Finding Demand, Rapid Growth and then: Selling

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There’s no denying it: rapid business growth is great for companies that can accommodate increased sales.  It leads to new job creation and an influx of dollars in to the local economy.

At the same time, it raises eyebrows of competitors who may seek to acquire the fast growing business before it hinders the growth of their own company.

This is exactly what happened to 2011 Inner City 100 winner Salar, Inc.

Salar, based out of Baltimore, provides electronic filing services for the health care industry. They integrate information and documentation systems for doctors and hospitals, enabling health care providers to move from paper-driven processes to electronic data tracking and storage.  

CEO Todd Johnson and his co-founder, Meir Gottlieb started Salar right after graduating from Cornell. The two opted to start their own company rather than trying to work for someone else. They graduated at the height of the dot-com boom, making an internet start-up a wise decision. Initially, they offered a software development service that attracted a few health care service clients. As a result, they began to develop a keen understanding of the digital serviced in high demand by health care customers.

Using this expertise, they changed the company’s focus in 2005: rather than providing software services, they began to develop a concrete product intended solely for U.S. health care providers. The electronic filing system is now available to hospitals and doctor’s offices nationwide.

The change in focus has helped propel Salar to rapid growth. The company nearly doubled revenues from the year prior. Their growth trajectory remains strong.

Certainly, much of the growth has to do with the new federal focus on health care information—an opportunity that Salar was poised to take advantage of and jumped on the opportunity. The federal government recently invested over $31 billion in health care IT, helping firms like Salar rise quickly. Furthermore, the health care industry has historically underinvested in IT services: currently only 1 in 41 hospitals offer the technology that Salar sells. This represents a huge opportunity for established and successful software companies like theirs that directly serve the industry, and can help health care companies become more technically sophisticated.

To keep pace with the rapid growth and changing federal regulations, Johnson admits that he sometimes overburdens his employees. But as a result, he is able to avoid over-hiring and the risk of layoffs during the feast and famine cycles of the health care market.

Also contributing to the company’s rapid growth: its inner city location in the Fells Point neighborhood of Baltimore. This bohemian area used to be an old shipyard but is now populated by numerous other small businesses, like microbreweries (who doesn’t love that kind of neighbor?!) and tech companies. The area has excellent access to transportation, helping to attract employees and making travel for Salar’s sales team a breeze.

But alas, the rapid growth led Salar to the same fate as many other high growth firms: in August 2011, Salar was acquired by Atlanta-based Transcend Services, Inc. in an $11 million cash-for-stock transaction. Transcend, to the delight of the city of Baltimore, opted to keep the company’s inner city location in Fells Point.  Now Transcend is adapting Salar’s growth model to continue expanding within their urban locale.

Small businesses: tell us - have you considered acquisition, either acquiring another company or selling yours to a competitor, as part of your growth strategy?

BY Alex Rodriguez on February 21st, 2012

TAGS: small business | business | entrepreneur | ic100 | acquisition | baltimore | health care