The 1985 Inc. 500 companies that are still led by their founders have generally remained stable, but that kind of stability doesn't always last after a sale. Once they were sold by their founder, some companies soon changed ownership again, perhaps because a corporate parent changed its objectives, fell on hard times, or was itself acquired. Relationships between a company's new owners and its founder weren't always cordial, either. "The culture of Dow is gone; there's nothing left of the company I built," Richard Willich, founder of Dow Industries, lamented to a local paper in 1986, the year after he sold his company, a maker of electromagnetic shielding for buildings, to Bairnco.
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The Failures
We classified 95 companies as failures -- though only 57 are confirmed as such. The rest we simply couldn't locate. Most probably went out of business, but our company-tracking experience suggests that a number of them ended in small acquisitions that didn't make the news. However, to be on the conservative side, we included those "missing in action" in the failure category.
Look closely at that failure rate. That's an average of about 10 companies closing their doors each year, for a total 10-year failure rate of 19% -- over a decade that included a serious recession, a stock-market dive, and a credit crunch. Meanwhile, the losses in jobs and revenues from those failures were far surpassed by the economic contributions of the surviving members of the 1985 Inc. 500. In 1984 the 95 companies that later went out of business had combined sales of $1.92 billion and employed 10,083 people. Subtract those figures from the recorded gains since 1985 for the 233 companies described above, and the result is a net sales gain of $23.6 billion, as well as some 81,900 net new jobs. (Remember, those numbers understate the true contributions of the 1985 Inc. 500 because the statistics involve the changes in only 328 of the 500 companies. In the interest of practicality we did not try to estimate sales and employment statistics for the 135 companies that were sold or for the 37 privately held companies that exercised their right not to give us current sales figures.)
Like any list of fast-growing small companies, our list always includes a few sleazy operators. Happily, a number of those on the '85 list were eventually shut down by regulators. However, most Inc. 500 failures involved simple business misjudgment. For the most part, every failed company has its own story of a stock offering that didn't happen or a lawsuit that did.
But not all the failure stories are bleak. Some CEOs of failed companies are back in business. Tom Whatley looks back on the failure of ABO, his Inc. 500 company, without rancor. When ABO, an architectural-truss manufacturer in Mabank, Tex., fell victim to the turmoil at its bank and in the Texas construction industry, Whatley says he found himself, in the spring of 1987, "without a company and with $10,000 a month in real estate payments." Whatley quickly started a new business -- Eagle Metal Products, a metal-stamping shop that today employs 15. Whatley believes ABO's failure made him a better human being and a smarter businessperson. He's changed his strategies ("Not having debt cures a lot of ills," he says) and his personal priorities. He's learned to value his time with his wife and children more. "I've been really blessed," he says today.
In that sense, and even though his company failed, Whatley is like many other Inc. 500 CEOs. Too often, major American corporations have an attention span of about two minutes, hopping from management fad to management fad and acquisition to divestiture. But spend some time with Inc. 500 CEOs -- of any year -- and you can't help noticing how many of them love what they do. For many, their companies are their beloved creations.
No wonder they keep growing them so well.
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Research assistance provided by Tim Dailey and Nancy Maloof.
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Half-Billion-Dollar Club
A sampling of 1985 Inc. 500 alumni that now have at least $500 million in annual sales --
ABC Supply: Roofing- and construction-materials supplier
Amtran: Charter and scheduled airline
Drug Emporium: Drugstore chain
Merisel Corp.: Software and hardware distributor
Microsoft Corp.: Software developer
Oracle Corp.: Software developer
Solectron Corp.: Contract electronics manufacturer
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The Remarkably Durable Class of '85
1995 Breakdown of 1985 Inc. 500 Companies
Still held by the original owners: 238
Publicly owned: 32
Cannot be found, assumed failed: 38
Failed: 57
Belong to new owners (many are private): 135
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In 10 years most of the independent Inc. 500 companies . . .
. . . have grown dramatically . . .
Aggregate sales:
1984: $3.5 billion
1994:$29.0 billion
. . . and created many jobs.
Aggregate number of employees:
1984: 35,000
1994: 127,000
Note: Based on financial data available from 233 companies. n
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