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So You Want to Be an Inc. 500 CEO?

A list of eight qualities common to Inc. 500 CEOs and their companies. Statistics include the marital status and economic background of owners and the types of services their businesses provide.
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Ins &Outs

Grab a calculator and figure out your odds of landing on the list

Time to take stock. Although you can certainly be successful in your own self-defined style and market niche, the more you depart from the Inc. 500 norm, the rougher the road is likely to be. For those of you who are as obsessed with statistics as baseball fans are, here's a quick way to figure out your Inc. 500 CEO batting average.

1. Marriage
Let's start with your personal circumstances. More than 80% of Inc. 500 CEOs are married and report a stable home life. Only 9% are divorced, and among those whose marital status changed during the course of joining the Inc. 500, nearly three-quarters got married or got divorced and remarried.

Give yourself two hits for being married and staying that way **
Otherwise, you've struck out

2. Education
Economic background isn't a key differentiating factor, since nearly 90% of Inc. 500 CEOs say they grew up in middle- or working-class homes. But education matters a lot. Only 11% didn't graduate from college, and 35% have M.B.A.'s or other advanced degrees, while nearly half are four-year-college graduates.

Give yourself two hits if you have a graduate degree **
One hit for a college degree *
Otherwise, you've struck out

3. Age
Previous experience? Not really necessary. More than half the CEOs who made the Inc. 500 have started just one company. And forget about developing an idea with your former (or perhaps current) employer. More than 80% of Inc. 500 CEOs never offered their winning idea to a previous employer, and a sizable percentage of those who did were turned down. But age does matter. Few of the Inc. 500 CEOs started their companies before they were 25 or after they turned 50, but more than a third were 30 or younger, and more than three-quarters were 40 or younger.

Give yourself two hits if you're under 41 **
One hit if you're between 41 and 50 *
Otherwise, you've struck out

4. Sector
OK, what kind of company gives you the best odds? This year 63% of winners classify themselves as service companies, 24% manufacture products, and the rest sell or distribute someone else's products. Ten years ago only 44% of the Inc. 500 called themselves service companies, which means that among the Inc. 500, the service sector grew 4% larger each year.

Give yourself one hit if you run a service company *
Otherwise, you've struck out

5. Industry
Ten years ago business services was the hot field, constituting 21% of all Inc. 500 companies. This year computer-related businesses represent 36% of the winners--that's almost double the percentage of computer-related businesses that appeared on the 1988 list. Telecommunications has also grown dramatically, going from 2% to 7% of the Inc. 500 in 10 years. Meanwhile, everything else has lost ground.

Give yourself two hits if you're in computers or telecommunications **
One hit if you're in business services *
Otherwise, you've struck out

6. Capital
Does a company's legal structure matter much? Apparently not. The split between S corporations and C corporations isn't too far apart (55% to 41%, respectively). What about the home office and all this talk about the virtual company? Not a key indicator. The split between winners that were started at home versus those that began in a real office is not far apart, about 54% to 46%. Also, the majority of founders started with at least one other partner, which should dampen any notion you have of the artful soloist.

What about capital? Despite the emphasis placed on financial resources, having money doesn't buy you a place in the starting lineup. Approximately one in every five Inc. 500 companies started with $5,000 or less in start-up capital. Not only that, but don't be fooled into thinking that taking on debt is a good way to make the big leagues. The majority of Inc. 500 company founders never borrowed a penny to start their company. If they needed capital, they tended to use their own savings. Once they were up and running, the majority raised additional capital by borrowing under a traditional bank line of credit. If you're just planning to use fancy financing from angels, venture capitalists, factoring experts, or Uncle Joe, you won't slug a homer here.

Give yourself one hit if you have enough cash in the bank right now to meet your capital needs *
Otherwise, you've struck out

7. Advantage
The majority of Inc. 500 companies began with some kind of proprietary competitive advantage, such as a founder's technology skills, some kind of process expertise, or the rights to the intellectual property embedded in a product or a service. Only a third have chosen to compete on generic capabilities like customer service or low prices.

Give yourself two hits if you control valuable intellectual property **
One hit if you really know more about your field than anyone else around *
Otherwise, you've struck out

8. Revenues
Now let's turn to revenues. You can't make the Inc. 500 unless your company is growing fast. How fast? Well, over the past decade Inc. 500 winners have experienced, on average, a 15-fold increase in revenues during the five-year measurement period. That equates to a growth rate of about 75% every year for five years. So, how do they do it? How do the Inc. 500 sell their products and services? Despite all the fashionable talk about networking, alternative distribution channels, outsourcing, and contracting, most Inc. 500 companies sell the traditional way, with their own captive sales force. Not only that, but most compensate the sales staff with traditional base pay plus bonus or commissions. Nothing fancy here, just meat-and-potatoes selling.

Give yourself one hit if you're doing things the old-fashioned way and your revenue growth has always exceeded 25% annually *
Otherwise, you've struck out


Here's how to figure your batting average. You've had 34 at bats, so divide your total number of hits by 34. Any batting average above .300 is respectable, and above .350 is extraordinary. Remember, as in baseball, the celebrated heroes still strike out two out of every three times at the plate. See you at the ballpark.

Eric Kriss is the former CEO of MediVision Inc. and MediQual Inc., both Inc. 500 companies.

Last updated: Oct 15, 1998




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