Three great responses to my first post got me thinking today about the whole big/little business discussion.
Rob's and Allen's comments essentially asked the question: "What if I want to stay small, what's wrong with that?" My response: Not a thing. For many people, the purpose of a business is to provide a living for their family and interesting and rewarding work for themselves. Millions do that and, as an added benefit to the rest of us, they help imbue the U.S. economy with its trademark stability and resilience. But read a bit further in their posts and you'll see precisely why I decided to write my book. People tend to go bimodal when they talk about business: There's small business and there's big business -- and that's it. (Rob chose as his straw man nasty big companies like Enron, and Allen chose the Fortune 200 giants).
I wrote The Breakthrough Company because I noticed that most of the attention gets focused at the extreme ends of the spectrum (very small businesses and very large businesses), and I thought it was time that someone studied the middle. Interested in how to run a great small company? Books like Bo Burlingham's Small Giants and Donna Fenn's Alpha Dogs have got you covered. Interested in what makes huge companies tick? Check out In Search of Excellence, Built to Last, and Good to Great (the companies featured in Good to Great have average annual revenues of $32 billion). But where does a person go to understand the keys to high performance for companies in the middle -- particularly companies that start small and generate great performance year after year for decades? I decided that it was time for a serious study of the question.
Are these companies in the middle market -- the ones in the process of breaking through the entrepreneurial stage, important? You bet your life. One study suggests that just 4 percent of U.S. companies create 60 percent of the new jobs. It turns out that breakthrough companies are the real engine of the U.S. economy-so understanding the keys to breaking through seems important.
Heather's question about why we selected the $250 million mark as the threshold for entrepreneurial breakthrough is a great one. After five years of studying this question, we simply don't think there is a "magic number" where a company breaks through. Our deep-dive field studies of 52 companies taught us that some firms break through at $50 million, others at $500 million. Instead of getting hung up on a specific number, we wanted to identify a population where, if we studied the top performers, we were likely to see a lot of the artifacts associated with the process of breaking through. So we chose the Inc. list, and we chose companies with minimum sales of $250 million -- reasoning that at that level of development, a firm is likely to have faced a broad range of issues associated with breaking through. (We also eliminated firms with 2004 revenue of more than $2 billion -- reasoning that firms of that size might still be great performers but would likely have grown so large that the artifacts of breaking through would be difficult to isolate).
Here's a list of the top nine performers our study identified:
1st Year on Inc. 500
Revenue that year (millions)
From humble beginnings in Huntsville Alabama, ADTRAN does battle with industry giants Alcatel and Lucent, and earns 60% gross margins.
Starting out as a folk-art store in Fort Meyers, Florida, this retailer of women's clothing grew into a retail titan of 900+ stores. Its stock has stumbled in recent months, but it still earns the highest profit per square foot in the clothing industry.
This franchiser of temporary services firms with headquarters in Oklahoma City grew from nothing to become the fifth largest personnel firm in the country.
This Winona, Minnesota-based nuts-and-bolts distributor grew from nothing to more than 2,000 retail stores and annual revenue of more than $2 billion.
Chased Microsoft out of not one but two markets -- personal financial management and small business accounting.
Began as a tiny payroll processor in Rochester, New York -- now with more than a half a million small business customers.
Founded in Roseau, Minnesota, Polaris grew from 16 employees and dead last in the snowmobile business to become the world leader in snowmobiles and ATVs -- now taking on Harley Davidson in the motorcycle business.
Its statistical analysis software launched what is now the world's largest privately held software company based in Cary, North Carolina.
The Staubach Company
Former Dallas Cowboy quarterback Roger Staubach's company is in the Hall of Fame in the commercial real estate business.
The median revenue of these nine companies grew from $14.4 million dollars to more than $700 million. Aren't you just a LITTLE curious how they did it? I was.