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Sunday, Sep 25, 2022
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Valley Surging On Connection To Technology

SADA Systems says a lot about the Business Journal’s list of Fastest Growing Private Companies. The North Hollywood firm installs software that takes programs and data from desktop computers and makes it accessible from anywhere via secure Internet servers. Demand for so-called cloud computing has propelled SADA to two-year revenue growth of 88 percent since 2009. That ranks it No. 16 on the list. “There is almost limitless demand for what we do right now,” said owner and Chief Executive Tony Safoian. “It used to be that progressive tech-savvy companies went to the cloud, or maybe companies trying to save money. Today, companies large and small are doing it – some very large.” There are still all sorts of concern about the state of the economy, but the 60 companies on the fastest growing list point to a post-recession Valley economy that is being propelled by continued growth in technology. And it’s not only Internet related, but also involves high-tech manufacturing. For example, Dynamic Automation is a Simi Valley maker of sophisticated pharmaceutical manufacturing equipment that has seen strong sales, making it No. 34 on the list. (See story page one.) A number of other companies have taken advantage of diverse growth opportunities. The 60 companies reported average revenue growth of 75 percent between 2009 and 2011. That compares to a California economy that grew 3.7 percent in the same period, according to the state Bureau of Economic Analysis. Conspicuously missing are companies in mortgage lending, residential development, construction and commercial leasing – mainstays before the recession. Today, only one company –Coldwell Banker Commercial North County at No. 6 – is solidly in real estate. Bill Watkins, executive director of the Center for Economic Research & Forecasting at California Lutheran University in Thousand Oaks, described the Valley as an economy proficient in products and services that are either consumed locally or so specialized that national or foreign competition isn’t a factor, against a backdrop of a global technology boom. He expects technology, high-value manufacturing and medical insurers to lead the way in an uneven future. “Demand will pick up, but not in everything,” Watkins predicted. “Commercial property will come back very slowly, as will real estate finance. It could be quite a while before strength returns in those areas.” Technology companies account for one quarter of the companies on the list. Indeed, the No. 1 company is Arvixe, a website hosting with two-year growth of 414 percent. It has found success by pushing the technology frontier. It’s almost a virtual company, with employees scattered around the globe. That allows it to compete against much larger companies by keeping its overhead low and using its work-from-anywhere structure as a lure for talent. (See story page one.) Watkins at Cal Lutheran isn’t surprised at the tech dominance, noting that in the Valley the emphasis in on business-to-business application of technology. Lief Morin, chief executive of Key Information Systems in Woodland Hills, the No. 37 company, thinks any reasonably well-run tech company should do well. Key Information installs business computer systems and reported two-year growth of 29 percent. “Technology is growing fast all across the board,” Morin said. “After the economic challenge of 2008 and 2009, there has been a resurgence of investment in business IT. Given how pervasive tech is, it has become almost a corporate imperative.” Safoian at SADA Systems said his big growth opportunity is training nontechnical people in cloud computing, especially at large clients such as Los Angeles Community College District, newspaper publisher McClatchy Co. and airline Virgin America. “Our business is light on hardware,” he said. “It’s mostly about training people on the culture shift to the cloud. We work on that as much as the technical challenges.” One oddity about the list: young, small companies usually show faster growth that slows as a percentage gain as the company gets larger. This year 43 percent of the companies were founded since 2000. But a majority of the companies are older, including such recognizable names as Sunkist Growers Inc., Galpin Ford and Easton-Bell Sports Inc. Ten percent were founded before 1960. But there’s a logical reason for this trend. For many of these companies, the recent growth represents a reclaiming of revenue that was lost during the recession. Consider Keyes Automotive Group in Van Nuys, at No. 53, which has grown its revenue 13 percent in the last two years. Nationwide, the number of auto dealerships has shrunk 12 percent since 2009, according to the National Association of Auto Dealers. But even as manufacturers cut the number of dealerships they have consolidated sales at a few large ones. In the last three years, Keyes has built a new Mercedes-Benz showroom and opened Hyundai, Chevrolet and Cadillac dealerships. The new dealerships positioned the company for the rebound in sales over the last year, said Vice President Howard Tenenbaum. “You have pent-up demand in the market, so the business is outpacing the economy a bit,” he said. Also on the list are Galpin Honda at No. 14 and Galpin Ford at No. 31. (See story page eight). Future growth Carrie Nebens, chief executive at Equis Staffing of Calabasas, the No. 2 company, called the staffing industry the economy’s bellwether. She said the entire industry is prospering, and from her vantage point the future looks bright for many local businesses. “It’s not a steep growth incline, but I can’t say there is any one industry driving it,” she said. “It’s a cross-section of the kind of businesses you see in the San Fernando and Conejo valleys.” Still, one of the biggest questions is how long the technology sector will drive growth. Safoian at SADA Systems believes the growth will continue indefinitely and the only real constraint for him is recruitment of qualified employees. “This is not a trend that will go the other way,” he said. “We need programmers and system administrators, but we also need non-technical people such as project managers are trainers.” However, Morin at Key Information Systems, believes there are real limits. As technology improves, the price of computers and other components constantly declines. The same economies of scale and improvements in manufacturing that have lowered the prices of big-screen TVs and computer tablets he believes will apply to large business servers. For Morin, that means that in order to grow his revenues, he must constantly sell his clients more machinery. “That’s the natural march of technology,” he said. “You have to stay two steps ahead of the curve to meet your objectives.” Download the 2012 VALLEY’S FASTEST-GROWING PRIVATE COs list (pdf)

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.
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