The Longest-Running Hit
Back in 1988 many of this year's Inc. 500 CEOs were still getting started, building up those first big sales and hiring key staff. Not Gary Gale. His company -- then known as Weathashade, now known as the Gale Group -- was already #408 on the Inc. 500, with a five-year sales growth of 773%.
This year one-third of the companies made last year's list as well, but the $58.1-million Gale Group (#427), based in Winter Park, Fla., is the only one to make it for the fifth year in a row. After all, it's not easy to keep maintaining a five-year growth rate of more than 600%.
So how did Gale do it? No doubt by entering one of those exploding markets, like computer networking or environmental cleanup, right? Wrong. His company designs and makes gardening products such as garden covers and flowerpots -- even Gale admits it's a "pretty sleepy industry." His approach: intense in-store merchandising and a commitment to new products. He says most of the company's new products were created abroad by someone else who needed help entering the U.S. market. That's an area in which Gale is a natural: he's a transplanted Australian who started his company as a way of bringing his family's business to the United States.
The World Is Their Market
At first glance, Russ Teubner may not seem typical of much of anything. After all, his Inc. 500 company, Teubner & Associates (#364), is a fast-growing high-tech business based in Stillwater, Okla. "A lot of the technology companies cluster in certain areas," Teubner admits gamely. "One of them is not Stillwater."
Nevertheless, Teubner & Associates exemplifies an interesting trend in this year's list. Like 51% of the companies on the list, Teubner & Associates makes more than half of its sales in a national and international marketplace. In that respect, these growth companies are dramatically different from ordinary small businesses. In general, when it comes to small businesses, "the vast majority are predominantly local," says Bruce Phillips, who directs the U.S. Small Business Administration's database on small companies. Growth companies apparently sense early on that the world is their marketplace: 74% of this year's Inc. 500 have some national sales, and 45% sell internationally. What's more, they are not just occasional exporters: half of the companies that report international sales say those sales account for at least 10% of their revenues.
How does a company with no track record gain the trust of national and international customers? Many CEOs rely on their contacts from previous jobs, but Teubner's only previous employer was Oklahoma State University. And in his case, the problem was exacerbated by his location and his potential marketplace -- only very large organizations have the type of mainframes that can use Teubner's flagship software product.
So Teubner initially concentrated on what he calls "the desperate few" -- those companies that would have such a strong need for his product that they would be willing to risk doing business with him. As quickly as he could, however, Teubner got distributors to sell his product across the country; today 83% of the company's sales are national and the rest are international. "It's rather foolish to think you're going to take the Fortune 1,000 by storm from Stillwater," he says. The company's entry into the global marketplace was uneventful, according to Teubner. "Someone called up from Switzerland and said, 'Will you sell us your product?' "
Who Needs Seed Capital?
It sounds like the title of a sleazy get-rich-quick book: How to Start a Growth Company with No Money Down. But that's exactly what Bruce Barkelew and Thomas Smith did. They started Datastorm Technologies (#376), in Columbia, Mo., with, they say, absolutely no seed capital.
Unfortunately, what Smith and Barkelew did can't be replicated in most industries. The two, computer-science graduates who'd designed a software product in their spare time, decided to distribute their product through "shareware." That means they placed their software on a number of electronic bulletin boards and encouraged users to try it out. Each time people used the product, a note would flash on their screens, reminding them to send a check to Datastorm.
That's not exactly a strong-arm collection technique -- Smith guesses that somewhere from 3% to 8% of regular users eventually bought the software. Still, shareware has enabled Smith and Barkelew (who were later joined by Stephen Monaco) to build a $17.8-million company, which now has retail distribution as well.
The duo are not alone. Seed-capital requirements for the Inc. 500 vary widely, but an astonishing 26% of this year's companies were started with $5,000 or less. And they represent a wide range of industries -- from mail-order catalogs to computer-peripherals manufacturing to sandal making to pizza. While some companies did require much, much more -- the highest initial capital reported was $31 million -- the median Inc. 500 company raised $30,000.
