Good housekeeping
The challenge of keeping the organisation aligned for continued growth is the second biggest worry for the Fast50 group.

“At its most basic,” says Trade Me’s Morgan, “you’ve got to create a great place to work. Empower your employees, let them know their opinions will be listened to and that they can effect change in the workplace.” At Trade Me, he says, there is no hierarchy and the goal has been to create a humane place to work. In the midst of rapid expansion, though, Morgan admits there is a risk of diluting the culture you’re attempting to build. Any advice? “Stop and digest the people you’ve inhaled!”

When breaking into overseas markets, take a lesson from Endace (currently exporting nearly 100% of its computer network intelligence systems to companies such as AOL, Sprint, AT&T and France Telecom) and Prolificx (which exports about 50% of its electronics technology solutions, with plans to increase that). Pellett says don’t underestimate the importance of international experience or the need to align yourself with people who have skills in global markets. “All of our management team has international experience, as does the majority of the rest of the team. If you never leave New Zealand, there is just so much knowledge missing. It sounds corny, but our success is 100% because of the team. You have to build a very strong team of people who aren’t just competent, but are motivated by the desire to be excellent.”

But Pellett warns that under the pressure of growth, it can be tempting to “compromise, make bad hiring decisions and shoehorn people into places where they don’t fit. It’s better to slow down expansion than hire the wrong people.”

Money, money, money
Attracting capital was the third biggest challenge to growth among the Fast50. Almost without exception, Chambers says, people underestimate how much it’s going to cost to start a business and usher it to profitability.

For the first few years, luring finance was a key challenge for Trade Me, but now Morgan says, “capital is no longer a problem”. An enviable position, no doubt, but one not shared by many others.

Endace and Prolificx are currently in the $5–$20 million revenue category, but are expected to exceed $20 million next year, and both are preparing to seek funding externally. Prolificx has had a small round of venture capital funding, including successfully raising money in the US. “You hear horror stories about VC and trips to Sand Hill Road, but we haven’t found that. VCs are very smart, and we did a learning trip to casually chat with them and understand their head space before going back to make a pitch. You have to be ready.”

What about the future?
The general feeling among the Fast50 is that the economy is headed for a ‘softening’, rather than a downturn. Are they worried? Not necessarily, but they are prepared.

Provincial Finance (number 20 both this year and last, and fifth in 2002) is in the business of lending small sums of money to a large number of consumers for things like renovations, cars and overseas trips. While it sees a bit of an increase in property investment and rural sector lending over the next few years, director David Lyall says an anticipated dip in the economy will simply mean it would toughen up its lending criteria.

Trade Me’s Morgan reckons his company is pretty well hedged against any downturn in the economy. “In a strong economy, people buy a lot and sell what they’re replacing. If the economy goes south, those who just had to have that plasma TV might need to sell it when they lose their job. It’s win, win.”

But that’s not the song they’re singing over at Endace and Prolificx. Pellett says the strong New Zealand dollar has had a “draconian” effect on Prolificx’s margins. However, the long-term strategy is not to sell on price, but rather win contracts that add value to the consumers’ business.

And a final word from the fastest company for the up and comers? “When you’re small, watch your expenses; when you’re medium, don’t be afraid to hire and invest for the future. But above all,” says Trade Me’s Morgan, “make sure you understand the culture of the company that you’re building.”

Fast 50 companies:

• created 437 jobs in the last 12 months (582 in 2003)
  
• are optimistic — 48% expect to achieve growth of at least 50% next year, 30% expect growth of 20-50% and 15% expect growth of 10-20%.
  
• think growth matters — 84% say growth is an important item at team meetings
  
• are often exporters — 44% were selling offshore in 2004 (50% in 2003)
  
• generally do it without handouts — few had received assistance from New Zealand Trade & Enterprise or other economic development agencies few had received assistance from New Zealand Trade and Enterprise or other economic development agencies
  

• maintain standards and have good administration systems and infrastructure
• choose the right team and empower them
• plan ahead
• tolerate mistakes but don’t allow them to be repeated
• have lots of cash — implementation always costs far more than you thought
• control costs — spend as if it were your own money

• the slowest-growing of the Fast50 (Ascent Technologies of Wellington) more than doubled its revenue in 2004, with 108% growth (the slowest of the 50 last year grew at 132%)
  
• average growth for small companies in the under $5 million turnover bracket was 319%; in the $5 million - $20 million bracket 299%; and in the $20 million-plus bracket, 424%