Building a fast-growth business is like charging up Heartbreak Hill. At some point on the incline, founders make the Inc. 5000, our annual ranking of the nation's fastest-growing private companies, and pause to cry, "Yes!" Then they're off and running again.
Only this year, the road ahead looks very different. Picture K2, only with more avalanches and less oxygen.
From 2016 to 2019, the Inc. 5000 achieved a median revenue of $10.2 million and a median compound growth rate of 165.3 percent. These founders were buoyed by smarts and gumption, sure, but also by a lift-all-boats economy. That era is worlds away from the economic decline that hit the U.S. alongside the pandemic in March.
Still, the job creators of the Inc. 5000 just keep going. At presstime, only 11 percent had cut staff since March, while 47 percent were landing talent let loose by others. And for every CEO reporting a sales decline, another is seeing an uptick. In July, 80 percent were anticipating profitability for 2020.
But what's most striking about this year's class is how many companies are remaking themselves.
Take ASRV Sportswear. Founder Jay Barton was hoping to extend his $10 million activewear brand with a chain of traditional indoor gyms. Then, when Covid hit, sales of ASRV's outdoor training clothes shot up. "A lot of people won't want to go back into crowded gyms," says Barton, whose Carlsbad, California, company landed at No. 1,170.
Barton's new vision: ASRV-branded outdoor training courts in urban parks, where people work out with free battle ropes, squat racks, and cardio equipment, the way they use city basketball courts. "We're trying to make an easy transition for people who want to stay out in the fresh air when this is over," says Barton.
In the wide world of small and medium-size businesses, most Covid story lines have focused on survival strategies. Some variation of "We switched from T-shirts and whiskey to masks and sanitizer" has been a common refrain. Roughly half of Inc. 5000 companies, however, will emerge from the pandemic transformed by new products, services, and markets.
This is the beauty of the Inc. 5000. Even as their stomachs got smaller, their eyes got bigger. More than 40 percent of honorees say current conditions make it more important than ever to scale quickly. Just 10 percent feel it would be best to slow down.
Pro-Cal Lighting (No. 1,076), a $19.8 million business based in Vista, California, designs and installs energy-efficient lighting for commercial and government buildings. Sales are down about 10 percent, and founder Brian Morales anticipates a larger falloff next year as customers like school districts and municipalities reduce spending. So he's recasting Pro-Cal as a provider of infrastructure to smart cities. Says Morales, "It's not just 'How do we get more efficient?' but also 'How do we provide broadband to disadvantaged areas, ensure safety, and attract entrepreneurs with new technology?' We're investing, so we're in a good place to make money."
More than a third of Inc. 5000 honorees have been motivated to seek customers they've never before served. Our Man in Havana (No. 3,289), for example, is a New York City-based advertising and design agency whose largest client is Hyatt Hotels, including 19 of its sub-brands. Hyatt, of course, has taken the same Covid gut punch as the rest of the hospitality industry, sinking Our Man's revenue by 80 percent. In response, the company is contacting individual hotels--a prospect it once viewed as too overwhelming--and offering its services on a sliding scale. Even after Hyatt's corporate business rebounds, founder and executive creative director Andrew Golomb expects to keep servicing individual properties, "which could add 30 to 50 percent to revenue," he says.
Other Inc. 5000 honorees are developing new products and services for existing customers. FarmLogix (No. 165), a $2.6 million Chicago-based company, helps large entities such as hospitals, universities, and corporations source locally grown produce for their patients, students, and employees. During the pandemic, many FarmLogix customers closed their offices. So it developed an app to allow them to distribute food in convenient spots for constituents, such as parking lots or local restaurants.
Founder and CEO Linda Mallers ticks off several possible applications for her app post-pandemic: Corporate cafeterias could eliminate lines by offering takeout, and restaurants, hospitals, and universities might become pickup sites for subscription boxes. "People will continue wanting to support local suppliers," says Mallers. "And they're going to like buying things it places where traditionally they couldn't."
And, yes, plenty of Inc. 5000 companies threw in on hand sanitizer and facemasks. But even those efforts were more than normally innovative. ADCO Hearing Products, a $5.3 million medical supplier based in Englewood, Colorado, has many customers who "rely on the ability to see people's mouths to help them understand what they're saying," says president Abby Armijo. So ADCO (No. 3,146) developed face coverings with clear mouth panels.
As companies learn from this ordeal, so will their CEOs. Almost 75 percent say they are addressing weaknesses in their leadership approaches, some of which they recognized after dispersing to work from home.
"The pandemic forced me to see my deficiencies and tackle them," says Tony DaRe, founder and CEO of BSI Corporate Benefits (No. 3,372), a $5.4 million company in Bethlehem, Pennsylvania. Facing existential levels of uncertainty, "I dialed up every ounce of training and mentoring I ever received," says DaRe, who is among the 40 percent of Inc. 5000 founders who are now working to be better, more visible communicators to their staffs.
"There still is so much to learn," he says. "But this pandemic has shifted me into a new place and sense of purpose."