Sales by companies on Inc. magazine's Inc. 500 list were incorrectly reported in a chart in last week's Washington Business. The numbers should have been in thousands of dollars. (Published 12/10/90)

Glenn Smoke founded Sterling Courier Systems in 1985 because he was fed up with "questionable business practices" at the air courier company for which he was working. After seven years in the business, he said, he also knew how to do it himself.

With $80,000 of his savings, Smoke started lining up contracts and narrowly defining the firm's niche: deliver packages by airplane during the same day only, and only deliver within the continental United States. In his first year, Sterling Courier had two employees and $108,000 in gross sales. Last year, with 24 employees the Herndon firm's sales were $4.2 million.

Such rapid growth -- a 3,780 percent increase in sales over five years -- earned Sterling Courier position number 59 on Inc. magazine's Inc. 500 list.

Smoke has a lot of neighbors on the list, too. Forty-six Washington area firms (45 in the Virginia and Maryland suburbs, one in the District) were among the Inc. 500, which ranks independent, privately held companies by percentage increase in sales from 1985 to 1989. To qualify, companies must have had $100,000 to $25 million in gross sales in 1985.

Of the 10 most populous metropolitan areas in the country, Washington ranked highest in terms of per capita concentration of Inc. 500 companies, according to the survey. Washington had 10.7 firms on the list for every 1,000 residents of the area. The D.C. area beat out two cities commonly known as centers of entrepreneurism: Boston had 6.1 firms per 1,000 residents and San Francisco had 5.6.

Such a concentration of emerging growth companies confirms that the Washington area is a center for entrepreneurism -- or at least it was in the mid-1980s. Last year, the area had 30 companies on the list.

For Smoke, success came by sticking to his clearly defined niche, he said, and by compensating employees well. Most startup companies in the air courier industry, he said, make overnight deliveries and keep their prices lower than Federal Express.

"They were trying to compete with Federal Express, which I see as a disaster scenario," Smoke said.

Clients of the courier company range from commercial printers to health firms that move organs for transplant operations. Such deliveries, Smoke said, "tend to not go up or down with good times or bad times. These tend to be pretty steady interests."

In addition to keeping the quality of service high, Smoke keeps his employees happy by paying big bonuses: "We've paid out over $800,000 in bonuses over the past five years."

That message of building a customer base through high-quality service and happy employees was echoed by a number of local firms that made the magazine's list.

Fred Dual, president of Dual & Associates, 14th on the list, said that getting government contracts requires quality employees. In the past five years, his firm's sales have grown to $17 million from $161,000. In the same time period, employment jumped to 212 workers from eight.

Dual started his company with 20 years of experience in the Navy, so he knew the procurement process, but he had another advantage: In 1985, Dual & Associates entered the Small Business Administration's 8a minority business contract set-aside program. "It unquestionably has been a major factor in our rapid growth," Dual said.

Dual said he wasn't surprised by the Washington area's concentration of Inc. 500 companies, because there are so many agencies here that generate business activity.

"To me, Washington is sort of like the center of the world," he said. "It seems like everything that is happening in the world is in orbit around Washington, D.C. Most of the agencies that you want to deal with are headquartered right here."

This flurry of business activity made Jorge Kfoury start JAK Construction in Sterling in 1982. Noticing that no companies in the area specialized in interior construction, which in this area can mean expensive office work, he started the company to serve that niche.

"I started with $400 and a tool belt and no contacts," Kfoury said. It took him about five months to come up with his first contracts, but once he did, he said he built up a customer base by treating his clients and employees well.

Last year, JAK had more than $18 million in gross sales. This year's local building slowdown has driven many builders into interior work, making the industry more competitive, Kfoury said, but he still expects revenue to be about $500,000 higher this year compared with last year.

Kfoury company's slowed growth may be indicative of what many firms are experiencing this year -- Inc.'s survey noted that Washington companies may not have such a strong showing on future lists.

Charles Heller, director of the Dingman Center for Entrepreneurship at the University of Maryland, speculated that cuts in defense spending in particular could mean bad times for area entrepreneurs. The Washington area's concentration of firms on Inc.'s list "doesn't surprise me," he said. "I wonder, though, how that list will look next year."