Heat Wave

Which new businesses are on the fast track to success? The companies in <i>Entrepreneur</i> and D&B's 10th Annual Hot 100 listing are blazing their way to the top.
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This story appears in the June 2004 issue of Entrepreneur. Subscribe »

The companies on our annual Hot 100 list of 's fastest-growing new entrepreneurial companies are proof that nice guys do finish first. But more on that in a moment. Here's a closer look at what's new in our 10th Annual Hot 100 listing. (To view the listing now, please click here.)

Overall, the companies in this year's listing are slightly more mature, with an average of 37 months in compared to last year's 29 months. They're also making more money, with combined sales of $1.1 billion-a substantial increase from last year's total of $923.5 million. And they're getting bigger, with an average of 48.5 employees each, up from an average of 31.6 last year. What's more, they're doing it all with less: This year's average Hot 100 company launched with $416,000 in startup capital, compared with an average of $565,000 last year.

Although our Hot 100 companies are geographically diverse, with no one state or region dominating, certain industries did dominate. that were not tech-related accounted for 19 of our companies; nine of those provide and services. Construction and home improvement accounted for another 19 companies. (Also profiting from the hot real estate market, five of the six financial services companies in our listing are mortgage brokers.) Tech companies showed a slight decline, down from 19 last year to 15 this year. Perhaps the most dramatic change was the growth of manufacturing, which surged from five companies last year to 12 this year.

At a time when each day's headlines seem to bring new corporate scandals to light, it's heartening to know that being "good guys" has paid off for our Hot 100 companies. We were impressed by the number of entrepreneurs in this year's listing who credited their success to their employees and spoke passionately about the importance of treating customers and staff well. Proving they not only talk the talk, but walk the walk, the number of companies offering employee benefits such as health , 401(k) plans and stock options increased this year.

And while experts can come to no certain conclusion as to the state and direction of the , our Hot 100 are overwhelmingly optimistic: 92 percent believe the economy "is headed in the right direction." Their budgets are evidence of that confidence: They spent a total of $17.4 million on technology this year and a total of $28.4 million on overall marketing. In fact, this year's group tripled their average marketing spending to $299,000.

As an added bonus this year, we've highlighted the best success secrets from our Hot 100 within the listings. Read them, learn from them, and perhaps you'll find yourself part of next year's Hot 100.

Arbitech; Pro-Motion Technology Group

#1 Arbitech

It's high tide at Laguna Beach, California, computer products distributor Arbitech. Manned by Torin Pavia, 32, and William Poovey, 33, our second-place winner for both 2002 and 2003 has now vaulted to the top of this year's Hot 100.

Growth is the buzzword around this . Sales for 2003 popped up to $86 million, and the company has expanded from 26 to 35 employees. But what's even more impressive than the numbers is the way Arbitech got there. "All our growth has come from existing accounts buying more from us, and word-of-mouth," says Pavia.

Staying down to earth (or down to sea level, in this case) is a priority at Arbitech. As Pavia puts it, "We've fought hard to keep our corporate culture-the fun Hawaiian shirts, [being] near the beach, surfing and playing basketball together. We're all still surfing." Fun and hard work go hand in hand in their office's high-energy trading-floor environment. Every trader working at Arbitech is his or her own CEO, says Pavia. That's not just lip service. Each employee makes major decisions, from accepting returns to setting the price for computer components. That attitude of empowerment is one of Arbitech's most potent secrets for success.

Beyond the catered lunches and annual retreat (this year to Las Vegas), the Arbitech team stays heavily involved in the community. They donate computer parts to the local high school and sponsor a golf tournament benefiting underprivileged youth, among other charitable activities.

Arbitech is still engaged in one of its greatest challenges: positioning itself as a complementary company alongside industry giants Tech Data and Ingram Micro, while still competing with them. Pavia and Poovey are accomplishing that by settling strongly into their niche of handling discontinued and constrained products (products that aren't readily available through Tech Data or Ingram Micro). This area also allows them to offer incredibly competitive prices to their small and midsize reseller clients, many of whom rely on Arbitech as a lifeline for staying profitable in competitive times.

Looking ahead, the Arbitech founders plan to continue to work their niche, hang their surfboards on customer satisfaction, and trust their employees to lead the way. Says Pavia, "We couldn't stop growing right now if we tried." -Amanda C. Kooser

#11 Pro-Motion Technology Group

Pro-Motion Technology Group went from zero to $9.4 million in sales in one year. That's faster than you can say "audiovisual." The Wixom, Michigan, company headed by founder, president and CEO Lynn Matson, 41, shows no signs of slowing down. "This year, it's going to be $9.4 million to $22 million," she says. Pro-Motion provides audio, visual and interactive solutions to retailers, restaurants and others across the nation. Its clientele list includes heavy hitters like Bally Total Fitness, Foot Locker and TGI Friday's.

