Not too many investors would link growth with such everyday, unglamorous things as equipment leasing, automobile renting, business-credit checking and employment agencies. Yet growth is there.

As our economy matures and becomes wealthier, the business service industries assume increased importance. A society well supplied with goods and money can afford the conveniences it desires. Furthermore, the growing size, complexity and specialization of business and government favor a host of business services ranging from tax advice to marketing research.

Business services cover only a part of the much broader service industries category which, in government statistics, includes everything left after eliminating agriculture, manufacturing, construction and mining.

Despite recurring cyclical swings in U.S. economy, consumer outlays on all kinds of services have exhibited an uninterrupted rise since the end of World War II, according to a study by Steiner, Rouse & Co. which shows that service expenditures have risen about 165 per cent from 1947 to 1960 against 90 and 60 per cent for personal expenditures on durable and nondurable goods respectively. Moreover, services are expected to become the fastest-growing major segment of the economy over the next decade, with a projected rise of more than 50 per cent, exclusive of inflationary price factors.

Factors favoring growth of service companies are freedom from foreign competition and absence of the excess capacity present in the nation's basic industries. Also, their better profit margins result from their ability to pass on higher costs more easily to customers.

One of the fastest growing services is equipment leasing. From a humble beginning of $10 million a decade ago, it is running well over $400 million a year and should go beyond $1 billion by 1965. There are few industries in the country which scored a fortyfold sales jump in ten years, with further growth expected at an annual rate of better than 100 per cent for the next five years.

"For decades, leased equipment has been available in specialized fields," said E. F. Hutton & Co., "but, in recent years, the range of products which may be leased has expanded dramatically. Now, all levels of the economy function with a growing amount of leased equipment and almost every comfort and need of life can be catered to, from cradle to wheelchair."

A rental revolution is changing America's way of doing business. Behind this revolution is the businessman's necessity of turning over his capital as fast as he can. You can't make money on no sale or only a few sales. To increase sales, it is necessary to turn over inventory. If capital funds are imbedded in machinery and equipment, they can't be released for, among other things, turning over additional inventory. Renting is an obvious alternative.

The growing popularity of renting or leasing is also attributable to the large increase in corporate debt in the last decade. Between 1950 and 1959 there was a rise of about 150 per cent in corporate debt due to the rising capital requirements of a rapidly expanding economy. Leasing obviously represents a solution, at least partially, to the multiplying capital requirements.

The lease represents a departure from the traditional concept of asset ownership as it involves only its use for a specified time. There is evidence that this use-value concept is gaining acceptance in other areas of the economy as well. The stock market may well have given a dramatic demonstration of its prophetic qualities when it abandoned the asset-value theory of establishing value and adopted the price-time-earnings multiple. The switch to valuing a company by its earnings power rather than by its assets is a good example of the use-value concept in action.

In addition to saving funds for other uses, renters have the additional advantage of the newest equipment or machinery available, which is important in this era of rapid technological advances. Then, too, there is a tax advantage, as rental fees are treated as a cost of doing business.

Leading the rapidly growing equipment-leasing field is Lease Plan International Corporation, which, first offered to the public on August 12, 1959, at $11.50 per share, appears to have a period of substantial growth ahead of it. It is expanding operations in such areas as office machines, computers, electronic equipment, etc.
The equipment-leasing industry is believed still in its infancy. Take computer renting, for instance. A brand-new business is being built up around computer-service outfits, relatively new themselves.

For instance, C-E-I-R (Corporation for Economic & Industrial Research) rents time to other companies on the high-speed computers that it, in turn, rents from IBM. Another major part of its business comes from the use of its technical knowledge to help other companies to find answers to their problems in the form of mathematical formulas with the aid of the large highspeed computers. The problems could be anything, ranging from those of outer space to controlling the costs of a toy-making plant.

There are about a score of independent computer-service companies, including C-E-I-R and Statistical Tabulating Corp. A rented IBM 1401 computer from the latter helped a relatively small New York bond dealer, William S. Morris & Co., to beat out the giant Bank of America syndicate in two major State of California bond issues.

Also participating in the computer-service field are the major computer manufacturers themselves. International Business Machines, for instance, which has operated seventeen computer rental offices since 1957, expects to add fifty-two more in the next five years.

In the private passenger-car leasing field, Ryder System, a major truck-leasing company, is challenging the leadership of "rent-a-car" Hertz by cooperating with the National Insurance group of Columbus, Ohio. Under their joint plan, any individual may lease any car of his choice, and a single monthly payment will cover the cost of leasing, insurance, service, maintenance, taxes, etc.

On its part, the Hertz Corporation believes that its years of greatest growth are still ahead. According to Giles A. Wana-maker, Hertz executive vice president, its potential markets are "virtually unlimited." He said that the expansion possibilities for Hertz were analogous to those of the airlines, which were "well aware that there are many millions of people who have never flown in a plane."

Mr. Wanamaker said that Hertz was directing its sales campaign at the many millions who have never rented a car and was striving to convert more companies to full-service truck leasing.

There are all kinds of services created to meet the needs of other businesses. Manpower, Inc., has benefited from a scarcity of qualified men for certain jobs. The scarcity, according to Census Bureau Director Robert W. Burgess, will continue at least for ten years.
 
Manpower, Inc., is now the world's leading temporary-help service organization, serving 66,000 employers including 98 of the 100 largest corporations. Its Office Division furnishes a complete line of temporary help ranging from key-punch operators to secretaries. Its Industrial Division provides a variety of maintenance and other industrial services while a newer, more rapidly growing Merchandising Services Division was created for product demonstration, survey interviewing, etc. Its revenues have climbed from $5.75 million in 1955 to $35.25 million in the fiscal year ended June 30, 1960, believed equal to the results of all major competitors combined.

"Of greatest future significance," said A. G. Becher & Co., "is Salespower, a wholly owned subsidiary, which utilizes Manpower's national office network to provide trained groups of sales personnel to launch new products or otherwise meet the need for special sales promotion. Salespower reputedly offers 'a new dimension to selling' and can put 1,500 salesmen on a nationwide campaign within 24 hours." This subsidiary could, in time, rival the parent company in revenues.

Certainly the best known among business companies, Dun & Bradstreet is expected by experts to continue in its solid position of strength despite increased competition. Among the reasons for this healthy future are the company's highly trained personnel, its 17,000-mile private wire network and, above all, its files containing data compiled over more than a century, and currently including three million business organizations. No wonder the name Dun & Bradstreet has literally become a synonym for business credit information.

Another well-known service is that of A. C. Nielson. His ratings have long been a mainstay of the television industry and its advertisers. Nielson's media service was set up to do a somewhat similar job for the magazine industry.

Another business to serve other businesses is technical writing. It has grown mainly as an accompaniment to the rapid advances in military sciences and space technology which create the need for accurate, up-to-date military manuals. The Armed Forces needed a new "service" to help interpret the increasing technical complexities of weapons systems. Even defense contractors, which mostly maintain in-house technical writing departments, require the help of specialist houses.

Another business service of growing magnitude is one of providing financing services to the business community. Leading the field is Walter E. Heller & Company. The earnings growth of Walter E. Heller & Company is comparable to that of any of the more popularly known growth companies. It is based on the expanding business population with the resultant increasing requirements for working capital funds. Its services include re-discounting retail-automobile paper and small-loan paper, financing industrial installment notes receivable, collateral loans, factored accounts receivable, inventory loans, and financing motion-picture and television film-production loans.

This field is virtually unlimited. With an anticipated continued strong demand for business services the shares of companies dominant in their respective fields should provide above-average, long-term opportunities for capital appreciation.

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