Every year Inc. Magazine recognizes the 5000 fastest growing private companies in America. Last month they published their findings. Outskirts Press was ranked #1266. Getting on the list once is hard enough — the majority of companies don’t appear on the list twice. Well, actually, most companies don’t appear on the list even once, but that’s a different story.
Lists such as these average a company’s growth percentage across a number of years. What makes this interesting is that a company’s annual revenue can actually increase year after year and at the same time, their overall average growth percentage will naturally decline. This is what happened at my company, Outskirts Press. 2009 revenue was the highest it has ever been but the exponential leap in revenue over previous years was smaller. Not surprising really when an average company is considered successful if it increases revenue by 10% year over year and companies appearing on the Inc 500 in 2010 have average revenue increases between 20,000% (#1 Ambit Energy) and 600% (#500 AtTask).
20,000% ?!? How is that even possible, you may ask. Well, a growth percentage like this is usually the combination of 2 things:
1) A new company that barely qualifies for the Inc 5000’s minimum revenue threshold in the first year, and
2) Receives an infusion of cash from investor(s), bank(s), or venture capitalist(s) in the remaining years.
This is what happened for Ambit, which earned $1.6 million in 2006 (their first year in business) and then received substantial investments which brought their 2009 annual revenue to $325 million. In fact, their whole business model is based upon finding rich people to invest in their company. Whether or not that is a sustainable business model is a topic for a later day.
But this is what makes repeating an appearance on the Inc 5000 list so difficult. It’s difficult to continue inticing investors into giving you money. Eventually those investors are going to expect companies to earn it. A company must continue growing at exponential rates either by receiving money or earning it.
In fact, if you look at this year’s Inc. 500 list in the September 2010 issue of Inc. Magazine, you have to scan all the way down to #18 to find a company that was on the list previously. Of the 500 companies listed, only 101 appeared on the list previously — 20%. These are probably the companies that are actually making money from customers, rather than having money handed to them by investors. I wonder what the Inc. 500 would look like if these companies were ranked according to the actual amount of money they earned from their customers, and not from their investors…
But that’s a topic I’ve spoken about in the past, so I won’t dwell on it much here, although I might dwell on it more next time.