APPLIED SYSTEMS INC.
UNIVERSITY PARK, ILL.
You saw it in the stock market. You've seen it in the merger-and-acquisition activity. Now you can see it in the INC. 500: software is hot. On this year's list there are more than 40 companies that design, manufacture, or distribute software, closing in on hardware as the driving force in the technology sector. Most experts see this as the start of a long-term trend, as the hardware becomes more and more like a commodity business and the software -- everything from applications programs to artificial intelligence -- becomes the high-stakes arena.
Near the top of this year's list is Robert Eustace's Applied Systems, which is typical of the successful software firms in its focus on a narrow market niche: applications software for insurance agents.
INTEGRATED SYSTEMS ANALYSTS INC.
As a U.S. Navy combatant in the Persian Gulf detects an enemy plane, the 50-millimeter cannons on its foredecks automatically rotate to zero in on the approaching target. As likely as not, the interfaces that link the radar to the cannon are designed by a company like Integrated Systems Analysts (ISA).
Cofounded by C. Michael Gooden in 1980 after a 17-year career with the navy, ISA gained its foothold in military contracting through the federal government's minority business development program -- and like many minority-owned companies, has spent the time since trying to get out from under its stigma. "It's a strained environment," he says. "We're constantly having to dispel the image that, as a minority contractor, we can't perform successfully." Gooden has apparently been successful enough that he can afford not to bid on such politically controversial projects as the MX missile and the B-1 bomber, which are more likely to be suddenly canceled with a change in Administration or public opinion. He has also been careful not to tie his company's prospects to any particular weapons system: no one contract supports more than 10% of his staff.
APPLIED ENERGY SERVICES INC.
In his capacity as an energy adviser to President Ford and head of the Mellon Institute's Energy Productivity Center, Roger Sant thought he saw a way to make money shipping coals to Newcastle.
It's called cogeneration. Like most other electric companies, Applied Energy Services burns coal or oil or gas to generate heat that turns turbines that generate electricity. And like most electric companies, that process produces a fair amount of waste heat. But unlike most electric companies, Sant doesn't just let the heat go up into the air. He turns it into steam and sells it to his neighbors -- an oil refinery in Houston, for example, or a chemical plant in western Pennsylvania.
"We are part of a major restructuring of a huge industry," says Sant, who estimates cogeneration, on average, cuts the cost of generating a kilowatt of electricity by as much as 10%. Nor is selling such power much of a problem: a 1978 federal law requires large utility companies to buy the electricity from these freelance competitors at a price equal to the cost of the utility's own energy.
Fawn Hall and Ollie North have been very, very good to Shredex. The famous White House duo is credited with boosting shredding machine sales by nearly 50% over this past summer. And the gain is not just government business, either. These days, federal agencies account for only 23% of Shredex sales. The real growth is coming from the private sector, where having a shredding machine has become a status symbol akin to an office with a window or a rosewood desk.
"These are no cloak-and-dagger, back-room machines," says president Michael Falco of the $500 to $18,000 cutter-uppers. "These are among the fastest-growing office products on the market, replacing the trash basket next to copiers and computer printers."
Falco, however, is not unmindful of how important a government scandal can be for boosting private-sector sales. Five years ago, he launched his company with a "Watergate" series. But he doesn't see any long-term market for a "Contragate" model -- at least not yet.
OPERATION BASS INC.
Most people can only fantasize about turning their hobby into a career. Mike Whitaker is one of the lucky ones. The former football coach and traveling salesman took $15,000 and a yen to fish and turned it into what has become the largest fishing organization in the United States. Each year, nearly all of the 24,000 active members of Operation Bass sign up for one of the club's 126 fishing tournaments held around the country, where the object is to weigh in with the fattest five to seven bass. Participants who do well in local contests move on to regional events and eventually the national competition, where the top prize is $100,000. Last year, that worked out to $4,760 per pound.
But there is more to his business than simply the tournaments, Whitaker soon found out. What started as an annoying chore -- a club magazine written and pasted up on the family's kitchen table -- has now turned into a nice little profit center for his company, representing nearly 20% of gross income. Indeed, it's such a fast-growing area that Whitaker can't find much time these days for what remains his favorite pastime -- fishing.
THE GIBSON GROUP INC.
