Unusual stories and interesting statistics about companies on the 2002 Inc 500 list.
The Inc 500 Hall of Fame
To make the list once requires unbelievable revenue growth from a company. To make the list more than once is an even greater feat -- for the larger you grow, the higher the revenue bar rises just to keep pace. In recognition of companies that have managed explosive growth over long time periods, we created the Hall of Fame. So far, 61 companies have been inducted after mak-ing the list five times. This year, four new businesses win the laurel: QSS Group (#313), Spectrum Communications Cabling Services (#323), Nav-igator Systems (#386), and ATX Forms (#497). In addition, Linksys (#226) and Monitronics International (#365) join the 12 other Inc 500 companies that have made the list a remarkable six times.
42 % of the Inc 500 CEOs surveyed expected substantial sales growth in 2002.
Can't Knock the Hustle
Lots of entrepreneurs get their start in business by working their way through school -- but typically not grade school. Yet that's the story of Tom and Richard Seeman. The cofounders of Staff One (#14) grew up on welfare in a family of 12 children. They shared clothes and roller skates "kid after kid after kid," Richard says, and ate at a restaurant only when McDonald's offered cheap cheeseburgers to children with lots of A's on their report cards. Both brothers worked at their Catholic grammar school, mowing lawns and sweeping hallways to help defray the cost of tuition. Today Richard marvels at how un-aware he was that his circumstances were so very desperate. "There were places we wanted to live that were ghettos even then, and we thought they were heaven," he says. --Cara Cannella
79 % of the Inc 500 CEOs surveyed said that if they had to do it all over again, they would start their business with partners.
Don't Call Me Daughter
At Esoftsolutions (#52), an IT-services provider based in Plano, Tex., Sheldon Arora's four-year-old daughter, Madison (pictured above), is sort of the office mascot. She began going to work with Pop eight months ago. At first she worked at the end of his desk, mostly drawing. But that turned out to be a distraction for Dad, so he moved her into her own cube, complete with a laptop with Internet access. Now Madison has begun to mimic her coworkers. "She comes by and says 'Hi,' the way you and I would come into the office, and goes straight to her cube," Arora says.
When Madison grows up, perhaps she'll follow in the footsteps of Marina Hatso- poulos, the founder of Z (#56). Like Madison, Hatsopoulos has a father who is an entrepreneur, though a much better known one: over a 40-year period, George Hatsopoulos grew Thermo Electron into a $2-billion conglomerate best known for letting employees develop autonomous business units, many of which have been spun off. Ironically for him, one "intrapreneur" that he couldn't hold on to was his own daughter, who worked in the company's acquisitions division before striking out on her own. She left, she says, because she feared being labeled the beneficiary of nepotism. "People were kind of assuming that I was there for the wrong reasons," she explains. --Bridget Behling
51 % of the Inc 500 CEOs surveyed said that large corporations were their primary source of revenues.
One of the great growth niches in recent years has been the sports-nutrition-bar industry, which has spawned several Inc 500 companies, including Powerbar, Clif Bars, and Balance Bars. But the latest nutrition-bar business to make the list -- ZonePerfect Nutrition (#307) -- might not have grown so quickly if it were not for fellow list maker Sweet Productions (#74). ZonePerfect has been outsourcing production to Sweet Productions for years, reports ZonePerfect CEO Chris Baker. But the moment of truth in the relationship between the two companies came in 2001, when Baker asked Sweet Productions CEO Paul Schacher to bear the heavy cost of doubling his capacity in order to accommodate ZonePerfect's projected surge in sales. Schacher agreed to make the investment in his facility. The rest is Inc 500 history. --John Courtney
Free -- For a Price
Sometimes the sale you forgo is the one that makes all the difference. That was the case for Dave Garcia, the founder of Network Management Resources (#136), who won a high-powered mentor simply by being neighborly. One day in 2000, a consulting business moved into offices in the same building as Garcia's. After offering to help the owner of the business hook up his T1 line, Garcia discovered that his new acquaintance was Timothy Price, who had recently retired as president and CEO of the telecom juggernaut MCI. Refusing payment for the Internet connection, Garcia proposed that Price reciprocate by meeting him over the occasional cup of coffee to talk over Network Management's strategies, opportunities, and problems. Today Price remains a member of Garcia's advisory board. --John Courtney
44 % of the Inc 500 CEOs surveyed said that winning new customers was substantially more difficult this year.
