WT Business Beat

By Nick Wakeman

Blog archive

My face is red

With each of our list issues such as the Fast 50, I always receive calls from companies asking why they were not ranked higher or weren't included at all.

When I answered the phone yesterday morning from a company that didn't make the Fast 50, at first it seemed a routine call. I explained how we calculated the compound annual growth rates and mentioned the common mistake companies make in determining the rate.

The person was very nice and asked if I could send her the formula, which I did. A short while later, I heard back from her. She plugged in the numbers and still came up with a figure higher than the No. 50 company on our list.

That's when my Monday went rapidly down hill.

The formula I had sent was from a master file for the Fast 50. I then went to the spreadsheet with the 2007 Fast 50 and looked at the formula. They were different.

The easiest way for me to explain how the two formulas are different is to show the formula for CAGR: CAGR = (EV/BV)1/n ? 1. The 1/n is an exponent. For the Fast 50, EV or end value is revenue for 2006; BV or beginning value is revenue for 2002; and N is 4.

Our mistake is that we used 5 for the n value, not 4. I still can't believe it, and still have no clue as to how it happened.

I was in a bit of a panic before I saw one saving grace of this mistake - we were consistent. Because all of the CAGRs were calculated with the wrong factor, the relative ranks of the companies did not change. So the No. 1 company is still No 1 and the order of all the other companies remains unchanged.

I was spared the embarrassment of calling companies and telling them that our rankings our incorrect. But still it is embarrassing.

We quickly posted a clarification our Web site and the numbers on the Web site are correct. The print issue, however, has the incorrect CAGR numbers. We'll run a correction and the list again with the correct CAGR in our next issue on Oct. 1.

Despite the mistake, I do urge you to read the Small Business Report. The stories are interesting, informative and compelling. Click here herelink to see the complete lineup.

Posted by Nick Wakeman on Sep 18, 2007 at 9:54 AM

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