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.
The companies on our annual Hot 100 list of America'sfastest-growing new entrepreneurial companies are proof that niceguys do finish first. But more on that in a moment. Here's acloser 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 slightlymore mature, with an average of 37 months in business compared tolast year's 29 months. They're also making more money, withcombined sales of $1.1 billion-a substantial increase from lastyear's total of $923.5 million. And they're getting bigger,with an average of 48.5 employees each, up from an average of 31.6last year. What's more, they're doing it all with less:This year's average Hot 100 company launched with $416,000 instartup capital, compared with an average of $565,000 lastyear.
Although our Hot 100 companies are geographically diverse, withno one state or region dominating, certain industries did dominate.Business services that were not tech-related accounted for 19 ofour companies; nine of those provide advertising and marketingservices. Construction and home improvement accounted for another19 companies. (Also profiting from the hot real estate market, fiveof the six financial services companies in our listing are mortgagebrokers.) Tech companies showed a slight decline, down from 19 lastyear to 15 this year. Perhaps the most dramatic change was thegrowth of manufacturing, which surged from five companies last yearto 12 this year.
At a time when each day's headlines seem to bring newcorporate scandals to light, it's heartening to know that being"good guys" has paid off for our Hot 100 companies. Wewere impressed by the number of entrepreneurs in this year'slisting who credited their success to their employees and spokepassionately about the importance of treating customers and staffwell. Proving they not only talk the talk, but walk the walk, thenumber of companies offering employee benefits such as healthinsurance, 401(k) plans and stock options increased this year.
And while experts can come to no certain conclusion as to thestate and direction of the economy, our Hot 100 are overwhelminglyoptimistic: 92 percent believe the economy "is headed in theright direction." Their budgets are evidence of thatconfidence: They spent a total of $17.4 million on technology thisyear 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 bestsuccess secrets from our Hot 100 within the listings. Read them,learn from them, and perhaps you'll find yourself part of nextyear's Hot 100.
Arbitech; Pro-Motion Technology Group
#1 Arbitech
It's high tide at Laguna Beach, California, computerproducts distributor Arbitech. Manned by Torin Pavia, 32, and WilliamPoovey, 33, our second-place winner for both 2002 and 2003 has nowvaulted to the top of this year's Hot 100.
Growth is the buzzword around this business. Sales for 2003popped up to $86 million, and the company has expanded from 26 to35 employees. But what's even more impressive than the numbersis the way Arbitech got there. "All our growth has come fromexisting accounts buying more from us, and word-of-mouth,"says Pavia.
Staying down to earth (or down to sea level, in this case) is apriority at Arbitech. As Pavia puts it, "We've fought hardto keep our corporate culture-the fun Hawaiian shirts, [being] nearthe beach, surfing and playing basketball together. We're allstill surfing." Fun and hard work go hand in hand in theiroffice's high-energy trading-floor environment. Every traderworking at Arbitech is his or her own CEO, says Pavia. That'snot just lip service. Each employee makes major decisions, fromaccepting returns to setting the price for computer components.That attitude of empowerment is one of Arbitech's most potentsecrets for success.
Beyond the catered lunches and annual retreat (this year to LasVegas), the Arbitech team stays heavily involved in the community.They donate computer parts to the local high school and sponsor agolf tournament benefiting underprivileged youth, among othercharitable activities.
Arbitech is still engaged in one of its greatest challenges:positioning itself as a complementary company alongside industrygiants Tech Data and Ingram Micro, while still competing with them.Pavia and Poovey are accomplishing that by settling strongly intotheir niche of handling discontinued and constrained products(products that aren't readily available through Tech Data orIngram Micro). This area also allows them to offer incrediblycompetitive prices to their small and midsize reseller clients,many of whom rely on Arbitech as a lifeline for staying profitablein competitive times.
Looking ahead, the Arbitech founders plan to continue to worktheir niche, hang their surfboards on customer satisfaction, andtrust their employees to lead the way. Says Pavia, "Wecouldn't stop growing right now if we tried." -AmandaC. Kooser
#11 Pro-Motion Technology Group
Pro-MotionTechnology Group went from zero to $9.4 million in sales in oneyear. That's faster than you can say "audiovisual."The Wixom, Michigan, company headed by founder, president and CEOLynn 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 toretailers, restaurants and others across the nation. Its clientelelist includes heavy hitters like Bally Total Fitness, Foot Lockerand TGI Friday's.
