Each year, Inc. Magazine selects its 500 fastest growing companies in the US. As part of this selection process, they also gather a great deal of anecdotal information. (Link)
Some thoughts on the data:
1. One of the criticisms of the data is that it only relates to 500 rapid growing firms out of 6 million or more small businesses in the US. It can be difficult to extrapolate much information from this.
2. Data such as this has ‘survivor bias’. In other words, it only includes those firms that have survived excluding those that have terminated. What if firms that are no longer with us, not included, have the same circumstances but terminated?
3. It’s a snapshot – firms at a point in time making it hard to make any conclusions.
4. Growth? Inc. ranks firms based on sales growth. Many of the firms in the 500 will be growing extremely fast but not losing money. Growth is not always good.
5. Probably most important – this is self-reported data. In other words, companies get nominated and all data is reported by the company. This affects the reliability of the data (not suggesting that companies lie but if the data were audited by CPA firms or provided some other 3rd party, that would add reliability to the survey).
By the way, these criticisms are not new and have been made of such surveys over time. With that said, what about some of the key takeaways we can make:
Age, Family, Education – the majority of founders started their businesses between age 20-39, over 60% noted a family member was influential in their lives as entrepreneurs themselves, almost 90% of the founders had some college in their background, and 60% of the founders had started some other business.
The Founding team – almost 2/3rds the CEOS said their entire founding team is still intact. This contradicts the data cited in Noam Wasserman’s ‘Founder’s Dilemma’ where a majority of founders are gone by the 5th year of business. One possible suggestion could be that Wasserman’s studies include mostly companies in the high-tech area which received venture capital investment.
I’ve come to believe there are lots of ways to grow a company and lots of ways to bury a company. Much is simply due to sheer timing (and luck) of being in the right market at the right time. CEOs and their management team can position their firm to be there and to make decisions that take advantage of opportunities but its very difficult to draw conclusions as to which is the ‘right’ way or ‘wrong’ way.