Dad is the visionary. Older son is the planner. Younger son is the realist. Together, the three Donohoos started The Gibson Group paper brokerage in 1981, and today -- with the help of one sales executive and four administrative assistants -- they run a $52-million business. That works out to some $6.5 million per employee -- the highest productivity of any company on this year's INC. 500.
Since 1935, Joseph, the elder Donohoo, has been involved with more than two dozen start-ups, including several in the paper industry. And he knew that most mills have excess paper and paperboard to sell. It is those excesses that The Gibson Group agrees to broker.
So far, it has been a lean if somewhat far-flung operation. Father Joe works out of his home in Florida, while his oldest son William does his selling from his home in California. It is left to Richard, the younger son and treasurer, to oversee the company's finances and small staff from the company's headquarters on the second floor of a renovated house in a quiet Cincinnati neighborhood. There are no company trucks, no storage facilities, no fancy computer systems. Here's a company that truly gives new meaning to the term "paper entrepreneurship."
But not for long. In October, The Gibson Group purchased its own paper mill in Harriman, Tenn.
INSURANCE CONSULTING ASSOCIATES INC.
To the neighbors it seemed so sad: a house gutted and a bereaved homeowner wondering why anyone would have wanted to burn his home down. But to the investigators of Insurance Consulting Associates, it didn't look quite so mysterious. On quick inspection, it seemed as if there had been a neatly sawed hole in the first-floor ceiling. And on further investigation, it was discovered that the bereaved homeowner had, conveniently enough, rented a chain saw the very weekend fo the mysterious fire. The man was later convicted of arson and sent to prison. And Ronald Blanquie had made a loyal client of yet another insurance company.
"About 20% of all insurance claims are fraudulent," says Blanquie, "and most people who make payouts have no process to detect it." In addition to insurance companies, Blanquie's customers include a growing number of self-insurers, from local governments to businesses to physicians unwilling to pay large malpractice insurance fees.
HUNTINGTON BEACH, CALIF.
It is a sign of these Republican times that golf is making a comeback. That's one reason that Slotline Golf is on our list for the fourth year running. Another is a more "foregiving" club design that, by putting extra weight in the heel and toe of the club face, helps to prevent the club head from twisting in the golfer's hand.
Before he began designing golf clubs 15 years ago, C. R. "Duke" Duclos was designing airplanes and space vehicles for McDonnell Douglas Corp. Today, sales of his "inertial" putters account for the majority of Slotline's $7 million in sales, but Duclos has high hopes for his new line of irons and woods, which has been competing head-to-head with the number-one-selling Ping line over the past year. Duclos also plans to beef up his European sales as soon as a new manufacturing, warehousing, and marketing facility is completed in -- where else? -- St. Andrews, Scotland.
RPM PIZZA INC.
The way we figure it, $93.5 million in pizza sales is a lot of pizza. In terms of supplies, that adds up to about 5 million pounds of cheese and 2.5 million quarts of tomato sauce each year. End to end, the pepperoni would stretch from Gulfport to Kansas City.
RPM Pizza not only delivers a lot of pizzas, it delivers an important message about franchising -- namely, that franchisees can become their own companies of significance. With 242 stores in five states and Canada, RPM is the largest franchisee of the Domino's Pizza empire and one of the largest pizza enterprises in the country. Owner and chairman of the board Richard Mueller started with Domino's as a driver in 1967 before becoming a franchisee, a corporate vice-president, and then a franchisee again -- only this time with exclusive Domino's rights to all of Louisiana and Mississippi. Having now moved well beyond its Deep South base, RPM is building new shops at the rate of two and three a month. Will the nation soon satisfy its appetite for the Italian pies? There is no indication of it from this year's INC. 500. Also on the list: The Pizza People (#456), another Domino's franchise; and Massachusetts-based Bertucci's (#265).
MOUNTAIN VIEW, CALIF.
Heidi Roizen finds it amusing that her company is on the list of the country's fastest growing. In a way, that's precisely what she has been trying to avoid.
It all started when her brother enlisted her help in selling his new spreadsheet program. Roizen promptly set about doing what any new M.B.A. fresh out of Stanford Business School has learned to do: spend money. As a result, despite strong sales, their new company nearly faltered.
