Some companies that make it onto the Business Journal's list of fastest growing private companies may end up little more than flashes in the proverbial pan. But making it on the list for five years running is a sign of sustained success.
And that's exactly what's happened with five companies: two real estate development firms, a gas station operator, a restaurant chain and a re-manufacturer of toner cartridges.
To make it onto the list just once, a company must grow at least 40 percent over three years, and doing that for at least five years straight is no small feat. Even more remarkable: two of these repeat performers Panda Restaurant Group and gas station operator United Oil posted revenues in excess of $750 million last year, contradicting the notion that smaller companies are the ones able to post consistently fast growth rates.
"It's really remarkable when you get companies showing significant growth for that long a period. So many companies grow so fast that they can't maintain the quality. They overdo it and run into problems," said Betsy Zeidman, director of the Center for Emerging Domestic Markets at the Milken Institute in Santa Monica.
The other three consistent growth stars are NewMark Merrill Cos., a buyer and developer of shopping centers; MJW Investments, a real estate development firm specializing in downtown L.A. properties; and Micro Solutions Enterprises, the toner re-manufacturer.
So how have these companies managed to grow for so long without running into setbacks?
Turns out that being in the right place at the right time has a lot to do with it. Two of the companies NewMark and MJW were well positioned to capitalize on the five-year real estate boom in Southern California, while United Oil has benefited from annual run-ups in the price of gasoline at the pump since 2000, with each spike higher than the last.
"The hot real estate market definitely had something to do with our growth," said Mark Weinstein, president of MJW.
But being in that position is not just pure luck. It involves a fair amount of foresight, making sure the company has the wherewithal to keep growing or investing when the sector heats up.
Seizing the moment
In MJW's case, this meant accumulating a number of holdings in and around downtown Los Angeles in the soft market of the mid-1990s. "We sold some of our original assets and used those proceeds to buy some more" as the market turned, Weinstein said. "All along, we were helped by the rising real estate market."
To keep the acquisitions going, Weinstein then accepted institutional capital. He also co-invested in deals that were too rich for MJW to enter into on its own.
In a different market shopping centers NewMark took a slightly different approach. NewMark develops shopping centers and acquires, manages and repositions existing ones. "When the market for new shopping centers drops, we can turn to our existing shopping centers," said Sandy Siegel, chief executive and president of NewMark. "We can pick the market that's best for us at a given point in time."
For the last few years, shopping center development has been very profitable, while the acquisition market has been overpriced, he said. Now, the market is moving towards a more favorable climate for acquisitions.
United Oil, meanwhile, took advantage of the soft oil market in the late 1990s when many integrated oil companies decided to get out of the retail gasoline business and sell their stations.
"We've been able to gain market share by purchasing these gas stations as the oil majors turned them over to third party dealers," said Ron Appel, president of United Oil.
Then, when the market turned around 2000, United Oil was poised to take off with the price of oil. Also, with so many more service stations having mini-marts, United Oil benefited from skyrocketing cigarette prices another instance of being in the right place at the right time.
As gas prices have come down off their record highs earlier this year, Appel said United Oil is now focusing on providing a higher level of service at stations while still remaining competitive on price with competing stations.
While Panda Restaurant Group has also been in the right market ethnic food at the right time, it has adopted a much different approach than its competitors. When co-founders and chairs Andrew and Peggy Cherng realized that they had entered into a vast untapped market of casual dining for Chinese food, they didn't rush in with a massive expansion.
Instead, Panda has been opening a few of its Panda Express restaurants each year, making subtle adaptations to a changing marketplace with each one.
"We focus on opening one store at a time, cautiously but continually" said Peggy Cherng, co-chairwoman of Panda Restaurant Group. "This way, we can get quality people in to manage each restaurant."
This avoids what entrepreneur experts say is the greatest risk for successful companies: growing too fast. Some grow too fast right out of the starting gate; others enter into the "hockey stick" mode, with an extended period of modest growth followed by a sudden spike.
"There is a great danger in growing too fast: Unless you have a huge amount of extra capital that you can tap, you can run out of money too fast," said William Crookston, professor of entrepreneurship at the Marshall School of Business at the University of Southern California.
What's more, as Peggy Cherng pointed out, if you grow too quickly, you may not be able to get good managers in place.
Indeed, getting quality people on board has been key to the growth at Micro Solutions, where the focus has been on quality products and quality service for its re-manufactured toner and printer cartridge business.
"We're in a $3 billion or $4 billion industry," said Avi Wazana, the chief executive who runs the company with his brother Yoel. "The way we differentiate ourselves from the pack is by providing quality that goes beyond the quality of the product. It's quality people, quality behavior, quality customer service."
Wazana said that this focus on quality guides him in his hiring.
"My mantra is that I follow people: If I find a good person that I want to add to the team, I do so, even if it's not in the original business plan," he said. "This way, when we do expand, we have quality people in place."
To maintain the company's growth, the Wazana brothers have invested in more distribution channels, more product lines and have moved into new geographic markets, including Canada and Europe.
And as part of the focus on quality people in key positions, both MJW Investments and Panda Restaurant Group have focused intensely on personal growth training.
"The idea is about building an organization where everyone here is inspired to better their lives," said Panda co-chairman Andrew Cherng. "It's an organic approach: bettering yourself leads to helping others, making others around you feel better. As we grow faster, that carries over to the business side."
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