While some companies are carried up on a rising tide, others succeed by bucking the industry trends.
Groucho Marx once said that he never wanted to belong to a club that would have him for a member. There must be times, we suspect, when companies on the INC. 500 feel similar apprehensions about the industries of which they are a part.High-growth industries -- the glamour sectors of the economy -- provide any number of opportunities for smaller companies, but they are treacherous. The market niches that looked so appealing yesterday are likely to be jammed with eager new competitors today. Shrinking segments of the economy, or sectors unusually vulnerable to the business cycle, can be even less appealing, in that they force growth-oriented companies to find ways of circumventing the market's trends. Fast lane or slow, it can be hard to fight the traffic.
That said, it is, of course, easier to make the INC. 500 grade in a high-growth business than in a sluggish one. Some 145 companies on the list, for example, are involved in such rapidly expanding industries as telecommunications, computers, cable television, and publishing. None are in cigars or ladies' shoes. Still, there are dozens in other industries that either remained flat during the past five years or exhibited a marked downward trend.
How did the fast-laners avoid the potholes? And how did the slow-lane standouts outstrip the pack? In the stories below, INC. takes a closer look at some of the companies from each category -- at what made them unique and at what they have in common. What emerges from the stories, oddly enough, is a sense that the 500 companies resemble one another more than they resemble their counterparts in the same industry.
Maybe that makes them members of a new kind of club -- and maybe it is one that even Groucho, had he been a businessman, would have wanted to join.
PUBLISHING The hot medium
A word of advice to all the electronics buffs who have been predicting the demise of the printed word because of computers, telecommunications, cable television, and such: If you have been holding your breath, let it out.
For all the hoopla surrounding electronic communications, the printing and publishing industry has never been healthier. It employs 1.3 million people, puts out a total payroll well in excess of $20 billion annually, and projects 1984 sales of some $100 billion. Every single category of printing and publishing -- from books to magazines to greeting cards -- grew last year, even adjusting for inflation, and nearly all are expected to grow at the same rate this year.
"We're in the middle of a boom that is not all that fragile," says William Lofquist, an industry analyst -- and master of understatement -- with the U.S. Department of Commerce. According to the department's figures, Lofquist adds, printing and publishing depends more heavily on small businesses than does any other manufacturing industry. Of the more than 50,000 printing and publishing establishments nationwide, four out of five employ 20 or fewer people
Part of this words-on-paper boom can be traced to a buying binge among advertisers. Magazine ad revenues, for instance, have increased nearly 50% from 1979 to 1983, says the Magazine Publishers Association, from $2.7 billion annually to almost $4 billion. That growth far exceeded the percentage increase in both the number of magazines and their total circulation.
Still, it may be only a matter of time before the proliferation of magazines catches up with the growth in advertising support. Magazine publishing requires relatively modest capital for a start-up, and the killings being made in the business have already attracted a host of new players. Even though few of these new ventures succeed, those that survive find it a fast "cash-generating business," according to A. Emmet Stephenson Jr., founder of General Communications Inc. (#255) in Denver.
Stephenson should know. The owner of a kind of miniconglomerate, he counts banking, oil and gas, and mobile homes among his various business interests. "Actually, I'm a venture capitalist," he says. "Publishing is just one of my businesses." In 1978, he started a small tabloid called Denver Business World, and later converted it to a glossy magazine. Revenues promptly doubled and profits soared -- despite the added costs of a magazine format. He has since acquired city magazines, in Denver and Vail, and two real estate trade publications, one in Denver and another in Colorado Springs. General Communications grossed nearly $2 million last year despite an ongoing newspaper war in Denver that has kept ad rates low.
Once you have a couple of publications up and running, says Stephenson, the economics of starting another become irresistible." You use half your money and half tax write-offs to build the business," he says. "So it's easier to make the decision to start something new."
Vincent Testa, who started Testa Communications Inc. (#170) in Carle Place, N.Y., in 1979, publishes a swarm of trade and consumer magazines and tabloids for professional music and sound production industries, music equipment dealers, and home-entertainment enthusiasts. Testa, a onetime record producer who used to work with the rock group Vanilla Fudge and singer Janis Ian, formed the company with "well under" $100,000 and grossed $2.3 million last year. His specialty now, he says, is "starting magazines."
In fact, his specialty may be finding unexploited markets. "I always look for a hole to fill," he observes. Except for Home Entertainment, a ritzy magazine for well-heeled audio and video buffs, Testa's publications are "hard core" magazines carefully targeted to established professionals in the music and sound business. "We're not trying to reach 300,000 teeny-boppers who might want to be musicians," he says. "There aren't enough 17 or 18 year olds trying to be the next David Bowie. We focus our editorial content for people already working in the business."
Steven Simon, who spent 12 years in his family's lithography business before moving to Florida 10 years ago, found his own hole in the printing brokerage business. Simon originally planned a career switch into real estate when he left New York for the sunny South, but discovered on arriving in Miami that "nobody approached printing services as a large volume brokerage business" there. Figuring to become the first, he launched Miami Printing and Publishing Corp. (#42) as a clearinghouse for small and medium-size printers.