Then last year it nearly happened again. One of T/Maker's independent software developers had come up with the first desktop publishing program for the IBM personal computer, and within the first 10 weeks, T/Maker had orders for 10,000 copies. What it didn't have was the support staff necessary to provide 24-hour-a-day support services to 10,000 customers and to make constant improvements to the program. Personal Publisher required a bigger company than Roizen or her business partner, Royal Farros, wanted to run, and they promptly sold the program to a larger firm.
"Sales growth is not our objective," says Roizen. High margins are. Let others try to make their companies the next Microsoft, she says. "We like it when we can do 20% of the work and get 50% of the revenue."
MID-SOUTH COMMUNICATIONS INC.
In the 1960s, it was alternative newspapers. In the '70s, it was city magazines. Now, in the entrepreneurial '80s, it's regional business journals that are the hot publishing properties, this year breaking into the INC. 500 for the first time with Mid-South Communications.
There are about 200 of the business regionals around the country now, offering business executives a different perspective and more in-depth coverage than the consumer-oriented reporting of most local newspapers. Journalistically, Ward Archer's Mid-South Memphis and Nashville papers are considered among the best. By one estimate, as much as 90% of the advertising for the business regionals has been siphoned off from local media -- newspapers, city magazines, even local radio. But that is about to change: with nearly half the magazines already consolidated into multijournal operations like Mid-South's, they have begun to make a bid for national advertisers as well. It is perhaps no coincidence that advertising pages for business regionals are up 7% this past year -- about the same amount that advertising pages in national business publications are down.
GOOD NEWS TRAVELS INC.
Christmas in Opryland with a pilgrimage to the Minnie Pearl museum. Springtime in Michigan with entertainment by the stars of "The Lawrence Welk Show." A summertime holiday in Dollywood. These are among the offerings of Good News Travels, a Christian group-touring company intent on helping its customers "explore God's creation." Run by John Tribble out of a small Easley, S.C., office, Good News Travels will coordinate about 175 vacations this year for senior groups, civic clubs, and those who want a tour that starts each day with prayer.
Unlike some of the other religious-oriented enterprises around the country, Good News Travels claims it has been unaffected by the Jim and Tammy Faye Bakker scandals at the PTL Club. "We're different in that we offer people something tangible for their money," says Tribble. "It's sad what happened. So many people put their trust in Jim and Tammy Bakker instead of Jesus Christ."
LANDSCAPES UNLIMITED INC.
Think of fast-growing companies and where do you picture them? San Jose? Tampa? Boston? How about Lincoln, Nebr.? This city of only 185,000, in the middle of the country, in the middle of an agricultural depression, is home to four companies on this year's INC. 500. There's a publisher of phone books (United Phone Book Advertisers, #6) and a distributor of computer supplies (Data Source Media, #250), a contractor for interior space (Interior Surface, #476) and one for exterior spaces, too (Landscapes Unlimited). Landscapes Unlimited's president William Kubly admits that if he were dependent on the Nebraska economy, he would have been out of business years ago. His company's crews, he says, spend most of their time on the road, building golf courses in other states. Then why stay in Loncoln? Kubly credits a pleasant community, the lively atmosphere of a state capital, and the University of Nebraska's Cornhuskers football games.
FLUORESCENT MAINTENANCE SERVICE INC.
Don't tell Jimmy Williams that his future looks bright -- it's a really tired joke to a guy who changes light bulbs for a living. And don't ask him how it is that he married the boss's wife. "It always sounds so bad," he laments.
The facts are that Fluorescent Maintenance Service is a company that both designs lighting plans and sends crews out to systematically clean and replace the bulbs. When founder Rex Knowles died in 1980, the company was left to drift for several years without any senior management. Williams, a former employee, was finally recruited to return to help Margaret Knowles "clean up the mess," and along the way they fell in love and got married. He is the president, she the vice-president, with 76% of the equity.
As for the company's turnaround, Williams attributest it mostly to his own plan of linking its fee directly to a client's energy savings. And the savings, it turns out, are considerable. Williams claims companies can shave as much as 50% off their electric lighting bills from installation of more energy-efficient lighting units and regular washing of bulbs and fixtures.
MERRY MAIDS INC.
