Building a Fast-Growth Company

There are tried-and-true rules for growing a company. And then there are entrepreneurs who pay no attention to the speed limit, put their engines in overdrive and blaze their own paths to furiously fast growth.

Entrepreneurs don't follow rules--they break them. Rules about tradition, rules about convention, and rules about what can and cannot be done--they all fall before the perseverance and innovation of entrepreneurs.

At least that's the legend. But what about the rules for creating a fast-growing company? Are there certain financial, market or other conditions that must be met for a company to grow rapidly? To find out, we asked experts in small-business growth what they saw as the rules for rapid business expansion. Then we talked to successful fast-growth entrepreneurs for their takes. We found that entrepreneurs do not all take the same paths to fast growth, but they do all believe that rules were made to be broken.

1. You Must Have Big Money

Of all the conceptions about what it takes to be an entrepreneurial success, access to bountiful sources of investment capital is probably the most widely held. There are good reasons for that, says George Foster, Wattis professor of management and director of the Executive Program for Growing Companies at Stanford University in Palo Alto, California. "Dollars clearly enable a company to invest in research and development to fast-track a process," Foster says. "Dollars enable you to hire a sales force of 40 as opposed to 10."

But starting a business with little capital can also work--if you find innovative ways to cut costs. Tampa, Florida, entrepreneur Stuart Suddath, 34, started self-service moving company Movex Inc. in a spare bedroom of his father's home in January 2000. Its customers save money by loading their own household goods onto professionally driven trucks supplied by Movex. The company did well almost from the start, generating $2 million in revenues its first year. In 2004, Movex made $13.7 million with just 34 employees.

The company's major outlays include advertising its nationwide service and developing software to monitor the moves in progress. But other than that, capital outlays have been minimal. "The real kicker of the whole thing is that Movex is a non-asset-based business," says Suddath. Rather than rent or buy a fleet of trucks, Suddath contracts with independent truckers and trucking companies and monitors their locations, keeping them fully loaded at all times. "It's a lot cheaper than owning the trucks," he says. "We'd have to spend $100 million to haul what we need to get hauled."

2. You Must Have a Deep Management Team

Another standard ingredient in the fast-growth recipe is a broad and deep management team with high-end skills and experience--"a resilient, focused, top-shelf management team" is how Foster puts it. "Until you have been knocked down and shown you can pick yourself up, take an obstacle and overcome it and make an opportunity of it, it's hard to become a viable company," he says.

Executives of Round Table Group Inc., a business that connects independent subject-matter experts with attorneys and money managers to help with litigation support and investment research, have certainly been resilient: All three co-founders of the Chicago company have been there since it was founded in 1994. The organizational chart is not, however, particularly deep--the company still has just 12 employees despite growing to $6 million in 2004 revenue, nearly doubling 2003's $3.6 million. And CEO Russ Rosenzweig was just 24 and fresh out of college when he co-founded the company.

Rosenzweig says that keeping the business simple and focused has helped grow revenue rapidly while keeping the management ranks thin. "Having a simple story and a focused customer segment were the two key ingredients for fast growth for us," says Rosenzweig. "It can't be a complex business that's hard to explain. You need to be able to explain yourself in a sentence."

3. You Must Have a Technological Competitive Advantage

The dotcom boom may be long gone, but the idea that proprietary technology is a prime component of the jet fuel that powers fast growth is still around--and for good reason. "We like a technology-based competitive advantage because it allows you to create wealth, not just move it around," says venture capitalist Jack Biddle, co-founder and general partner of Novak Biddle Venture Partners in Bethesda, Maryland. When a company has a technological edge, it can essentially create brand-new markets for its products and services, he explains. Then it doesn't have to take sales away from established competitors to grow.

It might be said that Karen Booth Adams succeeded in spite of technology. The 35-year-old from Atlanta had founded four startups in the IT field when she and a partner began PoshTots, an online retailer of baby dÿFDFDcor items, in November 2000. At that time, of course, the fuse on the dotcom implosion had already been lit, and yet the company not only survived the blast, but also grew to 22 employees and a projected $10 million in sales for 2005.

Despite Adams' tech background, PoshTots had no particular technological edge over its competitors in online retailing. And the company's plan to sell furniture such as cribs and beds online was, at the time, almost an icon of internet futility, having been the same strategy adopted by a number of spectacularly unsuccessful dotcom ventures. PoshTots prospered for the simple reason that no one, online or offline, offered what Adams did--a single, convenient place to go for high-end children's dÿFDFDcor and furnishings.

"We picked a niche, stuck to it and did it the best," she says. Another factor was that Adams' partner, Andrea Edmunds, skillfully made the most of the firm's celebrity clients, and nurtured relationships with media outlets that provided lots of free publicity for the upstart retailer and its sometimes amazingly pricey products.

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This article was originally published in the April 2005 print edition of Entrepreneur with the headline: The Fast Lane.

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