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Brady Schmidt (left) and Geoff Klein of Coulter, Schmidt & Klein. Photo by Pat Christman

Making a plan Strategies vary for business financial planning

Also in this issue • Kato Cue Club • Ignition Fitness & Sports • Cheese & Pie Mongers

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F E A T U R E S February 2015 • Volume 7, Issue 5

Business owners seek help from financial planners for a number of reasons, but setting up retirement plans for themselves and employees tops the list.

Josh Raines has traveled the country to compete in pool tournaments. Now, he and his wife, Erin, have opened Kato Cue Club in downtown Mankato.

Jason Tompkins took his lifetime passion for exercise and fitness and opened Ignition Fitness & Sports on Sibley Parkway in Mankato last year.

Tim Harbo and his wife Liberty Warren recently opened The Cheese & Pie Mongers in downtown St. Peter, offering artisan cheese and homemade pies.

MN Valley Business • February 2015 • 5

■ February 2015 • VOLUME 7, ISSUE 5 PUBLISHER James P. Santori EXECUTIVE EDITOR Joe Spear ASSOCIATE EDITOR Tim Krohn CONTRIBUTING Tim Krohn WRITERS Kent Thiesse Heidi Sampson Nell Musolf Ted Ornas PHOTOGRAPHERS Pat Christman John Cross COVER PHOTO John Cross PAGE DESIGNER Christina Sankey ADVERTISING Ginny Bergerson MANAGER ADVERTISING sales Jen Wanderscheid Theresa Haefner ADVERTISING Barb Wass ASSISTANT ADVERTISING Sue Hammar DESIGNERS Christina Sankey CIRCULATION Denise Zernechel DIRECTOR For editorial inquiries, call Tim Krohn at 507-344-6383. For advertising, call 344-6336, or e-mail mankatomag@mankatofreepress.com. MN Valley Business is published by The Free Press Media monthly at 418 South 2nd Street., Mankato MN 56001.

■ Local Business memos/ Company news................................7 ■ Business and Industry trends.........8 ■ Minnesota Business updates....... 10 ■ Business Commentary................. 12 ■ Construction, real estate trends.. 33 ■ Agriculture Outlook...................... 34 ■ Agribusiness trends..................... 35 ■ Job trends..................................... 36 ■ Retail trends................................. 37 ■ Greater Mankato Growth.............. 38 ■ Greater Mankato Growth Member Activities ....................... 40

From the editor

By Joe Spear

Small business rises too

he big news of the Mankato business scene over the last year has of course been the record growth of new commercial and multi-family residential construction. But this month’s Minnesota Valley Business also shows the need and value of small businesses along with the opening of new office towers and corporate headquarters. Small business growth is not always readily observable like an office tower, but the Mankato region seems to have a steady growth of small business startups. In the last year, several small businesses made a splash from one end of town to the other. Friesen’s Bakery opened in Old Town and the Eatery Tap restaurant opened on Madison Avenue hill. Paging through the Greater Mankato Growth New Business section of Minnesota Valley Business for just the last three months or so, we see new businesses opening up including White Orchid, Perfect Tan, Pieology Pizza, Freedom Home Care LLC, Front Street Tattoo and Z Wireless. This month’s edition features two more new small businesses. Husband and wife team Josh and Erin Raines have opened up the Kato Cue Club, a new billiard hall that is fitted with top of the line pool tables. Raines has long been a pool player who valued quality equipment and he notes the closest similar establishment is in Burnsville. He says there is a hefty market for pool playing in the Mankato region. Tim Harbo and his wife Liberty Warren, have established The Cheese & Pie Mongers shop in St. Peter. The business features artisan cheese from all over and home-made pies. They learned business from Tim’s parents, who have long operated The Welsh Heritage Farms Apple Orchard & Pie Shop of Lake Crystal. While Tim learned working for his parents Larry and Pam, the new venture will be a little different. They’ll go from experience in a seasonal business he grew up with to a year-round business.

6 • February 2015 • MN Valley Business

The business seems to take the same approach as the other food and food services businesses opened up recently by local owners. “We believe that is a good idea to support our local businesses as much as possible,” Harbo said. “Also, we find that people are looking to purchase locally as well, especially in fruits and vegetables and that’s half the battle.” With each new locally owned business comes an attitude and allegiance to the hometown customers. Jason Tompkins, owner, manager and coach at Ignition Fitness & Sports just completed his first year in business in Mankato. He sees fitness as a lifestyle rather than a resolution and aims to work closely with individual customers, young and old. The business offers a twist on a typical fitness club in that it works with young athletes in training as well as all other ages and conducts a test of the seven fundamental human movements with clients. It offers 2,000 square feet of turf rental, for teams to practice soccer, lacrosse or their golf swing. He clearly has a passion for his business. Regular exercise helps a person feel better, physically and mentally, he says. “Exercise clears your mind and it’s also good for cognitive development.” We round out our coverage this month trying to sort out the complicated world of retirement planning, estate planning and succession planning. A number of local experts share their knowledge of these complex and vexing issues. It’s an extremely helpful primer for family businesses looking to the future. But the state of small business startups in the Mankato region seems alive and well. That people have confidence to taking the risk of starting a small business suggests the regional economy as a whole seems on an upward path. MV

