STRATEGY

Inc. 500 Almanac

A statistical look at this year's Inc. 500 companies and the CEOs that run them.
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THE STATS

Average five-year growth rate 1,598%
Average 1996 sales $17.9 million
Median 1996 sales $9.1 million
Collective 1996 sales $9 billion
Average number of employees 121
Median number of employees 64
Collective number of jobs generated 60,436
Percentage of companies turning a profit 85%
Number of companies that broke $100 million in sales 9
City with the most Inc. 500 companies New York (which has 12)
Fastest-growing industries Computers and business services*
*both up 6 points from last year
Percentage of companies that made the list last year 30%
Number of companies older than 15 years 27
Oldest company C.D. Smith Drug Co. (#390, founded in 1886)
Most harmonious workplace Cecchetti Sebastiani Cellar (#252), with one employee until 1997
Number of companies that at one time employed 50 or more in CEO's home 4
Percentage of CEOs who had a formal business plan 47%
Number of companies started with $1,000 to $10,000 115
Number of companies started with $100,000 or more 95
Fastest-growing company started with $3,000 or less Gearon & Co. (#23), which grew by 4,660%
Percentage of companies planning to go public within a year 17%
Percentage of companies planning to go public within the next five years 34%
Number of CEOs who worked at a "paying job" after founding their own company 98
Number of CEOs who admitted to going without a salary in 1992 23
In 1996 0
Number of CEOs whose 1996 salary totaled $1 million or more 7
Youngest president Lance Reid, 25, of InfiNet Systems (#409)
Number of CEOs born in India 17
Number of CEOs born in Brooklyn 10
Percentage of CEOs who psych themselves up by praying 3%
Number of CEOs whose favorite business thinker is--
Jesus Christ 1
"Dilbert" creator Scott Adams 2
"Myself" 3
Number of CEOs who plan to pass the company to the next generation 12

THE CEOS

The Incredible Upbeatness of Being
There is probably no more optimistic group of executives on the planet than the CEOs of the Inc. 500.

And we have the numbers to prove it. Yes, we have statistical proof that Inc. 500 CEOs are one annnoyingly upbeat group of people.

When others saw their home garage half empty, these CEOs saw it full of employees; some even had a staff of 50 before they moved the company from their home. Where others saw nothing, they saw niches (two companies peddle personal cooling systems). Where others saw headaches, they spied opportunities (41% sell to the government). Despite having humble beginnings, these 462 men and 38 women foresaw fast growth. A sizable group had known from an early age that they wanted their own companies and couldn't wait to get started. The only questions were what and when. Never why.

Few did it for the money. Even today, Inc. 500 CEOs' salaries are comfortable but not excessive. (The midpoint is $150,000.) No, they started companies so they, and their families, would amount to something in their communities.

"We always said we didn't want to be a mom-and-pop shop," says Tony Cooper, the 32-year-old cofounder of $5-million Computer Free America (#240), in Springfield, Ohio. He and his partner, Jerry Geer, were best buddies in high school, and they started the company in their hometown. Says Cooper, "We want to be the largest employer in Clark County."

Oh, sure, Inc. 500 CEOs fret about cash flow, where the next sale will come from, and how to raise capital. But they worry more about how to find enough good people to meet their expansion plans. And how to keep things fun. The truth is, their biggest problem is what to do with all their success. It can be draining, you know.

But these CEOs are just doing what they love, oozing delight from every pore. They love their jobs so much they don't want to be doing anything else in five years--88% tell us that. These CEOs are living the American dream. Why shouldn't they be feeling giddy? --Susan Greco

