How Companies Get On The Top 500 List

Every year the Fortune 500 list ranks companies both in the public and private sectors by total revenue. This list has grown to now feature nearly 1000 companies. Making it on the list shows that you have been recognized for the achievements your company has made. In the business world, making the Fortune 500 list is a big deal. However, most businesses never make it into the list. If you dream of making it on the list, here’s how. 

What is a Fortune 500 company?

Every year Fortune magazine ranks companies by their sales revenue as reported by the business in the previous fiscal year. The top 500 enterprises by that criterion become the Fortune 500. The next 500 companies make up a longer list known as the Fortune 1000. Making any of these lists is impressive in its own right, but the real milestone is making it into the top 500. 

The list was first published in 1955 when the American economy was centered around production. At the time, the list consisted mainly of companies that were in the manufacturing, mining and energy sectors. However, there were large companies that were left out by this criterion. Over the next few years, the service sector became increasingly vital, and it became quite apparent that it should be included. In 1994 the list’s criteria changed to include companies in the service sector too. Diversity and inclusion statistics now show that the list has companies in mostly all sectors.

Revenue Threshold

The annual revenue reported by companies is one part of the equation. These companies are ranked according to the revenues they reported to their respective government agencies. These revenues are generated from either their core operations, discounted operations, or consolidated from their subsidiaries. Companies must report their income to government agencies to qualify for the list. However, or all companies use the same fiscal year, but since they are often close, it still allows for the comparison. 

Companies that have subsidiaries whose annual revenue is consolidated into that of the parent company are also included. This is why Wallmart has been leading the list for the last eight years. This retail giant’s annual revenue is a consolidation of all its stores countrywide. The revenue threshold for companies to qualify for the list was 4.825 billion dollars in 2013 and kept changing every year. For a company to reach these revenue figures, businesses must have adaptability, long term focus, prioritize people and strong ideas. By working out a reasonable revenue goal, you might get on the list in the next ten or twenty years, depending on you.

Adaptability

Companies often have to adapt and adjust to the prevailing market environment because no product or service is immune to the ever-changing customer demand. Companies that regularly feature on the Fortune 500 list have learned to adapt to these changes. If you aspire to be on the top 500 list, your company’s ability to adapt to market conditions will play a significant role in it. Understand that the road to being a fortune 500 company will take a lot of years, and whatever services or products you are currently offering might not be enough to get you all the way there. Change is inevitable; you will have to keep up with the market changes and your client’s needs to enable you to keep providing them with value. This might mean that you will stray from what is your core product or service today. For instance, IBM made the personal computer as a business tool, but it has not built one in years.   

Long term Goals

These top companies also focus on their long-term goals. Unless you are on the verge of making it big, any realistic plan to get into the list requires time and a lot of it. Many of the companies on the list are quite old. For example, DuPont and Colgate-Palmolive are getting into their third century of operation. Even in the tech industry, longevity is essential. Tech giant Google has been around for about 20 years, while Apple has been here for 40. The company, now known as IBM, was established in the 19th century. 

Human resource

Human capital is the scarcest resource in today’s business market, and it plays a big part in the growth of a company. It also influences the quality of employees and leaders in a given company.it is therefore essential that you understand and prioritize people, whether it is your employees or clients. For instance, companies can report little to no profit in a fiscal year and still have investor support and maintain positive growth.

Strong Vision

With strong ideas on products or services, companies are also able to feature on the list. These big ideas are more necessary than having a large capital. They are your company’s vision. And can help create new revenue streams that boost the annual turnover. These factors combined affect a company’s growth and overall revenue.  

Sustained Growth

A company can feature on the top 500 list even when they have lost money for the year. The list shows how much after-tax profits a company made, but this does not play a role in the ranking criteria. Part of being a fortune 500 company is having the financial ability to weather difficult times. Your company’s ability to maintain continued, steady growth yearly, plays a massive part in whether or not you will feature on the list. For instance, Tesla, the car manufacturer, was ranked in the 260th position in the 2018 list despite having been on the verge of failure several times in its history. 

The Fortune 500 list is crucial because it allows companies to see who their main competitors are. It also enables other companies and readers of the magazine to follow changes in the business sector and know who are the influencers of the country’s economy. Being on the list has many advantages and disadvantages, but in this case, the good outweighs the bad.

Adam Hansen