INC. readers will remember that, back in June, we profiled the rise and fall of Carol Brothers and her ill-fated cleaning service franchise, Pop-Ins. Now, here's one that did it right. Dallen Peterson started Merry Maids in 1980 and today has the largest house-cleaning operation in the country. Like Brothers, Peterson says he started with no previous experience in franchising, coming out of a long career in corporate management. But unlike Brothers, who put most of her energy into promotion and marketing, Peterson concentrated on extensive training and reliable support for the 415 franchises now located in 44 states.
HOW THE INC. 500 WERE SELECTED
You might say that Deborah Weeks is the 501st member of the INC. 500. By the time December rolls around, she certainly feels like one. Her annual checklist is a long one: maintain individual files on each of the thousands of companies that apply; enter final data on each applicant on the research department computer; calculate rankings and determine breakdowns by industry, sector, and state; check, recheck, and re-recheck the final list. Oh, and most important: humor the INC. 500 senior editor.
For Weeks to qualify a company for the 1987 INC. 500, a company must have been independent and privately held on August 1, 1987, when applications were due. The rankings are based on the percentage increase in sales during a five-year period. During the base year (fiscal 1982), sales must have been between $100,000 and $25 million. And during the fifth year (1986), sales must have been greater than the year before.
Information on each application was verified by phone both with company officials and with their accountants. The checking process is something of a painstaking task that falls mainly to our summer interns. We remember, in particular, the dietary habits of interns Angus Macaulay, who ate three bologna sandwiches each day for lunch, and Suelette Daniel-Dreyfus, for whom a typical meal consisted of two doughnuts, a bag of popcorn, and a diet Coke. Elizabeth Thompson represented the magazine with distinction in a big summer road race, but less agile Mason O'Neal broke his hand just putting on a pair of roller skates. Karen Novick wins the prize for finding the accountant with the most distinctive name, one Barefoot Bonehead. And on one of her first days, Erin Oatway telephoned another accounting firm and asked to speak with "Mr. Waterhouse" -- apparently neither he nor Mr. Price was available.
The INC. 500 is prepared under the direction of special projects editor Sara Baer-Sinnott. She also had help from Robyn Campbell, Brad Drury, Elizabeth Scaccia, and Kathryn Thibodeau. Researcher Leslie Brokaw authored the brief profiles that appear among the listings.
The information published here is the only material INC. will make available.
Note: This table may be divided, and additional information on a particular entry may appear on more than one screen.
Company (1986 rank) Percent '86 sales '82 sales
Business description increase ($000) ($000)
1. American Photo Group Atlanta, GA 52,244% $77,992 $149
Photo-finishing production & marketing
2. PC Connection Marlow, NH 25,644 59,984 233
Retails mail-order peripherals &
3. Compuadd Austin, TX 15,127 44,158 290
Retails microcomputers & peripherals
4. Measurement Sciences Farmingdale, NY 12,385 32,960 264
Distr. computer software & equipment
5. American Cimflex Pittsburgh, PA 12,178 26,397 215
Mfrs. computer-integrated systs.
6. United Phone Book Advertisers (48) 10,928 15,770 143
Publishes telephone directories
7. Gates Distributing Richmond, CA 10,721 26,836 248
Distr. microcomputer hardware &
8. Customer Development Peoria, IL 10,664 17,868 166
Customer database mgmt.
9. Brett Aqualine Huntington Beach, CA 9,160 9,445 102
Mfrs. health-spa equipment
10. CareerTrack Boulder, CO 9,082 25,526 278
Professional development training
11. Bluebird Systems Carlsbad, CA 7,933 11,648 145
Publishes & distr. software
12. Homeowners Marketing Services 7,640 16,331 211
Provides real-estate marketing &
13. Applied Systems University Park, IL 7,627 10,431 135
Develops & mfrs. microcomputer
14. Lunar Radiation Madison, WI 7,522 14,634 192
Mfrs. bone densitometry equipment
15. Zymark (11) Hopkinton, MA 7,490 12,372 163
Develops & sells lab automation
16. G.O.D. Kearney, NJ 7,487 12,671 167
Overnight express motor carrier
17. Penn Lyon Homes Selinsgrove, PA 7,383 23,720 317
Mfrs. modular homes
18. Maui & Sons (10) Irvine, CA 7,233 9,753 133
19. Sun Financial (33) Clearwater, FL 7,112 8,366 116
Provides equipment leasing &
20. Morris & Raper Realtors Atlanta, GA 6,743 26,004 380
Sells real estate
21. Manask & Carl Toluca Lake, CA 6,118 8,083 130
Contract food svcs.
