Whether Hardware or Hardcore, List Reflects Diverse Economy

A close-up look at select Los Angeles companies that have sustained rapid growth during the past year.

1. David Lewis Co.

Executive Placement

Two-Year Growth: 9,126 percent

David Lewis was bred on the traditional methods of recruiting.

His father owned a financial recruiting firm and after working in the family business for six years, Lewis left to found David Lewis Co., a one-man executive financial recruitment firm, in 1993.

But while working to fill positions with the most qualified candidates, he realized that corporations were changing too fast to rely on the old ways.

“Most financial executives look at an organizational chart and think if they can fill all the boxes with the right people the company will move to a static state of everlasting happiness,” said Lewis, who holds a master’s degree in international economics from Georgetown University. “But the static model doesn’t work anymore.”

Lewis saw that people were changing jobs every three to four years, and that companies are never fully staffed. He also saw demand for project-based hiring and in 1998, he revamped his Woodland Hills-based company to focus on project-based financial consulting.

“There’s a 50- to 60-year business trend toward ‘projectizing’ work and we’re riding that trend,” Lewis said.

Lewis built his recruiting business primarily through cold calls and the occasional referral. When he re-focused on consulting, many of his recruiting contacts came along and used his consulting services. When client contacts moved to different companies, they would go back to him with new requests.

A typical project will come up when, say, a company’s controller leaves. Lewis examines the position to see what the highest priorities are tax statements vs. administration, for example. Then he identifies someone on his staff with the right experience, abilities and availability. There’s a meeting with the client to make sure that the fit is right, and work commences.

With 2003 revenues projected around $8 million, Lewis says his biggest challenge is maintaining the infrastructure to support rampant growth. His company has deployed consultants in health care, music, entertainment, food, real estate and agriculture. Current and former clients include Nestle USA, Walt Disney Co. and ConAgra Foods Inc.

Unlike many consulting firms, Lewis’ employees are on salary and not paid on a per-project basis. All have experience at Big 4 accounting firms or in Fortune 1,000 companies.

“We want our employees to focus on taking care of our clients, not worrying about whether they’ll get pulled from a project before the work is done,” he said.

Lewis didn’t begin marketing his firm until this year, though the company has recently launched a new Web site and created an internal marketing department.

His next goal is to double the number of consultants he employs and expand into 10 new metropolitan markets within five years. “It’s not just about hiring good people and finding work every day,” he said. “It’s trying to help clients change their view of how to organize and execute the work they have.”

Simone Kaplan

3. Ironclad Performance Wear Corp.

Glove Manufacturer

Growth: 486.7 percent

When Ed Jaeger helped remodel the home of a friend, he had no idea it would be the start of a $7 million-a-year business. “By the end of the first day my hands were thrashed,” he remembered.

Jaeger also remembered something else: that the subcontractors all doing different jobs were using the same poorly fitting canvas gloves that he wore. “I looked at my friend and said, ‘I’ve got it. This is the next idea,'” he remembered.

That idea to make a glove that provides task-specific hand protection remains the cornerstone of four-year-old Ironclad Performance Wear.

Calling itself a “technology company that makes gloves,” the company uses breathable, flexible materials to make gloves that fit well and stand up to harsh working conditions.

Starting with $25,000 raised from family and friends, Jaeger put an industrial designer to work making 3-D drawings. Then he found an Asian manufacturer to make samples. Less than a year after initial drawings, Ironclad was ready to enter the market with four glove styles.

Numerous trade show appearances in 1999 led to the first serious cash infusion that allowed him to expand production. “It was an angel focused on startups,” Jaeger said. “It gave us $700,000.”

Now nearly 10,000 retail outlets carry Ironclad, which has 16 different product lines. The biggest seller is the Heavy Utility Glove, used for heavy manual labor, followed closely by the Subzero, for work in cold climates.

Ironclad also runs focus groups, sends out surveys and tests new products in its research and development lab all of which helps explain why these gloves are pricier than typical canvas work gloves that go for around $5 a pair.

“When I started, people told me no one would buy a $25 work glove,” said Jaeger. “They were wrong.”

Daniela Drake

9. Schecter Guitar Research

Custom and Mass Market Guitars

Two-Year Growth: 231.8 percent

At Schecter Guitar Research the key to success has been simple: combine low-cost Asian production with good old American quality.

