Finding Growth in a Recession
It will probably come as no surprise to savvy Inc. readers that it's not as easy to find growing companies as it was a couple years ago. In 2008, the second year of Inc.'s expanded list of 5,000 growing privately-held companies, there was much enthusiasm as firms across the country showed eagerness to be part of our list. The three-year growth rate of the company at the No. 5,000 rank doubled from 20 percent in 2007 to 40 percent in 2008. This year, the enthusiasm was still there, but very often, the growth was not. Our measuring period of 2006 through 2009 encompasses the recession, which economists say started in December of 2007 and lasted through the end of last year. Poignantly, many firms applied for this year's list even though their 2009 revenue was less than that of 2006.
The changes in the economy over the past three years as reflected in the Inc. 500|5000 are fascinating. When we launched the first Inc. 5000 in 2007, the construction and manufacturing industries had the greatest representation on the list. These industries, we said, "represent the backbone of the economy." If the current economy has a backbone, it has morphed into the vertebrae of a very different kind of creature. Manufacturing and construction have dropped to 10th and 11th place in terms of the number of companies on the list, each with less than half the number they had in 2007. Another unsurprising loser with unemployment at 9.5 percent: the human resources sector has 37 percent fewer companies than last year, amounting to just 124 companies on this year's list.
This year, the business products and services industry has the most companies on the list, surpassing IT services, the leader in 2008 and 2009. There are lots of these companies—printers, law firms, events planners—but their median growth, at 52 percent, is the lowest of all our industries.
The fastest-growing industry sector by number of firms on the list is government services. The number of firms on this year's list increased 33 percent from last year to 336 companies, and up 148 percent from just 135 in 2008. More than half of these firms are located in Virginia, Maryland, and Washington, D.C. There's a heavy dose of IT consulting in the government services firms, and a good number work primarily for the military. Government services is also the second fastest-growing sector by median three-year growth rate, at 202 percent, beaten only by what's left of the real estate sector—just 38 mostly young, small companies that showed a median of 231 percent growth.
The food and beverage sector saw the third biggest increase in the number of companies after government services and business products and services, led by new purveyors of healthy foods such as fruit distributor Sundia (No. 130), Food Should Taste Good (No. 134), which makes tortilla chips free of trans fats, cholesterol, and gluten, and The Fresh Diet (No. 177), which delivers three fresh, healthy meals and two snacks to its customers daily. We've also added a number of brewers to this year's list, both upstarts like Michigan's Short's Brewing (No. 720) and Rhode Island's Narragansett Brewing (No. 2,627), and more established brands like Brooklyn Brewery (No. 2,780) and Boston's Harpoon Brewery (No. 3,734).
Total growth (the percentage increase of the sum of all honorees' revenues) is way down, to 45.8 percent, from 106.3 percent last year. The median growth rate is 96 percent, down from 126 percent last year and a peak of 147 percent in 2008. But total revenue is more than ever: $321.8 billion, up from $214 billion last year. That's thanks in part to some huge companies new to the list: health care giant HCA (No. 4,512) at $30 billion, convenience store chain 7-Eleven (No. 4,929) at $15.1 billion, and toy store chain Toys "R" Us (No. 4,932) at $13.6 billion. There are also very large companies that we knew way back when. Computer memory manufacturer Kingston Technology (No. 4,708), which debuted on our 1992 list at No. 1 with $140.7 million in revenue, is now a $4.1 billion company. HDTV manufacturer Vizio (No. 1,018) first saw the list in 2007 with $677 million; it's now at $2.5 billion. Online computer hardware and consumer electronics superstore Newegg (No. 3,347), founded in 2001, was huge when it first made the list in 2006; it has since nearly doubled in size to $2.3 billion. Apparently the message here is if you want to get really really big, hardware is the way to go.
Our individual profile pages sport several cool new features this year. Each profile is accompanied by a bubble chart that shows the entire Inc. 5000 universe, plotted according to percentage growth rate along the vertical axis and 2009 revenue along the horizontal axis. Each company is represented by a circle whose diameter corresponds to the number of employees it has. These circles are color-coded according to industry. Our advanced search feature is now conveniently located in a column on the right side of each of the profile pages, and is part of a larger Intelligence Infographic. If you haven't used this feature before, we encourage you to try it out. The infographic allows you to search by revenue, growth rate, rank, number of employees, industry and more. These new features, the bubble chart and infographic, were designed by Information Graphics Editor and Designer Tommy McCall.
Additonally, this year each profile page includes every year a company has previously appeared on the Inc. 500 or Inc. 5000, with its rank for that year, and revenue and employee count for the year prior to its listing. Let's take this opportunity for a shout-out to Allen Corporation of America (No. 3,129), Pelican Products (No. 1,726), and Wier & Associates (No. 4,082), all of which made our second Inc. 500 list back in 1983.
This year's online-only feature articles explore some trends we've observed. Margaret Dodge looks at some companies doing well despite—or because of—the downturn, including Debt Free Associates (No. 7) and Timeshare Relief (No. 1,288). Tanisha Sykes describes how social media companies are changing the way fast-growing companies operate. And Darren Dahl shows how direct selling is making a comeback these days, as illustrated by Inc. 5000 companies Stella & Dot (No. 67) and Ambit Energy (No. 1).
How are things looking for your firm this year? Has it been around for more than three years, and does it look like you'll have more revenue this year than in 2007? Let us know! You can send us an e-mail list from this page so we can give you a heads up on applying for next year's list. You know, we can't do it without you.