Going Their Way

When you look at the leaders on this year's INC. 500 -- the 25 companies that by virtue of their growth sit at the top of the list -- you can't help but be impressed, first by their phenomenal accomplishments, and second by their remarkable diversity.

Sales among the Top 25 companies expanded an average 6,028% from 1978 to 1982. The average Top 25 company reported revenues last year of $14.7 million, up from $229,000 in 1978, and now employs 156 people, instead of the 9 it had in 1978. All together, these companies have created 3,672 new jobs in six years.

But differences abound. Revenues among the group range from $82 million to $3.3 million from sales of products as diverse as gravity inversion boots and telephone modems, and of services as disparate as computer software design and downtown auto parking. Their initial capitalization ranged from a lot to none at all. Some were planned, and others seem just to have happened. Some are still 100% entrepreneurial, a few have assumed some of the trappings of mature businesses.

For all their differences, however, these companies do share a common characteristic -- the force that powers their growth. It is neither obvious nor measurable, and finding it requires looking not only at the businesses but also at the people who started and run them. The common characteristic, expressed differently in almost every case, is an unmitigated commitment to creating something where before nothing existed.

These 25 companies that top the INC. 500 are young. Eight were founded in 1978, and only 4 predate 1976. While the oldest, Gravity Guidance Inc. (No. 2), of Pasadena, Calif., goes back as far as 1971, it began operating as a full-time business only in 1979. Company founders, likewise, are young, 23 men and two women who, when they started their companies, ranged from age 19 to 45, with an average age of 33.

More than half of the founders were entrepreneurial virgins, most often refugees from larger companies, who left before achieving senior executive status. Most of the entrepreneurial veterans, on the other hand, are not on their second or third venture, but more like their umpteenth. Bruce Burdick -- a one-time private eye -- lost $100,000 in the worm-ranch business before starting Burdick's Computer Stores Inc. (No. 14), of Overland Park, Kans. Miles Barber's Commercial & Industrial Administration Co. (No. 10), of Santa Clara, Calif., is only one of five businesses Barber founded in California. Rex Maughan, founder, chairman, and president of Forever Living Products Inc. (No. 6), of Phoenix, has, over 15 years, put together dozens of nonoperating partnerships (e.g,. Bear River Land & Cattle Co.) and dabbled in office building and land deals. Robert Sillerman, co-founder -- with -- Bruce Morrow of Sillerman-Morrow Broadcasting Group Inc. (No. 13), of Middletown, N.Y., claims to have a hundred or more start-ups under his belt.

Every one of these companies began not just because an opportunity existed, but because a founder recognized the opportunity. The reason Bruce Burdick (who was living in Sioux City, Iowa) started his chain of retail computer stores in Kansas City has little to do with geography and everything to do with the difference between luck and Burdick's keen eye. At39, he was operating a greenhouse and raising worms with his stepfather in Sioux City. In 1978, on his way home from a wormranchers convention in Dallas, an article on computers caught his attention, and within a few months he had moved his wife and four children to Kansas City, where a Computerland franchise was available. Last year, Burdick's Computer Stores's six Kansas City retail outlets generated sales just shy of $10 million. Two new stores opened this fall. "My mother says I was lucky," Burdick remarks, "that I was in the right place at the right time. I tell her, 'No, I was in Sioux City, which was the wrong place. I had to move. There were millions of people in Kansas City who could have taken advantage of that opportunity, but I recognized it and they didn't. It's not just luck."

The difference between looking at an opportunity and seeing it comes up in the story of almost every company's founding, or, in the case of Fifth Season Travel Inc. (#3), of Indianapolis, its turnaround. In 1977, Patti McVay, an accounting instructor at a local business college, was asked at a cocktail party to look at the books of a vacation travel agency started earlier by four Indianapolis lawyers. Not only did they not have any books, McVay says, they had no business. Something, however, caught her attention. "I looked around. The agency was in a building with lots of big corporations, and it wasn't arranging any of their travel. I was curious, so I went in and asked about it, and I began reading." Soon McVay agreed to take over 51% of the equity in the failing company, and last year Fifth Season generated revenues of $10.9 million arranging travel for its expanding roster of corporate clients.

McVay and Burdick both had keen eyes, and the guts to take the next step -- to take a risk. Risk-taking for an entrepreneur has two elements. One is the degree of risk: What are the chances for success? The second is the amount at risk: What is the cost of failure? Companies among the Top 25 have balanced these two elements through the full range of proportions.

Consider Brian and Sharon Stutt, a young, New York couple surviving in Houston on food stamps and Sharon's waitressing tips. Brian, having worked for a time in his family's appliance business, noticed that Houston wholesalers charged higher prices than retailers got back home. So he and Sharon stuffed neighborhood mailboxes with fliers promising cut-rate prices on major appliances if the customer would pay up front. Two neighbors responded and the Stutts made their first sales using a borrowed truck to deliver the goods. Word spread, and the Stutts soon had a growing white-goods business operating out of their home. Last year their company, Warehouse Appliance Inc. (#5), generated sales of $8.9 million, and the Stutts took out their first bank loan to help them open a second showroom.

The degree of risk for the Stutts in starting a discount appliance retail business was, and continues to be, high. Several major competitors have failed, as Houston's oil-based economy has cooled. But the Stutts have compensated for the high degree of risk by putting as little as possible at risk. Failure at any point in the growth of Warehouse Appliance, while undesirable, would not have been expensive.

On the other hand, the failure of Polycoat Systems Inc. (#18), of Hudson Falls, N.Y., would have cost George Carruthers a bundle. He and family members put up $600,000 in capital to launch the company, and while that is a lot of money to risk, there was relatively little chance that the venture wouldn't survive. Polycoat manufactures and distributes the same kind of insulation materials that the family's construction business had been installing for many years. Carruthers undertook to outsell the competition by outmarketing them -- promising problem-solving and technical assistance while others sold only product. It was a good idea. Last year's revenues were $7.4 million, up from $4.5 million in 1981. But Carruthers was hardly betting the family fortune on an untried product in an unfamiliar market.