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12
Grandfather Clause
A MARRIAGE OF CONVENIENCE

As the president of Southland Corp. in 1927, Jodie Thompson oversaw the largest chain of icehouses in Texas. One day an employee nicknamed "Uncle Johnny" Green suggested to Thompson that his icehouses stock milk and other perishables. The experiment led to the modern-day 7-Eleven. Today Jodie's grandson Jere Thompson is CEO of his own "convenience store" in Dallas: CapRock Communications, which offers one-stop shopping for Internet and telephone services.

14
Niche Picking
BALANCE OF POWER

Balance Bar isn't the only energy-bar company to make this list--just the fastest growing. Clif Bar (#152) is a two-time winner. The folks at You Are What You Eat (#441) knew a good thing when they saw--er, tasted it. After distributing both the Balance Bar and Clif Bar for years, You Are What You Eat came out with its own product in 1997.

26
Background Check
HEART ATTACK

As the founder of Great White North Distribution Services, Robert Shenefelt has spent the past seven years helping U.S. companies sell their products north of the border. His marriage, meanwhile, headed south. Shenefelt went to a therapist, who attuned him to the communication gaps in his relationship. Shenefelt quickly realized he wasn't the only entrepreneur who needed help on the home front. Indeed, a total of 39 of this year's Inc. 500 CEOs have gotten divorced in the process of growing their companies. But Shenefelt turned his personal tragedy into, well, another start-up: the Place to Be refers individuals--including company owners--to counseling services.

39
Niche Picking
BIGGER THAN CHAI?

"Femme Phenom" sounds like a sports headline describing the gold-medal efforts of a 12-year-old gymnast. But to Kirk Perron, CEO of Jamba Juice, a 100-store chain of juice bars, it's nothing less than a trademarked title. The drink--a frothy mix of folic acid, fruit, frozen yogurt, and other ingredients--boasts "superior female nutrition." Don't laugh. Among Jamba Juice's early investors: Starbucks CEO Howard Schultz.

74
Quirky Perks
DEAR JOHN

David Woo, CEO of the Automatic Answer, sets high standards for his salespeople, but he lets them name the reward. When John Gurden hit his target of $125,000 in sales in one month, he asked the company to designate a "John Day" in his honor. Woo was happy to indulge him. "John Day" banners adorned the offices, and the staff answered the phone, "It is a good morning at the Automatic Answer, where today we are celebrating John Day." Woo even gave Gurden his office for the day. Later, at a catered lunch in his honor, the salesman was presented with a special photo album that let him take John Day with him forever.

84
Darkest Hour
INDECENT EXPOSURE

Most entrepreneurs would kill for an appearance on national television, but in William Converse's case, it nearly killed him. When his Alpine Industries was still a start-up, Inside Edition aired an investigation into claims that Alpine's air purifiers actually polluted the air. Ouch. Sales took a quick plummet, and the state attorney general launched an investigation. Converse countered by going on radio talk shows and beefing up training for his independent sales reps, some of whom, he admits, made inflated product claims. Today the air has cleared, so to speak, and sales are back up.

106
Background Check
THE BEST DEFENSE

When Defense Daily recently published a list of the world's 40 most influential people in the defense, aerospace, and national-security arena, only two women made it. One was Arrowhead Space & Telecommunications CEO Mary Ann Elliott. The other: Madeleine Albright. Now Elliott has her long-term sights on a government appointment--preferably in the cabinet.

108
Niche Picking
IN GOOD COMPANY

It's no accident that Jackson Lan locates his 17 computer stores in close proximity to big retailers like CompUSA and Computer City. The CEO of PC Club, which markets its own line of custom PCs, says it's part of his "accompaniment strategy" to give computer shoppers more variety. If customers can't find something in his store, he refers them to the CompUSA across the parking lot. The approach, he says, has created positive buzz about his customer service, and many he sends to the competition return and bring friends. Plus, being located next to the big boys keeps him on his toes. "If we can make money next to them, we can make money anywhere else."