Schecter designs its own models and has most of them manufactured in Inchon, Korea, putting on the finishing touches at its offices and warehouse in Burbank.

The result, the company claims, are guitars priced as low as $500 that are defect-free and comparable to domestics costing three times as much. “We put a lot of quality research into the guitar,” said J.P. Simoes, Schecter’s vice president. “It’s what a player wants.”

Revenues hit $7.3 million last year, jumping 231.8 percent since 2000 when they were $2.2 million. The company is looking to hit $11 million in sales this year.

And it’s also got an impressive roster of musicians playing its Korean-made Diamond series guitars, including Jerry Horton of Papa Roach and notorious rocker Tommy Lee, a guitarist better known as the drummer for Motley Crue.

Musician Dave Schecter founded the company in 1976 largely as a manufacturer of custom guitar components, such as the pickups that capture the sound of vibrating strings and turn them into electric signals.

Schecter sold out in 1984 to a Dallas-based firm that tried to take the line mass market. The effort faltered, and the business was purchased by Japanese investor and guitar enthusiast Hisatake Shibuya three years later. The custom designs proved so popular that in 1998 Schecter launched its lower-priced Diamond series, which has set it on a recent growth spurt.

The company still manufactures hand-made guitars that sell for as much as $5,000, but its Diamond series, with prices ranging from $500 to about $1,000, accounts for most of the 2,600 units shipped to retailers each month.

At all price levels, guitars are manufactured with quality hardwood and high-end components. When the guitars arrive from Asia, they go through a final set up filing down the frets, making sure the intonation is perfect and other adjustments.

The company also has made a name for itself with some over-the-top marketing with ads in guitar publications featuring scantily clad women and guns. “We are a true rock n’ roll guitar company,” Simoes said.

Laurence Darmiento

11. Ventura Distribution Inc.

Home Video Distribution

Two-Year Growth: 203.3 percent

From its start as an entertainment marketing firm a decade ago, Ventura Distribution Inc. has become one of the largest DVD and VHS distribution companies in the industry, with projected 2003 revenues of $82 million.

How? By learning to grab growth opportunities when they present themselves.

Larry Hayes started the company in 1993 following a 21-year career as a sales and marketing executive in the music industry. After working for companies including Windham Hill Records, RCA Records and A & M; Records, Hayes, who is chief executive, saw an opportunity in the emerging “sell-through” video market.

At the time, retailers like Kmart or WalMart were buying movies on VHS from rental distributors whose main business was selling major studio releases to rental shops. There was no distribution conduit that focused solely on the retail market, and no direct sales channel for independent films.

“Independent producers had to choose between going through rental distributors, who were not familiar with the retail market as it was, or creating ad-hoc partnerships with major studios for distribution,” said Scott Palladino, Ventura’s chief financial officer. “The retail chains needed a umbrella distributor to handle non-rental studio and independent inventory, and the producers needed a more efficient and cost-effective way to get their product into stores.”

Within three years, Ventura Marketing became Ventura Distribution and the company had moved into a 4,000-square-foot warehouse in the San Fernando Valley. Hayes was moving video inventory for customers like Tower Records and Wherehouse Music. Then, another opportunity: As the DVD movie format reached popularity, Hayes saw a chance to open his retail distribution channels to studios that wanted to market movies on DVD to consumers.

“It was great timing because DVDs are priced to move in the retail market, and people don’t rent DVDs as much as VHS, so we were able to partner with some major brands to get their labels to market,” Palladino said. “We had the existing relationships and warehouses.”

Today, Ventura Distribution sells and markets more than 5,000 movie titles for partners that include TimeLife Video, BET Video, Showtime and Fox Sports Net.

The company has added 40 employees over the past 12 months, and later this year it is moving into a new 75,000-square-foot facility in Thousand Oaks. Ventura Transfer has also established three in-house labels, UrbanWorks Entertainment, StudioWorks Entertainment and Studio Latino, for distribution of in-house programming aimed at the Latino, African-American and children’s markets.

Simone Kaplan

17. Pathnet Esoteric Laboratory

Human Pathology Testing

Two-Year Growth: 143.6 percent

Alan Kaye subscribes to the theory that smaller can indeed be better.