22. Group Benefit Services (76) Hunt 6,070 11,045 179
Group insurance administration
23. Systech San Diego, CA 5,811 10,286 174
Mfrs. & mkts. communication subsysts.
24. RJO Enterprises (39) Lanham, MD 5,510 14,753 263
Provides systs. engineering svcs.
25. STB Systems Richardson, TX 5,279 18,289 340
Designs & mfrs. enhancement products
26. WordPerfect Orem, UT 5,160% $47,549 $904
Develops & mfrs. computer software
27. Strategic Data Systems Sheboygan, WI 4,840 5,681 115
Develops application software
28. Early Cloud Newport, RI 4,783 5,567 114
Sells software products
29. Action Systems Indianapolis, IN 4,769 6,914 142
Provides technical consulting svcs.
30. Special Care Philadelphia, PA 4,729 5,795 120
Provides in-home health-care svcs.
31. ABC Supply (1) Beloit, WI 4,645 216,020 4,553
Distr. building supplies
32. GRiD Systems Fremont, CA 4,617 56,600 1,200
Mfrs. laptop computers & communication
33. Business Information Technology 4,585 5,153 110
Provides business systs. consulting
34. Ghafari Associates Livonia, MI 4,441 5,495 121
Provides architecture & engineering
35. Contract Professionals Pontiac, MI 4,357 9,137 205
Provides technical temporary-help svcs.
36. Quality "S" Manufacturing (44) Phoenix, 4,295 8,965 204
Mfrs. trailer hitches
37. Blackbaud Microsystems Huntington, NY 4,287 4,606 105
Supplies turnkey computer systs.
38. Emmis Broadcasting Indianapolis, IN 4,273 20,376 466
39. MicroSolutions Dallas, TX 4,250 6,047 139
Sells microcomputers & software
40. Trinity Computing Systems Houston, TX 4,156 4,597 108
Mfrs. medical software
41. Richard Young Office Prods. (26) 4,100 16,465 392
Deerfield Beach, FL
Distr. computer supplies & accessories
42. Distinctive Business Products Alsip, IL 3,986 5,107 125
Sells & svcs. business equipment
43. Interactive Business Systems (23) Oak 3,979 6,731 165
Provides data-processing consulting
44. Integrated Systems Analysts (20) 3,907 21,079 526
Defense systs. engineering
45. Advanced Systems Development 3,889 4,667 117
Provides computer consulting svcs.
46. Communications International 3,883 5,695 143
Sells & leases telecommunications
47. Curtis Manufacturing Peterborough, NH 3,873 6,674 168
Mfrs. computer accessories
48. Magnetic Data Eden Prairie, MN 3,805 10,309 264
Mfrs. & mkts. computer equipment
49. Bytex Southborough, MA 3,763 24,958 646
Mfrs. electronic matrix switches
50. C.A.S.I. Boca Raton, FL 3,708 5,788 152
Mfrs. computer software & systs.
51. Stamper Industries Carrollton, TX 3,655 18,439 491
Mfrs. aluminum windows & doors
52. Waste Energy Technology Bedford, MA 3,637 7,736 207
Operates waste-to-energy facilities
53. American Communications Group 3,617 3,828 103
Mfrs. telecommunications equipment
54. Distribution Plus Frederick, MD 3,577 20,702 563
Distr. computers & peripheral
55. International Micro Systems Miami, FL 3,529 6,968 192
Distr. microcomputer products
56. Historical Developers of PA 3,489 17,334 483
Develops historical residential
57. Intergroup of Arizona Tucson, AZ 3,482 39,400 1,100
Health maintenance organization
58. Aquatran Kingwood, TX 3,415 3,656 104
Provides overseas mailing &
59. Logistix (116) Milpitas, CA 3,376 23,361 672
Mfrs. software & hardware
60. Southeast Holding Charlotte, NC 3,335 20,059 584
Provides asset mgmt. & construction
61. C.J.P. Development (163) Cranbury, NJ 3,285% $8,531 $252
Distr. & Installs residential siding
62. JAC Creative Foods Los