128
Darkest Hour
EXIT STRATEGY

Ascent Solutions hired salespeople fresh out of college, knowing full well that they'd leave within a couple of years. But CEO Tim Meade never expected to lose nearly his entire sales force over a couple of weeks--until it actually happened. When three of his four salespeople gave notice at the same time, Meade and his partner were forced to cover the phones. They now have a sales trainer and a full-time "people's advocate" to stem turnover.

162 & 227
Quirky Perks
OMMM, SWEET OMMM

Within a dimly lit, white-walled, marble-floored soundproof room at NetScout Systems, president Narendra Popat leads employees in a form of meditation called Vipassna. What? Never mind. "Meditation trains your mind to focus on the positive side of situations," Popat says. John Wheeler agrees. Every Monday morning, he leads some 45 employees at Rockford Construction in a session of "guided imagery." The staff gathers to light incense and candles and listen to audiotapes. A series called Opening the Heart is a favorite. "A hundred years from now, we'll all be in the same place anyway," says the CEO, "so we might as well be relaxed and enjoy what we're doing now."

168
Background Check
REPRODUCING THEIR SUCCESS

The company may be new to the list, but the family isn't. CEO Diane Hendricks cofounded American Patriot Insurance Agency with her husband, Ken, whose ABC Supply has appeared on the list four times (hitting #1 in 1986). The couple have founded 25 businesses and are still actively involved in 12. The inspiration for their latest success came from their desire to control insurance costs. They soon found their contractor customers shared their concerns. Diane Hendricks says she can contact any of ABC's 220 stores and be provided with a list of 10 potential insurance clients.

221
Niche Picking
PUMP AND CIRCUMSTANCE

David Gamboa and Bill Miller got the inspiration for their company, Petrolsoft, when they were juniors at Stanford. Gamboa's father, who owned a chain of gas stations in Los Angeles, was having cash-flow problems, which he attributed to difficulty forecasting demand. So Miller wrote a software program that calculated long-term projections based on daily inputs of sales and inventory figures; Gamboa's father tested the program, and they got Chevron to sign on for a test drive. "They bought it for $40,000," says Miller. He and his partner couldn't have asked for a better graduation present.

224
Background Check
HE RANKED HIGHER THIS TIME

In his 1978 high school class of 430, Kent Murphy finished 427th. He spent the next two years as a construction worker by day and a janitor for ITT at night. Sidelined by a dislocated collarbone, he took a job polishing fiber-optic wires and soon became a closet expert on the new technology. Several ITT engineers encouraged Murphy to go to college. He eventually graduated from Virginia Tech--with a Ph.D. in electrical engineering. His thesis project became the prototype for a fiber-optic sensor--the first product produced by F&S, the company he founded in 1990. So much for high school prophecies.

256
Grandfather Clause
MISSING LINK

There's only one success story that VIS Development founder Andy Snider likes more than his own: the story of Irwin Freund. At the turn of the century in Chicago, Freund worked as a meat buyer. His specialty: buying animal-intestine casings for a sausage company. Hoping to increase his profits, Freund tested a synthetic casing. But the new casings didn't hold up: when cooked, the synthetic exterior fell away. Yet somehow the meat itself had formed its own casing and remained packed together. That, according to Snider, is how the hot dog was born. He should know. Irwin Freund was his grandfather.

257
Unnatural Disasters
THROUGH HELL AND HIGH WATER

Jeff Semple returned from a routine sales call to a situation that was anything but routine: panic-stricken employees fleeing his building. Frozen water pipes at Sempac Systems had burst and shattered, flooding the offices and collapsing parts of the ceiling. Six hours later the fire department shut down the leak. As if that weren't enough of a test, two months after the flood, Semple got a phone call at 2 in the morning: a fire had broken out in the manufacturing facility. There was little damage, but Semple now has the unusual distinction of being on a first-name basis with the local firefighters. "We joke about when the tornado's coming," he says.

