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The fastest-growing companies don't just exploit theirniches -- they redefine their industries. Here's how
Finding the High-Stakes Customer
Allsup * Belleville, Ill.
After quitting his job with the social Security Administration, in 1982, Jim Allsup spent more than a year studying how disability claims were mishandled. Then he started a business that helps insurers and employers -- institutions with gigantic stakes in the outcome -- obtain proper benefits for employees. With the company's guidance, clients get to reduce their private insurance premiums or self-insured payments significantly.
One thing that's enabled the company to grow to $3.7 million in eight years is its compensation strategy. Rather than receiving straight salaries, claims people get incentives based on the number of cases they're able to resolve and the size of the settlements. A typical case might save a company $100,000 in benefits over 13 years. Allsup is preparing to introduce some new products, such as health-and retirement-benefits administration programs. Instead of selling to consumers, it will target institutions like banks, enabling them to form stronger ties with their customers.* * *
Vertically Integrating Service
Bendco/Bending and Coiling * Pasadena, Tex.
To say that Bendco is in the metal-bending business is to offer only the faintest outline of what it does. This seven-year-old company functions more like a design consultant to customers in the chemical, refining, and construction fields. Staffed by highly skilled metalworkers, many of whom worked for a now-defunct division of Armco Steel, Bendco helps customers map out the best configuration of pipes and beams to meet their requirements in safety, cost, or design.
Bendco's early focus was on Houston-area petrochemical and oil refiners, to whom founder Jim Friery pitched the safety and cost benefits of bending versus welding. Even when purchase orders seemed unlikely, Friery notes, "we'd visit their plants and offer design suggestions at no charge." Prospective customers have always been encouraged to visit the company's facility to discuss future projects.
"We love to show off," Friery concedes. Each of Bendco's 10 machine operators, for example, is certified to work in several different kinds of metals. Most have certification as independent inspectors as well. Too much training? Not as far as Friery is concerned. "We think it helps people do a better-quality job, and it gives our customers a feeling of confidence." As Bendco attempts to do more business internationally, Friery thinks the investment will pay off.* * *
Tightly Controlling Quality and Image
Pleasant Co. * Middleton, Wis.
At a time when lots of companies are out there slashing overhead and farming out everything they can, Pleasant Rowland has attempted to keep as much of the work as possible in-house. Pleasant Co. produces and sells a line of high-end books, dolls, toys, and clothing aimed at girls between 7 and 11. The lengths it goes to maintain the integrity of its products and service are extraordinary. Rowland launched her company five years ago less as a profit-driven enterprise than as a vehicle for teaching girls about U.S. history. She began with three fictional characters from different historical periods and has recently added a fourth. Each is brought to life by a doll, priced at around $80; period artifacts, which run as high as $175; and six books about the heroine's adventures.
A former elementary-school teacher, Rowland oversees product development, working closely with company-employed historians and advisers. The dolls and accessories are manufactured on the outside to Rowland's finicky specifications, but they're sold exclusively through the company's own catalog, which is mailed to 16 million households; only the books are available in stores. To ensure that phone agents represent the company and its products properly, Pleasant Co. uses its own people; customer reps receive two weeks of special training before taking their first order. The company, which sold $44.3 million in products in 1990 and is aiming to finish this year at $70 million, has received numerous offers from bigger companies for licenses to its characters. But despite these opportunities, it's not the direction Rowland wants to go. "We're trying not to be a fad," she says. "I'd rather have a business that's deep and narrow than shallow and wide."* * *
Becoming Consultants, Not Just Technicians
American Teleconferencing Services
Overland Park, Kans.
Nowadays, it's not that difficult to link up a few dozen telephones scattered around the globe. "In some respects," admits Robert Cowan, founder and CEO of American Teleconferencing, "the technology of teleconferencing is simple." So what enables Cowan's seven-year-old company to stand out from competitors, such as AT&T, which offer the same basic capabilities? To a large extent, it all boils down to the level of service.
American Teleconferencing specializes in managing large-scale teleconferences in which there might be as many as 400 or 500 people on the line at once. But it acts more like a consultant than a technician. On the front end, for instance, it works closely with company managers on how the conferences might be best formatted to accomplish a client's goals. And it goes out of its way to make sure the client's expectations are met. If participants need printed material in advance, for example, American Teleconferencing will do the faxing. If people get cut off, the in-house operators pull them back in. The company will even provide a taped summary for people who couldn't make it to a call. You might say the company does everything but serve coffee and doughnuts.
American Teleconferencing markets its services at large corporations with 20 or more locations. Many of its clients, such as Charles Schwab & Co., the discount brokerage firm, use conferencing almost daily. In an effort to become more valuable to clients, Cowan and other managers visit clients at least twice a year to learn about the direction of the business and where audio or video conferences might provide value. "The more we can help them," says Cowan, "the better it is for us."* * *
Solving the Problem, Then Selling the Solution
Seaboard Mechanical * Richmond, Va.
The Yellow Pages in most towns have long lists of heating, ventilation, and air-conditioning (HVAC) contractors who can fix broken systems and install new ones. But few independent contractors have the engineering know-how to suggest the most effective way to solve complex heating or cooling problems. Nor can they structure the financing. Seaboard Mechanical, with five offices in Virginia and North Carolina, can do both. It's been selling the engineering end of its capability since founder Greg Skillman and engineer Gary McSherry merged their two businesses, five years ago.
Indeed, Skillman notes, a growing percentage of the company's business comes from energy-management contracts, in which Seaboard can pinpoint and quantify opportunities to save energy dollars throughout a plant or office. In some instances Seaboard has developed ways of upgrading HVAC systems at no new cost to the user. How? By using the savings on energy bills to pay for the new equipment.
"We'll either find outside investors or finance the new equipment ourselves," Skillman says. In the latter case, after the new system is in place, the customer and Seaboard share in the energy savings until the equipment is paid for.* * *
Working Both Ends of the Market
Nutech Laundry and Textiles
Unless you own a big hotel, you probably don't have a clue about how much it actually costs to keep the sheets and towels clean and the linen closets properly stocked. But everything Jack Robinson learned as a consultant to the hotel industry indicated that it was a line item that was both large and growing out of control.
An accountant by training, Robinson figured that large hotels, in particular, would pay significant sums of money to anyone who could help them get a grip on their huge linen bills. The growth of Nutech Laundry and Textiles to $2.2 million over the past five years is evidence that he may be onto something.
Nutech developed a system -- built on computers and proprietary software -- that monitors and organizes the laundering process. "We've taken the guesswork out of the process," says Robinson. "And because there's less linen handling in our approach, we've greatly improved the productivity of hotel housekeeping staffs."
To date Nutech has focused on hotels in the Washington, D.C., area, where it operates a 28,000-square-foot laundry facility. At one large Hilton, Robinson says, the savings surpassed $300,000 in the first year. But soon Nutech will be jumping into other markets. Robinson is planning his attack on two fronts: Rather than owning facilities, he'll enter into partnerships with both laundries and hotels. With hotels, he says, "we'll lease them computers and teach them how to run things better." With laundries, he'll do that plus assist them with marketing. As part of the deal, Nutech aims to tap into the money its partners save.
Competition doesn't concern Robinson. "If we did 1% of the hotels in the United States," he says, "we'd have more business than we could handle."* * *