In 1992, armed with little more than $2,000 in cash and a couple of credit cards, building contractor John Daigle decided to set out on his own. He had years of experience managing restaurant and retail construction projects for others, he reasoned. Why not begin doing it himself?

Almost immediately, Daigle struck gold, connecting with a fledgling retail chain that appeared poised for explosive growth. The new client’s name? Starbucks Corp.

Starbucks, of course, is now as ubiquitous a chain as they come, with almost 2,000 outlets nationwide. Daigle’s firm, El Segundo-based Construction Management Group, has built hundreds of them and has used that experience to land lucrative contracts with other, similarly fast-growing retailers, including Hollywood Video, Trader Joe’s and Jamba Juice.

Between 1995 and 1997, revenues at Daigle’s firm have expanded at a blistering 206 percent, and the number of employees has grown from 35 to 75 a pace that has landed CMG at the No. 16 spot on the Business Journal’s list of 100 fastest growing private companies in L.A. County.

“It’s been quite a ride,” Daigle said.

They may not be household names, but fast growing, privately held firms like CMG have become the new standard bearers of L.A.’s economy. With so many large corporate operations closing up shop, leaving the area or being gobbled up by larger competitors, it’s the smaller players that have provided the necessary punch as the region continues to emerge from the recession of the early 1990s.

“There is a new economic paradigm. We’re not organized around large hierarchical organizations anymore,” said G.U. Krueger, deputy chief economist of the California Association of Realtors. “It’s all part of a general revolution in management, where you go for the growth and keep your costs as controlled as you can. And the smaller, entrepreneurial economies are masters of that.”

Indeed, the 100 firms on the Business Journal’s list collectively generated $14 billion in 1997 revenues. Last year, combined 1996 revenues totaled $11.1 billion.

As the local economy has accelerated, so has the average rate of growth of companies on the list. Between 1995 and 1997, the revenues of the fastest growing 100 went up an average of 124.7 percent; between 1994 and 1996, the average rate of growth was 100.1 percent.

“It reflects the rather robust economic situation here in Southern California, as well as the heightened entrepreneurial spirit that is going through (the region) like lightning,” said Krueger.

Added Jack Kyser, chief economist of the Economic Development Corp. of L.A. County: “You have a very unusual business marketplace in Southern California. There are so many privately held firms out there. People don’t realize how much they have built up in terms of assets.”

As befits L.A.’s multi-dimensional economy, companies on the list cover all bases from high-tech firms with hundreds of millions of dollars in revenues and hundreds of employees to tiny business-service enterprises with a handful of employees and sales in the $2 million to $5 million range.

The region’s burgeoning high-tech sector including software developers, computer manufacturers, distributors and wholesalers boasts the highest concentration of fast-growing companies, with 25 such firms. Business services also make a strong showing, with 20 firms, including 11 employment or temporary help companies.

Reflecting the rebound in both the commercial and residential real estate markets, there are 12 construction or contracting firms on the list.

Geographically, the companies are similarly diverse. As home to a large number of high-tech and health care companies, the San Fernando Valley boasts the highest concentration of fast-growing firms, with 24 on the list, followed by the South Bay (17), the San Gabriel Valley (15), the Westside (13) and Mid-Cities (14).

Figures for the San Gabriel Valley might even be higher, were it not for the fact that a number of businesses located there that wound up on the Business Journal’s initial database of fast growers refused to confirm basic financial information a requirement to be on this year’s list.

The one thing these myriad companies have in common is that they are growing and fast.

Consider Giroux Glass Inc., a commercial glass wholesaler in downtown L.A. and No. 17 on the list. As the region’s real estate market has rebounded in recent years, so have Giroux Glass’ fortunes. The company has landed contracts with a number of high-profile projects, including the Getty Center and the refurbished St. Francis Catholic Hospital in Lynwood.

Between 1995 and 1997, the firm’s revenues jumped 193 percent, from $4.3 million to $12.6 million. The number of employees went from 54 to 105.

“There have been some great buildings built over the past couple of years,” said Anne-Merelie Murrell, the company’s president and owner.

At the other end of spectrum, both technologically and in sheer size, is No. 27 on the list: Viewsonic Corp., the nation’s leading supplier of computer monitors in terms of market share. The Walnut-based company, No. 27 on this year’s list, had 1997 revenues of $826 million, a 136 percent jump from the $350 million posted in 1995.

Of course, fast growth is no predictor of long-term success. For every company that succeeds, there are dozens of others whose sales have expanded at too rapid a pace, without the infrastructure, management expertise or accounting practices necessary to accommodate such growth.

“The landscape is littered with companies that haven’t managed their growth effectively and have paid the price,” said Lloyd Greif, managing director of the L.A. investment bank Greif & Co., which specializes in fast-growing entrepreneurial companies. “There is definitely a double-edged sword associated with growth.”

James Chu, founder, president and owner of Viewsonic, is well aware of how deeply that sword can cut.

“We’ve had growing pains at every corner,” said Chu, a Taiwanese immigrant who founded Viewsonic in 1990. “When the company is small, you can do a lot of things yourself. As you get bigger, you have to learn how to delegate to other people. And recruiting competent people is a big challenge.”

In fact, it might be the biggest challenge, said Tim Lovoy, a business consultant who runs the high-tech practice for the L.A. office of Deloitte & Touche LLP.

“I always tell my clients to focus on investing in infrastructure, financial controls, the right management,” Lovoy said. “It’s easy for private owners to focus solely on what is needed for today. But you have to stay ahead of the curve. When you are growing at that rate, once you get behind the curve, you’ll never catch up.”

It’s a problem that Bill Pegnato, chief executive of Pegnato & Pegnato Building Services, a roof repair and maintenance firm in Marina del Rey and No. 32 on the list, is determined not to have. As the 7-year-old firm’s sales have surged from $4.2 million in 1995 to $9.4 million in 1997, Pegnato has been careful to invest in new talent including high-priced managers and accountants accustomed to operating firms with revenues 10 or 20 times what Pegnato currently generates.

Considering that entrepreneurs tend to be a bullheaded lot, often with a sense of self-confidence bordering on arrogance, such delegation is seldom easy.

“I have to battle my ego all the time,” Pegnato said with a laugh. “I’ve definitely had to change who I am as a manager. For the first two years, I was like a bull in a china shop. There’s a place for that in the beginning. But I’ve learned to be a better manager. And that means realizing that I don’t know everything.”

Pegnato seems to be doing something right. He said he has been constantly approached with offers from venture capitalists or potential equity partners. But he’s not ready to relinquish control just yet. And he’s been able to finance his company’s growth from within, through cash flow and a small line of credit.

Once a small-business owner like Pegnato is prepared to cash out, there likely will be plenty of offers, said Greif, whose investment bank did $1 billion of deals in 1997 a record the firm expects to break in 1998.

With continued volatility in the world’s financial markets, more and more money is flowing to private equity funds, Greif said. And that means more and more opportunities for private owners of businesses.

“There is no shortage of firms looking to invest in well-run, high-growth businesses,” Greif said. “It’s like harvest time from our perspective.”

But private ownership does have its advantages, said Viewsonics’ Chu. “It’s more simple,” he said. “You can respond to the market much faster. As long as you have cash, you can maintain your growth.”

Business Journal researcher Edvard Pettersson contributed to this story.