Meet the Smart50 2010: and learn their 10 growth secrets

If you are one of the thousands of entrepreneurs around Australia gearing up for growth as the economic recovery takes hold, then you’d better hurry up – the entrepreneurs on the Smart50 for 2010 are already way ahead of you.

In the last 12 months – during a period in which business conditions have been patchy at best – the Smart50 have produced average revenue growth of more than 60% and all have plans to accelerate as the economy improves. New markets, new products, new ideas – the Smart50 are raring to go.

To see the entire list, click here.

Total revenue on the 50 companies on this list climbed from $701 million last year to $741 million, although this remains more than 25% lower than the $1 billion recorded in 2008, during the last boom economic period.

However, what is particularly remarkable about the Smart50 is the number of jobs created they have created in the last 12 months – a staggering 1144, up from 900 in 2008-09.

Leading the pack this year is one of Australia’s fastest-growing green SMEs, Carbon Management Solutions, which posted average annual revenue growth of 453% over the past three years and revenue of $72 million. The husband-and-wife run business, owned by Cameron Ferguson and Amber Ferguson, is one of Australia’s biggest wholesale suppliers of solar panels for residential properties, and now have their eyes on the commercial property sector.

But the company is the only wholesaler on the list; the most prominent sector is information technology, followed closely by property and business services and retail trade.

In terms of geography, 20 of the companies are based in New South Wales, followed by Victoria and Queensland.

Almost half of the companies on list are aged five years and under, while the bulk took two years or less to hit the magical $1 million revenue mark.

So what are some of the growth secrets of this class of 2010? Here are 10 big ones:

1. They stuff up – often

Like every fast-growing business, the members of the Smart50 make some truly horrific mistakes. As well as the standard late payers, poor sales people, and dud sub-contractors, there are some absolute shockers. We’ve got an internet retailer that decided to buy hosting services on the cheap, the web services firm that lost 50% of its revenue in a single day, and the IT developer who ran out of capital before becoming profitable. The lesson here is that bad stuff happens – good companies are able to respond, restructure and get back on a fast-growth perspective.

2. They know who they are

Business entrepreneurs always tell start-ups the same thing – build a strong value proposition that can be easily articulated to customers, staff, investors and the market. It’s something that the Smart50 have clearly taken to heart. While many have complex structures, processes and systems working below the surface, most can be summed up and explained very easily. As Amblique‘s Justus Wilde says: “Develop a strong and clear selling proposition – something you can explain in two to three sentences.”

3. They start from home

Launching your business from home does not mean you can’t grow quickly – more than 56% of the companies on the list started from home. Dynamiq, which provides risk management services to clients around the world, launched from cofounder Anthony Moorehouse’s kitchen table, with just $19,000 in start-up capital. Today the business turns over $4.4 million.

4. They start as part-time entrepreneurs

For many business owners, making the transition from salaried worker to entrepreneur takes time. At Carbon Management Solutions, founders Cameron Ferguson and Amber Ferguson worked as an engineer and TAFE teacher. At Megabuy, cofounder Nick Shelomanov worked as an investment banker while the business got off the ground. While their businesses eventually required full-time attention, they are proof the model can work.

5. They spot niches

Toilet rentals. Virtual data rooms for companies involved in mergers and acquisitions. Tagging and testing electrical appliances. Pre-employment screening. None of these are big industries but they are all extremely profitable niches that a SME can dominate. And domination means market power and pricing power.

6. They react when the market changes

Lisa Allen, cofounder of Freez Clothing, struck a big problem during the GFC – her target market, women over 40, had stopped spending on themselves, and revenue was suffering. She quickly made a change, pushing the business to focus on younger women, who want a new outfit for every Saturday night. That sort of flexibility is crucial to fast, sustainable growth.

7. They pour money into talent

With Australian business now on red alert for signs of skills shortages, the Smart50 are reacting by investing heavily in the training and development of their staff. Don McRae, from McRae’s Gardens, explains it like this: “We are focussing on employee engagement. We know from experience that those representing us at the coal face are the ones that will assist us in organic growth.”

8. They never forget cash

Nearly every member of the Smart50 knows the pain of cashflow problems. The best example is professional services firm Cordelta, which got into such trouble that they created a “days to ruin” measure that showed how long the owners had until the cash ran out. Clearly these lessons will never be forgotten – every company watches cashflow closely, runs lean where possible and manages growth carefully.

9. They don’t rely on the banks

While access to capital has been an issue for most members of the Smart50, most have learned to live with less – and expect very little from the banks. Growth appears largely to be funded through cashflow or by cornerstone investors and most entrepreneurs on the list have become very clever at solving funding problems by carefully managing the size and pace of expansion plans. “Finance should never hamper you provided you are creative,” Chris Taylor of Apricus Australia says.

10. They keep innovating

Turning your company into an ideas factory is something a lot of companies try to do, but many succeed. The Smart50 are experts at ideas generation, using techniques such as “brainstorm box” for gathering staff ideas, online surveys with customers, quarterly offsite meetings and the establishment of a special “creative board”. One of the best ideas came from software firm Aconex, which holds quarterly “Hack-a-thon” days, where engineering and product development teams have a day to work on any side project that could benefit the company; the teams then present their project and the winner is voted on. Now that’s thinking.