Highest Level of Education Completed
Two-year college 8%
High school 9%
M.B.A. 14%
Other graduate or advanced degree 20%
Four-year college 49%
Economic Background
Poor 4%
Affluent 6%
Working class 24%
Middle class 66%
On-the-Job Training
Number of CEOs with previous management experience 322
Number of CEOs with management experience at a Fortune 500 company 116
Number of CEOs who have been casualties of downsizing 37
Greatest Weakness and Strengths
Number of CEOs who cite the following as a-- Strength Weakness
Sales-and-marketing strategies 145 19
Managing people 112 89
Financial strategies 53 75
Information technology 29 19
Product innovation 23 2
Other 59 35
*Out of 405 respondents; numbers do not add up to 100 because of rounding
Equity: On Average, Who Has It Now?*
Cofounders 18%
Investors 10%
Family 7%
Employees 4%
CEO 60%
Three Best Shoulders to Cry On
With Whom Do You Commiserate?
1. Fellow entrepreneurs 41%
2. Spouse or other relative 31%
3. Friends outside the business 12%

Favorite Business Thinkers
Bill Gates, Tom Peters, and Peter Drucker

Unusual Choices for Favorite Business Thinkers
Mark Twain, Robert Frost, Ayn Rand, Jerry Garcia, and "My brother Oscar"

What Keeps CEOs Up at Night
CEOs' four biggest worries:

  1. Finding and managing people
  2. Managing growth
  3. Keeping up with competitors' strategies
  4. Keeping up with technology
*Out of 368 respondents; numbers do not add up to 100 because of rounding.
The Take at the Top
1996 CEO salaries*
$201,000 or more 27%
$150,001 to $200,000 17%
$100,001 to $150,000 29%
$50,001 to $100,000 24%
$50,000 or less 4%
*Numbers do not add up to 100 because of rounding.
Current Marital Status*
Other long-term relationship 1%
Divorced 5%
Single 8%
Married 85%

Times at Bat
A whopping 191 CEOs reported that they had founded one or more other companies; some 38 are still involved in those other ventures, but at least 60 CEOs experienced failure, some more than once. Nicholas Turano struck out 4 out of 5 times with other companies but scored a home run with this year's #400, Warm Springs Machining.

The R&R Report
Average amount of vacation in 1996: 2.3 Weeks
% of CEOs who take time off to get motivated: 4%
% of CEOs who exercise for motivation: 9%
% of CEOs who plunge themselves into another company challenge for motivation: 68%


THE COMPANIES

How to Build an Inc. 500 Company
Pssst. Want to see your company's name on the Inc. 500 list in a few years? If your answer is yes, it pays to keep one word in mind: computers. Sure, all kinds of companies make our list. You can find everything from an ice-cream maker to a pizza chain on the 1997 Inc. 500--if you look hard enough. But the truth is, ordinary businesses like those are underrepresented on the Inc. 500. Year after year, the list includes a disproportionate number of companies that are capitalizing on the most recent trends in digital technology. This year that's more true than ever: a whopping 36% of the companies on the 1997 list report that they're in some facet of the computer industry. Although that's the highest percentage in the past decade, computer-related companies have always made up at least 20% of the list during that time. And throughout the history of the list, companies like Microsoft, Oracle, and Gateway 2000 have gone on to gain national prominence after appearing on the Inc. 500 list.

What's going on here? Shouldn't an industry dominated by the likes of Microsoft at some point become inhospitable to new entrants? To judge from the Inc. 500, that hasn't happened so far. Because of its continuous change and development, the computer industry is a driving force in our economy. Each technological advance spawns a crop of growth companies racing to exploit a new market. Some of those growth companies, in turn, make our list in their early years.

If computers are a constant on the Inc. 500, other things do change with time. One such long-term shift: over the past 10 years, the proportion of retailing companies on the list has shown a gradual decline. Last year and this year, that proportion dropped to what may be an all-time lowof 5% of the list. (That's less than half the percentage of retailers that have appeared on the list in some earlier years.) The drop is one sign that, in this age of superstore chains, traditional retailing may have become less friendly to new privately held growth companies. Then again, who knows if that trend will last? Industries keep changing--and change always spells opportunity for smart entrepreneurs. -- Martha E. Mangelsdorf

The Inc. 500 by Sector
Retail 5%
Distribution 9%
Manufacturing 27%
Service 59%
The Inc. 500 by Revenues
% of companies with revenues of--
Less than $5 million 27%
$5 million to $9.9 million 27%
$10 million to $19.9 million 25%
$20 million to $29.9 million 9%
$30 million to $49.9 million 6%
$50 million or more 6%

