Show us what you're made of

Are You young, hard-working and running a company where product quality, customer service and responding to customers' needs are paramount? Then you could be at the head of one of Britain's fastest-growing independent companies.

This weekend, the search begins to find the owner-managed businesses that will pick up the torch carried in the past by such companies as pubs group JD Wetherspoon, bus - and now trains - company Stagecoach, information provider MAID, mobile telephones supplier The Carphone Warehouse and Hat-Trick Productions, the television company responsible for such hits as Drop the Dead Donkey and Have I Got News For You. All of these companies have featured in the Independent 100 prepared by the Independent on Sunday and accountants Price Waterhouse over the past six years.

In that period - which included the toughest recession many can remember - they and dozens of others created thousands of jobs as sales mushroomed. This success - at a time when many household-name companies quoted on the stock exchange were being taken over or shedding thousands of employees - has helped alert banks and business advisers and politicians to the changes going on in the British business environment.

When the listing began, private companies were assumed to be small enterprises of little importance to the economy. Now, the sector is acknowledged to be a key driver - and to include businesses of all shapes and sizes. The success of Richard Branson's Virgin Group in an ever-widening range of spheres is evidence that being private does not necessarily limit a company's horizons, while the interest shown by the Body Shop in abandoning the stock market demonstrates how obtaining a listing may not necessarily be as attractive as it once was.

High-tech businesses, which have made a strong showing throughout the history of the Independent 100 listing, have traditionally been ambivalent towards flotation as a means of obtaining extra funds because of what they perceive as the City's difficulty in understanding their need to invest in research and development at the expense of shareholder returns. MAID has had an especially rocky ride since it came to the market, and it remains to be seen how Pace Micro Technology, which is involved in developing the next generation of television equipment, will fare in the wake of its June 1996 listing.

Twenty-one companies featured in the six Independent 100 league tables so far, including some mentioned above, have gone on to gain listings either in Britain or the United States - and not all on the full markets. For example, Majestic Wine joined the Alternative Investment Market at the end of last year, while the computer components manufacturer Madge Networks has gone for a listing on the US Nasdaq market.

In addition to taking different approaches to stock-market listings, companies have different motivations for seeking them. Thirty-nine per cent of the companies in the 1996 tables indicated an intention to float within three years, but their reasons ranged from "realising the owner's investment" (cited by 38 per cent), through "raising finance for growth" and "access to further finance" to "market credibility" and "prestige" (11 per cent and 4 per cent respectively).

Others, such as the first winner, the provider of computerised medical information Value-Added Medical Products, and the 1995 victor, the children's sticker publisher Merlin Publishing International, have been bought by multinationals.

These routes have brought substantial gains for the founders, but other companies continue to flourish in private hands.

Indeed, the desire to make substantial sums of money is only the second most popular reason cited for setting up in business. Forty-nine per cent of the heads of companies in last year's listing said their primary reason for going it alone was the wish to escape from the lack of recognition given to flair and invention in large organisations. Many founders of companies appearing in the listing started their business careers in big businesses, but found the culture did not suit them.

A family tradition of running your own business and redundancy ranked lower as reasons for starting out, cited by 14 per cent and 7 per cent of respondents respectively, compared with 30 per cent for "to make more money".

The research was carried out by Price Waterhouse partner Nigel Crockford and his colleagues among companies in last year's Top 100 and the "Middle Market" category, for companies that had achieved the feat of sustaining swift expansion in sales after reaching a significant size. It showed that successful high-growth companies are almost exclusively run by people who started in business under the age of 40. Nearly two-thirds have been educated to degree level.

They said their priorities were building strong management teams - 50 per cent had non-executive directors and rated their contribution highly - and retaining key staff, and rated motivational and selling skills as key leadership qualities.

There was, however, no substitute for hard work. Ninety per cent worked more than nine hours a day and 42 per cent worked over 11 hours. Weekend work was also commonplace.

But perhaps the key differentiator between these star companies and the typical small and medium-sized enterprises is their experience of banks. Though three-quarters favoured action on late payment, fully 89 per cent described their banking relationships as good or excellent. It is probably not coincidental that 90 per cent of companies have financed what has largely been organic growth from retained profits. Having little or no borrowing proved particularly vital in weathering the recession.

In fact, only 30 per cent of those questioned said they expected to raise finance - on the grounds that most were cash-generative and lowly geared.

However, while only 3 per cent of companies said they had expanded purely through acquisition and just 24 per cent claimed a mixture of acquisitions and organic growth.

If you think you could be one of those rising companies, fill in the forms and let us know. To qualify you have to show strong sales growth from a base of at least pounds 500,000 over five years. For the Middle Market award, the starting point is pounds 5m. In each category the accounts relating to the most recent trading period must show a pre-tax profit.

To give you an idea of whether you can compete in such heady company, the average turnover of the 1996 Independent 100 companies was pounds 25.1m and the average compound annual sales growth achieved over the five years was just under 40 per cent.