New Economy or Old, Rapid Growth Has No Favorites

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New Economy or Old, Rapid Growth Has No Favorites

No. 2

PeopleSupport Inc.

Business: For most companies, customer service is just one part of the business. For PeopleSupport, that’s all it does.

The Los Angeles-based company acts as a customer service representative for 20 businesses, including Armani, Saks Fifth Avenue and Expedia. Whenever a customer contacts one of those clients, the call is routed to one of two PeopleSupport centers, which provides technical support and other kinds of customer service. The centers also field e-mail and fax inquiries.

PeopleSupport has ballooned to a workforce of 718, from just 14 in 1999. The company’s largest call center, with over 500 employees, is in the Philippines. The company has a second call center in St. Louis, with just under 100 employees. Revenues were $20.1 million in 2001.

1999-2001 Growth Rate: 957.9 percent

Management: Lance Rosenzweig, chairman and chief executive, has been an entrepreneur for 17 years. He founded two other companies, both of which were acquired, before PeopleSupport. He holds an MBA from Northwestern University’s Kellogg School of Management and held management roles at GE Capital, Dean Witter (now Morgan Stanley) and Jefferson Smurfit Corp., before striking out as an entrepreneur.

Chief Financial Officer Caroline Rook, appointed in August, was previously the finance chief at Acxiom Corp., a technology firm in Little Rock, Ark.

Turning Point: The dot bust was a blessing in disguise for PeopleSupport, which started out helping only online customers. As their client base began going out of business toward the end of 2000, the company revamped its strategy by providing a service to more than dot-comers. “Etoys went from our biggest client in Christmas of 1999 to zero the next year,” Rosenzweig said. “In the face of that, we really had to change the company.”

Strategy: Handle customer service more efficiently than client companies. Employees are trained for at least a month before they are allowed on the phone. “We really need to make sure we recruit the right people,” Rosenzweig said.

Biggest Challenge: Changing its business plan as the capital markets dried up. “We were very fortunate to have raised a ($50 million) round in April 2000,” Rosenzweig said. Dealing with old economy customers threatened to stunt growth, as it took months longer to close a deal. The new funds led PeopleSupport to profitability in the second quarter of this year, the result of leaner operations and a new focus. Now, Rosenzweig feels confident that growth can be sustained. “We’ve had more than six consecutive months where we’ve been cash positive,” he said. “Before it was burn rate and everything was funding losses.”

Conor Dougherty

No. 3

MJW Investments

Business: The Santa Monica-based real estate investment company develops, manages, constructs and leases mixed-use apartments and retail projects as well as industrial properties, mobile homes parks and self-storage facilities.

Its most ambitious venture to date has been the $130 million Santee Court, which it touts as the largest multi-use loft apartment downtown. The project consists of 10 historic buildings in the fashion district. When completed in early 2005, the complex will have 578 lofts for lease, 20 percent of which will be set aside as affordable housing. The remaining 80 percent is considered “workforce affordable,” renting for between $1,100 and $1,400. The project also includes 110,000 square feet of retail, 110,000 square feet of office space and 730 parking spaces.

Founded in 1983, the company also acts as a receiver when a court takes control of (but not title to) the assets and business affairs of a property. In those cases, MJW is paid a fee for collecting rents and running the business for the benefit of the owners and creditors until the court makes a disposition.

1999-2001 Growth Rate: 337.3 percent

Management: Mark J. Weinstein, MJW’s president, began his career as a real estate attorney and broker and has served as a California probate referee and as a State Court appointed receiver. He was raised in Canoga Park and received his BA from the University of California, Santa Barbara, and his law degree from Loyola Law School.

Chief Operating Officer Alan Epstein joined MJW in July from Voit Cos., where he was president and chief operating officer. Epstein is a graduate of MIT with graduate degrees from the Stanford Graduate School of Business and Stanford Law School.