The Inc. 500 by Age
The average company made the list at the age of 9

*Numbers do not add up to 100 because of rounding.
The Inc. 500 by Industry*
Computers 36%
Business services 22%
Consumer goods and services 9%
Telecommunications 8%
Health care 5%
Construction 5%
Industrial equipment 5%
Financial services 4%
Media 2%
Environmental goods and services 2%
Transportation 1%

THE START-UP YEARS

Source of Idea for Company*
% who say it came from working in same industry: 60%
*Out of 428 respondents

Who helped in coming up with the idea? No one: 35%

*Out of 396 respondents
**Includes overseas investors, employees, insurance, government grants, and other sources.
Where the Money Came From
% of CEOs* who tapped--
Personal savings 79%
Family members 16%
Partners 14%
Personal charge cards 10%
Friends 7%
Bank loans 7%
Angel investors 5%
Mortgaged property 4%
Venture capital 3%
Other** 8%
Top Four Sources of Inspiration
Partners 20%
Future customers 18%
Industry colleagues 14%
Family members 7%
*Out of 412 respondents; numbers do not add up to 100% because of rounding
Revving Up
Length of time from idea to start-up*
6 months or less 59%
7 months to one year 19%
13 months to two years 12%
More than two years 9%

Home Economics
% who started business at home: 50%

Seed Capital
Average $166,300
Median $25,000

The Need for Speed
What separates inc. 500 founders from the millions of Americans who dream of starting their own business?

Well, for one thing, when they saw a great idea staring them in the face, they didn't blink. They acted. They didn't wait for all the niggling doubts to sink in, the endless stream of what-if's. They didn't allow themselves to utter the F word ( failure, that is). They got feedback, in some cases starting with the very employer they were plotting to leave. They wrote a plan, however rough or ridiculous. They stopped eating out and started fishing for business partners. They begged for money and begged some more. They didn't listen to what the nay-saying banks said. They talked to potential customers. By talking, they made it real. And they did something else: they asked for the sale.

As they say in real estate, time is of the essence. These company founders knew that well, especially those in fast-changing technology niches.

Speed is essential to market dominance, yes, but also to a budding entrepreneur's self-confidence. Once these entrepreneurs had announced their ambitions to their colleagues, their siblings, their mothers...and themselves, there was no time to waste. Allyn Kramer, founder of Kramer Lead Marketing Group (#259), in Dallas, took about six months to go from having his idea to starting up. "I don't consider myself a big risk taker," says Kramer, who was 40, with a wife and young child, when he started the company. "Six months was conservative for me. I knew who I wanted to call on and why. All of a sudden I felt a maturity in doing what I was doing to make the right decisions."

In fact, within a year, most of the Inc. 500 founders had their companies up and running. However, Jack Priester, who was 30 when he founded Armstrong Data Services (#318), in 1970, told us it took him 27 years and four months to get to the start-up stage, which would have made him a toddler when he began the journey. We think we know what he meant: when you're traveling at light speed, a year is a lifetime. --Susan Greco


THE OPERATIONS

Employee Package Deal
Forget about record unemployment rates. When sales double every year, as they do at the average Inc. 500 company, you're always facing a labor crunch.

Five years ago this group of Inc. 500 companies averaged just 17 employees each; today the average is 121. So when it comes to creative recruiting, these companies have made the most of their natural advantages--the adrenaline of being part of an upstart, the lure of owning a piece of what could be the next Starbucks. And they offer surprisingly good benefits. Can your company match them?

This Inc. 500 has made the most of the risk-reward quotient. Employee stock ownership plans exist at 28% of the 435 companies that responded to our survey, and 26% offer stock options to full-time staffers. A full 85% fund bonus programs, and 43% have formal profit sharing. (Those numbers reflect big jumps from what these same companies offered in 1992.) Of these companies, 77% offer a 401(k) plan, 17% more than did in 1994, for example.

