You still can't generalize about hot regions or sectors from the survey results. The 53 survivors include a vitamin supplier and a contract aviator, a manufacturer of disposable industrial clothing and a home-insulation merchant. Only 12 companies went public, and 2 later went private again. Surprisingly, the experience of going public doesn't appear to have set them apart. Eight of the 12 are still run by the same CEOs, and most are growing at rates not much different from those of the ones that stayed private.
Although the survivors' companies remain as niche oriented as ever, they are doing more things in more places these days. Some have expanded vertically and others horizontally, and almost all have reached out geographically as well. But no matter what growth path the companies have taken, success has forced them to wrestle with the dilemma of scale. In the early days, after all, they benefited from being small. Their size allowed them to be quick, flexible, focused, and responsive. Companies that keep growing, however, reach a point at which they begin to need the strengths of a large organization -- geographic reach, range of service, economies of scale. The question is, How do you acquire those strengths without sacrificing the small-company advantages that helped you grow in the first place? How do you avoid bureaucracy and keep your employees working as a team, especially when they begin to number in the hundreds and are spread all over the map?
That has been the fundamental challenge confronting the survivors. They've found ways to resolve the dilemma and keep their companies growing. In place of conventional hierarchies, the survivors have built systems of relationships inside and outside their companies that depend more on trust and mutual advantage than on authority and delegation. In the process, they have extended the definition of an entrepreneur and developed new models of management.
But it's not just the companies that have grown. So have the CEOs themselves. The survivors of 1983's top 100 are not nearly as obsessed with control as the people I met in Houston were. They can't be. Now they are hands-off by necessity, giving up day-to-day management to focus on strategic planning and building the team. They also spend more time thinking about their employees than they used to. These days they talk not only about identifying but about sharing the opportunities and responsibilities of growth.
They're getting older, too, moving through their forties and fifties. After all these years, they've had enough of the stress of 60-hour workweeks. Success has given them freedom, time to travel with their kids or coach Little League or just go fishing. Business is still an adventure, and they're still passionate about making their companies grow. But they're looking for something more.
You can track trends and events from the past seven years by studying the 16 companies that failed. But you can't prove much about entrepreneurship beyond the truism that some growth companies are better managed than others.
Times were hard in Houston, home to 7 of the top 100 companies on 1983's Inc. 500 list. Four of the companies went bust, and another is on the brink. But John McCormack's Visible Changes (#54) managed to thrive in Houston's collapsing market, reaching $22 million in sales in 1990. Outside the oil patch, consumer electronics experienced a shakeout, fad products came and went, and two stereo chains from the top 100 went under, along with a waterbed store, a comic-book publisher, and Gravity Guidance (#2), maker of the Gravity Boots that Richard Gere wore, hanging upside down, in the movie American Gigolo. But TSR (#51) had turned the 1980s' teenage mania for Dungeons & Dragons into a $27-million business by 1990, expanding into magazines, board games, and books.
One company's crisis is another's opportunity. Prakash Melwani tried to expand mail-order clothier Royal Silk (#21) into retail stores and sank into Chapter 11. Yuppie-toy master Richard Thalheimer made the same move with The Sharper Image (#76), which grew to more than $200 million in sales. Two S&Ls slipped into the national morass, taken over by the feds. But Commonwealth Mortgage (#68) stayed healthy and pushed sales from $10 million to $50 million by sticking to loans for individual home buyers, rather than for development or construction.
The survivors' companies kept growing because they learned to reinvent themselves through seven years of crisis, choices, and change. Most followed textbook paths, broadening the markets they served and the ways they served them, capturing more customers and more revenues from each customer. Many expanded to other countries.
They have grown by fits and starts for the most part, and all of them have had to overcome external threats of one sort or another. But growth itself has usually been the biggest catalyst of change, as the survivors have struggled to make sure their companies retain the qualities that ignited their original expansion.
It was easy for Dennis Hayes to keep his hands on and the excitement high in the early days at Hayes Microcomputer Products (#4). To launch the company, he'd pulled together seven employees in classic garage-style fashion. There was no structure to speak of, no communication problems, no walls separating marketing and engineering and sales. Everyone worried about quality, cost, response time, and new-product introduction: with first-year sales of just $134,000, survival depended on doing those things right. Growth kept the pressure high, but the reward was high, too: a five-year 9,066% sales increase that put Hayes Microcomputer Products on the 1983 Inc. 500 list with $12.3 million in sales.