Turning Point: “Things really took off six years ago when I changed the focus of the business,” Weinstein said. His then-girlfriend died, causing him to re-evaluate what he was doing with his life. “She taught me, ‘You won’t be successful if you’re not passionate.'” So he began focusing more on housing than receiverships.

Strategy: “Focus on fundamentals and don’t get ahead of yourself,” Weinstein laughed. “I also take a look at an asset’s real value and where it would go if it drops. That’s different than most people, who look at real estate and say ‘How can it go up?'” With the acquisition phase essentially complete, MJW is concentrating on reinventing and upgrading its portfolio properties. “We’re being more conservative now,” he said. “But there are still buying opportunities we’re known for buying properties when someone doesn’t perform and clean up other people’s messes.”

Biggest Challenge: Weinstein wants more time for himself. “I’m off-loading more responsibility to my key employees,” he said. Another company-wide challenge: “Finding the right people to sit in the right seat on the bus. We’ve got a lot of good ones with talent but we’ve got to make sure they’re deployed to their best use.”

Margot Carmichael Lester

No. 4

Outsource Technical

Business: The technology meltdown has not hurt Outsource Technical, an El Segundo staffing agency with additional offices in Newport Beach, San Diego and Daly City. Technical workers for big companies are still in demand and Outsource has capitalized on that.

The four-year-old company employs 20 and has under contract 250 temporary employees in its staffing pool for jobs in computer/IT, telecommunications, and electrical, voice, data and computer cabling. Another 10,000 potential workers are accessible for special projects via a proprietary database. Clients include Mattel Inc., Countrywide Credit Industries Inc., Toshiba, Taco Bell and Verizon. Its 2001 revenues were $16.2 million.

Outsource Technical pays workers by the hour and marks up that rate in the amount it charges clients. The agency recently expanded into medical staffing to fill the growing need for nurses. “It’s a little different than our core business, but it’s still staffing and it’s such a gangbusters field right now,” said Chief Executive John Lowell.

Growth Rate: 268.2%

Management: Lowell, who co-founded Outsource in 1998, and Angelo Cuneo, co-founder and president, started their careers at Aerotek, a large technical staffing company. Lowell joined Aerotek’s Las Vegas office as a sales representative and later transferred to Southern California. There he met Cuneo, who joined Aerotek after graduating with a business degree from the University of Southern California. Besides running Outsource, the two are in a band called Crackshot. Cuneo plays lead guitar and Lowell plays drums.

Turning Point: “We were profitable in our second month of operation,” Lowell said. A more significant turning point occurred when they leased their first office space in 2000. “We were basically running $4.5-$5 million in business out of our homes,” Lowell recalled. “We couldn’t hack the phone calls I even lost a live-in girlfriend because of it. So we opened offices in El Segundo and Orange County, and that’s when we became a ‘real’ corporation as opposed to a couple of guys working in their bedrooms.”

Strategy: Initially, the plan was to leverage relationships forged at Aerotek by supplying more highly trained technicians at market rates. Outsource Technical could afford lower returns because of its smaller size. “Most of our competitors are large national players with high fixed costs and little room for flexibility,” he said. Lowell and Cuneo also tried to avoid turnover by having employees own shares.

Biggest Challenge: The dot-com meltdown, but that became a blessing in disguise. They were able to hold onto larger clients who were eager to outsource their technical staffing to cut costs. “In 2000, we had multiple bankruptcies among our smaller clients and about $600,000 in bad receivables,” he said. “We survived because we have a nucleus of strong clients that account for 60 to 70 percent of revenue. They paid their bills, helping us push past the losses.”

Margot Carmichael Lester

No. 5

C & H; Electric Co.

Business: Rather than bidding on only certain types of contracts like many contractors do, this family-run, Pacoima-based business has a broad client list from institutional to retail.

It also is owned by a woman, Charlotte Seitz, who bought the firm from her husband of 26 years, Hugh, in 1983. Deciding to focus on being an electrician, he remains general superintendent in charge of all of the company’s construction sites.

The company, with 2001 revenues of $23.7 million, does many public works projects, but also handles electrical contracting in private and other site development projects.

