John Stephens of Movie Systems Inc. calls it "determination." Robert Foster of Ventrex Laboratories Inc. calls it "the ability to stay optimistic when it's raining." John R. Folkerth of Shopsmith Inc. says his wife calls it "pigheadedness." Whatever their education, training, or experience, whatever their strengths and weaknesses, most of the INC. 100 CEOs agree that persistence is the primary prerequisite for success.
A college degree is not required. Although Joe Quick of Nuclear Support Services Inc. may worry that "my lack of a sheepskin really hurts me," 14% of the INC. 100 CEOs left school before graduating from college. Engineers lead the college graduates, with 30% holding bachelor degrees in electrical, mechanical, or chemical engineering. Another 13% hold economics degrees, while only 9% boast business degrees. Charles Haverty of Xonics Inc. studied in a seminary, Elisabeth Claiborne Ortenberg of Liz Claiborne Inc. studied art in France.
Almost half -- 46% -- of the INC. CEOs have advanced degrees, most often in engineering, 31%; followed by business administration, 27%; or law, 12%. Only three hold PhDs. Joe Quick is still going to school, studying by correspondence for a business degree.
Some 16% came from brokerage houses, banks, or accounting firms. A few, 4%, like Quick, came out of the military. Most, however, had a background in business management, usually in the same field as the company they would later run.
Nearly half had some experience in a Fortune 500 company, often developing the product -- or the motivation -- to go independent. Richard Greene had spent 11 years at IBM Corp. when he got the idea for Data Switch Corp. He took it to his corporate superiors first, "but they weren't interested. So after two years of frustration, I went out on my own." Richard Blackmer had been a project engineer at General Electric Co. for 25 years; when GE began to sell off its new ventures, including the project he had been working on, Blackmer founded Oxygen Enrichment Co. Gerhard Von der Ruhr developed the initial idea behind Biochem International Inc. while he was at GE as well, but the decision to go out on his own came earlier, when he was in his early thirties and an international vice-president of Bristol-Myers Co. "I realized I didn't want to spend the next 30 years of my life working for a large corporation," Von der Ruhr remembers. "I didn't seriously aspire to the presidency of Bristol-Myers; instead, I wanted to be in charge of my own destiny and have a stake in the company as well."
The old truism that the quickest way to the CEO's chair is to start the company is proven once again by the CEOs on the list Only 24 are outside managers, brought in an average of 10 years after the launch; the other 76 were present at the creation. On average, the founding CEOs were 37 years old when they set out. The youngest was 19-year-old Konrad Ruckstuhl of SPM Group; the oldest was 54-year-old Raymond Mueller of Comair Inc. The companies they began now average 12 years of age; 71 were founded in the 1970s. Only 6 were formed before 1960.
Two-thirds of the founders had a partner, three-quarters of whom are still in the business. The split, if it came, was most often a parting of directions in the early years. One co-founder of Intelligent Systems Corp., for example, wanted to develop units at a high cost/high performance bias; he left to start his own business. A Ferrofluidics Corp. partner left when the emphasis changed from research and development to marketing; he became a senior scientist at Exxon Corp.
The majority of the founders -- 61% -- considered their company market-driven rather than product-driven at the outset, whether the market involved computers or energy, health care or food. Gedalio Grinberg began North American Watch Corp. when he decided to gamble that people would buy watches as status fashion accessories rather than mere timepieces. The growing number of fashion-conscious women in the work force led Elisabeth Claiborne Ortenberg to set up her own women's sportswear company under the Liz Claiborne label. Merrill Anderson of Consul Corp. had been an investment banker who raised money for a Mexican-hot-sauce business then saw it take off -- and decided to buy into Mexican-food franchises. Harold Katz of Nutri/System Inc., on the other hand, decided to franchise weight-loss centers after following his mother's unsuccessful weight-loss attempts.
Initial funding for the 100 companies most often came from multiple sources. Some 69% of the CEOs raised funds from personal savings, 39% from outside investors, 28% from banks, and 9% from venture capitalists.
For over a third of the founders, insufficient resources were the biggest hurdle at the start. "I didn't even realize at the time just what undercapitalized meant," Leonard Newman, CEO of Diagnostic/Retrieval Systems Inc., says ruefully. B. Robert Jefferson of Jefferson-Williams Energy Corp. remembers being "so undercapitalized that it was one continual crisis."
Life at Oxygen Enrichment was a shock for Richard Blackmer after his 25 years at GE. "With a large corporation, marketing, distribution, and servicing were automatic; we had to learn all of that," he says. "We'd been dealing with almost limitless resources at GE, but when we started out on our own we were operating out of a garage with a screwdriver and a wrench."
Blackmer began with less than $170,000. "If things had gone according to plan, we wouldn't have needed any more." But negotiations with GE stretched out over a year, draining his cash pool. Developing the financial vocabulary and savvy to raise more "felt like going into a foreign country," he says.
