Thriving Small Shops Move Up While Mid-Size Ones Move Out

0

Small businesses, large businesses and not that much in-between.


That’s the pattern among the 100 fastest-growing companies in Los Angeles County.


At one end are dozens of smaller firms coming up with innovative products to drive their rapid growth. Many of these firms are technology-related or have found ways to ride the outsourcing wave.


At the other end are a handful of very large companies taking advantage of the cyclical booms in real estate and private financing to post huge revenue gains.


Four companies with revenues exceeding $1 billion provided most of the $8.5 billion increase in aggregate revenues of the 100 companies on the Business Journal list compared with last year. That, in turn, drove up average revenue from $173 million to $259 million.


Only 20 “middle market” companies with revenues in the $75 million to $500 million range made this year’s list.


“Los Angeles continues to be a very good place for innovation that helps create fast-growing technology companies,” said Kevin Klowden, research economist with the Milken Institute in Santa Monica. “But middle-market firms have not been doing as well in this area. They either relocate or get bought up.”


Klowden said the high cost of doing business in L.A. and the diminishing ranks of locally based financial institutions that nurture middle-market companies are largely responsible. In general, growth tends to slow down when companies hit the middle-market stage.


Newer firms that are using technology and outsourcing wound up high on the list. In all, 23 technology firms made the top 100, along with a dozen outsourcing/logistics companies. (Companies are ranked by their percentage growth in revenues from 2002 to 2004.)


A good example is this year’s fastest growing company Kurtzman Carson Consultants, which has combined technology and outsourcing to fuel its revenue growth from $1.1 million in 2002 to $11.8 million in 2004.


Founded four years ago by two bankruptcy attorneys, Kurtzman Carson provides claims agency services to the bankruptcy community. Its computer networks eliminate the need for parties in a bankruptcy to do the costly and time-consuming work themselves.


Another company using outsourcing is No. 3 eTelecare Global Solutions, a call center operator whose revenues jumped from $16 million in 2002 to $124 million in 2004.


Co-president Derek Holley said eTelecare specializes in hiring operators that can handle difficult situations for their clients. “It’s not about how many calls are answered or where those calls are answered but rather the customer experience,” Holley said.



‘Talent pool’


Holley said L.A. has the advantage of offering “an excellent talent pool with moderate competition.” Other locations, like the Bay Area, are too competitive to draw top talent, he said.


eTelecare grew its workforce from 800 in 2002, to more than 6,000 in 2004, making it the largest employment gainer on the list. (Panda Restaurant Group was a close second, going from 7,000 to 12,000 employees in that time.)


Another hotbed for fast-growing firms is anything connected with real estate. This year’s list contains 16 construction/real estate firms and another seven financial companies.


“Those companies benefiting from low interest rates should be the fastest growing,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University.


These include major firms like general contractor and homebuilder J.F. Shea Co. Inc., which grew to more than $3 billion in revenues in 2004 from nearly $2 billion in 2002. Shea was the second largest revenue gainer in absolute terms on this year’s list behind private finance firm Platinum Equity LLC., which doubled its revenues to $8 billion in 2004 from $4 billion in 2002.


Other beneficiaries of the real estate boom include United Pacific Mortgage, Shapco Inc. (pipe manufacturer and real estate developer), MJW Investments (developer), RMCER Corp. (real estate sales) and SCI Real Estate Investments.


Eleven manufacturers posted high enough revenue gains from 2002 to 2004 to qualify for the list, despite the loss of 50,000 L.A. County jobs in that sector over those years.


“Manufacturing is a big enough sector that there can be firms that are prospering at a time when the aggregate is a drag on the economy,” said Joseph Magaddino, chair of the Department of Economics at California State University Long Beach. “These companies have managed to find a niche.”


One such company is Robinson Helicopter, which moved up from 69th place on the 2004 list to 23rd, the biggest leap up on this year’s list. Robinson’s revenues more than doubled, to $220 million in 2004 from $92 million in 2002.


“Those were pretty good years for us,” said Kurt Robinson, vice president of product support. “We came out with a new helicopter with a larger engine and sales exceeded our expectations.”


Robinson said he does not expect the firm to duplicate this level of growth over the next couple of years. “We’re still growing, but we don’t expect to see that level of growth for a while until we come out with a new product.”


He said L.A. still has some advantages for manufacturers. “There’s a broad-based labor pool here, some of the regulations like workers’ comp have gotten just a little easier, and we’re close to ports and airports that we use to export our products.”

No posts to display