Do You See What I See?

The heads of America's fastest-growing companies tell: what they watch to alert themselves to changes in the economy; what those signs are telling them now; and what they're doing about it inside their own businesses

While economists announce an official recession whenever the U.S. gross national product declines for two consecutive quarters, the men and women running fast-growth companies across the country have their own distinct and personal notions of what makes for a recession. John Bell says it's when worries about his direct-marketing business give him fitful sleep. To Soni Christensen, a recession means she might lose her new $500,000 design studio. California plastics manufacturer William Czapar is more direct. "A recession," he declares, "is when it hits your profit and loss, no matter what the rest of the economy is doing."

To be sure, this Inc. survey on the economic outlook turned up the usual suspects when folks were asked to name signposts that might signal trouble ahead -- high interest rates, unemployment rates, inflation, the stock market, even the number of help-wanted ads in local newspapers. But for Clarence E. Harris of Calhoun, Ga., a leading economic indicator is "gossip at the post office." Is Harris the kind of character you'd see on reruns of "The Andy Griffith Show," an entrepreneurial Barney Fife? Not quite. His Carriage Industries Inc. employs 1,000 workers and posted sales last year of $103 million.

Who's to say that the guys hanging around the Calhoun post office know any less than Alan Greenspan, chairman of the Federal Reserve System? His take on the economy comes from sheets of bloodless statistics, and numbers don't always tell the whole story. "You can feel a recession coming in your gut," remarks one company owner. "It's like a deer sensing the presence of a wolf that it can't yet see."

Differences within a region

What is striking, when one speaks with the survey respondents, is the divergence of economic outlooks among people in the same region, and sometimes even within the same industry. For depending on one's niche, a recession can be either a curse or a blessing in disguise. Take the Northeast, for example, which is already beginning to feel the effects of the rolling recession that wracked Texas, and before that the Rustbelt. It now is suffering the hangover of an exuberant binge.

Soni Christensen is president of Design East Interiors, in Concord, N.H. The company furnishes and equips model homes, lobbies, nursing homes, and the like. In 1988, when Design East made the Inc. 500 list, it had about 90 active models in its client base, and revenues reached $1.7 million. New Hampshire was hot. Then, very quickly, the bottom fell out of the New England housing market. The government's repeal of the investment tax credit did some of the damage, but mainly the supply of new housing simply outstripped demand. One of Christensen's projects was a condominium complex with 120 units; only 12 were sold.

Christensen had expected to have at least 20 employees by now. Instead, her staff peaked at 16 early in 1988 and has since been trimmed to 4. "This is the first time since I opened my doors in 1982 that I am going backward, not forward, in huge leaps," she says. "Sales are off by nearly 50% from our peak. I'm telling my people, 'Guess what? Be glad you have jobs. So don't be asking me for a raise, and don't pick up the phone and make a long-distance call, either.' My truck is worn out, but I'm not buying a new truck. Our van is worn out, too, and I'm not buying a new van. I'm not even buying clothes, and my daughter can't go on her ski trip."

Now consider the case of Mel Borrin. His New Hampshire real-estate firm, Preferred Properties Inc., sits on the shores of Lake Winnipesaukee, a scenic recreation area less than an hour north of Concord. Borrin specializes in the vacation-home market. Most of his buyers come from Massachusetts, New York, Rhode Island, and Connecticut.

Last year Borrin sold $22 million worth of real estate. This year, based on the volume of inquiries, he expects sales worth $30 million or more. "The volatility of the stock market has played right into our hands," he says. "People have seen too many collapses. They see that stability isn't in the market, it's in real estate. There's a lot of pent-up demand out there, and I think people have decided that now is the time to buy. Prices are more realistic. So I think we are in one hell of a great year."

Patricia Gallup, president of PC Connection Inc., in Marlow, N.H., feels the region's problems only indirectly. The $100-million mail-order retailer of computer peripherals and microcomputer enhancements is coming through the state's doldrums in fine style. But there is one problem, and that, too, has to do with the depressed New England real-estate market. "We used to attract employees from Boston and other urban areas in New England who wanted to live in a rural environment," says Gallup. "Now, those people are less likely to relocate because they're having trouble selling their homes." That's left Gallup with at least 30 vacant positions.

John Bell, the man for whom recession equals insomnia, is less sanguine. His company, Creative Professional Services Inc., had sales of $5.5 million last year. Its 45 full-time and 55 part-time employees handle business-to-business direct-mail marketing from their offices in Woburn, Mass., on Route 128 -- the high-tech corridor that not long ago was synonymous with fabulous growth. Bell's problem is not that business is down. If anything, it is up. No, Bell's problem is getting paid.

"We have had to install a program to speed up collections, because receivables are running from bad to terrible," Bell says. "That's true even with the best of payers, I might add. Everyone is trying to delay their payments, so nobody gets paid and we all go down together. I talk to a lot of CEOs of companies my size in this neck of the woods, and a lot of us are having trouble getting sleep these nights."

How companies are responding

Telephone interviews with scores of fast-growth company executives across the United States reveal that many believe they enjoy a special edge, some advantage, that will protect them no matter what the economy does.

Donald Eberly of Sacramento, Calif., is a businessman who sees a recession coming but is confident he'll emerge unscathed. His $11-million company, Qualimetrics Inc., manufactures, installs, and maintains meteorological sensors and systems for airports. "This is an area that is going to grow regardless of the short-term economy," says Eberly. "The modernization of airports is going to happen." The company now exports 28% of its volume, but what excites Eberly are his prospects in Eastern Europe, where airports now rely on antiquated Soviet-made equipment. He expects to land two major contracts shortly, probably in Bulgaria and Czechoslovakia.