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HUMAN RESOURCES

The World According to the Inc. 500
 

An Inc. writer offers a quick overview of the 1995 Inc. 500 issue and reflects on what the 1995 Inc. 500 list reveals.
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Individually, the tales of these 500 companies are inspiring. Collectively, they have a far richer story to tell

I admit it: I'm an Inc. 500 junkie. I love this list. It's easy to look at the Inc. 500 and just see 500 small companies, each growing at an extraordinary rate. But if that's all you see, look again. The Inc. 500 list also reveals a wealth of information about our economy; it reflects the excitement, ferment, and dynamism on the economy's leading edge. What types of technology are these businesses using? In what markets are entrepreneurial companies growing? Where are the opportunities? Who starts these businesses, and how do they run them? On its own, each is just another fast-growing company; together, they mirror some of the most important transformations in the contemporary business landscape. No wonder I get excited.

Studying the list can reveal pockets of the U.S. economy that have been experiencing unusual growth. Although the Inc. 500 always includes enterprises that have found success in what you might call ordinary, mature industries -- this year's list includes a truck manufacturer and a restaurant chain -- those companies are the exception. It's no secret: the easiest way to grow a business rapidly is to grow it in a rapidly expanding market. That's why the current Inc. 500 list is home to more systems integrators and temporary-help companies than grocery stores and gas stations. It's also why, over the years, the types of businesses on the list change as new markets undergo bursts of growth. A look back at the companies on the Inc. 500 list 10 years ago, in 1985, throws this year's roster into sharper relief, revealing trends like these:

The key to fast growth today is to make fiber-optic color-coding inks . . . or something equally arcane. No doubt about it: the 1995 Inc. 500 betrays the economy's increasing complexity. A company like Jelyn Associates/Old Glory (#174) seems almost an anachronism on this year's list. Its business description could be explained easily to a six-year-old: the company makes sweaters. These days there aren't many businesses on the list that are that easy to describe. Instead there are companies like Programmed Solutions (#374), which develops management software for the printing industry, and CardMember Publishing (#79), whose membership programs give credit-card users discounts in areas such as health services and travel. Those businesses are growing by claiming narrow niches in an ever more complex economy, whether by specializing in satellite communications for university campuses or nutritional products for people with kidney disease. It should come as no surprise that more than half this year's Inc. 500 CEOs say they got the idea for their companies while working in the same industry; many of these narrow opportunities would be visible only to industry insiders. These days it pays to have specialized knowledge.

Everything old is new. "Bring us your broken, wounded, worn-out components," say the 1995 Inc. 500 CEOs. "We'll make them good as new -- and make a buck in the process." One striking feature of this year's Inc. 500 class is the number of companies engaged in repair, rehab, recycling, or just plain thrift. In a decade of economic uncertainty and corporate cost cutting, those enterprises have grown by helping businesses and consumers make the most of what they've got -- or make new purchases cheaply. On this year's list there are companies that will sell you everything from more memory to energize your old PC (Megabyte International, #33), to used cash registers (Register Resale, #414), recycled toner cartridges for printers (Access Computer Products, #423, and Color Image, #68), and refurbished office equipment (TFM-Remanufactured Office Furniture, #107). Medical Equipment Repair Services (#158) will fix your busted oxygen concentrator; Carstar Automotive (#410) and Three-C Body Shop (#458) will repair your damaged car; and Homefix (#138) will remodel your home. Finally, the ultimate fix-it: Commercial Financial Services (#347) buys troubled loans from the FDIC and restructures them.

The computer industry is still hot; competing with Bill Gates is not. Some things don't change with time -- and one of them is the preponderance of computer-related companies on the Inc. 500 list. The computer industry has been and remains a driving force in America's economic growth. What has changed between 1985 and 1995 are the niches in the industry that are most hospitable to Inc. 500 companies. Those enterprises start off small, often without much capital; in markets that are still in the early stages of growth, small-scale entrepreneurs can expand easily without facing too many big, entrenched competitors.

