Meet the Smartclass ‘07

Welcome to the inaugural SmartCompany50. This special bunch of companies are fast growing and innovative. They are web-savvy, Gen-Ys and baby boomers, they don’t need your money, and they are setting trends for the future.

Meet the SmartCompany50: the fast growing and most innovative companies in 2007.

There are more than one million small businesses in Australia, and every year more than 100,000 companies are started up. Many are not alive three years later, or they struggle on, eking out an existence with no employees.

But about 10% – or under 100,000 – grow fast, and it is these businesses that are the huge creators of jobs and innovation.

Then there is a very special group – and we call them millionaire entrepreneurs – who grow fast year after year.

That is exactly what the SmartCompany50 have done: cracked $1 million revenue and kept growing.

Revenue for 2006-07 for the SmartCompany50 ranged from $177 million for Quest Serviced Apartments (winner of the SmartCompany 2007 Top Franchise Award sponsored by NAB) to $1 million for The Fine Food Store.

Average growth rates ranged from 781% for the winner of the SmartCompany 2007 Fastest Growth Award sponsored by HP, Contours, to 23% for Intralink Financial Solutions.

So what makes them so smart? What does it take to grow a fast business?

Characteristics of the Smartclass of ’07

1 Webtrepreneurs leap ahead

Smart entrepreneurs are more internet savvy this year than ever before. Even a few years ago the internet was a tool. Now it lies at the heart of many smart businesses, acting as a powerful sales lead generator, an e-cash register, a marketing and recruiting tool.

The internet gives smart companies the marketing clout of a much larger company. Many use search engine optimisation, which helps their site rank well in search engines and enables them to be found easily when people are looking for specific products and services. They ensure their home page carries key words and phrases that are searched by consumers.

They also using paid search, buying key words so when these words are entered into search engines they appear at the top of the ranking in the sponsored links area. They focus on getting similar sites to provide inbound links to improve their Google ranking. And they back that up with external marketing to drive people to their site. SmartCompany Millionaire Entrepreneur Award winner Atlassian Software, for example, has no sales force, relying entirely on online sales to generate 80% of sales.

More than half the companies export and those with a focus on international markets have far more advanced websites. Wireless, broadband and BlackBerrys are just standard tools of the entrepreneur’s trade.

For some companies their business is the web. The SmartCompany 2007 Awards Overall Winner Aconex has created a web-based platform for storing and exchanging project documentation and correspondence. “This saves time through fast and easy information access, cuts administration costs such as printing and couriers and reduces risks such as information loss or disputes and delays,” says chief executive Leigh Jasper.

2 More Gen-Ys, more baby boomers, more women!

Fast growth companies are historically usually run by men between the ages of 30 and 50. It needs the knowledge of those over 30 and the physical stamina of those under 50 to direct and control these rockets. The entrepreneurs, usually university educated, work for years in a profession developing knowledge and networks before starting out on their own in their 30s or early 40s. Although they hope for a capital gain down the track, they do not do it for the money – they would usually be paid more by staying in their profession. They do it because they see a niche, they think they can do it better, and they want flexibility and independence.

But how life is changing. This year we are seeing a new trend: fit baby boomers are determined to keep working and are starting their second or third venture. In fact nearly 20 of the SmartCompany50 business owners are over 50!

There are fewer Gen-Ys, with only six under 30, but they are running some of the most impressive businesses on our list and picked up more than their fair share of awards with Mike Cannon-Brookes and Scott Farquhar (both 27) from Atlassian Software taking out the SmartCompany Millionaire Entrepreneur Award, and James Macini from recruitment company Hippo Jobs taking out the Top Website Award.

Also changing is the number of female entrepreneurs running fast growth companies. Eleven of the Smartcompany50 are run by women. Judge Kosmas Smyrnios, professor of marketing at RMIT University, who studies high growth firms, says this is an excellent result and we could at last be seeing the ranks of female entrepreneurs on the rise.

Interestingly most of the females are going it alone with no business partner.