But hiring people is one thing; keeping them is another. To wit, 52% offer flextime, and about a third allow employees to telecommute. A surprising 9% of these companies have a sabbatical program, and 6, or 1%, offer on-site day care. Nearly half the companies have formal employee-recognition programs and stress-relief perks.

When you put it all together, it's one helluva package. That's why Inc. 500 companies can snag seasoned managers like Bob Carroll, 42, chief financial officer at Ex Officio (#395), a designer of travel clothing in Seattle. Carroll's résumé includes a stint as CFO at Piper Aircraft. "Ex Officio couldn't afford me at first," he says, "so I started out by helping them get conventional financing, and eventually, we structured a full-time arrangement" that trades on pay and equity for performance. Now Carroll can extol the virtues of Ex Officio's hot-selling "ultimate travel skirt," sounding not at all like a bean counter. "I'm having a lot of fun." -- Susan Greco

*By % of the 324 respondents who said they'd be taking funding of any kind
Finding the Money
Top three sources of funds CEOs plan to tap this year*
Bank borrowing 85%
Public offering 17%
Private placement 15%
Spending the Money
% of companies with a direct-sales force 76%
Average % of overall sales spent on sales and marketing 12%
*Numbers do not add up to 100 because of rounding.
Managing the Growth
Age of company when it brought in outside managers*
6 months or less 8%
7 months to 1 year 7%
13 months to 2 years 16%
25 months to 5 years 40%
More than 5 years 28%

Going Overseas
181 companies reported overseas sales in 1996
In 1996, the average percentage of sales from overseas was 12

Leveraging Technology
% of companies--
Using the Internet 97%
With intranet sites 37%
With home pages 74%
*Out of 435 respondents
Benefits for All Full-Time Employees
% of companies* offering the following in--
1992 1996
Bonuses 54% 85%
Disability insurance 26% 60%
ESOP 9% 28%
Flextime 37% 52%
401(k) plan 14% 77%
Health insurance 67% 97%
Life insurance 34% 67%
Profit sharing 15% 43%
Sabbatical 3% 9%
Stock options 9% 26%
Telecommuting 11% 29%

THE LOCATIONS

The Winners. In 1997 Batman returned to the big screen, and Gotham loomed large on our Inc. 500 radar screen, too. New York City scored big, with 12 companies calling it home--edging out Dallas and Atlanta for the city with the most Inc. 500 companies.

In the state race, New York State nearly doubled its number from last year, returning the Empire State to its glory days of 1993, the last time it landed 25 companies on the list. Virginia (up by 9) and Pennsylvania (up by 8) also recaptured their positions of 1993. Maryland, meanwhile, gained 5 spots in a year's time. California, the usual single-state leader, made an impressive showing this year. With a total of 94 companies, California gained 12 spots over last year but has yet to surpass its previous high of 101 companies, achieved back in 1985. San Francisco, Irvine, and San Jose each kicked in 7 companies, and San Diego, 6.

The Inc. 500 is often clustered around a dozen or so states, and this year that cluster is superconcentrated: the top 15 states--the five states already mentioned, plus Texas, Florida, Massachusetts, Illinois, New Jersey, Georgia, Arizona, Washington, Ohio, and Colorado--accounted for 78% of the total.

The Losers. Seven states remained at entrepreneurial ground zero, their zero-company status unchanged from last year. They are Alaska, Arkansas, Hawaii, Montana, North Dakota, West Virginia, and Wyoming. But the biggest "losers" overall were previous gainers Ohio and Florida, which lost 10 and 6, respectively, compared with last year. North Carolina went down 6. Massachusetts lost 5, while Georgia, Washington, and Wisconsin lost 4 apiece.

And a Surprise. Maine, often a desert in the Inc. 500 landscape, ended its recent two-year dry spell by spawning two companies in 1997. Who knows, maybe modest Maine will be the big winner five years from now. --Susan Greco

Almanac edited by Susan Greco; statistical research compiled by Elyse M. Friedman.

Last updated: Oct 15, 1997




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