughout the Western Hemisphere.
And
HOT 50 CEOs expect their export train will keep on rolling: more
than half of them believe exports will fuel at least 50% of their
future growth.
Who
needs an IPO?
In
the dot-boom, many startups launched with a quick multimillion-dollar
stock offering in mind. If any HOT 50 entrepreneurs had the IPO
dream, they were disappointed. Only one member of the Class of 2003
— DevStudios Inc. — is publicly traded, and it went public
on the TSX Venture Exchange through a reverse takeover. Just a handful
have been able to tap angel investors or venture capitalists for
growth capital.
In
fact, PROFIT HOT 50 CEOs say raising capital was the No. 1 challenge
of their startup phase. When finding money is tough, you go to who
you know: friends, family and yourself. Some 48 founders injected
seed capital into their companies, and 42 of them have since put
in more funds.
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If I had $50,000 ...
Where HOT 50 CEOs would invest a sudden windfall
Sales and marketing: 24
New equipment / technology: 8
Staff development / incentives: 6
Facilities upgrades: 4
Other: 8
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Also, their experience with big banks reminds us that Bay Street
isn't in the risk capital game. Only 12 of the HOT 50 secured bank
financing, such as term loans and lines of credit, in their startup
phase. That 27 companies have accessed the vaults since then suggests
bankers get more friendly as you grow more established.
But
not too friendly. Only 64% of the Class of 2003 say they're satisfied
with their current banking relationship. And many of those companies
found happiness only after taking their business from one institution
to another: 13 of the HOT 50 report they've switched banks since
they were founded.
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Growing up is hard to do
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Big, fast
Largest HOT 50 firm: Webhelp Inc.;
Kerry Adler,
President & CEO;
2002 revenue: $27.6 million
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Of course, financing has not been the only hurdle for HOT 50 companies.
Finding great people is never easy, and it's even more difficult
for startups, which, in the eyes of potential employees, often represent
an uncertain paycheque. No wonder HOT 50 companies cite finding
good people as their top ongoing challenge, with a difficulty rating
of 3.5 out of five. Dealing with success ain't easy, either: managing
growth (3.4) is the next toughest challenge of HOT 50 firms, followed
by raising growth capital (3.1).
No
doubt, more obstacles lie ahead. But PROFIT HOT 50 firms have proven
they have the moxie, resilience and determination to defy the odds.
You'll find their stories online at PROFITguide.com.
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How we found the HOT 50
PROFIT
HOT 50 entries were solicited primarily through a self-nominating
entry form that appeared in the April/May and June issues of PROFIT,
and online at PROFITguide.com. The nomination drive was also promoted
through advertisements in Canadian Business, Maclean's and MoneySense
magazines. Qualifying public companies were encouraged to enter
through direct mailings.
Special
thanks to research associate Laura Pratt for her excellence in interviewing
this year's HOT 50 CEOs.
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