Big Money, Small Payroll

Can you imagine a company that brings in $1 million in revenues per employee? How some Inc 500 companies excel at doing more with less.

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Productivity

Here's how some enterprising companies excel at doing more with less.

Inc 500 CEOs are often justifiably proud of their employees' productivity. But the numbers from New Age Electronics (#344) are enough to put other entrepreneurs to shame. Lee Perlman's electronics-distribution business generated $1 billion in 2000 sales with only 125 employees. That's a staggering $8 million per worker, representing the highest productivity ratio of any company on this year's list. Ask Perlman how he does it and his answer is simple. "It's just the model," he says.

You see, Perlman distributes office and consumer electronics to retailers. He acknowledges that the $8-million-per-employee figure has more to do with his company's industry than with its many operational efficiencies. New Age Electronics happens to be in a sector that allows it to function -- and function mightily -- with relatively few employees.

But a number of Inc 500 companies have found ways to keep their head count low while running what are typically more people-intensive manufacturing or service businesses.

COMPANY: Nature's Cure (#212), in Oakland, Calif.
DESCRIPTION: Produces a line of acne medicine
REVENUES: $6 million
EMPLOYEES: 13 ^*
RATIO: $462,000 per employee
PRODUCTIVITY STRATEGY: Outsource like crazy

The reason for the company's low head count is simple: CEO Amy Baker deliberately built the company to function with few rank-and-file workers. The staff is incredibly top-heavy: 7 of the company's 13 employees are executives.

Baker gets away with her unorthodox management structure by outsourcing nearly everything. For instance, whereas many consumer-products companies would employ rank-and-file workers in sales and marketing, Baker has farmed out most of those functions to brokers and outside strategists. The executives in sales and marketing operate more like relationship managers.

BLEMISH FREE: CEO Amy Baker of Nature's Cure farms almost everything out.

To be fair, Baker's penchant for outsourcing artificially inflates her company's productivity ratio. But Baker argues that the outsourcing makes it easier for her employees to maneuver or make changes without fixed overhead. Take, for example, her four sales executives. Three of them manage a regional group of sales brokers, and one serves as an inside sales coordinator. If the VP who's in charge of the Atlanta region finds that sales are slow, then that VP can simply fire the broker and find another.

Strictly speaking, Nature's Cure is a manufacturer of acne medicine. Yet the company even outsources the making and packaging of its product. The company also relegates its distribution to a warehouse-cum-shipping center in Chicago. One of Baker's execs, based in Chicago, oversees the entire distribution process. Another VP, in the Oakland office, coordinates every aspect of manufacturing: quality standards, packaging, and inventory management.

Baker acknowledges the risks of building a manufacturing company this way: Nature's Cure has few hard assets, such as equipment or real estate. A valuation of the company would involve only an appraisal of the soft stuff: the company's medicine patents and the Nature's Cure brand.

And because Baker's exit strategy is to sell Nature's Cure to another consumer-products company, she believes that she ought to spend her time and capital on building assets that her acquirers would covet -- namely, a big-time brand.

COMPANY: Legacy South (#487), in Atlanta
DESCRIPTION: Provides wealth-management services
REVENUES: $3 million
EMPLOYEES: 5
RATIO: $600,000 per employee
PRODUCTIVITY STRATEGY: Automate key functions with technology

Legacy South grosses an impressive $3 million a year with only five employees, but that feat is even more impressive given that two of those staffers are administrative. The other three, including CEO John Viani, do the actual wealth management, each handling about 35 clients. Some clients speak to Viani quarterly, while others talk to him a few times a week. And Viani's two partners communicate with clients just as frequently.

The perpetual challenge for Legacy South is striking a communicative balance: maintaining high-quality personal interactions while preventing a daily deluge of calls from needy clients.

For Viani, the answer is technology. In addition to sending clients their quarterly statements from discount broker Charles Schwab, Legacy South sends its own statements, which are "in a more friendly format," according to Viani. The company generates the statements through a software program called Advent, which automatically downloads information from the Schwab Web site, then rejiggers it to Legacy South's easy-to-understand style. For daily access to the information, clients can log on to the password-protected Legacy South Web site (www.legacysouth.com).

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