“There’s such a thing as diseconomies of scale,” said the president of Pathnet Esoteric Laboratory Institute in Van Nuys. “If you get too large, like some of our competitors, customer service goes down.”

Pathnet provides laboratory services for women’s health care providers, testing for cancer and sexually transmitted diseases.Revenues have already topped $12.5 million thus far in 2003, up from $3.9 million in 2000.

Kaye traces the most rapid period of growth to early 2001, when the sales staff was expanded and the menu of services broadened to include new testing techniques such as screening for human papilloma virus, the venereal disease that Kaye said has been found to cause cervical cancer.

Kaye’s client base now includes more than 900 private health clinics, non-profits, state and county family planning agencies and Planned Parenthood Federation of America clinics, which Kaye said carries out about 5 percent of all cervical cancer screenings in the U.S.

One of the keys to Pathnet’s growth has been to specialize on the women’s health niche and reaching poor and underserved populations. Though the company has grown quickly, Kaye says it’s stayed small enough to emphasize customer service.

Kaye and his wife Randi founded Pathnet after cashing in their 401(k) plans, securing a Small Business Administration loan and taking out a home equity loan in 1996. Nine months later, Kaye took a risk and acquired another testing company’s client list.

“We raised the prices they were offering for their testing right away,” Kaye said. “We knew there would be attrition, but we calculated that the raised prices would more than compensate for it.”

Within a year, Pathnet moved from the Kayes’ garage to a 25-person operation in a 1,500-square-foot office. By 1998, the company was turning a profit.

The Kayes also took advantage of tax credits offered through a City of Los Angeles zoning initiative to encourage job creation in languishing areas. They eventually expanded to 13,500 square feet by knocking out walls and remodeling adjacent offices.

Pathnet’s early success was followed by a setback that shook Kaye’s faith in his mission so badly he almost quit. In 1998, Randi who had never smoked was diagnosed with lung cancer and died three years later.

“Here we were in the business of fighting cancer, and my wife is dying of cancer and there’s nothing I could do about it,” he said. “While we’d been growing all this time, I was on the edge, operating in a sort of fog.”

In the next 18 months, Kaye plans to make three more acquisitions of human pathology testing laboratories with revenues in the $1 million to $5 million range.

“We will need to go to the financial markets for that, which I’ve been avoiding,” Kaye said. “I don’t want to lose control of the company, so we’re going into it very, very carefully.”

Matt Myerhoff

19. Disc Marketing Inc.

Audio, Visual and Interactive Marketing

Two-Year Growth: 128.6 percent

It’s only fitting that Disc Marketing Inc. began from a cue given by the music industry.

Tena Clark, chief executive of the Pasadena-based interactive marketing agency, was a songwriter and producer who co-founded Primal Records, a label distributed by EMI Group, when she watched the Internet boom take off.

Concerned that the music industry was not taking advantage of the medium as a marketing and promotional tool, she left the label and formed Disc Marketing in 1997.

While Clark has stuck to her musical background by writing and recording music for television and film, the business has grown into six divisions, ranging from recording studio and music publishing to its most rapidly growing sector: the creation of digital marketing products.

Its DMI Marketing Special Products group creates interactive ad campaigns that combine video, music and Internet links to promote a broad range of brands.

Clark’s medium of choice for those campaigns is the “enhanced” CD first used three years ago when United Airlines hired the company to create a CD that could guide customers to its Web site.

Only a year ago, Clark said enhanced CDs were a tough sell. Now, about half the clients request them as part of their ad campaigns, fueling the firm’s rapid run-up in revenues.

Clients landed in the last year include General Mills Inc.’s Betty Crocker brand for a promotion during last year’s holiday season. Its CD blended music, recipes, party ideas and video of vintage TV commercials. United and Coca-Cola Co. have used Disc Marketing’s enhanced CDs for a joint marketing campaign targeted at college campuses that featured up-and-coming musicians.

Over the past year, Princess Cruises, Victoria’s Secret and Mattel Inc. have also placed orders for enhanced CDs.

“It’s up to us to convince them. There’s no better way to create loyalty than through emotion and there’s no better way to create emotion than through music,” said Clark.

