Build a business that lasts

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When Colin MacDonald and John Risley started Clearwater Seafoods with a single pickup truck in 1976, all they wanted was for their busi­ness to last longer than a year.

They couldn't have predicted then just how big and long lasting it would become.

Clearwater is now one of the top performing seafood companies in the world. It has gone from dis­tributing live lobsters to custom­ers in the Northeast coast of North America to harvesting and selling scallops, clams, lobster, shrimp and other species worldwide. Last year, the company brought in about $390-million in revenue.

Every business owner would love to create a successful com­pany like this one, but of course that's easier said than done. Half of all Canadian small businesses fold after five years, according to Industry Canada. Keeping a com­pany going for nearly 40 years is clearly a tall order.

"Many factors contributed to our growth and longevity over the last 38 years," says Ian Smith, Clearwater's CEO, "in particular we have shown ourselves to be innovative, growing the company through developing new products and markets as well as imple­menting new technologies."

So what does it take to create a business that will stand the test of time? Take a look at the many companies that have been around for years, and there's one thing that all of them have in common: They're not afraid to innovate.

"Research and development is at the basis of any company that wants to survive in today's world," says Robert Guy, a Montreal-based senior vice-president with GE Capital. "Companies need to innovate, and they need to have a view of what's going on around the world."

Clearwater's executives have understood this from the begin­ning. In the 1980s, the company

wanted to expand its markets by finding a way to extend the health of live lobsters in storage. Through its R&D efforts, it found that lobsters held in individual trays and kept in 1°C water could live for up to six months. Clearwater used that research to build a state-of-the-art facility that could hold nearly 2 million pounds of lobster for extended periods of time.

"It allowed us to be in a very different business than most in the industry," says Mr. Smith. "We could – and still can – do daily delivery of premium wild live lobster globally, even when the product's not in season."

More recent innovations include mapping scallop fisheries on the bottom of the ocean (the scallop is a sedentary species, so mapping makes it easier to find these creatures) and automated scallop shucking, which allows the company to process scallops more efficiently.

While technological evolution is a big contributor to company longevity, executives must take an innovative approach to their finances, too, says Barry Levine, a Toronto-based associate partner at Ernst and Young.

Companies typically have a lot of money tied up in inventory and receivables, and many fail to manage their working capital properly, he says. The most suc­cessful operations have found ways to better manage the money that's coming in and the dollars that are going out. "The more money that's freed up, the more they can reinvest in their business and invest in new technology, equipment and products," says Mr. Levine.

"Long-lasting companies also find innovative ways to structure their balance sheet and we're there at GE Capital to help them think through different solu­tions," adds Mr. Guy. "Naturally, the less interest a company has to pay, the more money it has to invest in the business."

Like a lot of companies, Clear­water ran into debt-related chal­lenges during the recent financial crisis . In 2009, the company was paying up to 15 per cent interest on some of its loans, says Tyrone Cotie, Clearwater's Treasurer.

Clearwater worked with GE Capital to simplify its compli­cated capital structure – it had both senior and junior debt as well as convertible debentures – and that helped lower inter­est costs. Clearwater now pays on average five per cent on any borrowed funds and has a more flexible loan structure that allows the company to take advantage of growth opportunities.

The more flexible loan struc­ture has given the company more leeway in investing to take advan­tage of growth opportunities, says Mr. Cotie. For example, it's now building a $50-million vessel that will expand its clam fleet.

There are other keys to decades-long success, such as getting the most out of the supply chain and excellent customer service, but for Clearwater it comes down to smart innovation and prudent financial planning.

"We still have that entrepre­neurial spirit that got this com­pany off the ground nearly four decades ago," says Mr. Smith. "We're also always asking our­selves how we can deploy capital to improve efficiency, lower costs, increase quality and maxi­mize revenues. That's worked so far, and there's no reason it won't work in the future."

This content was produced by The Globe and Mail's advertising department, in consultation with GE Capital. The Globe's editorial department was not involved in its creation.