Profile of Inc. 500 companies from 1983.
The conventional wisdom said they'd sell out, go public, or go under. The conventional wisdom was wrong
It looked like a graduation celebration: the 1983 Inc. 500, assembled in Houston on a hot May night, CEOs and their spouses dressed in unaccustomed formal wear for the gala dinner dance that ended the second annual Inc. 500 conference. For two days they'd sat through workshops and speeches, earnestly discussing the strategy and tactics of growth. Now they were ready to party.
They had reason to celebrate. The United States had recently come out of its worst recession in a decade, an economic slump marked by an unprecedented number of bankruptcies, the largest bond default in history, and the skyrocketing of the federal debt and the trade deficit. But the recession hadn't touched the companies represented in Houston. They were thriving, the hottest growth businesses in the country. While the Fortune 500 were losing market share and laying off employees by the thousands, the Inc. 500 could boast an average five-year sales increase of 770% and employee growth of 402%.
It was as if the economy had turned upside down. Most of the CEOs were in their late thirties and less than a decade away from start-up. Their companies were still relatively small (averaging $8.8 million in sales), anonymous, and often stretched near breaking by day-to-day demands. According to Inc., however, they were "the pacesetters of the recovery." Now they were being feted by the governor and the mayor, treated to dinner and dancing and a Rita Moreno stage show. Who needed champagne? The recognition was enough.
I'd never met a group like them. Strangers when the conference began, representing 35 states and the District of Columbia as well as a dizzying diversity of industries, they were like old comrades-in-arms by the night of the gala. Each one had a tale. Self-proclaimed novices at management, they seemed totally absorbed by the adventure of building a company.
No one knew, though, what making the Inc. 500 meant, beyond the five-year growth spurt that had put their companies on the list. Clearly these people had been in the right place at the right time, but you couldn't prove anything about national economic trends from the group or generalize about which regions or strategies were the most fertile.
No one knew how long their companies would last, either. Entrepreneurship had been out of favor for so long that it seemed like a new phenomenon in May 1984, when the conference was held. Inc. itself was an upstart in the publishing world, and David Birch's landmark study of growth-company job generation was still controversial. The conventional wisdom equated our national business health with the health of the Fortune 500 and Wall Street, dismissing most entrepreneurs as shooting stars and predicting astronomical failure rates for their companies. Just how significant were all those new jobs if they were going to disappear tomorrow?
The CEOs I met in Houston didn't buy the clichés. Yes, they were driven, but it wasn't money that drove them so much as control, the need to take charge of their own lives and futures. Their values came straight from Main Street: be your own boss, build something of your own for yourself and your family. They shared a common long-range goal, too: to keep the companies they'd founded independent and growing.
Privately, I didn't think many of them would make it. For all their determination, long-term growth would require deeper pockets and more structural sophistication than most of them could muster. The majority of their companies were newly profitable, without the resources to survive a market slump or an attack from a more established competitor. I expected that 25% of the businesses would fail outright sooner or later. Another 25%, technology companies for the most part, would go public, riding the then-booming IPO market. Most of the rest would wind up being sold. In fact, a group of mergers-and-acquisitions specialists from New York City had already called the magazine, trying unsuccessfully to buy the phone numbers of all the companies on the list. "They saw the 500 as a prospecting list," recalls editor-in-chief George Gendron, "a gold mine of hot companies that would have to be taken over to survive."
This past summer, six years after the Houston gala, I decided to track down the CEOs of the top 100 companies in that 1983 class, to see how accurate the predictions had been. I'd followed a few in Inc., such as Lane Nemeth, who built Discovery Toys (#17) to $70 million in sales, only to find herself embroiled in a bitter lawsuit with an early investor ("Greer vs. Nemeth," July, 07900761). But I'd lost track of most of the others. "Life After Growth" is what I planned to call the story. Where had their companies gone, and how did the CEOs look back at their Inc. 500 days, now that the dust had settled?
To my surprise, relatively few of them have the time or the inclination to look back. Most of their companies are still here, just as the CEOs had hoped, and are still focused on the future, growing and creating new jobs.
The conventional wisdom about failure rates was wrong: only 16 of the top 100 are out of business today. The New York City M&A specialists were wrong, too: only 22 of the companies were sold. The Inc. 500 CEOs were right. Fifty-three of the 100 companies that topped the 1983 list are being run by the same men and women who led them to the Inc. 500. But they are hardly the small companies I remember from Houston: 19 of them have crossed the $50-million mark, and 10 of those have made it past $100 million, including the class's sales leader, Oracle (#82), which went from 15 products, 38 employees, and $5 million in sales in 1982 to 380 products, more than 7,000 employees, and $1 billion in sales today.