Ten years ago computer customers were still asking "Where do I buy the thing?" and other basic questions. As a result, many companies on the 1985 list had found ground-floor opportunities in still-new markets such as computer retailing and general-business software. No more. Today entrants in those fields find themselves competing with large established corporations -- some of which, among them Microsoft and Oracle, were on the 1985 Inc. 500. On the 1995 list there are several companies in computer retailing, for example, but most entrepreneurs find it easier to grow young companies in markets that are less mature. A look at the 1995 Inc. 500 suggests that two of the computer areas that have been good to this year's class are systems integration and the creation and management of wide area networks that join remote computers. Today the question on customers' minds is "How do I get these #@%$! things to work together in my business?"

It's a small, small world. Exporting is big on this year's list: about 45% of the 1995 Inc. 500 sell internationally. So it makes sense that the list contains a handful of companies whose business is the business of the global economy. (See " The Globalists"). In the late 1980s and early 1990s, as the dollar fell, those businesses grew, just as U.S. exports increased. Their métier is supporting other businesses that do business overseas. For example, CIBT (#265) spotted an opportunity in expediting visas for traveling executives, and DXI (#249) provides rate information to international shippers.

We're a nation of neurotics. Back in 1985, companies made the list the old-fashioned way: by making software, distributing gaskets, or baking brownies. Now there's another way: catering to our citizenry's emotional and social problems. Call it a legacy of broken families, turbulent economic times, or simply the privatization of government services. Whatever the reason, in 1995 there are several Inc. 500 companies making a business out of personal dysfunction; in 1985 there were none. Today Family Advocacy Services (#256) provides mental-health services to troubled youths, and Correction Management Affiliates (#162) is part of our nation's burgeoning jail industry. And National Safety Alliance (#298) administers substance abuse testing programs in the workplace. (On the bright side, perhaps all this pain is leading Americans to seek spiritual growth of all types: Sounds True, #442, has grown by selling meditation and inspirational tapes, while Platinum Entertainment, #238, is a fast-growing gospel label.)

Government regulation is truly out of control. Want proof? Take a look at the 1995 Inc. 500. Entrepreneurs know a growth market when they see one. There have always been companies on the list whose markets were shaped by government regulation -- businesses that deal with hazardous waste, for example. What's different from a decade ago is the number of companies whose only reason for existence is to interpret and navigate government regulations for other companies. It's sad but true: it has become so difficult and time-consuming to keep abreast of regulatory requirements that companies hire red-tape experts -- experts like Compliance Services International (#432), which ensures that its clients' plants meet environmental requirements, and Linderlake (#248), which deals with local real estate bodies on behalf of large utilities that need to acquire rights-of-way.

Take my employees -- please! A related (and unsettling) trend on the 1995 Inc. 500 is the prevalence of businesses engaged in handling other businesses' personnel needs -- including the red tape. Although temporary-help firms and employee-leasing firms have long been staples of the Inc. 500 list, this year the phenomenon is especially pronounced. About one in every 15 companies on the Inc. 500 provides some form of contingent employment services -- more than five times the number of comparable businesses on the list a decade ago. That's a sobering commentary on the way relationships between employers and employees have weakened over the years. The temporary-help business has become so pervasive that it's spawned fast-growing suppliers of its own: Tricom Inc. of Milwaukee (#445) has grown rapidly by selling administrative and financial services to temporary-help agencies. Can it be long before we have a host of Inc. 500 companies without any employees?

The one-to-one future is here. In 1993 Don Peppers and Martha Rogers made marketing news with their book The One to One Future. The authors describe the way companies can harness technology to create marketing messages tailored to individual consumers. Several companies on the 1995 Inc. 500 have grown by turning that theory into practice. Desktop Data (#59) uses technology to create customized news reports delivered to clients' computers, while Best Personalized Books (#167) produces children's books in which each child gets a starring role. Personal Creations (#187) takes one-to-one marketing to an extreme: the company's catalog features everything from monogrammed cereal bowls to golf balls sporting their owner's photo.

The Inc. 500 list, then, isn't just a collection of 500 smart or lucky companies; it's a yearly snapshot of an economy very much in motion. Any one company in a moribund industry may make the list through smarts, savvy, pluck, and luck -- but the odds are, 20 won't. As a group, the Inc. 500 speak volumes about what's happening in the marketplace. Individually, the companies' tales are inspiring; collectively, they have an even bigger story to tell.

Last updated: Oct 15, 1995




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