That suggests starting a growth company is not financially beyond the means of most people. U.S. government data bear that out; according to the Census Bureau's 1987 survey of business owners, more than half of all small businesses are started with less than $5,000; however, many of those remain one-person operations. It's far more surprising that so many companies grow so rapidly from such humble beginnings. There's no better example than Jim Allsup, sole owner of Allsup Inc. (#363), a $6-million company in Belleville, Ill., that provides health-care-claims services. Allsup started his company in 1984 with a few hundred dollars -- from his unemployment checks.
Sign of the Times
The last five years haven't been the best of times for the banking industry -- or most financial services. But don't tell that to Ric Tomlinson. From 1987 to 1991, his company, Univest Financial Group (#450), grew from $2.1 million to $16.5 million in sales, even though the Marietta, Ga., company's business is analyzing mortgages -- both residential and commercial. What's the secret?
Timing. Ric Tomlinson and his partners developed a sophisticated database designed to value loans in the portfolios of savings-and-loan institutions. What he didn't count on was the S&L crisis, which suddenly gave the federal government a great need to value huge numbers of loans from failed institutions. "We created a product prior to one of the greatest financial crises in the history of our country," he says. "A lot of this has to do with timing and luck."
Just for the record: Tomlinson didn't always think his timing and luck were so good. Early on, Univest took on some work valuing loans for an S&L that was, well, a little iffy. When Univest was almost finished with the project, the federal regulators seized the S&L, leaving Tomlinson with a sunken investment, no prepayment, and no customer. But because Univest had already valued most of the portfolio, Tomlinson had the evidence and motivation to convince the regulator that Univest could sell the portfolio for more than the government thought it was worth. From that starting point, Tomlinson reports, today 65% of Univest's sales are to the federal government. That's a pretty good return on a bad debt!
THE INC. 500 DATA
THE INC. 500 BY STATE
Very few long-term trends can be seen by comparing this year's map with those of previous years. About the most notable change is that a particular state or region will be depressed for a few years and then bounce back to normal. One example: In 1982 Texas and Oklahoma had 39 and 7 companies on the list, respectively. During the mid-1980s, when things got truly bad in both states, their 1987 totals dropped to a low of just 27 companies in Texas and one in Oklahoma. But by now things appear back to normal; the 1992 list has 41 Texas businesses and 7 Oklahoma companies. That should be encouraging to several New England and Rustbelt states (Massachusetts, New Hampshire, Rhode Island, Michigan, Illinois, Ohio, and Pennsylvania) that are currently at low points.
Alabama 4
Alaska 0
Arizona 15
Arkansas 0
California 78
Colorado 16
Connecticut 8
Delaware 2
District of Columbia 1
Florida 30
Georgia 19
Hawaii 0
Idaho 5
Illinois 13
Indiana 12
Iowa 2
Kansas 4
Kentucky 4
Louisiana 3
Maine 1
Maryland 12
Massachusetts 21
Michigan 11
Minnesota 9
Mississippi 2
Missouri 8
Montana 0
Nebraska 4
Nevada 1
New Hampshire 3
New Jersey 14
New Mexico 5
New York 26
North Carolina 7
North Dakota 0
Ohio 13
Oklahoma 7
Oregon 6
Pennsylvania 14
Puerto Rico 2
Rhode Island 1
South Carolina 2
South Dakota 1
Tennessee 8
Texas 41
Utah 8
Vermont 2
Virginia 30
Washington 11
West Virginia 2
Wisconsin 11
Wyoming 1
1992 Inc. 500 Companies Started With --
$1,000 or less 13.0%
$1,001-$5,000 12.6
$5,001-$10,000 8.3
$10,001-$25,000 13.3
$25,001-$50,000 12.0
$50,001-$100,000 15.6
$100,001-$500,000 17.8
$500,001-$1 million 2.8
$1,000,001-$2 million 2.2
$2,000,001-$5 million 1.3
More than $5 million 1.1
Number of respondents: 460
INC. 500 BY SIZE
Median number of employees 47.5
Average number of employees 144.6
Median 1991 sales $6.7 million
Average 1991 sales $16.8 million
-- BY 1991 SALES
% of companies
Less than $2 million 10.4%
$2 million-$2.9 million 14.8
$3 million-$4.9 million 14.8
$5 million-$9.9 million 23.6
$10 million-$19.9 million 19.2
$20 million-$29.9 million 6.4
$30 million-$49.9 million 4.4
$50 million-$74.9 million 2.2
$75 million-$99.9 million 1.2
$100 million-$149.9 million 1.6
$150 million-$199.9 million 0.8
$200 million or more 0.6
1991 PROFITABILITY
Profit margin* % of companies
16% or more 13.0%
11%-15% 12.2
6%-10% 19.8
1%-5% 44.0
Break-even 2.8
Loss 8.2
*Net income as a percentage of sales; S corporations use pretax figures.
We admit we're baffled. The economy was in a shambles last year, but never before have so many Inc. 500 companies been so profitable. Fully 25.2% report 1991 profit margins of 11% or more -- the decade's average is 18.2%.
We really don't have a solid explanation for this, but here's a theory. The only time we came close to seeing this kind of profitability was on the 1983 list, when we reported on profitability for 1982, also a difficult recession year. That suggests recessions somehow pay off for well-managed companies. Perhaps only the highly profitable can afford to grow in times when outside financing dries up; they may benefit even more when competitors with shakier finances can't effectively seize opportunities.
