The majority of B.C.'s biggest private enterprises got bigger last year.
More than half of the companies on BIV's list of the top 100 private companies in B.C. posted top-line revenue growth in 2012. Those companies contributed to the record level of total revenue of the list to $61.3 billion, up from $61.2 billion reached in 2008 prior to the global financial crisis hitting economies around the world.
That bit of good performance, however, has not come easily for B.C.'s largest companies. The past five years have been challenging for the majority of companies on this year's list that saw revenue decline for one or more years over the past half decade.
Fewer than two dozen companies on the Top 100 list posted consistent revenue growth between 2008 and 2012. Such companies included business titans like the Jim Pattison Group, and familiar brands like Pacific Blue Cross, Boston Pizza International, A&W Food Services of Canada and the Keg Restaurants.
While many of these companies can attribute their performances to steady expansion and organic business growth, some have seen substantial top-line increases because of significant developments since the global financial crisis.
Companies like Vancouver's Stemcell Technologies and Burnaby-headquartered Paladin Security have been among the fastest-growing top 100 companies by more than doubling their revenues over the past five fiscal years. Both B.C.-based companies have grown by tapping markets outside the province. In the case of Stemcell, 95% of its market is now outside Canada (See "Allen Eaves: Cell division" – issue 1219; March 5-11, 2013).
Since 2008, Paladin Security has expanded beyond its base in B.C. and Alberta to open offices in Toronto, Kingston, Windsor, Brandon, Winnipeg and Halifax. (See "Ashley Cooper: Safe bet" – issue 1202, November 6-12, 2012).
Vancouver-based Corix Group of Companies has also been among the top-five fastest growing top 100 companies this year with revenues jumping 54% between 2008 and 2012. Revenue is likely to rise again this year following its acquisition last December of Utilities Inc., one of the largest privately owned U.S. water and wastewater companies, which serves 290,000 customers across 15 states.
Since Corix (then Terasen Water and Utility Services) was spun out of Terasen Inc. in 2006, the company has focused on growing its market in North America. Jack Touhey, Corix's vice-president of public and government affairs, said, "The plan was always to significantly develop our presence in the utility infrastructure business. The lack of infrastructure in many places and the substantial degradation of infrastructure that was put in 30, 40, 50 years ago was a huge investment opportunity and operations and maintenance opportunity that we saw [in North America]."
Stagnant growth in big businesses in B.C. threatens economic growth
These three companies are among a handful on the list that have recently emerged as one of B.C.'s largest companies. Many of B.C.'s top 100 companies have existed in various incarnations for several decades, some for more than a century as in the case of the Oppenheimer Group.
But the challenge of growing small businesses into big enterprises in B.C. has increasingly concerned business analysts and economists. According to Statistics Canada, the number of head offices in B.C. fell 11% between 1999 and 2007. At the same time, the number of companies headquartered in Alberta grew by the same percentage.
StatsCan recently tweaked how it defines head offices; however, the gap between B.C. and Alberta in head office concentration has remained. The number of head offices in B.C. continued to decline between 2010 and 2011. Even so, Alberta had a quarter more head offices than B.C. and more than double the number of people employed in those head offices in 2011.
The employment numbers are more stark at the city level. While Calgary has fewer head offices (224) than Vancouver (247), Calgary's head office employment is double that of Vancouver.
That reality has posed significant challenges for B.C.'s economy and the people that live and work in the Lower Mainland.
"When you have an economy that doesn't have a lot of major head offices located in it, it tends to erode the overall quality of employment and that's certainly something we see here in the Lower Mainland," said Jock Finlayson, executive vice-president and chief policy officer at the Business Council of BC.
"Head offices and large companies are associated not only with good paying jobs but career positions that people can take and all the things that can go with that like training programs and so on. If we had more large companies here, we would tend to have a more affluent economy."
Larger firms also support key sources of economic growth, including exports, research and development and productivity growth.
"In the popular narrative, people have a positive view of small businesses and are more skeptical of larger ones. I understand that," said Finlayson. "But to an economist, bigger firms have a bigger payoff, if you will, for the overall economy."
Big business desire lacking
It has remained a mystery why B.C. has failed to grow its share of Canadian head offices.
"It's speculative on my part, but we don't seem to have it in our culture," said John Winter, president and CEO at the BC Chamber of Commerce. "There doesn't seem to be the level of forgiveness for failure. In the American psyche, if a small business owner screws up, that just makes them more determined to come back and prove success. I'm not sure that's the case here."
Robert Napoli, vice-president at First West Capital and president of the Vancouver chapter of the Association for Corporate Growth, suggested, "There's something special about leaders that are committed to the business and their employees. They want to build a substantial business for reasons other than financial. I don't know how you create that. If it's just a financial decision, most of them sell."
For CEOs like Paladin's Ashley Cooper, the desire to keep growing has never waned. "We're here for the long haul and enjoy it. We've never had so much fun and I think when you're having fun, it's not work. Maybe other business owners get tired. I don't know."
Touhey said Corix's management has largely been based in B.C. from the start, and while the growth opportunities are outside of the province, management is firmly planted in B.C. "For our company to grow, it has been substantially dependent on our key management, and they obviously want to work from here. All the attractions there are for Vancouver make it a lot of sense to stay here."
There's little need to move its head office from the province in which it was founded with Vancouver's concentration of professional talent and good transportation links. "I don't think there's a specific hub of utility excellence in North America that would require you to leave Vancouver, like Boeing did when they moved their head office from Seattle to Chicago."
While moving head offices to Vancouver has continued to be a challenge, Finlayson suggests it would be better for policymakers to focus on helping high growth companies to expand into productive, high-paying enterprises. "What I see from our politicians, from all parties, is this narrative that small business is great," he said. "They certainly play a key role in the marketplace, but it's almost like they want to keep them small than have them grow." •