1999-2001 Growth Rate: 182.1%

Management: Besides Seitz, who is president, and her husband, the couple’s son, Travis Roy, runs the operations department. “He started working for us in the summers when he was nine years old,” said Seitz, who had been an assistant to the president of a Beverly Hills contractor/developer before buying out her husband.

Turning Point: Seitz said the company’s first big project was the Evergreen Shipping Terminal at the Port of Los Angeles Berth 225 in 1999. “This was our first multi-million dollar contract, and really what we consider our ‘take-off’ or starting point on the large-scale public works and engineering projects,” she said. After that, they were able to get work on others of such scale.

Strategy: After setting her initial sights on retail development, Seitz realized that the market was slowing and her company would need to grow to survive. “As construction began to ease in the mid- to late-’80s, our focus shifted toward public works and work down at the ports,” she explained. “This [also] allowed us to transition into schools and office buildings.”

Having a broad base of work actually gives C & H; less competition because there are more projects to choose from when bidding. This also keeps down turnover because the work tends to be steady, Seitz said.

Biggest Challenge: C & H; is a non-union merit shop where employees are hired and promoted based on abilities rather than seniority. More than 80 percent of California’s contractors are merit shops, according to the Merit Shop Roundtable, a trade and advocacy group.

In some public works projects, that can be problematic because union contractors are required, Seitz said. If merit shop proponents had their way, she added, the job would go to the lowest responsible bidder, whether or not the firm is union.

Margot Carmichael Lester

No. 6

Molina Healthcare Inc.

Business: This family-run company, based in Long Beach, has found its niche in a complicated and competitive industry by focusing on the treatment of low-income patients. Many of its patients are covered under Medicaid and other government-sponsored health insurance programs. The company, which provides health-care services while also acting as an insurer, was founded in 1980 by Dr. C. David Molina, who believed that low-income patients were not getting proper care. The company, with 2001 revenues of $500 million, employs 817 and offers health plans in California, Washington, Utah and Michigan. It also operates 21 primary care clinics in Northern and Southern California.

1999-2001 Growth Rate: 171.1 percent

Management: Dr. J. Mario Molina, president and chairman, assumed leadership in 1996 after the death of his father, who was the founder. The younger Molina received his medical degree from the University of Southern California and performed his internship and residency at Johns Hopkins Hospital. He has worked at the family business since its inception.

His brother, John Molina, is executive vice president of financial affairs. George S. Goldstein, vice president of health plan operations, previously was chief executive of United Healthcare Corp. of Southern California and Nevada.

Turning Point: In 1994, Molina Healthcare was approved by the state to operate as an insurer. At that point, the company was able to expand its services by providing health plans to patients, in addition to treatment. “We went from a medical group to a health plan, and this gave us opportunity,” said J. Mario Molina.

Strategy: Provide health care to people who have experienced barriers due to language, cultural issues and financial problems. Of his father, Molina said, “He was an emergency room doctor, and he saw a lot of patients coming into the ER for minor health problems because they had nowhere else to go.”

Biggest Challenge: It’s difficult to find doctors who will see Medicaid patients, so resources are being devoted to recruitment, hiring and training. Cultural and language barriers are also huge challenge. “Doctors and patients need to be able to communicate,” Molina said.

In October, Molina Healthcare received a grant of $150,000 from The Robert Wood Johnson Foundation’s Hablamos Juntos “We Speak Together” program, to improved health care access for Latinos. The company will use the funds over the next year to better improve doctor-patient communication including new printed materials and signs at their clinics.

Koula Gianulias

No. 7

MicroSolutions Enterprises

Business: MSE is a manufacturer and distributor of toners, ink jets and ribbons that are compatible with name-brand printers, fax and copy machines. Founded in 1995, the family-owned and operated company employs 250 and can generate up to 75,000 toner cartridges per month for global distribution, leading to 2001 revenues of $21 million. “In the compatible world there are two options out there: Junk that leaks, and quality,” said Chief Executive Avi Wazana, who owns the company along with his brother, Yoel.

