Life After the Inc. 500: Fortune, Flameout, and Self Discovery
BY Leigh Buchanan
A new study illuminates what happens to companies, and their founders, in the years after they land on the Inc. 500.
We all know what happened to the breakthrough companies of the Inc. 500, because they are with us every day. Zappos. Jamba Juice. Go Daddy. Honest Tea. But the vast majority of Inc. 500 honorees simply vanish. Not into obscurity, of course. Most live on, making life better for their customers, shareholders, and employees. But unless companies repeat on the list or hove back into sight with some fresh tale to tell, we rarely learn their fates. Did they soar or plummet or just keep chugging along on a slightly less steep grade?
Recently, the Kauffman Foundation, the world's largest organization devoted to entrepreneurship, sought to answer that question by researching the outcomes of roughly 1,300 companies that appeared on the Inc. 500 from 2000 to 2006. Relying chiefly on the Web and databases like Hoover's, Kauffman followed companies and—as far as possible—company founders up to 2010, the year before the beginning of the study. Most of the foundation's findings will be good news to current and aspiring Inc. 500 companies. But there is a dash of bitter with the sweet.
Every year, we ask Inc. 500 founders about their exit strategies, and every year, most respond with some variation on "I can't imagine a better job than this." So it's no surprise that 59 percent of companies remained in private hands four to 10 years out. But those more mature companies are sometimes very different animals from the ones that took Best of Show in their Inc. 500 years. On one end of the spectrum, Total Quality Logistics—no slouch when it made the list in 2005 with $101 million in revenue—now hovers at around $1 billion with the same leadership. By contrast, dozens of companies—with a heavy concentration among HR services and small IT providers—are shadows of their former selves, with revenue in some cases dipping more than 90 percent. Overall, 40 percent to 50 percent of companies generated less revenue in 2010 than in the year they made the list, according to Kauffman.
Thirty-two percent of companies merged with other companies or were acquired. Many founders rolled their money into new ventures: Forty-three percent went on to start other businesses.
Five percent of companies died off. IPOs have been even scarcer: By 2010, just 34 Inc. 500 companies—among them American Apparel, Under Armour, and Shutterfly—had gone public and remained in business.
To provide a sense of the different trajectories fast-growth companies take, we tracked down some entrepreneurs from the classes Kauffman studied and asked about their lives post-Inc. 500. Here are some of their stories.
LEIGH BUCHANAN is an editor at large for Inc. magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture. @LeighEBuchanan