The federal government recently named Frontier Airlines a “major” airline, a designation reserved for carriers with $1 billion in annual sales.
Reaching $1 billion in sales puts Frontier, which went public in 1994, in rarefied air for another reason. Of the thousands of U.S. companies that have gone public since 1980, only one in 20 has reached $1 billion in sales, said David Thomson, a management consultant and author of “Blueprint to a Billion.”
Billion-dollar companies serve as a barometer of an economy’s ability to innovate and generate wealth.
While an average of 32 public companies a year make it to the $1 billion mark in the U.S., more “blueprint” companies are needed if the country is going to remain prosperous, Thomson said.
“We have to grow the number of companies going to a billion in order to stay ahead of other countries that are catching up,” he said.
Despite losing Transmontaigne Inc. and Western Gas Resources Inc. to acquisitions last year, Colorado maintains a disproportionate share of blueprint companies, putting it in a second tier, following more populated states such as New York and California.
By Thomson’s count, Colorado has seven blueprint companies making more than $1 billion and another dozen on track to hit the mark over the next decade.
“Colorado is like a giant petri dish where good business ideas germinate,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. “The ability to grow billion-dollar companies is important.”
Not only do fast-growing, homegrown companies hire large numbers of workers, they also contribute to nonprofits and civic life, Clark said.
And those companies can change the economic landscape for other businesses. Frontier, for example, didn’t reinvent aviation, but it has boosted traffic through Denver International Airport, drastically increasing access to the state.
Frontier’s beginnings were far more humble, when the airline employed only a few dozen and made $25 million in 1995. Revenues jumped 186 percent the next year. Frontier now employs 4,200 in Colorado and more than 5,000 total.
Higher energy prices in the past few years have lifted Cimarex Energy to billion-dollar status, with Whiting Petroleum and Markwest Hydrocarbons expected to join this year. St. Mary’s Land & Exploration should follow in 2008, Thomson forecasts.
Two real-estate investment trusts, Apartment Investment and Management Co. and ProLogis, meet Thomson’s criteria for blueprint companies.
Other Colorado firms on a trajectory to hit the $1 billion-in-sales mark this year or next include Chipotle Mexican Grill, Time Warner Telecom and Ciber Inc.
And one early Colorado blueprint company, EchoStar Communications Corp., which crossed $1 billion in 1999, is close to breaking through $10 billion in sales.
About the same odds, one in 20, apply for a $1 billion company getting to $10 billion, Thomson’s research shows.
Reaching $30 million to $70 million in sales is an important threshold for startup companies. But to get to $1 billion, sales need to accelerate at a high rate.
Besides momentum, blueprint companies tend to share several common managerial traits – the ability to exploit high-growth markets, to use alliances to break into new markets and to recruit skilled experts to the board of directors. It also helps to be in a large, fast-growing industry.
Restaurant chain Chipotle Mexican Grill should have an easier time carving $1 billion out of a $116 billion industry than what Boulder drugmaker Pharmion Corp. faces reaching $1 billion in a $40 billion industry.
Chipotle executives aren’t as focused on reaching specific benchmarks like $1 billion in sales as much as they are in executing their business plan, which this year involves adding around 100 new restaurants to the 500 already operating, said company spokesman Chris Arnold.
“If we run the restaurants the way we are capable of, all of those other things take care of themselves,” Arnold said.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
—————————————-
ECHOSTAR COMMUNICATIONS
Industry: Satellite television
Annual revenue: $8.425 billion
Year reached $1 billion: 1999
CHIPOTLE MEXICAN GRILL
Industry: Restaurant
Annual revenue: $627 million
Expected to reach $1 billion: 2007
DELTA PETROLEUM
Industry: Oil and gas
Annual revenue: $166 million
Expected to reach $1 billion: 2011
WILD OATS
Industry: Food retail
Annual revenue: $1.123 billion
Year reached $1 billion: 2004
FRONTIER AIRLINES
Industry: Airline
Annual revenue: $996 million
Expected to reach $1 billion: 2006
TIME WARNER TELECOM
Industry: Telecommunications
Annual revenue: $758 million
Expected to reach $1 billion: 2007
RED ROBIN GOURMET BURGERS
Industry: Restaurant
Annual revenue: $571 million
Expected to reach $1 billion: 2010
PROLOGIS
Industry: Industrial real estate
Annual revenue: $1.938 billion
Year reached $1 billion: 2005
PHARMION
Industry: Pharmaceutical
Annual revenue: $235 million
Expected to reach $1 billion: 2012
