Scale is King: Top Lessons From Nation’s Largest Black Businesses

“Scale is critical. If you don’t have it, you limit your opportunities for growth.”—Christopher Che, Cameroon-raised CPA; President & CEO, Che International Group L.L.C.

So asserts Che, the Cameroon-raised CPA who placed Cincinnati-based Che International Group L.L.C. among the BE 100s through strategic acquisitions just six years after its inception in 2006.

Che assembled the building blocks of his multinational holding company, ranked No. 87 on the 2014 BE INDUSTRIAL/SERVICE COMPANIES list with $31.2 million in revenues, by purchasing complementary packaging and label manufacturers—Hooven-Dayton Corp., Digital Color International, and Cog L.L.C.—and then he reinvested in infrastructure and technology to fully serve corporate and industrial customers. As a result, CIG has increased the flow of contracts from existing customers such as Procter & Gamble and Johnson Controls as well as captured new, lucrative accounts. Che plans to continue targeting established manufacturers

in other sectors according to his value proposition of “identifying, acquiring, and growing scalable, wealth-creating companies that help maximize supply chain diversity while promoting innovation and excellence.”

CIG is an exemplar of a growing number of companies found in our 42nd Annual Report on Black Business under our theme, “Scale Up Your Business.” Scores of CEOs of the BE 100s—the nation’s largest black-owned businesses–have remodeled their companies for expansion. In fact, scalability has been the foundation of growth for the five billion-dollar revenue leaders–World Wide Technology Inc., ACT-1 Group, Bridgewater Interiors L.L.C., Modular Assembly Innovations L.L.C., and RLJ McLarty Landers Automotive Holdings L.L.C.

RELATED: Access the 2014 BE 100s lists, ranking the top black-owned companies in the U.S. at BlackEnterprise.com/Lists

The creation of flexible business models, along with tapping fresh capital sources, building viable partnerships, and gaining the right tools to mine opportunities, was among key components of our recent Black Enterprise Entrepreneurs Conference in Columbus, Ohio. Che and a number of other BE 100s

CEOs joined approximately 1,000 business owners for one of the nation’s largest gatherings of entrepreneurs. At the event, we also unveiled our 2014 companies of the year which can be found in our June issue.

The BE 100s continue to demonstrate elasticity during an economic turnaround that has markedly improved since the Great Recession five years ago but still hasn’t shed its seesaw qualities. In its third and final estimate, the Commerce Department’s Bureau of Economic Analysis reported that U.S. GDP contracted at an annual rate of 2.9% in the first quarter of 2014, a significant decline from the second half of 2013 in which the economy advanced at a 3.4% rate.

 

Against this backdrop, the nation’s largest companies have, for the most part, proved resilient across sectors. The companies that make up our BE INDUSTRIAL/SERVICE COMPANIES list produced revenues of 21.8 billion in 2013 versus $19.1 billion in 2011–a 14.3% increase–with The Peebles Corp., Adams Communications & Engineering Technology Inc., and Devon Industrial Group as growth leaders. On the strength of domestic and import car sales, the BE AUTO DEALERS grossed $8.0 billion versus $7.2 billion–an impressive $11.4% hike. Even as black-owned advertising agencies combat Madison Avenue giants for business, the BE ADVERTISING AGENCIES

collectively posted a solid 7.2% revenue bump, from $287.5 million in 2012 to $308.2 million in 2013.

Financial services companies, however, shift with the economic tide and market forces. For instance, BE BANKS produced a 2% dip in assets–$5.5 billion in 2012 to $5.4 billion in 2013–and a 12.4% plunge in capital–$474 million in 2012 to $415 million in 2013. BE INVESTMENT BANKS saw a precipitous decline in the dollar volume of total issues: Over the past year, taxable securities transactions plummeted 32.1%, from $821 billion in 2012 to $558 billion, while tax-exempt securities deals fell 25%, from $235 billion to $177 billion. Despite the equity market advances — the S&P 500 was up 29.6% in 2013–BE ASSET MANAGERS’ performance was flat, 0.4% growth in assets under management, from $118 billion in 2012 to $118.4 billion. BE PRIVATE EQUITY FIRMS welcomed newcomer RLJ Credit Management L.L.C. to the list, which now comprises 15 companies.

Whether they enjoyed a banner year or suffered from abysmal performance, BE 100s CEOs across industries have learned one invaluable lesson: Scale is king.