The Chatsworth-based company, ranked in Inc. Magazine’s 500 Fastest Growing Private Companies in each of the last two years, expanded its East Coast presence in 2001 by opening a 90,000 square foot distribution and manufacturing facility in Pennsylvania.

1999-2001 Growth Rate: 169.2 percent

Management: Israeli-born Chief Executive Avi Wazana says he came to the United States in 1986 with $300 in his pocket. He worked as a hot dog and muffin vendor in the Beverly Center while attending classes at both California State University, Northridge and Los Angeles, majoring in business and marketing.

His brother, Yoel, who had remained in Israel to support the family, came to the U.S. the following year and began working in the imaging supply business before helping launch MSE. He is now president of the company.

Turning Point: When MSE opened its doors as a cartridge reseller in a tiny one-bedroom apartment it suffered from quality control problems that Wazana blamed on outsourced production. In their first year of business, MSE lost $37,000. MSE brought manufacturing in house, stressing rigid quality control measures.

Strategy: “We focused all our efforts on R & D; and engineering, to put out the highest quality at a reduced price,” Wazana said. MSE uses recycled components to remanufacture cartridges to keep costs down, recently stepping up recycling efforts by launching a customer-incentive program called RecycleInkjets.

Biggest Challenge: “Our challenge today is managing our growth, and continuing to compete with manufacturers in California,” Wazana said.

Koula Gianulias

No. 8

Prosum

Description: Founded in 1996, El Segundo-based Prosum provides consulting, staffing and implementation services for the computer and software needs of businesses. Since 1999, its employment has more than quadrupled, to 85 from 20, and its 2001 revenues were $13 million. It has two operating divisions, resource management and technology consulting. Customers for the staffing services of Prosum’s resource management group include Vivendi Universal, AOL-Time Warner, Countrywide Credit Industries and DirecTV. It has contracts with Farmer John, General Motors, Western Digital, Guitar Center, Long Beach Unified School District and the city of El Segundo on the technology consulting side.

1999-2001 Growth Rate: 165.3 percent

Management: Prosum was founded and bankrolled by three Hughes Aircraft alumni: Ravi Chatwani, its chief executive; Ken Aster, now a member of the board; and Aaron Price, chief systems architect. Chatwani previously was a director for Datum Group, which marketed wireless data systems to public safety agencies in the United States, Latin America, Asia, and the Middle East. He began his career at Hughes while earning a master’s degree in electrical engineering at USC. Aster had been director of IT services for JTA Research and a project manager for Computer Sciences Corp. and Hughes Aircraft. Price began his career as a software developer at Hughes Aircraft’s Ground Systems Group.

The management team also includes John Petri, chief financial officer; David Heroux, vice president of the resource management group; and Pegor Papazian, director of consulting services.

Turning Point: A contract from publicly traded Sports Club/LA for a custom membership management system built from the ground up. Prosum got another boost in 2000, when it opened its staffing division. Since 2000, growth has slowed; the company’s overall strongest years were 1999 and 2000.

Strategy: Focusing on the core business of providing infrastructure consulting and operating system upgrades, but also moving into other areas of IT consulting. The company has sought customers who are too small for larger competitors. “Pricing is important,” said Heroux, who said the company seeks to outbid others with rates that are half of the $200 to $300-an-hour consultants from larger companies. To achieve the goal of 25 clients in each region of the nation, Chatwani wants to begin in each region with “small projects to prove ourselves.”

Biggest Challenge: Two years ago, Prosum competed with lots of smaller dot-coms, but “our competitors are becoming the larger companies moving into our space,” Chatwani said. Prosum is banking on its “overhead efficiencies” to give it an advantage over Dell, Hewlett-Packard and Compaq. One advantage the smaller company doesn’t have, however, is brand recognition, which Heroux called Prosum’s “biggest challenge.” That makes it harder to establish credibility with potential clients, a problem the company addresses by stressing its track record. “We’re very much a relationship-oriented business,” said Heroux.

