You can tell a lot about where the state’s economy has been and where it’s heading by examining this year’s Michigan 50 Companies to Watch list.
In one case, the future is being built on three wheels.
“This is one of the strongest classes we’ve ever had,” said Rob Fowler, president of the Small Business Association of Michigan, one of the sponsors of the annual competition.
“What happened to the economy of Michigan in the past few years has happened to these companies,” said Fowler, who has judged all nine years of the 50 Companies to Watch competition. “They are on an upward growth path we’re looking for. They’re a metaphor (for) what’s going on in Michigan.”
This year’s class posted combined sales last year of $333 million, up 125 percent from sales of $148 million in 2009. The class collectively employed 1,448 workers, a 101 percent increase from 2009.
These companies project combined sales to grow to $486 million this year and payrolls to expand by 360 net workers.
The 2010 class, the first selected after the Great Recession, posted a collective sales increase of 71 percent between 2006 and 2009 and employment growth of 64 percent in the period.
Michigan 50 Companies to Watch are so-called “second-stage” companies, privately owned firms that employ between six and 99 workers, and have annual sales ranging from $750,000 to $50 million.
Not your typical mode of transport
One of this year’s honorees makes wheeled vehicles that predate the automobile by a few hundred years.
TerraTrike is a Grand Rapids manufacturer of adult recumbent tricycles capitalizing on the interests of aging baby boomers who want to continue cycling, but, due to the burdens of time, find it harder to do on two wheels.
Even the less-aged are getting in on the action. Jimmy Fallon and Queen Latifah recently raced a couple of TerraTrikes on the set of the “Late Night with Jimmy Fallon” show. TerraTrike Chief Financial Officer Wayne Oom said the race came about because of connections between the show’s staff and a TerraTrike dealer in New Jersey.
The company was founded in 1996 after Oom and CEO Jack Wiswell – boyhood friends – reconnected at a holiday party in their hometown of Hastings.
Oom said Wiswell used a cocktail napkin to show him a rough sketch of a “really unusual bicycle” Wiswell wanted to build. TerraTrike was born.
The company now sells about 5,000 tricycles a year throughout the United States, Canada, Europe and Asia.
“We’re hitting in the market right now because a lot of baby boomers are looking for a more comfortable way to exercise,” Oom said.
TerraTrike also customizes its tricycles for riders with special needs, such as those who have had strokes or have had limbs amputated.
Prices range from about $700 for a single-speed tricycle to $5,000 for a 27-speed tricycle tandem. The company, which has sales of about $5 million last year, expects to add 10 employees to its work force of 20 by 2014.
Proven and projected growth required
In order for firms like TerraTrike to be eligible for the “50 to Watch” competition, companies must submit three years of financial reports and demonstrate “an intent and capacity” for further growth.
“They’re branded as reliable, secure and innovative companies that you should seek out to do business with,” said Jennifer Deamud, associate state director of the Michigan Small Business and Technology Development Center, one of the competition sponsors.
Of the 450 companies named to the list since 2005, 449 are still in business either as independent firms or divisions of companies that have acquired them.
This year’s class is heavily represented by manufacturing companies -- no surprise considering that manufacturing has led Michigan out of the Great Recession.
Two-thirds of the 32,000 new jobs added in Michigan in the past 12 months have been in manufacturing. And
45 19 percent of the state’s economic output last year was in manufacturing, according to newly released state gross domestic product figures.
But although 21 of the 50 Companies to Watch are involved in manufacturing, many have diversified from the state’s traditionally dominant auto sector.
“They are so much more diverse in the industries they serve,” said Joy Kitamori, program production manager at Cassopolis-based Edward Lowe Foundation, another competition sponsor. “Five or six years ago, almost all of them (in previous 50 Companies to Watch lists) were in the auto industry.”
‘Wrestling gators’ in business
The CEO of another business on the 50 Companies to Watch list cites wrestling alligators as one of his responsibilities.
“I don’t like to wrestle them, but I do it,” said Kevin Clark, the founder and CEO of Critter Control, a Traverse City-based franchising business that calls itself “the nation’s leading wildlife control firm.”
The company, founded in 1983, has about 120 franchise locations nationwide.