A Different Kind of Gas Grill
If viewing the world from a different vantage point is one of the hallmarks of entrepreneurship, Bill Johnson was already prepared for company building by the age of 10. By that time, he was well on his way to seeing all the lower 48 states from the cab of an 18-wheeler. Johnson's father, a long-haul furniture mover, took Bill with him on jobs during the summer. In his son he instilled a gritty work ethic. Earning only one dollar an hour and having to buy his lunch each day, Bill, the president of Alden Systems (#121), became pretty inventive and disciplined with money. A bootstrapper even then, he packed hot dogs in a cooler and cooked them wrapped in aluminum foil on the truck's motor. "It was cheaper than buying a hot dog at a rest stop," Bill says. "And it was fun." Fun in a diesel-tasting kind of way. --Mike Leonard
25 % of the Inc 500 CEOs surveyed planned to make more than 10 new hires this year.
Como Se Dice "Pay Raise"?
Sandi Smith, CEO of Liners Direct (#138), wanted to hold a successful holiday party for her employees. Instead she found herself in a scene reminiscent of a middle school dance. At the event, the dinner table was split evenly in two, with half of the employees speaking English and the other half speaking Spanish. Afterward, Smith made it her mission to teach the eight Spanish-speaking employees English over the course of the next year. Enlisting the help of a Spanish teacher from her daughter's high school, she began to hold weekly English classes at the office. The class, held directly after work on Thursdays, was not mandatory -- nor were employees paid for attending -- but they still eagerly went. Not one employee has missed a session, and staffers have even taken time out of their vacations to attend. Smith and her personal assistant sit in on the class, too -- to pick up some Spanish. --Marie Prokopets
34 % of the Inc 500 CEOs surveyed took fewer than 10 days off last year.
The Body Poli-Tech
Mike Connell is at the nexus of politics and technology. His company, New Media Communications (#171), develops on-line strategies for Republicans from Bob Dole to George W. Bush. But Connell isn't simply a gun for hire, and he isn't focused solely on this country. Since 1996 he has worked pro bono in Central and Eastern Europe, where people "are hungry for and willing to embrace new ideas," he says. Connell is especially proud of a youth-get-out-the-vote project that he orchestrated during a national election in Slovenia in 2000. "About 80% of youth are carrying cell phones and text messaging, so we collected phone numbers and then sent text messages on election day to remind them to go and vote," he explains. Bulgaria and Slovakia have since brought in Connell to oversee similar projects. "I have yet to make money overseas, but in my mind it's a very important investment," he says. --Maureen Ryan
2 % of the Inc 500 CEOs surveyed believed they've spent "way too much" on information technology during recent years.
Most women don't have to be dragged away from the phone to give birth. But Julie Pearl of Pearl Law Group (#210) is not like most women. On the day she was scheduled to have labor induced, Pearl conducted a 40- minute phone interview with a potential hire. Only desperate hand motions from her husband could persuade her to end the call. Then, after she gave birth to her son Sam (8 pounds 9 ounces and 22 inches), the second call Pearl took was from a colleague who wanted to discuss the new employee's salary and start date. Why the recruiting frenzy? It was early 2000 and "in Silicon Valley you could get a job if you could fog a mirror," she recalls. In Pearl's third trimester, 5 of her 15 workers left for other jobs, leaving her scrambling to replace them before her water broke. "My business was my first baby," she explains. "I couldn't just let it go; it was in a fragile state." --Bridget Behling
66 % of the Inc 500 CEOs surveyed said that they "rarely" encountered unethical behavior in their business dealings.
But Did She Also Send a JPEG?
With singles Web sites like Match.com popping up all over the place, finding a partner on-line is a current craze. But what about hooking up with a business partner on-line? That's how Steve McKee and Pat Wallwork found Carol Henderson, in 1997, when they were looking to bring on a third partner at their Albuquerque-based advertising agency. "I posted an ad on-line that I thought was quite creative," says McKee. "It said, 'There are only seven people in the entire country who can inquire about this ad.... Not only do you have to love your job, you have to love New Mexico, too." In fact, several people responded to the ad, including Henderson. She, McKee, and Wallwork began conversing by E-mail. One thing led to another, and they decided to meet. At first the partners played it cautiously, hiring Henderson rather than bringing her on as a partner right away. Now, five years later, they are all equal partners at McKee Wallwork Henderson (#232). --Maureen Ryan
20 % of the Inc 500 CEOs surveyed were seriously considering selling their company in the next 12 months.
Créme De La Créme
CEO Craig Nelson likes to mix vacation and philanthropy. Last year the founder of Mission Controls Automation (#248) spent two weeks erecting a dairy plant for an orphanage in a town in Romania called Oradea. While on the trip, Nelson and his wife, Renae, worked every day from 7 a.m. to 9 p.m. installing insulation and hanging drywall in the dairy plant. They left their cell phones, pagers, and laptops at home; Nelson left his CEO cap at home, too. "We were just workers -- very sore workers," he says. "As a CEO, it's fun to go as a student or just as a helper." This spring the Nelsons will spend a second vacation in Romania, assisting with the installation of the dairy production equipment. The project, which is the brainchild of one of Nelson's clients, should be completed by next summer. --Maureen Ryan
27 % of the Inc 500 CEOs surveyed shared equity with their spouses.