Travis Purser

No. 9

Portosan Co.

Business: With 332 employees in 11 branch offices from Sacramento to San Diego, El Monte-based Portosan claims to be the nation’s largest privately owned portable restroom contractor. Founded in 1998, the company supplies restroom facilities, fencing, wash stations and trailers. It serves the construction and motion picture industries, in addition to outfitting special events like The Tournament of Roses Parade and the Rose Bowl. The company also provides services for disaster relief and government agencies.

1999-2001 Growth Rate: 164.1 percent

Management: Founder and managing member, Ronald Valenta, also is chairman and chief executive of Mobile Storage Group Inc., which supplies storage and shipping containers to clients worldwide. Valenta graduated from Loyola Marymount University with a Bachelor of Science degree in accounting. Before founding Portosan, he was senior vice president with Public Storage Inc.

The management team includes John French, regional manager for Northern California and member, whose 22 years in the industry make him most senior member. Kenny Jones, Central regional manager and member, has 16 years in portable services, followed by Southern California regional manager and member Timothy Nicoletti, with 15 years, and controller and member Marc Perez, with 12 years.

Turning Point: Portosan made the turn soon after it was founded. “The largest players, Browning Ferris Inc. and the like, decided to return to their core solid waste businesses,” Valenta said. “They shed non-core businesses, like portable services.” This enabled Portosan to grab a significant share of the market by buying up the discarded businesses at affordable prices. “By doing this accretive tuck in acquisitions combined with our strong organic growth, we have become the largest private portable services business in the United States,” he said.

Strategy: The company initially grew through acquisition. But moving beyond the portable restroom market and into fencing and trailers allowed it to expand further. “We continue to grow aggressively though product line expansion, adding customers and doing acquisitions when the opportunities arise,” Valenta said.

Biggest Challenge: “As it is for every growth company, procurement, development, training and retention of field management,” Valenta said. Much as it seeks both internal and external growth, the company looks for management from other organizations, as well as developing staff in internally.

Margot Carmichael Lester

No. 10

Cook Inlet Energy Supply

Description: One of just three companies among the fastest growing that had revenues of more than $1 billion in 2001, and the only one among the Top 10. Based in Los Angeles, the energy trading company was officially classified as a minority-owned business after Gregory Craig, a native Alaskan, purchased the 51 percent share of the company held by Houston Natural Gas. Co., Enron Minority Development Corp. and Inupiat Energy Corp. The balance is owned by Fletcher Energy Development Corp., an affiliate of Harvard Management Co. Inc. of Boston. The company recently launched an affiliate company called Cook Inlet Power.

1999-2001 Growth Rate: 154.5 percent

Management: Craig, Cook’s chief executive, earned his Bachelor of Administration degree from the University of Alaska and his MBA from UCLA. He opened the Los Angeles office of Cook Inlet Corp. (not affiliated with Cook Inlet Energy Supply), managing two of its television stations and nine radio stations as director of investments and strategic planning. It was in that position that he launched Cook Inlet Energy Supply in 1989.

Turning Point: Shortly after opening, the company made its first deal supplying Southern California Gas, which Craig credits for its initial success. Since purchasing majority interest, he has aimed to aggressively invest in operations, assets and trading talent. “We do not have a marked turning point where business started to take off,” he said. “Stability of our operations, our focus on profitability not growth for growth’s sake and retaining our employees are all core principles that have been key to managing our growth.”

Strategy: Keeping operational costs low while focusing on retaining employees and keeping customers is key. “While some of the other large energy companies were piling on debt and entering businesses like broadband, we grew around our core competencies and focused on delivering the highest level of service and value to our energy clients,” he said.

Biggest Challenge: “With the roles of so many of the formerly dominant players changing, our biggest challenge is properly selecting the right opportunities from the many that are available to us,” Craig said. The company aims to assess new business against a backdrop of “steady growth and continued profits for our investors.”

– Travis Purser

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