One-third of the founders complain of lack of business experience as a hurdle at the outset. "But that inexperience may be a blessing, because you're too dumb to know what you shouldn't do," Dean Sloane of CP Rehab Corp. says. "I'm not very smart," Frank Lasater of Flare concedes. "I've accomplished what I've accomplished by being like a pit bulldog."
Such tenacity has paid off for the group as a whole. Average sales of the INC. 100 now surpass $53 million; 21 companies are over the $75 million mark, including 13 that have surpassed $100 million and 4 that have topped $200 million. On average, sales are growing at a compound annual rate of 89%. Running at 9.6% of sales, net income averages $4.6 million.
The average CEO holds 21% of the equity in his company. The range extends from J. George Drews's 1% of International Game Technology to George Acker's 70% of Cable TV Industries. Together the 100 have created 58,480 new jobs in the last five years. While they may marvel, like Franklin Bishop of Matrix Corp., that their business is "like a caterpillar that turned into a butterfly," nearly 90% say the vision of the company with which they began has stayed the same. "Only the scale is different " says C.R. Michaels of Lomak Petroleum Inc. Most insist that they have remained market-driven, "listening to our users and developing what they need," as John Cullinane of Cullinet Software explains.
The CEOs spend most of their workweek in the office, with usually only one day a week away from headquarters. Half turn most often to colleagues and associates for business advice first; one-third to a board member; and one-tenth to a spouse. On a broader scale, 85% read for information about technology, market development, and news of their competitors, most often in trade journals. The Wall Street Journal is the favorite source of daily business news. Some 70% attend industry conferences and seminars, 46% are active in trade associations, and 4% are members of Young Presidents' Organization Inc. Beyond that, 27% sit on other corporate boards and 21% pursue business interests beyond their INC. I00 company.
The majority -- 71% -- are not hands-on computer users, most often agreeing with Leonard Carr of Oxoco that "my people are alot better at it than I am, so I let them do it. Otherwise, I'd be here 18 hours instead of 12." Their job, most of the lNC. 100 CEOs insist, isn't with the computers, although they rely on the increased data computers provide. Instead, the crux of the CEO's job is much more fundamental. Most say their main responsibility is to set a corporate course, to make sure that the values with which the company began are maintained throughout the operation.
"The job is to orchestrate, to keep everyone working in the same direction," Flare's Frank Lasater says. Joe Quick of Nuclear Support Services calls it "project management" -- "keeping all the things the company is doing in vision as one single project, then making everyone aware of their targets and keeping them on track."
"The CEO establishes the personality of the business," John Cullinane explains. "His most important role is to set the tone. You can write memos and try to set an official tone, but it's the philosophy you act out day by day that ripples through the organization."
Running a growing organization with a growing staff is different from starting out on your own. If persistence is most often cited by the CEOs as the first requirement for success, "good people" is cited second. "The CEO has to be a lion tamer," Tom Hendrick of Hadson Petroleum Corp. says. "But if he's going to succeed he's got to have some pretty good lions." For Vern Rees of St. Jude Medical Inc., that means that his most important responsibility is "being able to read people psychologically, understanding what makes them want to complete a task."
"You have to get your employees involved in the company," John Cullinane agrees. "You try to instill a team spirit so they don't worry about the clock." For Cullinane, as for fully 96% of the INC. 100 CEOs, building a team spirit means offering to share your equity with key employees. Shared equity means shared responsibility, shared risk -- and shared gain. "We made 12 millionaires six months after going public," Richard Greene of Data Switch says happily.
But it is the CEO who has to decide when to roll the dice. Over and over again, the 100 CEOs describe themselves as aggressive and action-oriented, attracted to the risks that business success demands. "You've got to be decisive," James Hoak of Heritage Communications Inc. says. "You have to be confident and persistent, willing to make decisions and not look back. But there is a flip side to all that. Decisiveness carried to its extreme is impatience."
If the CEOs describe their strengths as persistence and decisiveness, they recognize as well that their biggest weakness is impatience, the belief that "I can do it faster myself -- and better," and a consequent unwillingness to delegate. "As an entrepreneur, I felt that I had to do everything myself," Leonard Abramson of United States Health Care Systems Inc. says"I had to force myself to delegate, to let go. But I've found that the secret is to pick good people and work with them. Develop confidence both ways, and then you can leave them alone -- if they're good and well trained, you'll all succeed." No CEO can run a fast-growth company without sharing some of the pressures, but there is always more to be done. "I tried to delegate; I hired a new senior vice-president to relieve me of some of my duties," admits Jesse Edwards of Mid-America Petroleum Inc. "Then I just went out and found a lot of new ones."
As persistent as they are on the job -- creating a corporate culture, training their staff, forcing themselves to delegate -- the INC. 100 CEOs are even more tenacious about their hold on the corporate reins. A full 83% insist that they will never retire, often agreeing with Charles Muench of Intelligent Systems, who vows, "I won't go until they carry me out in a box."
David Jackson, the 45-year-old founder of Altos Computer Systems, is an exception, however. Jackson has already announced when he will retire. At age 84.