At the end of the third quarter last year, Trendsetter companies were projecting their 1994 composite revenues to be 27.3% higher than in 1993. This estimate is 10% higher than just one quarter earlier, indicating increasing bullishness about final-quarter performances. At press time, with the final quarter drawing to a close, the economy's strong performance gave every indication that the Trendsetter companies' bullish forecasts would be borne out.

"The improved forecasts for year-end performances should place these companies in a very strong position in 1995," says George Auxier, national director of Entrepreneurial Advisory Services for Coopers & Lybrand L.L.P.

Optimism about the economy as a whole also remains high. Six in ten growth-company CEOs (63%) said they were optimistic about the economy, a slight gain of two points over the second quarter. Another 30% remained uncertain, while only 7% were pessimistic.

Looking ahead over the next 12 months, growth-company CEOs anticipate that their companies will grow at a rate of 28.2%, which is 6% faster than service sector firms: 29.8% versus 26%, respectively.

Some of this positive outlook can be traced to the diminution of two potential barriers to growth: increased taxation and lack of customer demand.

Fear of increased taxation has decreased sharply in the past year as a potential barrier to growth: 51% expressed that concern in the last quarter, compared to 75% during the third quarter of 1993, a decline of 24 points, including a drop of seven points in the latest quarter alone.

Since the survey was taken, the Republican sweep of both houses of Congress and the tax-cut proposals put forth by President Clinton, the Republicans and the Democrats have further boosted business-owners' optimism regarding the tax climate for 1995.

Another major concern -- lack of demand -- declined significantly, to 39% last quarter from 58% in the third quarter of 1993, a drop of 19 points.

Fear of legislative and regulatory pressures remains growth companies' primary concern, although it too has moderated to a 57% level, down eight points since the third quarter of 1993.

Again, the results of the November elections are not reflected in this poll. Both the newly elected legislators in the Federal government and many state governments and the incumbents who managed to retain their offices have given strong indications that they will enact new laws that will be less restrictive to many businesses.

The only potential barrier to growth which shows a notable increase this quarter is a concern about future availability of skilled, trained workers. Forty-one percent of Trendsetter CEOs voiced this concern, up six percentage points from the third quarter of 1993.

"Today growth-company CEOs are far less worried about demand and taxes and far more concerned about the lack of an available, skilled workforce," says Auxier. "They appear relieved that the health care debate did not result in tax legislation. But their alarm about trained work-force availability may suggest possible future wage inflation, a concern shared by the Federal Reserve Board."

Although the percentage of firms expecting to add new hires over the next 12 months has leveled off at 75%, planned composite workforce additions have grown from 15% in the second quarter to 16.1% last quarter, up 7%.

Product and service sector firms reveal similar hiring plans: 16.1% and 15.9% composite workforce additions, respectively. However, because growth-company product firms employ an average of 15% more workers, in absolute numbers these firms plan significantly more hires.

Planned hiring of professionals and technicians was most evident, with 47.7% anticipating additions, followed by marketing and sales staff, expected by 43%.

More than six in 10 Trendsetter companies (62%) are planning major new investments of capital over the next 12 months, a level that has remained relatively stable over the past year. They expect investment levels to represent 11 .8% of composite revenue, a slight increase over the previous quarter.

The most popular major new investment is in information technology, cited by 56% of growth- company CEOs, up two points from the previous quarter. And nearly half (48%) said they plan to increase investments in facilities expansion, up four points overall and seven among product firms.

Planned new investments in sales promotion were cited by 48%, with new advertising investments showing a sharp increase to 44%, up 6%. New product development, on the other hand, declined in importance, down six points to 47%.

The Trendsetter companies' willingness to invest in new information technology is considered particularly significant. Computers and information technology (IT) have played a critical role in the development and management of America's fastest growing companies, according to research conducted by Coopers & Lybrand.

A total of 86% of fast-growth company CEOs are advocates of IT, rating computers and IT "extremely important" (60%) or "very important" (26%) to the profitable growth of their business. An additional 12% rate them "somewhat important," while only 2% score information technology as "not particularly important."

TWO TRENDS

"Two intersecting trends -- decreased costs for technology and increased access to sophisticated software and databases are helping growth-companies that use these tools to break away from the pack," says Mike Blum, a partner specializing in information technology for growing and mid-size companies. "Effective use of technology can help a 'David' become a 'Goliath."'

Currently, CEOs of fast-growth firms estimate that their annual investment in computer information systems represents a remarkable 7.84% of their overall revenues. Over the next 12 months, they expect this level of investment to grow to 8.68%, an increase of 11%. One-third expect to increase their IT investment, while only 8% expect a decrease. The remaining firms expect either to retain the same level (55%) or are uncertain.

"Although the need for information technology remains critical to these rapid-growth firms, the good news is that such an investment no longer comes at a high price," notes Blum. "Unlike their larger counterparts, which must devote considerably greater revenues to IT support, Trendsetter companies can take advantage of personal-computer-based technology and client-servers that provide a high level of sophistication and require little or no support. With PCs, the barrier to entry has fallen."

Trendsetter firms that are IT advocates tend to be somewhat larger than the others in terms of employees -- 65 median employees versus 56 employees -- and in average revenue, $29.5 million compared to $17.1 million. These strong believers in IT are also well ahead of the others in expected company growth over the next 12 months.

All in all, the growth-company outlook for 1995 is decidedly positive. "Trendsetter companies, as evidenced by the latest survey results, are gearing up for a new level of marketing," says Auxier. "Their perceptions about the climate for business growth have changed."

Coopers & Lybrand's "Trendsetter Barometer" is developed and compiled by the firm's Entrepreneurial Advisory Services group with assistance from the opinion and economic research firm of Business Science International. At each Coopers & Lybrand office, an Entrepreneurial Advisory Services team is available to serve the needs of growing and mid-size companies.