Though the business is young, its history is lengthy. Matson founded a similar company in 1986, which was purchased and run into the ground by an outside interest. In 2002, she picked up the pieces by buying the assets from the bank and set out to launch self-funded Pro-Motion at the start of 2003. "I had a very good reputation with the clients in the field we dealt with," Matson says. That reputation and a fierce focus on customer satisfaction helped her ramp up the business quickly.

In one year, Pro-Motion went from five to about 30 employees. The challenge of adding so much staff hasn't fazed Matson in the least. "Business is so fundamentally easy if everybody is doing [his or her] part. My role is to make sure that everybody else is fully entrenched in their roles and enjoying doing what they do." That philosophy is echoed in the colorful and homey office where a casual work environment, music, and an on-staff masseuse are the order of the day.

With a knowledgeable staff, an office building big enough to handle huge growth, and its own product distribution center, Pro-Motion is poised to produce in 2004. "We think we're the best stock on the stock market, and we're not on the stock market," quips Matson. Her business has earned every bit of that confidence. -A.C.K.

Midwest Diagnostic Management; What Kids Want!

#21 Midwest Diagnostic Management LLC

Huge growth wasn't exactly in Kevin Tremblay's initial plan. When he founded Midwest Diagnostic Management LLC (MDM) in June 2000, he says, "we had dreams of one day getting to 20 employees and just having a nice lifestyle." Today, he has 89 employees.

At only four months, the business was recognized by patients, providers and companies, and Tremblay realized how vital his service was. He networks independently owned medical diagnostic radiology centers (to provide tests such as MRIs and CT scans) and streamlines the PPO referral process for doctors, patients and insurers. Early on, the company built a reputation for good customer service and received so many inquiries that Tremblay, 38, had to come up with a plan. "We said, 'We've got a couple of choices: We either dig in and go after it or choose not to.'"

Tremblay and his crew chose to go forward at full steam. Growing from $1.6 million in sales during MDM's first fiscal year to a projected $34 million in 2004, Tremblay used careful hiring practices to staff for the massive growth. "We kept adding wonderfully talented people, and we spent extra time making sure we were recruiting and maybe paying a little bit more for the right people," he says. Tremblay contracts with the diagnostic companies with equally meticulous attention. "If it takes a couple [extra] days before you fill that role, you [still] need to spend the time and make sure you know who you're working with."

Good hiring practices are even more important now that Tremblay juggles three businesses. He started Advanced Ancillary Services LLC (AAS) in June 2002 and Diagnostic PET Network LLC (DPN) in March 2003 to round out his client offerings. AAS outsources cost-saving services for employers and insurance companies, while DPN has created a network of PET diagnostic centers (for early cancer detection).

Looking to the future, Tremblay is striving for sales of $50 million for all three companies. He likens his entrepreneurial journey to a child learning how to crawl, then walk, then run. "We're watching all those details-we're watching our vendors, our bottom line, our sales growth, and we're in a nice run right now." -Nichole L. Torres

#50 What Kids Want! Inc.

Working with toys may sound like a lot of fun and games-and it can be-but it's still serious business for Jordan and Steven Kort, founders of the Northridge, California-based company What Kids Want! Inc. The brothers, who each have more than 20 years' experience in the industry, partnered up to start the company in 1999 after leaving their jobs at a toy business. The brothers' combined toy expertise has paid off in their new venture: Sales skyrocketed from their first-year take of $3 million to over $10 million in 2003.

Starting out on their own as a homebased business never discouraged the Korts from approaching big-name toy companies, and today, product licensing plays an important part in the company's success. What Kids Want! holds licenses with Kellogg's, PepsiCo. and the "Got milk?" campaign, creating a role-play set for each of them. The Korts also scored a license with Disney, which was a slight challenge. But using references from longtime buyers such as Target, Toys "R" Us and Wal-Mart, in addition to their creativity, the Korts won respect and the license. They now work with Disney to produce sidewalk items such as jump ropes, yo-yos, chalk and paddle-ball sets, as well as foam play mats.

The Korts also created, develop and distribute the What Girls Want line of dress-up/role-play and lifestyle accessories. Along with favorites like fairy princess garb, their trendy play shoes, jewelry and other dress-up accessories complete the line. Now projecting $12 million to $13 million for 2004, the Korts are proving that toys-and their company-are hotter than ever.

Because they have their products manufactured in China, Jordan, 52, and Steven, 47, set up a Hong Kong office within their first year and now have 7 employees there; at their U.S. office, they have 6 employees. In addition to the United States, What Kids Want! sells its products in Australia, Canada, South Africa and the United Kingdom and is seeking distribution worldwide. Although the products demand long hours and dedication from the toy makers, "at the end of the day," says Steven, "with the distillation of product ideas, fitting them within retail product schemes and price points, it's still all about the toys." -April Y. Pennington


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