3 More businesses started on a shoestring

Time to feel sorry for the venture capitalists. Increasingly they will want a piece of these fast growth companies – and they are unlikely to get it. It used to be very expensive starting a fast growing businesses. But the internet and technology is making it so much cheaper and most of the SmartCompany50 were started with less than $100,000.

More entrepreneurs are also saving costs on offices. Even 10 years ago only a third of fast growth businesses were started from home. Now most of the stigma around home offices has evaporated, broadband is better and more than 60% of the SmartCompany50 have set up from a home office.

On the other hand, cash emerged as a huge issue this year. Many of the businesses described running out of cash as a near death experience. “It’s very distressing to watch your business suffer from cash starvation when you have a P&L that shows a healthy profit,” says Carmelina Pascoe, founder of My Coffee Shop, which supplies coffee machines and related services to businesses and homes.

Most businesses were based in NSW (21) and Victoria (19) with only three each in Queensland, South Australia and Western Australia. There were no Tassies and just one company from ACT.

4 New trends: save, save, save, save…

The SmartCompany entrepreneurs have finely tuned radars. They see that there is a new demographic trend, demand is shifting, a market is becoming more sophisticated or regulations are changing – and they jump at the opportunity.

So what are the three key trends in 2006-07?

a. Save the environment:

Climate change has spawned a number of businesses on the SmartCompany50. While they are not providing planet saving technology, they are proving very popular with guilty consumers trying to do their bit.

New Water, which has won the SmartCompany 2007 Award for Best Innovator sponsored by Allianz, came up with new technology to develop rainwater tanks to enable homes to reduce water consumption as much as 60%. And Ecowash Mobile has developed a waterless mobile car washing business.

b. Save time

Consumers are increasingly time poor. Any business that will not only save consumers time but can market the message in a simple compelling way, will do well. Contours, which started three years ago and now has revenue of $25.4 million, has a simple message and product for women who want to get into shape; all it takes is 29 minutes, three times a week.

c. Save money and make life easier

Industries are becoming increasingly globalised and more complex. Any software, tools or companies that can bring different parties together to work on projects are growing fast. Also outsourcing continues to boom. The latest trend is the large number of companies setting up to provide IT, bookkeeping, computer or marketing services to other small and medium businesses. This was until recently seen as a very difficult marketplace, with SMEs reluctant to spend money on outsourcing.

d. Save your health

Whether it is gyms, healthy salads or low-fat takeaways, health is a key trend, and businesses that are coming up with clear branding and a message, such as Healthy Habits and SumoSalad, are booming.

5 It’s happening at last: the professionalisation of the personal services sector

The good news for consumers is that standard services such as takeaway food, coffee machines, dog washing or car washing, right down to the takeaway dinners, is going to get a whole let better. The personal services sector is being professionalised by a band of serious entrepreneurs who are passionate about improving their niche.

Some are already taking their brands national and are planning on international expansion. HydroDog washes dogs, Ecowash is washing cars, Wild Cards & Gifts is professionalising the card giving business, and Koffeeone is trying to get good coffee into your workplace.

Many are franchises – about 13 of the SmartCompany50 are franchises.

IBISWorld’s Phil Ruthven has long predicted the rise of the personal services sector, but this is the first year that we are seeing a wave of such businesses coming through. Ruthven says: “They start local, but will go international very quickly and rely on their branding, pizzazz and fast growth to outpace competitors. McDonald’s got 30 to 40 years being ahead of the competitors.”

6 The fast growing industries: IT, retail and property and business services

Always a good idea if you want to start a fast growth company is to do so in an industry rocketing ahead. Information technology once again is spawning the most companies (11) and many of the companies have higher growth rates as they went global from inception.

Retail (9) is also booming, partly driven by the professionalisation of the personal services sector. And property and business services also had its fair share of representatives with eight in the SmartCompany50.

One surprise was the finance and insurance sector, with only one company. But Ruthven has an explanation. He says there has been massive consolidation with the banks gobbling up the mid-tier and emerging companies.

Click the following to see:

>> SmartCompany50 Award Winners

>> SmartCompany50: The main list

>> SmartCompany50: Listed by state

>> SmartCompany50: Listed by industry