What gave entrepreneurship its pizzazz, of course, was growth. Anyone could start a company. But only a growing company could make a lot of money, net the big payoff, and arouse the interest of Wall Street. Only a growing company could have fun -- could provide the parties and the profit sharing, the opportunities and the excitement. And only a growing company could generate jobs. Though Birch's pronouncements on job generation were quickly adopted by small-business advocates, many forgot the fine print. Most small companies, Birch observed, don't grow at all. The jobs come not so much from small business but from the 10% or 15% of new businesses that grow the fastest. Growing companies, not small companies, were America's engine of development.
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Didn't it seem as if that flood of growth would go on forever? Here at Inc. most of us thought so. We plunged into the middle of the entrepreneurial revival, publicizing it and analyzing it and (we hoped) nudging it forward. Our first issue, in April 1979, related the still-unknown story of Apple. ("Born to Grow," the article was called.) Later issues told of Genentech, of People Express and America West airlines, of Mrs. Fields Cookies and Marquette Electronics and Jack Stack's Springfield Remanufacturing Center. Our annual listing of the hottest companies ranked them by percentage of sales growth, pure and simple. We weren't insensitive to the importance of profit and market share and return on equity. But sales growth seemed like a pretty good proxy for all the virtues of the new entrepreneurship. It was the fast-growth companies, after all, that were reshaping the business landscape.
And yet -- we'd better confess it -- we heard plenty of stories suggesting that growth wasn't all it was cracked up to be. We even printed a few.
In 1986, for example, Robert Mulder wrote a first-person article for us about why he deliberately kept his landscaping company small. Who, asked Mulder, wanted to lie awake nights worrying about how much he owed the bank? Who wanted the hassles of managing a lot of employees? Mulder's article hit a nerve with many readers: from then on letter writers periodically chided us for our focus on fast-growth companies and our benign neglect of small businesses like Mulder's.
One reader, Joline Godfrey, was so persuasive on this subject that we asked her back for a Face-to-Face interview. Ostensibly, Godfrey's complaint was that Inc. was sexist, ignoring the many thousands of companies started by women. But she thought we weren't so much piggish as blind -- blinded by our concept of growth. Companies started by men, the kind typically featured in Inc., fit into what she called the Make Money, Get Rich, Grow Fast, Devote Your Whole Life to This Thing model of entrepreneurship. Companies started by women often didn't. Like her, other women who owned businesses might choose to grow more slowly -- or not grow at all -- so that they could pursue other interests.
Along with such voices of sweet reason came tales of terror, of hypergrowth companies and hard-driving entrepreneurs who had crashed and burned. There were bankruptcies and business failures, of course. More personal, and thus more poignant, were stories like Tony Bykerk's.
Bykerk had grown up poor, and when he set out to build a telecommunications company, he wanted to build it big. Before long K&B Engineering Inc. had 450 employees and 16 offices nationwide. It made the Inc. 500 in 1983. Bykerk himself was a rich man. He had a $2-million house, a 53-foot Hatteras yacht, a Porsche, and two Mercedes.
He also had a troubled marriage, a drinking problem that just wouldn't quit, and a mess at the office. Though sales kept rising, profit margins sank. Thievery and foul-ups seemed to be mounting. On one memorable day an employee simply walked off the job at a construction site; Bykerk finally tracked down the unhappy fellow five states away.
Bykerk resolved his crisis before the marketplace forced him to. He dried out. He made up with his wife. He sold the house and the boat and the cars, and bought smaller versions. And -- wonder of wonders -- he shrank the business. From 450 employees he went down to 85, from 16 offices to 4, all of them in California. Growth, he said, was a narcotic. He had been hooked, and he had shaken the addiction just in time.
Most disquieting of all, maybe, were the stories of entrepreneurs who believed they were building better, stronger, more durable companies by avoiding growth. Bykerk himself fit that description -- profit margins in his newly small company were more than double what they had been -- but he, after all, had been forced into it. Other company owners seemed to hear the small-is-beautiful drum from the beginning. Carl Schmitt, founder of University National Bank & Trust Co., was written up as an entrepreneurial exemplar in popular management texts, including Tom Peters's Thriving on Chaos. Yet Schmitt deliberately limited himself to two full-service branches and a relatively small customer base. (See "Small Business," March 1991, [Article link].) Stew Leonard, the grocer, never carried more than 800 items in his famous store -- and he opened up a second store only because his children were clamoring for their own shop to run.
