Houston Inc. 5000 companies share secrets of success | Crain's Houston

Houston Inc. 5000 companies share secrets of success

Pinot's Palette, a paint and sip studio, offers art classes with a casual twist. | Photo courtesy of Jack Miller via Flickr

If there's one thing Houstonians are good at, it's starting and growing a business—and the companies featured on this year's Inc. 5000 can probably be considered experts.

Local companies made a strong showing on the Inc. 5000 released late last month, which lists the fastest-growing private businesses in the U.S., with 50 area businesses making the cut. While revenues for Houston companies on the list range from $52.6 million for Discount Power (No. 80) to $2 million for REI Network (No. 1215), they all have rapid growth in common. 

A newcomer to the list, Pinot's Palette, ranked at No. 1,746 with a 212 percent increase in revenue growth over three years to nearly $6 million, according to Inc. For Pinot's Palette co-founder Charles Willis, the difficult part was identifying a market for the paint and sip chain. 

"When my co-founder Craig Ceccanti first pitched the idea to me back in 2006 I couldn't see myself as the customer and it didn't seem like a viable opportunity to me," Willis said.

Fast-forward several years to an evening when Willis' new wife was scouring the Internet for ideas of how to spend a night out with her artsy sister—and the business idea suddenly took on a whole new meaning.

"About 85 percent of our customers are female," Willis said. "It's a night-out experience."

Of the company's 180 franchise locations, 159 are owned by women.

For Flite Banking Centers, an ATM management services company founded in 2009, there was no question about the market.

"We started at a time when banks were changing the way they service customers," founder and president Michael Villarreal said. "I said to myself, 'The branch banking model is not sustainable.'"

Villarreal, who used to work as an oil and gas investment banker, said he was naturally curious about how banks can afford to "build a branch on every corner" and staff it with employees.

The company currently helps banks and credit unions locate, develop and manage off-site ATM locations.

"Until an iPhone can print cash, the ATM will remain the most reliable, safest and quickest way for a customer to retrieve cash out of their account," he said.

Banks seem to agree, because Flite reported a 3,129 percent revenue growth to $4.2 million over three years, landing at No. 106 on the list.

SalesStaff, making the list for the fourth year, reported 295 percent growth over three years to $16 million in revenue and ranked at No. 1312. And Poetic Systems, a digital company that develops websites and apps, reported $2.2 million in revenue at the No. 1724 spot.

For Poetic Systems Founder and CEO Matt Hager, it's been a 10-year journey. He founded the company when he was 19.

"At first our market was anyone who would give a 19-year-old a chance," Hager said. "Over time we have evolved to fit what the Houston market is: Real estate, energy, medical and any startup activity there may be. A big lesson we learned is that we can't fight the market we have. We're not building the next Uber."

But that doesn't bother Hager. Instead, his company focuses on bringing innovation and a startup mentality to the customers he serves.

While the No. 1 company on Inc.'s list, Los Angeles-based Loot Crate, reported a 66,789 percent revenue increase over three years to $116.2 million, such exponential growth is not feasible year after year, said University of Houston Professor Barbara Carlin.

"These companies are growing at 3000 percent because for the most part they are new and young and have found a market other people haven't exploited, Carlin said. "At some point they will have achieved market penetration and their growth is going to slow.”

For those selling consumer products, Carlin said it likely means they will have to reinvent themselves. For services companies it's possible the owners will grow the companies until they reach a size range they are comfortable managing and stay that way until it's time to determine an exit strategy, Carlin said.

Poetic Systems, for example, will focus on increasing efficiency during the remained of 2016 and in 2017, Hager said.

"What's important is to have the whole organization built around a mission so as the company gets bigger they don't lose sight of what it is they do, why it is they do it and who they serve," Carlin said.

September 16, 2016 - 2:42pm