25 Years. 7,900 Companies. One Enormous Impact
Americhip, No. 496 on this year's Inc. 500, designs and manufactures magazine inserts that incorporate light, sound, voices, and moving parts. I wish we had hired Americhip to help with this article because the first quarter century of the Inc. 500--this ranking of fast-growth private companies debuted in 1982--cries out to be presented as a montage. I envision a screen, blank except for the words "American entrepreneurs, this is your story so far...." Then the images tumble forth in artfully edited succession: Quintessential outdoorsman-entrepreneur Yvon Chouinard scaling a cliff with the same derring-do he applied to building Patagonia (No. 438 in 1984, under the name Lost Arrow), the socially and commercially inspirational clothing maker. Ted Waitt, co-founder of Gateway 2000 (No. 1 in 1991), chain-smoking and knocking back Diet Cokes while explaining the peculiar allure of bovine imagery for PC buyers. Super Bowl MVP Roger Staubach, rugged features incongruous above immaculate business attire, comparing his conservative approach to real estate development (The Staubach Co., No. 91 in 1985) with his almost reckless courage as a Dallas Cowboys quarterback. James Goodnight, co-founder of SAS Institute (Hall of Fame in 1986) and a leader of the humanistic workplace movement, wandering a corporate campus on which employees spike volleyballs, listen to live music, and play with their children in an on-site daycare facility. Mark Hughes presiding over a tent-meeting-style rally for the Herbalife International faithful (No. 1 in 1985) while nonbelievers--including some in the U.S. Senate and California attorney general's office--denounce the company's weight-loss products as "snake oil" (it hasn't all been pretty, you see).
And the show would go on, unspooling early chapters from some of the great business stories of our time: Microsoft, Timberland, Paychex, Oracle, Domino's Pizza, Sharper Image, Jenny Craig, Intuit, E-Trade, Franklin International Institute, Jamba Juice, Clif Bar, Peapod, U.S. Robotics, Merry Maids, Vermont Teddy Bear Company, Morningstar, et cetera, as the King of Siam would sum up. Et cetera indeed.
Our montage wouldn't feature only famous faces. Of the roughly 7,900 companies that have graced the Inc. 500 over a quarter century, the vast majority never became household names in households other than their own. Yet their stories are often as compelling as those of the icons. So we would include Allan R. Thieme, thwarted repeatedly in his efforts to build a company around the wheelchair he had designed for his MS-stricken wife and succeeding at last by recruiting a sales force composed largely of people who were either disabled themselves or had disabled relatives (Amigo Sales, No. 212 in 1982). We would show Iranian immigrant Hadi Mahmoodi sleeping on a bench in Lafayette Park and scrounging food from Dumpsters before setting off on the arduous road to launching NIE International (No. 423 in 1996). Certainly we would remember Kenny Kramm, forced to abandon his undemanding career in the family pharmacy to build a company profitable enough to provide lifelong support for his severely disabled daughter (FlavorX, No. 295 in 2002).
And yet, the Inc. 500 is far more than a collection of personal stories. It is also the story of how entrepreneurship has energized the economy and captured the public's imagination in the late 20th and early 21st centuries. Three years after researcher David Birch famously reported that small companies create four times as many jobs as large ones; two years after the White House held its first conference on small business; and the same year that Harvard established the first chair of entrepreneurial studies, the Inc. 500 began adding real-business flesh to a growing theoretical skeleton. Over 25 years the companies on this list have often surpassed large businesses in terms of productivity (expressed as the measure of revenue per employee). They have created roughly a million new jobs. Their technological and business model innovations are legion.
More intriguingly, the 500 is also the story of how human beings tackle problems. The one problem common to all these companies, of course, is: How do I make money? Beyond that, one can view the 500 collectively as waves of ingenuity breaking against the most intractable ills of the past 25 years. These businesses have attacked escalating health costs with everything from home oxygen machines to rented medical equipment to contract nursing services. They have addressed rising environmental anxieties with innovative cleanup equipment and remediation services. In tight labor markets they have responded with every imaginable permutation of employee leasing and management. Some have gone so far as to tackle the problems of those who are tackling the problems. For example, Tricom reached No. 445 in 1995 by selling administrative and financial services to temporary employment agencies.
The Inc. 500 also play an important role in the paramount business story of the past few decades: how technology--Everyone ready? On the count of three...--changes everything! From the mid-'80s when the list was awash in computer retailers and general business software vendors to the '90s when companies specializing in networking, integration, and ever-nichier applications held sway, to today's Internet ventures, computer-related businesses have dominated the list. By 1994, one-third of the 500 described themselves as technology companies. And it doesn't take into account those businesses in industries that are technically not technical but that rely heavily on computers to make them faster, smarter, cheaper, or more flexible than the competition. Even if Microsoft hadn't landed on the list (No. 80 in 1984), the story of information technology could still be read across the length and breadth of the 500.
The final story told by 25 years of the Inc. 500 is one of survival. To thrive, to triumph as the 500 companies have triumphed, you must first stay alive. Looking back, you realize how difficult that can be. Fast growth is almost always precarious. As the late management guru Peter Drucker reminded us, "Growth at a high rate and for an extended period...makes a business--any institution--exceedingly vulnerable....It creates stresses, weaknesses, and hidden defects which, at the first slight setback, become major crises."
Most of these entrepreneurs can tell you about one--or many--moments when they didn't think they'd make it: when the loss of a customer, or a bit of wonky pricing, or a fire in the warehouse almost put paid to their dreams. Many have made the list one year and not the next, victims of bad management or a fickle market. Companies that started up during the economically fraught early '80s and '90s have stories to shiver the timbers of peers launching in more auspicious eras.
The theme of survival is particularly salient for the 2006 list, the first to include businesses that started up immediately before and after September 11, 2001, as well as many companies that had to raise capital amid the damp residue of a burst bubble. The optimism, fortitude, and pure stubbornness carrying these founders from those dark days to this bright one is worth celebrating above and beyond the success of their businesses. The final moments of our montage belong to them.
With reporting by Darren Dahl