Management issues, not money, are the top challenge facing so-called high impact companies in Canada, according to a new study by the Business Development Bank of Canada (BDC).
When BDC surveyed 866 such firms, four of the top five challenges named by the companies involved management issues: optimizing operations, developing and executing sales plans, setting overall strategy and making sure they have the HR capabilities to grow staffing as needed.
To combat those management obstacles, BDC has created a new business division called BDC Advantage. Devoted exclusively to high impact firms, it will provide them with non-financial support to help fill in the knowledge and resource gaps that make running their businesses a lot tougher.
“As these companies grow quickly, they want to penetrate a new market or adopt a new technology and they suddenly find the skill sets they have really are not everything they wished they had,” said BDC president and CEO Jean-Rene Halde.
BDC Advantage will provide the companies with assistance such as advice, formal management training, peer to peer networking and referrals to outside consulting help beyond BDC’s internal resources.
“The goal is to establish a long-term relationship with these entrepreneurs and help them think through the various issues. (We want) to understand their business and their issues and provide unbiased advice,” said Halde.
BDC defines high impact firms as mid-sized businesses (100 to 500 employees) that punch well above their weight when it comes to economic impact. Although such companies make up just 1.6 per cent of all Canadian businesses, they’re responsible for 12 per cent of total GDP and 16 per cent of employment, according to the study. BDC research also suggests the companies grow faster, export more, take greater risks and invest more in innovation than the average Canadian business.
Manufacturing had the highest concentration (42 per cent) of high impact companies in the survey, followed by services (30 per cent), retail (11 per cent), wholesale (eight per cent) and other (eight per cent).
In addition to offering financing services such as loans, venture capital, growth capital and business transition capital, BDC has a consulting division that assists around 2,000 clients per year. The division’s 150 consultants will be moved into the BDC Advantage team, which also plans to hire new full- and part-time advisors, Halde said.
Does it really make sense for BDC to offer more management related support instead of introducing new financing services? Yes, according to one high impact firm that participated in BDC’s study.
“We seem to have crossed the chasm around being able to access capital. We’re now the size and caliber of company that is attractive to (investors),” said David Offierski, president of Konrad Group Canada, a Toronto-based company that provides digital marketing, design, consulting and training services.
Rather than finding financing, Konrad Group is more focused on managing its quick growth, he said. Since it was founded seven years ago, the company has taken on big clients like McDonald’s and MTV, expanded its staff to 150 employees and opened three new offices in New York, Chicago, and Costa Rica.
“We are growing so fast and have a culture and appetite to be a much bigger company,” said Offierski. “The pace at which we can address opportunities in the marketplace both locally and globally – so we can find new opportunities and continue to grow our bottom line, service offerings, channels and clients – is really pretty staggering.”
One of Konrad Group’s main challenges is managing its foreign expansion.
“To get into new markets, you really have to commit to big investments in real estate, people, time and just supporting that and making sure it’s growing in line with other offices. Half measures don’t work. When you need to be in a (foreign) market, you need to go in headfirst. That’s been our biggest lesson,” Offierski said.
While Konrad Group has tapped into some BDC resources in the past, Offierski said his firm might not be first in line to seek consulting help from the new BDC Advantage team because “we don’t use many consultants. It would be extremely difficult for them to understand our business the way we do.”
He sees greater value in the BDC survey itself, simply for shining a light on high impact companies – especially technology businesses – and the value they can provide to the Canadian economy and investors.
“BDC is making investors understand how and why these firms are different and why and how they’re deserving of financing opportunities. Historically, technology firms have not been as attractive to traditional (providers) of financing. They’re legitimizing how companies like ours need capital and build capital.”
Cream of the crop
Who are the companies that BDC refers to when it talks about SMBs “punching above their weight?” We asked and here’s a few examples:
Energetic Services Inc
- Fluid hauling trucking company based in Fort St. John, BC that has expanded across western Canada to provide range of products / services to oil & gas, mining, and petro chemical industries
- Dedicated to improving internal communications and employee satisfaction.
- Have managed risk by investing in diversifying the services they offer.
- 5 year plan to expand across Canada and into the United States.
- Brennan Ross, President and CEO of BC based Energetic Services Inc.
- Provides electronic manufacturing services within the Atlantic region and across Canada.
- Experienced strong growth for the past seven years at a rate of 50% per year.
- Company is open to diversifying as well as global expansion.
- Julian Taylor, President and CEO, Sunsel Systems.
- Digital agency that designs and builds technology solutions and delivers transformation projects for companies ranging from start-ups to Fortune100 brands.
- Helping companies re-tool the skills sets of their teams in order to capitalize on changing how they engage with customers and employees.
- Seeing global demand driving global expansion.
- Investing heavily in building workplace culture and bringing that culture and energy into new markets.
- Recently acquired BrainStation, a company that specializes in hands-on collaborative classes in digital education. Filling need for customized technology training & advanced skillsets.
- David Offierski, President, Konrad Group.