How We Made the Inc. 500 List - Again
Today Inc. unveiled its 31st annual Inc. 5000 list, which ranks the fastest-growing, private companies in America. We are proud that the company we lead day to day, Avondale, made the list for the second year in a row.
The rapid growth trajectory of our company, as well as others on the list, began at the depth of the recession in 2008. We were able to turn the negative effects of the recession into rapid growth by building a business model that was naturally able to sustain a much bigger revenue base than we started with. That's not easy to do, but in our view it was necessary to start with that simple concept and move step-by-step toward our goal.
At the end of 2008--after Lehman Brothers had collapsed and the stock market was in the midst of a free fall that would see its value drop more than 50% in less than a year -we were partnering with two other consulting firms to serve three clients, since we had yet to build a solid pipeline of clients on our own. We knew we didn't have a distinctive offering, and given that we were working in partnership with other firms, it wasn't even always clear that our clients knew that we were distinct from those other firms. We had just brought on our first two employees but feared that the recession would force us to let them go.
Despite the trends in the broader economy, we were beginning to get consistent work and building a reputation among a few clients. We were confident that, if we could make it through the storm, we would be able to build something that was distinctive, if not advantaged in many ways, relative to other strategic advisory firms. Plus, we knew that because of the recession, bigger strategic advisory firms were firing employees, not investing in growing their organizations. We actually felt fortunate to be given the time to build the right business model.
We determined that to be distinctive we needed to move away from a traditional consulting model of charging clients for "projects" that may or may not be implemented, and instead, build a business that was paid for the results it delivered. This meant that in addition to consulting, we needed to build the ability to take equity positions in our clients, and eventually create a portfolio of companies, along with our investor partners, which we could build and share in the value creation we helped to achieve.
At the end of 2009, we made some significant bets in that direction, hoping we could sustain cash flow to keep that investment above water. Our luck began to pay off in 2010 when we developed and grew a strategic partnership with our first major client, which we are still serving today. But our business was still teetering on a few successes until 2011, when we had the opportunity to diversify our customer base across three major clients and our first portfolio company. This cash flow enabled us to transition from six employees at the beginning of 2010 to 11 at the beginning of 2011 and 20 at the beginning of 2012.
We just hired our 30th team member and are looking for more growth opportunities. We aren't likely to make the list next year. Our business model has shifted to emphasize equity growth in our portfolio companies vs. pure revenue growth. We'll keep growing, but given that the list is calculated based on revenue growth, our trajectory won't be on par with the fastest-growing companies.
We hope, though, that we can turn one of our portfolio companies into a future Inc. 500 award winner.
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KARL STARK AND BILL STEWART | Columnist | Co-founders, Avondale
Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.