Clark got into the business while working as a chimney sweep in metro Detroit after getting a call from a customer who needed to have a raccoon removed from his chimney.
He called around to a few pest control companies and animal control officers, but couldn’t find anyone who would deal with a raccoon in a chimney. So Clark started his own wildlife control company and began franchising it in 1987.
He located the firm in Traverse City, but occasionally removes unwanted alligators for customers while working from his branch office in Florida.
Other companies on the 50 Companies to Watch list are using cutting-edge technology to make their mark.
Embedded Logix, for example, is an engineering services firm located in Macomb County’s Shelby Township that makes testing equipment to ensure product quality and safety. Its testing equipment is used to monitor coal piles for the threat of spontaneous combustion, to control temperatures in metal heat-treating operations and to test for contaminants in food processing, among other applications.
President Deborah McLeod, who co-founded the company in 2008, said Embedded Logix has benefited from an abundance of engineering talent in Southeast Michigan.
“People around the United States are beginning to understand that you don’t go to Michigan for auto suppliers, you go to Michigan for world-class engineering that can translate into many industries with extraordinary results,” she said.
McLeod said state government and Michigan’s universities have aided her company by providing access to grants, strategic advice and networking opportunities.
“We are very fortunate to be located in Michigan, where we have access to the best talent in the United States,” she said.
McLeod said she expects to add nine additional engineers and other positions to her work force of 34 this year. The company posted sales of $1.8 million last year and is forecasting sales of $2.25 million this year.
Old firms with new bursts of energy
Some of the 50 Companies to Watch have been in business for decades, but have been put on a renewed growth path by a new generation of owners.
One such is Uckele Health and Nutrition, which was founded in 1962 in Blissfield, a small community in Lenawee County. It manufactures human and animal health supplements.
Michael Uckele, the grandson of the company’s founder, purchased it in 2005 and has been growing its business lines, especially in equine health products. Uckele Health and Nutrition had sales about $17.5 million last year, according to published reports.
The company quadrupled sales and has added 65 employees since Uckele acquired it in 2005. It expects to add seven more employees this year.
“I’ve lived my whole live here. This is my home. This is where I want to make this work,” Uckele said about doing business in Michigan. “The grass isn’t greener elsewhere.”
Fowler of SBAM said this year’s Michigan 50 Companies to Watch and SBAM’s annual Entrepreneurship Scorecard show Michigan is making progress in building an economy based more on growing existing companies than on attracting new ones to the state.
The scorecard, released in April, showed Michigan boosted its national rank in small business growth from 46th in 2010 to 31st in 2011, the latest year available.
In “entrepreneurial climate,” a measure of state business conditions supporting entrepreneurial activities, Michigan jumped from 45th place 2010 to 15th place in 2011.
Oom of TerraTrike said the state’s elimination of the complex Michigan Business Tax in 2011 was a “tremendous help” to the company. TerraTrike no longer pays state business taxes.
Gov. Rick Snyder came into office touting an economic development strategy based on “economic gardening,” which involves providing a toolbox of services that help existing companies in the state grow.
Fowler said state economic gardening programs haven’t developed as quickly as he have liked. But he said a crucial economic gardening “philosophy” has sprouted in state economic development policies.
“There is no major tool anymore to attract industry from outside the state,” he said. “That means we are committed to making this a good place to be” for existing companies.
Snyder and the Legislature abolished Michigan’s expensive business tax credits and replaced them with a $100 million fund that gives up-front grants and loans to companies that expand in Michigan. Most of that money has gone to Michigan-based companies.
The Michigan Economic Development Corp. also runs a number of programs that help growing business obtain capital, and management and technical advice.
Universities tout econ development role
Michigan universities are playing an important role in creating a new generation of entrepreneurs in a state that has become dominated by large corporations in recent decades. Fowler said.
Nearly one out of every five graduates of the University of Michigan, Michigan State University and Wayne State University have started their own business, according to a survey released last month.
The survey was passed on 40,000 responses to a survey conducted for the University Research Corridor, an alliance of the state’s three largest research universities.
“Ten years ago, universities were almost anti-entrepreneurship. There was an intellectual arrogance toward entrepreneurial activities,” Fowler said. “All of that is really changing in a very palpable way.”
Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.