Young and the Restless
Collection agencies have acute turnover problems, and Creditors Interchange (#385) is no different. After working as few as 30 days at the company, its employees often accept tempting offers to work for competitors. In response, CEO David G. Young developed a computer model that has helped his business maintain a comparatively low 50%-to-60% turnover rate. Every quarter, the system compares employees' performance levels with their hourly wage and recommends upward adjustments for strong performers. Young explains, "Now it's supereasy. We don't wait for our collector to come in asking for a raise." If an employee who scores poorly on the computer haggles for more money, Young holds firm, and some employees leave. Not that good-bye is necessarily forever. Within 30 to 60 days of quitting, about 25% of the employees that Young didn't mind losing come back looking for jobs, by the CEO's estimate. But "they don't come back with their tails between their legs," he says. That doesn't happen in the collection business. --Sarah Stroback
Parking is Such Sweet Sorrow
It was the perfect office, merely steps from the beach in Fort Lauderdale, Fla. But although the first employees of Data Warehouse (#302) enjoyed the locale, they hated the parking -- even though the building had a private lot. Dedicated workers who came in on weekends for start-up duty (and parked in the company's spaces) were mystified by a deluge of parking tickets. By the time each employee racked up his or her 12th violation, CEO Benjamin Waldshan filed a protest with the municipality. As it turned out, the meter attendants simply assumed that beachgoers were using the lot illegally. "With any small start-up, there's no such thing as spare cash," Waldshan says. "The last thing we needed was to pay parking tickets." He has since moved Data Warehouse to Boca Raton. --Janina van Loenen
49 % of the Inc 500 CEOs surveyed said that their biggest competitors were other small or midsize companies.
Honey, I Quit My Job
You want to start a company, and your spouse has a high-paying job. The risk is diminished, no? So calculated Stephen Satterwhite. He figured, "Hey, my wife is a bigwig at Enron!" And so he left Deloitte & Touche to start Entelligence (#320), a company that provides IT staffing and services, in 1997. Meanwhile, Jill Satterwhite was enjoying every minute working in Enron's prestigious internal consulting group. She had reservations about Stephen's leaving his corporate job, but she did support him. The Satterwhites considered whether Stephen's company might even provide services to Enron but decided it would be a potential conflict of interest. "What looked like bad news at the time turned out to be a good thing," Satterwhite says today. Two years later the couple were driving in their car, and Steve was chatting away about Entelligence's growth issues, what he needed to do, and how he was going to do it. Jill burst out laughing, turned to him, and said, "What you need is me." She joined her husband's company then, thus missing the shredding of Enron's reputation that was to come. For the record, she says, she loved working for the now-notorious energy company, which ranked #5 on the 2002 Fortune 500. But it turned out that her working there and holding Enron stock left the couple much more exposed financially than Entelligence ever has. --Sean Sweeney
The Jet Set
We're not sure if pilots are entrepreneurial or if company builders are simply drawn to the wild blue yonder, but we know that at least seven Inc 500 CEOs like to fly. John Amatruda, the president of School Technology Management (#359), says the common factor between the two avocations is "an inherent risk." Frank Gwynn of Freedom Medical (#36) thinks self-reliance is the draw. "When someone else is flying, you're not in control," he says. "But when you're at the controls, you're in charge." For Richard Larkin, a plane is simply a tool for troubleshooting. Larkin Enterprises (#6), which provides technical and support personnel to the power-generating and utility industries, has workers in 11 states. Three years ago the company's payroll-services vendor delivered 125 Michigan-bound checks to Maine and 125 Maine-bound checks to Michigan. Under a union contract agreement, Larkin's employees are mandated to receive paychecks every Wednesday. If they don't, they can remain "on the clock" until they do. "It was a logistical snafu," Larkin says. "We had to manually write out 250 checks so everyone got paid." After that incident, Larkin purchased two company planes so that, in the event of another mix-up, he could ferry checks around himself. He has done so several times during the past few years, most recently taking checks to workers in three states last Memorial Day weekend. --Mike Leonard and Maureen Ryan
24 % of the Inc 500 CEOs surveyed admitted that they reduced their own compensation this year.
Flush for the First Time
Steve Rosa was washing his hands in a rest room at a chamber-of-commerce function in Providence. Two men who had just taken care of one form of business were bemoaning another -- the fact that they might be forced to cancel an event they had planned. Their problem was marketing related, and Rosa, who had recently founded Advertising Ventures (#380), knew instantly what kind of campaign could work for the pair. But what of rest-room etiquette? Can you actually go for an RFP in the WC? The opportunity sounded so good that Rosa took the plunge. As he strode over to get a paper towel, he casually asked the men if they had considered his strategy. "They looked at me like I was Moses of the rest room," he recalls. After a cup of coffee (not in the men's room), Rosa signed up his very first customers. --Janina van Loenen
4 % of the Inc 500 founders surveyed hired CEOs to replace themselves.
