Talk about countercyclical: more than half the companies on the 2002 Inc 500 list have thrived in industries that are just puttering along. Here's how.
It's one thing to grow a company fast in a robust marketplace. It's quite another to be fleet of foot in a flat industry. Of the CEOs who responded to this year's Inc 500 survey, only 41% said their companies were in fast-growth industries. The remaining 59% of respondents said they're in markets that are growing slowly or not at all. Of those companies, many credited their unlikely growth to a combination of skill and luck. Here's how they sprinted ahead.
1. Get in their face.
Company: Custom Solutions International (#367)
Industry: Environmental consulting and con-struction services
Industry's five-year growth rate: 17%
Company's five-year growth rate: 635%
What the company did right: Made it personal. CEO Bill Baugh believes in constant contact. "We try to get in front of prospective clients as soon and as often as possible," he says. "My personal record is eight trips to an office that's over 100 miles away." Baugh predicts that during the next five years his much-visited client will contribute $50,000 to $75,000 in annual revenues.
2. Take advantage of industry consolidation.
Company: ATA Services (#180)
Industry: Maintenance, repair, and rebrand-ing of automated teller machines
Industry's five-year growth rate: -13%
Company's five-year growth rate: 1,167%
What the company did right: Expanded its repertoire and reach. ATA services and re-furbishes automated teller machines, an industry populated by local repair shops. President Mike Robson looked on thoughtfully as regional and national banks gobbled up local banks, creating far-flung networks of different kinds of ATMs, all with various problems. Grabbing the opportunity to win large customers, Robson turned ATA into a one-stop ATM-maintenance shop. "We are not the low-price leader," says Robson. "But by packaging all of our services to replace many different vendor interactions, ATA provides maximum value for the bank at these hard-to-handle remote locations."
59 % of the Inc 500 CEOs surveyed said their industry had been growing slowly or not at all in the past five years
3. Show no mercy.
Company: Network Display (#452)
Industry: Manufacture of point-of-purchase advertising displays
Industry's five-year growth rate: 23%
Company's five-year growth rate: 507%
What the company did right: Fired its least promising customers. For president Kathy Fyler, rethinking her customer list created opportunities for growth. "We decided to fire the clients that were consuming lots of time and energy with a small level of return and low potential for future growth," she says. "We decided to really focus on the existing clients who had the largest potential." Fyler and her partner then met with those customers who made the cut and tailored the company's product line to suit their needs.
4. Don't go it alone.
Company: Diversitech (#294)
Industry: Aerospace and defense services
Industry's five-year growth rate: 25% to 40%
Company's five-year growth rate: 789%
What the company did right: Inked alliances. Diversitech recently formed a joint venture with another Inc 500 company, Call Henry (#140). Together the two won an air-force contract that entailed providing site maintenance, janitorial services, and equipment maintenance and engineering -- far too large a job for Diversitech to handle alone, says CEO James Askew. "Many of our competitors think that they can do everything and anything alone; however, we found that partnering provides better opportunities to grow," he says. Reaching out to a large company also paid off; Askew became a certified supplier for GE Aircraft Engines two years ago and has enjoyed the steady work and timely payment that the distinction has afforded him.
5. Kiss up to your customers.
Company: Timberlane Woodcrafters (#306)
Industry: Wooden shutters
Industry's five-year growth rate: 3%
Company's five-year growth rate: 758%
What the company did right: Relentlessly pursued customer referrals. Many of Timberlane's customers will buy wooden shutters from the company only once, but that doesn't stop president Rick Skidmore from trying to impress them -- he knows they have friends.
Referrals, which have increased 5% each year, make up 25% of the company's sales. Sure, Skidmore focuses on high quality. But he also believes that the right kind of service can turn an unhappy customer into a company's biggest evangelist. When employees learn that a customer is dissatisfied, the company gets in touch immediately and promises quick resolution of the problem. Recently, Skidmore took that approach one step further by sending out an "Oops Kit" containing a flashlight and a note that thanks the customer for "shedding light on the mistake."
6. Do your homework.
Company: SM Consulting (#371)
Industry: IT consulting services
Industry's five-year growth rate: 31%
Company's five-year growth rate: 625%
What the company did right: Invested in research. President Sheila Heinze won't let her salespeople pick up the phone until they know everything there is to know about a prospect -- especially the challenges that the company is grappling with. Not long ago Heinze read that a pharmaceutical-services company was going after new customers in a different industry segment. "Any time you change your customer base, there are going to be changes in information and in customer-relationship-management needs," says Heinze.
Armed with that understanding, her sales team visited the company's vice-president of sales. "We were able to gain instant credibility by having knowledge of what his pains might be and some potential solutions to those pains," Heinze says. The result: a $250,000 project with "great potential for add-on business," she says.
Sources of industry growth rates:1. Environmental Business International; 2. The Nilson Report; 3. Point of Purchase Advertising International; 5. The Vinyl Siding Institute; 6. IT Services Business Report
How to Pull Ahead
Percentage of Inc 500 CEOs in low- or no-growth industries who attributed their company's rapid growth to
Offering a unique or innovative product or service that was not affected by industry trends
Gaining market share by offering a superior product or service or a better price
Gaining market share through superior marketing and sales strategies
Taking advantage of a particular business circumstance (e.g., an alliance with a leading customer)