266
New Tools
PLEASE STEP OUT OF THE CAR

Bill Haggar, CEO of Speedy Pete, likes to keep a low profile. A contractor to Airborne Express in eight midwestern cities, he prefers to play up the Airborne name on his company's vehicles. Haggar even declined to use his own name for the company. "Pete," he admits, is the father of one of his partners. ("He's a farmer in western Kansas.") Haggar lays low, all right--except when he's playing traffic cop. Without warning, he will hop into his car and tail delivery drivers, calling back to headquarters on occasion to have the driver pull over. "If he's doing well, I'll usually pop him $50," says Haggar. "Or if he's going crazy, I'll call in and say, 'Tell van 47 I'm right behind him.' "

310
Darkest Hour
DADDY, I CRASHED THE COMPANY

In 1991 Stephen Smith's parents handed him the keys to Axxis, the audiovisual-equipment-rental company they had started out of their garage a decade earlier. But the son and CEO nearly totaled the "family car" in a wild ride to increase sales. In 1995, with AV rentals peaking, Smith decided to start selling equipment as well. To launch the new division, he and a partner mortgaged their homes and raised $200,000. Like many Inc. 500 CEOs, Smith invested in his sales team. But perhaps he went too far. In order to attract the top sellers, Smith treated independent reps like regular employees, even guaranteeing their commissions for a year before they'd sold a thing. The problem: the reps didn't sell a thing--for two long months. The money ran out, and Smith started sweating. He was risking not only his own home but his parent's entire retirement fund. Six months passed before sales picked up and Smith could look his parents in the eye again. Today equipment sales are three times rental revenues, but Smith vows never to take the same risk again. "In retrospect, it's the most insane thing I've ever done," he admits.

336
Background Check
TOOL TIME

Some Inc. 500 CEOs come out of the starting gate knowing what they want to do. In 1979 all 20-year-old Lori Northrup knew was that she wanted something less "weather dependent" than Bar-S Trails, the horseback-riding stable she'd been running since the age of 16. Northrup's father, who owned a tool-manufacturing business, nudged her into his trade. So began Stride Tool, in Ellicottville, N.Y. For Northrup, repaying her father for his faith in her was not a problem: three years ago, she bought him out.

345
Wit and Wisdom
TEE BILLS

Gary Quick describes his method for controlling finances thusly: "It's called 'Stay close to your banker and take him golfing." Quick, CEO of Quick Solutions, has even formed a foursome with several competing bankers, pitting them against one another both on and off the green. Recently, when Quick sought funding to build a Charlotte, N.C., office, the CEO took his 15 handicap and his potential financier to the course. "How do you feel about financing the new office?" he asked casually. He got the money and shot an 84.

374
Background Check
FIGHTING WORDS

After five years of bootstrapping, Mike FitzSimons felt the time was right to seek bank financing. Unfortunately, the banks felt otherwise. The CEO of Precision Computer Services was particularly perturbed by the curt reply to his request for a Small Business Administration-backed loan. The rejection letter, from Lafayette American Bank & Trust Co. of Bridgeport, Conn., dated March 18, 1994, has hung on the wall outside FitzSimons's office since the day of its arrival. Although he eventually secured funding from People's Bank, the letter remains as a motivational tool.

378
Quirky Perks
ROADS SCHOLARS

At Astoria-Pacific all full-time employees have pocket cell phones and AAA Plus coverage for their cars, compliments of the company. The AAA plan, which covers breakdowns within a 100-mile radius, protects not only the 15 employees (half of whom work in sales or technical service) but their spouses and significant others as well. The cost to the company: $75 a year per employee for the AAA plan and $30 a month for the phones. CEO Raymond Pavitt has no trouble calculating the return on his investment. "Just last week, we had an employee completely break down 70 miles from the metropolitan area," he says, "and thanks to the Plus program and her cell phone, she was easily rescued. This is peace of mind."

