What really happens to fast-growing companies in America? To find out, we went after every member of the Inc. 500 of 10 years ago -- including Microsoft.
Al Caperna is not a household name. Labels are not a sexy business. and Bowling Green, Ohio, is no one's idea of a glamorous location. But here in the Buckeye State, Caperna has been growing his label-making company for 15 years, part of a little-known force in the American economy: the former Inc. 500.
There are lots of Al Capernas out there, as it turns out -- successful graduates of the Inc. 500 class of 1985, whose long history of successful growth flies in the face of conventional thinking about the economic impact and the stability of small businesses.
We know that because, for the first time, we asked. This year we set out to track down the companies that were on the Inc. 500 list 10 years ago, in 1985. We wanted to find out what had happened to them since -- how many had failed, how many had been acquired, what percentage had gone public, which ones were still private. And if the companies hadn't been sold, we wanted to know sales and employment figures.
The results are heartening. If the class of '85 is any indicator, young fast-growth companies are much more durable than most observers realize. For a start, the failure rate of the 1985 Inc. 500 is surprisingly low, given the companies' hyperfast growth history. Then there's the dramatic expansion -- in the number of jobs as well as in sales -- of the bulk of the class of '85. As a group the 500 companies had sales in 1984 of $7.4 billion. Today it takes only two of the alumni -- computer-products distributor Merisel and software developer Microsoft -- to exceed that total; the two companies' combined 1994 sales reached $9.7 billion. What's more, the 233 alumni from which we successfully captured 1994 financial data now have almost four times the sales of the entire 1985 list. Put another way, those 233 had average revenue growth over the last decade of more than 23% each year -- even through times of recession. (See the data below for further growth statistics.)
These days it's easy to tell the difference between Al Caperna and Microsoft chairman Bill Gates. But 10 years ago the companies on the Inc. 500 looked very much alike. Since then, the individual enterprises have followed widely varying paths. Today, amid the din of big-company downsizings and takeovers, many of those businesses keep quietly doing what they do best: creating jobs and sustaining communities all across America. Here are their stories
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The Superstars
Look at the 1995 Inc. 500 and you may wonder, "Who are all these little companies, anyway?" Inc. 500 companies generally aren't household names when they start making the list. But rest assured: some of them will be. Most of the aggregrate job growth and much of the aggregate revenues of the 1985 alumni have been generated by a handful of companies that have grown to become superstars. Some of them are now among the biggest corporations in America.
A classic example is Microsoft, #163 in 1985. Ten years ago an entrepreneurial upstart, Bill Gates's company now strikes terror in the hearts of both federal regulators and competitors. In 1980, the base year for the 1985 list, the company employed 75 and reported sales of $6.9 million. By 1985, Microsoft's second year on the list, the company was reporting $97 million in sales. Today the statistics are off the chart: the software giant had 1994 sales of $4.7 billion, as well as 16,000 employees.
Microsoft is no anomaly. Other well-known large companies that grew from the 1985 Inc. 500 include Oracle, another multibillion-dollar software powerhouse, and Solectron, now a $1.5-billion contract electronics manufacturer, perhaps best known for winning the Malcolm Baldrige award for quality in 1991. If we arbitrarily define "superstar" as a company with $500 million or more in sales, the 1985 list has so far yielded nine such businesses that remain independent; others have been acquired by other companies. In addition to Microsoft, Oracle, and Solectron, the superstars include two of the nation's largest computer-products distributors, Merisel (whose predecessor, Softsel, was on the list) and Tech Data; a computer-leasing firm, El Camino Resources; a drugstore chain, Drug Emporium; an airline, Amtran; and, in the unlikeliest of growth fields, a chain that distributes roofing and construction materials, ABC Supply. A tenth company, SAS Institute, a privately held software manufacturer, has sales approaching $500 million.
Those companies' economic contributions -- and meteoric growth -- are nothing short of amazing. The 10 Inc. 500 companies from 1985 that today have the highest revenues accounted for $19.1 billion in 1994 sales -- almost two-thirds of the total revenues earned in 1994 by the 233 companies from the 1985 list for which we have sales figures. Those same 10 companies now account for 58,000 jobs -- nearly half the 233 companies' total.
Interestingly, the superstars looked much like everybody else on the list back in 1985. Sure, many are in high-growth industries such as software publishing, computer distribution, and electronics manufacturing, but a disproportionate number of every year's Inc. 500 are in computer-related markets, and most don't become Microsoft or Merisel. There are the surprise superstars, too. Who'd have believed that roofing supplies would offer such opportunity? And there's Amtran, which thrived in one of the most failure-prone industries of the '80s -- airlines -- by specializing in charter vacation travel.
