Since 1986, Chief Executive has honored outstanding CEOs with its annual Chief Executive of the Year award, a peer-driven award that has honored many extraordinary leaders, from Jack Welch and Bill Gates to Ann Mulcahy of Xerox and David Cote of Honeywell. Over the years, judges have tended to favor leaders of large, complex companies. Chief Executive felt it was time to honor outstanding, mid-market companies that deserve recognition. These enterprises are the backbone of the economy, generate tremendous growth and often become major, global firms in their own right.
In identifying the best mid-market companies—private or public firms with annual revenues between $10 million and $1 billion in annual revenues—we used both quantitative and qualitative criteria to sort through the universe of 197,000 firms, according to the National Center for the Middle Market at the Fisher College of Business at Ohio State University. This meant finding firms that had superior growth relative to their industries, as well as companies with innovative products, compelling leaders, unusual practices/business models or an ability to leverage assets in uncommon ways.
To do this sifting, we have drawn upon a variety of sources. With public companies, for example, we engaged FactSet Research Systems, a Connecticut-based provider of financial information and research to investment professionals worldwide, to identify listed companies that grew faster than their market-sector rates. For private companies, we drew from published lists hailing from the Association for Corporate Growth, The Business Journal, E&Y’s Entrepreneur of the Year program, the Inc. 5000, as well as data from the Fisher College of Business and GE Capital’s research. In addition, we solicited nominations through Chief Executive’s web site. Through this process, we identified 100 superior performers.
Further personal interviews and additional research allowed us to present the best as finalists to the selection committee of CEOs and experts (see Selection Committee, below) for their consideration.
Our purpose is to draw attention to the triumphs of mid-market enterprises everywhere by identifying a peer-selected group that has distinguished itself in three important areas: Leadership, Innovation and Overall Excellence. This year’s honorees are Anytime Fitness’s Chuck Runyon for Leadership, iSend’s Steve LaBella for Innovation; and Coyote Logistics’ Jeff Silver for Overall Excellence. Their stories follow.
“Where we are today, it seems obvious that it was a great business model; but 11 years ago, no one thought our concept was a good idea—not my family, not my friends, not anyone in the industry,” notes Chuck Runyon. “To launch a business, you have to be determined and believe in yourself. No one can do that for you.”
When 1,300 associates are passionate enough about their workplace that they tattoo their bodies with its trademark, a company’s leadership has got to be doing something right. If you aren’t impressed by employee devotion expressed by permanent body ink, Anytime Fitness’s growth figures will surely wow you. This Minneapolis-based chain that began as a single fitness facility in 2002 now has 2,300 clubs in 50 states and 16 countries and revenues of more than $484 million.
Anytime Fitness’s breakout success in the crowded, low-margin fitness-club business is founded on a novel concept for its industry: providing its members with 24/7, low-cost access to a network of workout facilities that are 30-to-50 percent smaller than average. “When my partners and I owned a large fitness club, we realized that most of our members used the same workout areas every day, yet we had this huge facility and big payroll,” explains Chuck Runyon, CEO of Anytime Fitness. “We thought, ‘let’s carve out what people use the most, reduce the square footage and use technology to shave our payroll cost.’”
The result? Anytime Fitness clubs typically range in size from 4,000 to 6,000 square feet; focus on cardio machines, free weights and resistance exercise equipment; and they dole out keys and personal security devices so that members can safely come and go—any time of the day or night—to any of its facilities anywhere around the globe. Early on, the company’s founders opted to embrace franchising, viewing it as a less capital-intensive expansion method. Today, its 2,300 clubs are 99 percent franchise-owned.
Like its members, Anytime Fitness’ franchisees are attracted to the independence the company’s concept offers. “Profitability is the No. 1 metric with franchising; but beyond that, we provide balance,” says Runyon. “When you buy into Subway, you’re buying a 65-hour-a-week management job. With us, you can leave at 2:00 p.m. and the franchise still runs itself.”
While the concept behind Anytime Fitness was clearly a winner, the company’s leadership philosophy—one the founders describe as ROEI or Return on Emotional Investment—is as integral to its success as its business model. Its founders think of themselves as “coaches” helping people, whether employees or gym members, become better people. “There are different levels of being an employer,” explains Runyon. “Some companies are good at reinvesting in employees, but it’s about helping them become better employees. We invest resources to help our employees become better people.”
Like many companies, Anytime Fitness holds employee workshops, but these are often on topics that have little to do with running a fitness facility. “We call them ingredients classes,” notes Runyon, who says topics range from tips on gardening and financial planning to parenting. “At our last annual conference, 50 percent of the speakers and content were about specific business issues and 50 percent were about personal growth. We want to make our employees better people vs. making them better employees. I think that is a differentiator.”
“One of the biggest barriers for people in pulling the trigger to chase their dreams is fear of the unknown,” says Steve LaBella. “They think they need to have every question answered before they start—and usually that means they never [begin]. You’ll never have all the answers, so collect enough answers to get comfortable, then just do it and keep asking questions as you go. That’s how I’ve lived my professional life.”
For decades, immigrants leaving their homelands to seek a better life on foreign shores have sought to send financial help to the family and friends they left behind. Typically, they relied on money-transfer companies—the best-known being Western Union and Moneygram—and paid dearly for the privilege, often as much as 15 percent of the funds transferred. What’s more, those sending money they intended for utilities or phone service had no control over how it was spent.