Disc Marketing’s other divisions have proven strong contributors as well. They license songs and music cues for background use in the television, film and music industries. Another division, DMI Entertainment Programming, creates in-flight audio entertainment for United Airlines and has supplied in-flight programming for Air Force One and Air Force Two.

Michael Thuresson

38. Pipedream Products

Adult Toys

Two-Year Growth: 63.5 percent

David Feldman brings pleasure to customers, even in the worst of times.

His Canoga Park-based Pipedream Products enjoys a booming business selling adult-oriented gifts and gags like edible underwear, high-tech vibrators and flavored body lotions. “Big ticket items like cars or boats fall off the radar during difficult times,” Feldman said with a smile. “But everyone can afford $25 for a sexual toy.”

Pipedream’s growth story is no fantasy. Revenues are on track to surpass $26 million in 2003, from an inauspicious start in 1973 selling smoke paraphernalia to head shops. The last four years have been Pipedream’s busiest ever, said Feldman, who is chief executive.

The company produces 150 to 200 new items annually, and sells to a network of U.S. and international distributors. “We import raw materials from overseas.” Feldman said. “We do both design and manufacturing with a mostly minimum-wage workforce of 120 employees.”

Pipedream’s fastest growing area are private-label cosmetic lines like “Moist,” which he says is produced in the company’s lab. Gag gifts account for 50 percent of annual sales.

Feldman has had offers to take Pipedream public, but does not want to relinquish ownership. He’s also reluctant to sell products via mail order or the company Web site, which he said would be “biting the hand that feeds us.

“We used to sell directly to retailers,” Feldman said. “But it’s much easier to fill a $20,000 order to a single distributor than sell piecemeal and track down payment.”

Similarly, Pipedream doesn’t have any retail stores because Feldman doesn’t want to undercut his existing network of stores and distributors.

The company prides itself on identifying new markets. “One of our buyers in Virginia made more than $1 million last year through at-home parties,” he said. “She draws on a network of sellers women who don’t feel comfortable going into an adult novelty store to create Tupperware parties for sex toys.”

Pipedream’s most expensive item? A 7-speed oscillating vibrator, with forward and reverse, that wholesales for $60. “It’s called the Beyond 2000 GX4,” Feldman said. “Our most popular selling item of all time is glow-in-the-dark foreplay dice. We’ve sold more than three million since we introduced it four years ago.”

Pipedream’s plans for further growth include repackaging its line of marital aids for placement with non-adult retailers, like mass-market drug store chains. While the sex-toy industry holds up well during recessions, Feldman cites relaxed standards in the media as a factor in fueling Pipedream’s growth.

“In recent years it’s become much more acceptable to promote and talk about sexuality,” Feldman said. “I think that’s allowed the adult industry to come out of the closet.”

David Geffner

40. Bryan A. Stirrat & Associates

Environmental Engineering

Two-Year Growth: 55.5 percent

Bryan A. Stirrat & Associates has nestled itself deep into Southern California’s landfills.

The Diamond Bar-based environmental engineering firm specializes in working with landfill operators anything from designing landfill sites to building waste drainage systems to consulting site operators on environmental regulations and construction details.

“Landfill engineering includes not only assisting the operator with how they will put trash in the hole but also with the waste containment features that allow it to function without impacting the environment,” said John Boucher, vice president of regulatory compliance at Bryan A. Stirrat.

The company has done business with landfills in Orange and San Bernardino counties. More recent growth is tied to increased business with Scottsdale, Ariz.-based Allied Waste Industries Inc., which operates several landfills in California and hired the company to design a system that removes potentially explosive methane gas. Stirrat uses plastic pipes to dig into the landfill, vacuum out the gas and transport it to a disposal station.

The company was founded in 1984 by Bryan Stirrat, a former engineer at the L.A. County Sanitation District, after BKK Corp. hired him to manage the closure, or “capping,” of its hazardous waste landfill in West Covina. Capping landfills after they are full is one of the company’s main services and involves sealing them in dirt and plastic to make sure water does not seep through.

The company also provides consulting services on the cleanup of industrial sites and civil engineering services to commercial real estate developers.

Other projects include helping San Bernardino County expand landfills in Rialto and Victorville, giving each an additional 30 million tons of waste storage space.

