Construction in the Fast Mode
Imagine your company’s revenues growing at an average rate of 197 percent each year for five years. Even if you started off with sales of only $250,000 in the first year, you’d be running a $19.5 million enterprise by the end of year five – not to mention the corollary rise in company assets and equity value.
That scenario represents the real-world trajectory of RCG Construction, the top firm on the 2001 HISPANIC BUSINESS Fastest-Growing 100 directory. On average, these 100 companies increased their revenues 46 percent per year between 1996 and 2000. Total revenues jumped from $995.8 million to $4.6 billion in the same time frame.
These companies prove the value of growth momentum, even during a general economic slowdown. From 1996 to 1998, with the economy at full steam, total revenue for the 100 grew by 118.3 percent. During the 1998–2000 interval, particularly when the economy quickly cooled in 2000, the rate fell only slightly to 111.7 percent.
Resilience during a downturn reflects both internal and external factors of the Fastest-Growing 100. Hector Orci, CEO of Los Angeles–based advertising agency La Agencia de Orci, believes that even in the current economy, Hispanic consumers continue to increase their income and spending. This increase stems from the Hispanic population’s higher-than-average work-force participation, flexibility in taking available jobs to remain employed, and a concentration of Hispanics in the services that tend to weather economic storms best. These same criteria apply to much of the Fastest-Growing 100, with 45 of the companies in the service sector.
Certainly CEOs of these companies see the current economic slowdown in relative terms – a momentary hesitation in their gung-ho growth. “At the first of the year, there was not an abundance of work to bid on,” admits Rolando Hernandez, CEO of the number 1 company, RGC Construction in Las Vegas. “It dropped off in February and March. Once [Federal Reserve Chairman Alan] Greenspan dropped the rates a few times, people had more money and it has picked up. This might not be a banner year, but it will be a growth year.”
“This year I won’t do 50 percent [revenue growth], but maybe 30 percent,” says Carlo M. Pinto, CEO of Pinnacle Energy in Newark, Delaware. “In a sense, the downturn has affected us in a positive way. Our volume has increased every month compared to last year.” Pinnacle grew an average of 56.5 percent per year between 1996 and 2000.
Both RCG and Pinnacle illustrate the dominance of the construction industry in this year’s Fastest-Growing 100 directory. In all, 32 companies on the list work directly in the building trades. Another seven sell support services or peripheral products to construction.
“The growth is tremendous in Las Vegas – we get between 4,000 and 5,000 new permanent residents every month,” says Mr. Hernandez, who specializes in warehouse and retail construction. “Our projects are $4 million to $5 million jobs, so you don’t need too many to double your [revenue] volume.”
The late 1990s provided near-perfect conditions for fast-growing construction firms. According to the National Association of Home Builders (NAHB), the number of residential construction permits increased during this period to a peak of 1.66 million in 1999. By the following year, the number had fallen to 1.57 million, a level the NAHB expects will be maintained for the next few years.