Enter iSend. The brainchild of Steve LaBella, who founded the successful bill payment company QuickPay, iSend gives immigrants the ability to pay bills for goods and services—typically phone, electric, gas and household goods—directly to service providers and companies in their home countries. For its customer base, the advantage is trifold, explains LaBella. “You have a control advantage, a convenience advantage and a pricing advantage,” he says. “There’s less time and less risk involved versus recipients’ picking up money and then standing in line to pay bills. Straight off the top, you also cut out the fee charged by the payout location on the receiving end, which is a third of the cost.”
While the advantages for its target customers were clear, iSend needed to line up distribution partners—companies that would accept payments—before taking its service to the market. “Initially we focused on Mexico, Central America and certain Caribbean countries,” recounts LaBella, who notes that the annual market for U.S. to Latin America money transfers alone is more than $60 billion. “Our first hurdle was building relationships with mobile operators and other billers in different countries. In the beginning, you’re selling a dream and a concept and trying to convince companies it makes sense.”
Large mobile operators, however, soon saw the advantage of a partnership that would help ensure reliable payments. Those early relationships, in turn, provided a launch pad for signing on more companies. “Once we had a good base to show what we could do, the conversation changed,” says LaBella. “Not that it is a slam dunk, but it’s certainly a lot easier.”
In fact, over time, iSend has been able to pass some of the transfer costs—the portion of the transaction it collects for its services—onto the companies receiving payments, making the transaction free or nearly free for its customers. Not surprisingly, the immigrant community has enthusiastically embraced the concept, enabling the company to expand by enabling its customers to transfer funds to more than 100 countries.
Competitors looking to grab a piece of the market LaBella created have sprung up along the way, but iSend remains the dominant player. “Other [startups] have been significantly less successful and there’s no question that that is due to the team we have in place,” says LaBella, who handpicked former colleagues to form his startup team. “Our sales and business-development people have to fight all the time to keep our customers and to develop new partnerships. And our technology people are similarly tasked because we have to be up all the time to process more than million transactions each month in real time.”
LaBella, who sold his first startup after four years, does not protest a similar endgame for iSend, but he is in no rush. “”It’s been a wild ride—we’ve been profitable for three years and exceeded our best projections,” he says, adding that the company’s current focus is on expanding its distribution network in Africa and the Middle East. “It’s a big world and we’re looking at expanding in all the corridors across the globe where these services apply.”
“We bring in new employees in groups of 12 to 16 and I participate as much as I can in their training,” says Jeff Silver. “I try to get to know them. We have a database, but it’s better for me to get a sense of who they are, and it’s good for them to hear our story directly from me. Our people are really the critical piece of this. Our employees are on the phone with their customers carriers every day, interacting all different ways. The experience that anyone has when they interact with Coyote is really what dictates the future success of the company.”
Jeff Silver thought he left the trucking business for good in 1999. American Backhaulers, the company he’d help grow into the country’s second-largest third-party logistics company, had just been sold and Silver planned to retire at the ripe age of 37. Fortunately, after a seven-year hiatus—during which he collected an MBA, spent some time studying optimization logistics and parented his seven kids—he decided to jump back in.
“I looked for something else to do, but I never found another industry that had the same growth potential,” he explains, noting that an estimated $130 billion worth of “potentially outsourceable” transportation occurs in the U.S. every day. Huge amounts of freight moves across the country on a daily basis, many of it at far less than peak efficiency simply because trucks with excess capacity struggle to link up with the companies that need their services. “The basics of what we do is trying to find ways to put those two together,” says Silver.
That simple concept is at the heart of what is actually a very complicated logistics industry. Companies like Coyote use complex algorithms to manage on-land shipping and distribution for their customers—and this is the first of several areas in which Coyote excels. “I designed the software that runs our business on a day-to-day basis and I’ve been doing this my whole life,” explains Silver. “Most of our competitors have had IT people design their software, which means that it’s never optimized for what they do.”
While proprietary software provided an edge, it was Silver’s commitment to service that distinguished it from competitors early on. In 2006, when Coyote was launched, there were thousands of regional companies across the country but only one large business—C.H. Robinson, the company that had bought American Backhaulers. “The attitude across the industry was that you had to take the easy loads and give those that were problematic back to the customer or take care of them the next day,” explains Silver. “We took a different strategy.”
Silver tasked his team with moving every load the company committed to, regardless of difficulty. Often, the strategy meant spending more or working harder; but ultimately, it paid off. “The market was looking for another competitor,” he recounts. “When we came in and started delivering service that was in the high 90s when people were used to the low 80s, people converted right away.”
Behind this service edge is an ultra-committed work force, adds Silver, who makes a point of recruiting “people who have shown passion in all sorts of things” during their college lives. “We hire a very different type of person than most of our competitors,” he says. “We find that kids who played college sports usually have a tremendous work ethic. They are competitive, but in a cooperative way; and they know that if you lose today, you have to come back and do it again tomorrow. We care a lot more about what you did in college than we do about your GPA.”
The company also doesn’t rest on its laurels, instead continuing to reinforce its service mantra and refine its technology. It now employs a mobile app called Coyote Go, which helps the company track its drivers’ locations and supply them with dispatch information, improving efficiency by reducing the need for expensive and inefficient phone communication.
Such efforts have paid off over the past three years, with Coyote racking up a 139.7 percent growth rate compared to its industry average of 11.4 percent.
“Growth has been great,” says Silver. “There is a continued need in this difficult economy to find better solutions than what [have] been out there. Once someone tries us and we perform, it’s a done deal for us.” —Jennifer Pellet
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