Although a sizable number returned to the list, some went public and others were aquired. But most just couldn't meet this year's faster pace.
As 1983 approached, Robert E. Carr Sr. and Michael London faced crucial -- and not dissimilar -- decisions about the future of their companies. Carr, chief executive officer of Systems Engineering Associates Corp. (SEACOR), a naval engineering firm based in Cherry Hill, N.J., and London, president of Headquarters Cos. (HQ), a San Francisco-based company offering a nationwide network of technologically sophisticated business centers, both had hot performers on their hands. SEACOR was #192 on the 1982 INC. 500 list, with sales of $15 million and a five-year growth rate of 687%, and HQ, a younger company, was not far behind at #387, with sales of $5.6 million and a 347% sales increase since 1977.
Both Carr and London also knew that their campaigns for long-term growth would need to draw upon deeper resources than cash flow and credit lines. In 1982, SEACOR, a prime government contractor, was suffering from federal contracts a full quarter or more into accounts receivable. Worse, institutional lenders were wary of stepping into a company with little collateral beyond its own personnel; venture capitalists demanded high percentages from a limited (4%) profit-margin business; and the cost of a public offering -- not to mention Carr's feeling that his firm "had no pizzazz for Wall Street" -- seemed prohibitive. That left acquisition as the only palatable option. So Carr started shopping around.
London was shopping too. "We didn't necessarily want to be acquired," he says today, "but it seemed the best alternative. We hadn't yet reached the level of profitability to go public, and much of what we were doing was geared toward changes in the corporate landscape of the future."
What happened to SEACOR and HQ -- both were eventually bought by Day & Zimmermann Inc. and United Technologies Corp., respectively -- tells only part of the saga of the companies that failed to return to this year's INC. 500 list. Sixteen others were also acquired, and 12 went public. Some succumbed to market slumps, and many more put numbers on the board that, although impressive by almost any measurable standard, did not keep pace with 1983's first-stringers (this year's group had a minimum five-year growth rate of 397%, up from 1982's 235%).
In all, 318 members of the Class of '82 disappeared from this year's rankings, despite some very strong showings: 116 of them, in fact, more than tripled sales from 1978 to '82, and at least three -- Mainpro (#279 in 1982), an Irving, Tex., maker of lubricants; Bepco (#295 in 1982), a Winston-Salem, N.C., heavy equipment retrofitter; and Macom Industries (#330 in 1982), a Van Nuys, Calif., importer of antenna systems -- came within an eyelash of the 397% cutoff separating the 500 from the also-rans.
In other ways, though, the fates of SEACOR and HQ, while not necessarily representative, are instructive. Strongly entrepreneurial in character, each company looked for a buyer with a hands-off attitude and faith in current management. In neither case, paradoxically, was what they saw what they got.
"It's even better than what I'd thought," gushes London, who admits that his optimism sounds practically naive, given UTC's $13.6 billion size and enormous range of interests. "They've left my entire management team in place, growth has accelerated, and I feel strongly that our future success is assured on a very large scale. I'd talked to [United Technologies CEO] Harry Gray and [UTC's Building Systems Co. president] Tony Autorino seriously twice, and I talked to the presidents of several companies UTC had acquired before. They felt the promises had been kept. I've been so impressed since [the acquisition] that I told Harry I'd help him acquire other entrepreneurial companies if he wanted my services."
These are hardly the sentiments of Bob Carr, who lost 50 out of 450 employees ("some real backbone people," he says with a sigh, "and I'm afraid another big cut's coming"), was stripped of control over his own domestic operation, and finds himself in litigation with his bosses over certain clauses in his contract.
"I don't want to bad-mouth [Day & Zimmermann]," says Carr of the Philadelphia architectural and engineering firm that acquired SEACOR, "because they are a people company; they were good about the transition period, and certainly conditions in our marketplace changed drastically for the worse. But I miss the ability to say yes and no. Furthermore, under the terms of our agreement, I acted as an exchange agent, pledging personal liability, and I would certainly not do that again.
My biggest problem is talking about this. I never could get it to a personal level -- defining my personal criteria for the company, I mean -- and that's where I feel I could have done a better job."
Carr, former chairman of the Small Business Unity Council, a prime force behind the White House Conference on Small Business, sums up his feelings in no uncertain terms. "If you're a true entrepreneur and you decide to sell," he says, "don't stay on. Walk away and go do something else."
Not all of last year's true entrepreneurs fell by the wayside. Of the 182 returnees, 27 companies actually improved their rankings, including 5 who vaulted 100 places or more on this year's list. Thirty-two companies managed to jack up their growth rates but, due to the performance of faster-paced newcomers, they slipped several notches.
Among the many that failed to repeat, several were disqualified on technicalities -- for example, sales of less than $10,000 or more than $25 million in base year 1978. Falling into the former category were N. Bassil Ltd. (#280 in 1982), a Boston stationery shop, which had a 1,576% sales gain but 1978 sales of only $62,496; and Associated General (#45 in 1982), an Anchorage, Alaska, paving contractor,
which increased its sales 999% over the five years but had a 1978 sales volume of only $52,000. At the other end of the spectrum, Brenlin Group (#441 in 1982), California Plant Protection (#458 in 1982), and The Federated Group (#421 in 1982) all exceeded the $25-million sales limit in the 1978 base year and were dropped from consideration, despite significant growth since.
