News Column

Successful Companies are Young but not New

Aug 1 2000 4:18PM

If twentysomething millionaires have taken over the high-tech sector, how come the average age of CEOs on the HISPANIC BUSINESS High-Tech 50 list is 54 years? Although this may no longer be your father's economy, it's still your father's company that successfully competes in it.

Taken as a whole, the companies on the 2000 High-Tech 50 directory report cumulative revenues of $1.91 billion. That works out to a per-company sales average of $38.2 million. The age of the typical company on the list is 15.7 years long enough to establish a track record, yet short enough to respond to the volatile marketplace.

Even so, companies on the High-Tech 50 qualify as relatively young compared to the general market. A 1999 "Survey of High-Technology Firms," conducted by the Small Business Administration, found that "although the firms were 'young,' they were not 'new.' The average age of the firms was 25 years."

Young or old, the High-Tech 50 have entered aggressively into the New Economy, and 49 of the 50 companies have a Web site. Most of these function as brochure sites, providing basic information about the company. About 47 percent of companies with sites have customer-service capability, and 43 percent offer e-commerce. Looking ahead, 96 percent of these companies expect their revenues from e-commerce to grow over the next five years. Also, they plan to invest heavily in Web technology, with nearly 20 percent plowing $50,000 or more into their sites during the current year.

More than 80 percent (41 companies) of the High-Tech 50 work in the service sector. This number reflects the on-site assembly nature of information technology suppliers usually buy components and then incorporate them into the customer's system. Well over half of the High-Tech 50 specialize in such system installation, integration, and configuration, a business that brings together hardware (a manufacturing or wholesale function) and customized software (a service function). Only four companies on the High-Tech 50 engage solely in manufacturing, with the remainder of the non-service firms in wholesale (three companies) and construction (two companies).

In terms of marketing, the High-Tech 50 companies continue to receive more than half of their revenues from government sources. Federal contracts or subcontracts account for 46.4 percent of total revenues, down from 51.6 percent last year. State contracts account for another 4.8 percent, and municipalities provide another 2.1 percent. Twenty companies on the directory participate in the SBA's 8(a) program for minority contractor development.

While the SBA survey found that high-tech companies "became profitable very quickly," noting that two-thirds of responding firms reported profits by the second year of their existence, the profit-range profile of the High-Tech 50 shows only minor changes since 1994. Only six companies on the directory have profit margins of more than 10 percent; nearly half fall in the 2 percent to 5 percent range. Intense competition may keep margins tight, but the Hispanic high-tech sector shows steady revenue growth, even as it enjoys strategic status within the New Economy.

Source: Hispanic Business magazine

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