406
Background Check
SEED CAPITAL

Woodworking was just a hobby for Peter Caporilli, whose company, Tidewater Workshop, manufactures and sells cedar garden benches. Caporilli sold benches to pay his way through college and continued to moonlight as a woodworker during his early career, which included a stint in Philadelphia as a marketing manager with the W. Atlee Burpee seed company. In 1990 director of corporate relations Jonathan Burpee, knowing of Caporilli's hobby, ordered some of his benches. Word quickly spread at the company, and soon Caporilli was taking orders from many coworkers. Caporilli left Burpee less than a year later, with his first set of customers.

412
Wit and Wisdom
THE DOCTOR IS IN

Kathy Dodd, CEO of the Corridor Group, doesn't just give advice about health care; she takes it, too. Once a month, a team of "specialists," including a psychologist and an operations consultant experienced in treating entrepreneurial companies, comes in to take the pulse at the Kansas company by listening to its managers. Dodd knows what ails her: control fever. The CEO says she doesn't want to be perceived as running a "benevolent dictatorship." She adds, "I don't want this to just be Kathy Dodd's company."

459
Background Check
DESIGNER GENES

Entrepreneurs are born, not made. So believes Ruth Coleman, CEO of Health Design Plus, a health-care-management company, who comes from a long line of self-starters. "My uncle started it all as a huckster in the late 1940s, selling vegetables door-to-door." Her family's entrepreneurial history includes a sheet-metal contracting company run by her brother, an orchestra owned by her cousin, a mail-order crafts company managed by another cousin, and an engineering firm started by her late father. "It's genetics, not environment," says Coleman--although she admits it didn't hurt to grow up surrounded by entrepreneurs. "By watching my dad and brother, I learned to always preserve integrity and to do it right the first time."

463
Grandfather Clause
BUSINESS BY THE NUMBERS

Max Klein knew how to make plans easy for others to follow. In the 1950s, Klein, who invented paint-by-numbers art kits, owned and ran the Palmer Paint Co., one of the nation's largest producers of such kits. When Michael Klein began drawing up plans for Transoft Networks, he naturally turned to his grandfather for advice. Not that the younger Klein needed a lot of help--the CEO of Transoft has an M.B.A. and a law degree.

486
Unnatural Disasters
THE REAL DECOY

To raise cash, some Inc. 500 CEOs resort to raiding their retirement funds. That's nothing. Frank Frazier sold his personal coin collection, several guns, and 300 duck decoys to get his grocery-distribution business off the ground. Texas Premium Foods & Distributing's first rusty delivery truck was driven by none other than Frazier, who used the back of the truck to change into a suit before meeting with customers. His cheapskate ways paid off--that is, until last year: the company's ancient computer system died, taking with it a year's worth of financial data. He was forced to hire 26 temporary workers to reenter the information. Then he purchased new software. This time, he didn't need to finance it with duck decoys.

Stories prepared by the Inc. 500 research team and Sally Chicotel and Shane McLaughlin.


How the Inc. 500 Were Selected
To be eligible for the 1998 Inc. 500 list, a company must have been independent and privately held through the 1997 fiscal year, must have had at least $200,000 in base-year sales, and must have shown a sales increase from 1996 to 1997. Sales figures for agencies (such as advertising agencies) are net sales to the company. Holding companies and regulated banks and utilities were not eligible. Information was verified using tax forms and financial statements from certified public accountants and through telephone interviews with company officials. The base-year sales requirement of $200,000 is adjusted periodically for inflation. The 1998 Inc. 500 was prepared under the direction of editorial information manager Charlene Niles. For information on how to apply for next year's Inc. 500, please check our Web site.

The Inc. 500 research-team members were Abby Goldenfarb, Jonathan Schwartz, Kristen Croker, Nicholas Colletta, Rebecca Pollard, Forgan McIntosh, Jonathan Lynch, Kristin Minster, David Halperin, and Ilan Mochari, and Lauren Getsie. Assistance was provided by Sally Chicotel, CPA.