Such services, involving environmental impact consulting and construction quality assurance, have become essential with California’s strict environmental laws and the premium on space in the state.

“Operators want to squeeze as much refuse capacity out of their facility as possible,” Boucher said.

Michael Thuresson

48. Aspen Education Group Inc.

Specialized Educational Services

Two-Year Growth: 44.5 percent

While heading a company that provided mental health services, Elliot Sainer ran across a lot of kids who wound up being hospitalized.

Many, he believes, didn’t have to be.

“Some needed to be there, others we felt could benefit from a less-costly alternative and an environment more conducive to learning,” he said. “I realized this was an opportunity to take care of kids in a different way on a larger scale.”

A decade later, Sainer left to co-found Aspen Education Group Inc., which provides special education services and programs for children and teens having trouble in mainstream educational systems.

Backed by three venture capital firms Sprout Group, Warburg Pincus and Frazier Healthcare Ventures, each of which took a 25 percent stake in the business Aspen has expanded rapidly. Since 2000, its revenues have increased by 44.5 percent and based on its performance through the first half of 2003, it is on track to break $100 million in revenues for the year.

“There’s been a lot of demand for our services,” Sainer said. “With a lot of kids and families in trouble, there’s no shortage of need.”

Aspen, he said, has helped fill the needs of financially strapped counties that tap the company’s community services division, which provides treatment and preventative services for at-risk children.

The company operates 46 programs in California and 10 other states. It is made up of four divisions: wilderness/outdoors programs, residential schools, special education day schools and community services.

“Each program site has its own distinct identity and the company as a whole operates in a very decentralized manner, allowing programs to vary in length and specialization,” Sainer said.

Nearly half of Aspen’s business comes from residential schools, which offer programs ranging from six months to two years. Both the residential schools and wilderness programs are private-pay programs with tuition ranging from $6,700 to $63,000 annually, accounting for 70 percent of annual revenues.

At the end of the month, Aspen plans to open its first residential school in California, just outside of Fresno, and three additional schools are scheduled to open in the next nine months. Sainer expects Aspen’s growth to continue at its current rate through a combination of new schools, expansion of existing programs and other acquisitions.

Janna Braun

57. Chef Merito Inc.

Specialty Foods Manufacturer

Two-Year Growth: 37.8 percent

The story of Chef Merito Inc. is one of a local boy made good.

Founder, President and Chief Executive Plinio Garcia Jr. started the company (whose name means “little authentic chef”) in his father’s Chatsworth garage in 1985, after graduating from UCLA and getting an MBA from Pepperdine University.

“This all began as my father’s hobby,” Garcia told The San Fernando Valley Business Journal last March. “He loved to cook and make these huge jars of seasonings and special sauces for the meat we would eat for dinner and family gatherings.”

From humble beginnings, Garcia has carved out a multi-million dollar niche in the specialty food industry, manufacturing Latin American seasonings, spices and specialty foods with an employee roster that has nearly tripled in the last three years, to 63.

Revenues for Chef Merito have climbed steadily as well. The $7 million logged during the first half of 2003 puts the company on track to break through Garcia’s goal of $10 million. In 2000, revenues were $4.5 million.

Several years studying food import/export practices in Brazil convinced Garcia that he was ready to put his family recipes and his father’s knack for industrial preparations to the test.

“I said, ‘OK, I can go into financial planning or something along those lines, or I can become an entrepreneur and help my father,'” Garcia said. “I decided to become an entrepreneur and not too long after that we went to Sears and bought a concrete mixer and began making more and more products from our garage.”

Today the Garcia family manufactures 140 products under the brand names Chef Merito, Sabrosito and Pikos Pikosos.

To help cooks navigate the ins and outs of Latin-American foods, the company has compiled a food encyclopedia on its Web site. Entries answer questions such as why black pepper is a spice (it’s ground from a vine-grown berry).

For Chef Merito, 2000 was a watershed year. The elder Garcia retired from the business and the company switched its product marketing in 2000, replacing outside vendors with an in-house sales team to gain a better overall handle on the brand.

“We’ve just stuck to our original plan of marketing to the Hispanic markets,” Garcia told the San Fernando Valley Business Journal. “With population figures on the rise, that’s been a big payoff for us.”

David Geffner