Though the business is young, its history is lengthy. Matsonfounded a similar company in 1986, which was purchased and run intothe ground by an outside interest. In 2002, she picked up thepieces by buying the assets from the bank and set out to launchself-funded Pro-Motion at the start of 2003. "I had a verygood reputation with the clients in the field we dealt with,"Matson says. That reputation and a fierce focus on customersatisfaction 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 inthe least. "Business is so fundamentally easy if everybody isdoing [his or her] part. My role is to make sure that everybodyelse is fully entrenched in their roles and enjoying doing whatthey do." That philosophy is echoed in the colorful and homeyoffice where a casual work environment, music, and an on-staffmasseuse are the order of the day.
With a knowledgeable staff, an office building big enough tohandle huge growth, and its own product distribution center,Pro-Motion is poised to produce in 2004. "We think we'rethe best stock on the stock market, and we're not on the stockmarket," quips Matson. Her business has earned every bit ofthat confidence. -A.C.K.
Midwest Diagnostic Management; What Kids Want!
#21 Midwest Diagnostic Management LLC
Huge growth wasn't exactly in Kevin Tremblay's initialbusiness plan. When he founded Midwest Diagnostic Management LLC (MDM) in June2000, he says, "we had dreams of one day getting to 20employees and just having a nice lifestyle." Today, he has 89employees.
At only four months, the business was recognized by patients,providers and insurance companies, and Tremblay realized how vitalhis service was. He networks independently owned medical diagnosticradiology centers (to provide tests such as MRIs and CT scans) andstreamlines the PPO referral process for doctors, patients andinsurers. Early on, the company built a reputation for goodcustomer service and received so many inquiries that Tremblay, 38,had to come up with a plan. "We said, 'We've got acouple of choices: We either dig in and go after it or choose notto.'"
Tremblay and his crew chose to go forward at full steam. Growingfrom $1.6 million in sales during MDM's first fiscal year to aprojected $34 million in 2004, Tremblay used careful hiringpractices to staff for the massive growth. "We kept addingwonderfully talented people, and we spent extra time making sure wewere recruiting and maybe paying a little bit more for the rightpeople," he says. Tremblay contracts with the diagnosticcompanies with equally meticulous attention. "If it takes acouple [extra] days before you fill that role, you [still] need tospend the time and make sure you know who you're workingwith."
Good hiring practices are even more important now that Tremblayjuggles three businesses. He started Advanced Ancillary ServicesLLC (AAS) in June 2002 and Diagnostic PET Network LLC (DPN) inMarch 2003 to round out his client offerings. AAS outsourcescost-saving services for employers and insurance companies, whileDPN has created a network of PET diagnostic centers (for earlycancer detection).
Looking to the future, Tremblay is striving for sales of $50million for all three companies. He likens his entrepreneurialjourney to a child learning how to crawl, then walk, then run."We're watching all those details-we're watching ourvendors, our bottom line, our sales growth, and we're in a nicerun right now." -Nichole L. Torres
#50 What Kids Want! Inc.
Working with toys may sound like a lot of fun and games-and itcan be-but it's still serious business for Jordan and StevenKort, 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 in1999 after leaving their jobs at a toy business. The brothers'combined toy expertise has paid off in their new venture: Salesskyrocketed from their first-year take of $3 million to over $10million in 2003.
Starting out on their own as a homebased business neverdiscouraged the Korts from approaching big-name toy companies, andtoday, product licensing plays an important part in thecompany's success. What Kids Want! holds licenses withKellogg's, PepsiCo. and the "Got milk?" campaign,creating a role-play set for each of them. The Korts also scored alicense with Disney, which was a slight challenge. But usingreferences from longtime buyers such as Target, Toys "R"Us and Wal-Mart, in addition to their creativity, the Korts wonrespect and the license. They now work with Disney to producesidewalk items such as jump ropes, yo-yos, chalk and paddle-ballsets, as well as foam play mats.
The Korts also created, develop and distribute the What GirlsWant line of dress-up/role-play and lifestyle accessories. Alongwith favorites like fairy princess garb, their trendy play shoes,jewelry and other dress-up accessories complete the line. Nowprojecting $12 million to $13 million for 2004, the Korts areproving 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 firstyear and now have 7 employees there; at their U.S. office, theyhave 6 employees. In addition to the United States, What Kids Want!sells its products in Australia, Canada, South Africa and theUnited Kingdom and is seeking distribution worldwide. Although theproducts demand long hours and dedication from the toy makers,"at the end of the day," says Steven, "with thedistillation of product ideas, fitting them within retail productschemes and price points, it's still all about the toys."-April Y. Pennington