When Your Heart's In It
Just how critical is your health to your company's viability? For at least two years, that touchy question has been very much on the mind of George Woods of USA Environmental Management (#394), which assesses how organizations handle such hazardous materials as lead, asbestos, and radon and then makes remediations. Woods suffered a heart attack in December 2000 and has since had an operation to remove a precancerous growth from his colon. Those illnesses prompted him to slow down a bit. "I used to work long hours, but now I'm an early bird," he says. "I come in around 8 and leave around 12:30. I can do that because I have good people here. These people know and trust me, and I trust them. It is very important to have people you can trust." It's also important to stay active outside the office, Woods says. While he regrets that he'll probably never play another tennis match, he's getting into fishing, bowling, gardening, and golf. "I am doing the best I can," the 71-year-old says. --Cara Cannella
13 % of the Inc 500 CEOs surveyed said they have been involved in patent litigation.
Brand of Brothers
Take two ambitious guys (competitive brothers, no less), fuel them with a couple of cocktails, and unleash them on Los Angeles's Sunset Strip. What do you get? Tattoos. The year was 1996, and Scott and Greg Alterman of apparel company Gagwear (#430) were at their first big trade show. "Slightly buzzed," Scott recalls challenging Greg to emblazon Gagwear's logo on his skin. The deal: Scott would get the same tattoo, and he would even go first -- but if Greg chickened out, he would owe Scott $10,000. Both followed through: Scott's tattoo is on his back, Greg's is on his leg. Today Greg suggests that the tattoos demonstrate fidelity -- to both brother and business. What they really seem to illustrate is the power of partners to goad each other forward and the extent to which, for entrepreneurs, companies become all-consuming passions. --Janina van Loenen
6 % of the Inc 500 CEOs surveyed worked less than 40 hours a week.
Every year the bright young minds of Indiana move to cities like New York and Chicago, hubs of their most alluring job offers. The exodus drives local business leaders wild. So last year Bill Oesterle, CEO of Indianapolis-based consumer-research company Angie's List (#443), decided to take matters into his own hands. His action: to establish the Governor Bob Orr Indiana Entrepreneurial Fellowship Program to train young Indianans in business -- and, he hopes, keep them in-state. "It is our mandate to give them a road map on how to succeed in business in Indiana," says Oesterle. To kick off the program, which required only $1,000 in start-up capital, Oesterle and other board members reviewed close to 400 résumés and conducted on-campus interviews with college seniors. They selected 25 finalists, who then met with senior managers at the local companies that were to take on fellows at a salary of $32,000 a year plus benefits. Ten of the finalists were selected for the program, and Oesterle is pleased to say that all of them are staying put, at least for the time being. --Cara Cannella
53 % of the Inc 500 CEOs surveyed said that after they sell or leave this business, the next thing they'd like to do is to start another company.
Quickly realizing he'd need more start-up capital than the few thousand dollars he had, Eric Snider of MidAmerica Auto Glass (#485) did the only thing he could think of to raise money: he sold his 1987 Corvette. "It was my prized possession," says Snider, who nevertheless dropped it for $12,000, using the proceeds to buy an advertisement in the yellow pages. No sooner had he cashed the check than he began decorating his office with pictures of other Vettes, vowing to buy a replacement as soon as he could. That mo-ment came in 1998, when he finally pulled together enough money to get a brand-new model -- Nassau Blue with black-leather interior -- for $49,000. "I always told myself I'd get another one," says the CEO. --Mike Leonard
How the 2002 Inc 500 were selected
This year's Inc 500 list is the 21st annual ranking of the 500 fastest-growing privately held companies in the United States. To be eligible for this year's list a company had to
The ranking is based on a company's percentage increase in sales from 1997 through 2001. Applicants had to submit completed qualification forms and documentation of sales by May 6, 2002. Sales figures were verified using the companies' tax returns and financial statements (audits or reviews prepared by an outside accountant or auditor) for 1997, 2000, and 2001. Sales are total net sales. Profit ranges are those reported by the companies and have not been verified. Employment numbers refer to full-time employees.
The 2002 Inc 500 list was compiled under the direction of Inc editorial information manager Charlene Niles. Inc research editor Sally Chicotel, CPA, advised the team.
For information about how to apply for the 2003 Inc 500, go to http://www.inc.com/inc500/.
Please note that the information published in the list is the only information Inc will make available about the ranked companies.
The 2002 Inc 500 research team: John Courtney, Bridget Behling, Janina van Loenen, Sarah Stroback, Sean Sweeney, Mike Leonard, Maureen Ryan, Marie Prokopets, and Cara Cannella.
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