Every growth-oriented CEO will eventually encounter the problem faced by Fred Flores. During the last five years, the CEO of Diverse Staffing Solutions in Fullerton, Calif., has enjoyed a tremendous growth spurt.
His core staff has expanded from four to 50. The number of contingent employees – those the company provides to clients on a temporary basis – has climbed in the same period from 150 to around 3,000. Revenues have grown from $1 million in 2000 to $44 million in 2004. Thanks to that performance, Diverse Staffing ranks third on this year's directory of the Hispanic Business Fastest-Growing 100® companies.
The problem? Mr. Flores attributes 40 percent of his growth to the acquisition of competing companies, and financing that expansion has involved a long, hard search for capital. Diverse Staffing has solved the problem by persistently networking and lobbying banks and other financial institutions. The company now has significant levels of revolving credit to support the company's continued growth.
Mr. Flores plans to expand geographically into the Sacramento region of California as well as markets in Arizona, Kentucky, Texas, and Canada. He projects 2005 revenues between $52 million and $55 million (the company scored a recent coup when American Honda entered into a contract for its services), and the company expects to reach the $100 million mark in three to five years.
Aggressive acquisition worked for Mr. Flores, but the experience of the 100 Fastest-Growing Companies shows more than one way to achieve astronomical growth. LatiNode, the top company on the list for two years in a row, reports five-year revenue growth of 124,782 percent. Its core service of Internet-based telephony between the United States and Latin America combines strong market demand with money-saving technology (see story, "No Slowing for Repeat Champion").
Other CEOs among the 100 attribute their growth to the Small Business Administration's 8(a) Program. Scott Mandel, CEO of Asset Protection & Security Services in Corpus Christi, Texas, says the 8(a) program is largely responsible for the company's five-year revenue increase of 2,461.7 percent. A single major federal contract sent annual company revenues from around $800,000 to $10 million from one year to the next, he says, and employment jumped from around 60 workers to more than four times that many today.
In 2004, the company reported revenues of $20.8 million to rank number 9 on the Fastest-Growing 100. Mr. Mandel says the company is competing for one contract that would raise its annual revenues to between $58 million and $60 million.
Lack of funding nearly killed this growth almost before it started. According to Mr. Mandel, one of the company's biggest obstacles in its early days was access to capital. Banks refused to lend money despite a $10-million annual contract with the federal government. Meanwhile, the company needed a $1 million to $2 million line of credit to meet payroll for a year or so until government payments began to roll in. "No one would touch it and we were coming down to the wire," he says.
He finally found a factoring company in Dallas that would advance money based on receivables. Although more expensive than a bank loan, the factoring firm would advance 85 percent of the amount that Asset Protection invoiced the government. The factoring firm collected once the government paid in full. "Without the opportunity that they allowed us, we probably would have never been able to start that contract," says Mr. Mandel.
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