Joe Spear is executive editor of Minnesota Valley Business. Contact him at 344-6382 or jspear@mankatofreepress.com

Local Business People/Company News

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Workman honored as wealth manager

Tony Workman of Workman Retirement Planning has been chosen as one of Minnesota’s Five Star Wealth Managers for 2015. Five Star Professional partnered with Minneapolis/St. Paul and Twin Cities Business magazines to recognize wealth managers who provide quality service to their clients. Workman and other award winners were in the January issues. The award program was the largest and most widely published award program in the financial services industry. The award is based on multifaceted research methodology which incorporates input from peers and firm leaders along with client retention rates, industry experience and a thorough regulatory history review. ■■■

Greener world expands

Waseca-based Greener World Solutions expanded its spray foam insulation division. The company recently purchased enough equipment to increase their insulation capabilities by 25 percent. The purchase was prompted by a winning bid for a project in Belize. The new equipment was sent to the job site in Belize and used to apply spray foam as a sealant to control moisture on bins in the area, according to owner Dan Bulfer. When the equipment arrives back in the states, it will be used to meet a steady rise in demand for spray foam insulation in southern Minnesota.

Velasquez young professional of the year

Blethen, Gage & Krause announced that Kevin Velasquez has been selected by the Greater Mankato Growth Young Professionals as the 2014 Young Professional of the Year. This honor is awarded to an individual with a demonstrated commitment to the greater Mankato area through civic and business involvement during the past year.

Kevin Velasquez

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Abdo recognized by remodeling industry

Abdo, Eick & Meyers was recognized for its longstanding commitment to clients within the remodeling industry, as well as its dedication to listening to clients’ needs and customizing accounting solutions. The award came from the National Association of the Remodeling Industry, Minnesota. Kevin Kalal, of Abdo, is beginning his term as president of NARI MN’s board of directors. He is joined on the board by Abdo, Eick & Meyers senior accountant Heidi Lellman, who serve as the board’s treasurer. The annual NARI MN COTY Awards recognize excellence in the areas of aesthetics, functionality, superior craftsmanship, use of innovative construction materials and techniques, overcoming difficult obstacles, and meeting client needs. This year, the competition received 90 entries across 22 categories from remodeling contractors, firms and professionals throughout the state.

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Lee promoted at TBEI

Truck Bodies and Equipment International announced the promotion of Steve Lee to Engineering and Quality Manager at their Lake Crystal facility. TBEI’s Lake Crystal facility manufactures the Crysteel, J-Craft and Ox SuperDump lines of dump bodies. Lee has been with Crysteel/TBEI for more than 20 years, starting as a drafter.

Steve Lee

Alemar Cheese named national finalist

Alemar Cheese, a Mankato artesian cheese company, announced that its flagship cheese, Bent River Camembert, is a 2015 Good Food Award Finalist. From the 1,462 entries in 11 different categories — beer, charcuterie, cheese, chocolate, coffee, confections, honey, oils, preserves, pickles and spirits — 207 finalists were identified. Judges included chefs, retailers, food writers, farmers and food crafters. Alemar’s owner is Keith Adams and the cheesemaker is Craig Hageman.

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New Ulm shop featured in magazine

Sewing Seeds Quilt Co., a quilt shop in New Ulm, has been chosen as one of the 10 featured shops across the United States for the Spring/Summer 2015 issue of Quilt Sampler magazine, published by Better Homes and Gardens. Quilt shops submit a detailed application on their history, business promotions, charitable work, teaching schedules and design philosophies. A panel of quilt experts narrows the final list to 10 featured shops. Sewing Seeds Quilt Co and the other shops were photographed and interviewed by a team from Quilt Sampler, which will be available on newsstands on May 5.

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CliftonLarsonAllen announces promotion

CliftonLarsonAllen promoted Coty Bruender, to Audit Senior, Manufacturing Group in the Mankato office. CLA’s has a staff of 3,600 nationwide and serves businesses, governments, nonprofits, and the individuals with audit, tax, consulting, and outsourcing services.

MN Valley Business • February 2015 • 7

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Business and Industry Trends

Employment

electricity generation in 2013. • Minnesota ranked seventh in the nation in net electricity generation from wind energy; its net generation was 8 million megawatt hours in 2013, an increase of 5.9 percent from 2012.

The number of people receiving unemployment benefits in 2014 - 178,649 – was the lowest since 2007. In 2009 the number of claims was 351,458 and in 2010 it was 348,780. The state’s unemployment rate is the lowest since 2001. “The state’s low level of unemployment benefits paid in 2014 is another indicator of the state’s economic strength,” Katie Clark Sieben, commissioner of the Department of Employment and Economic Development said in a statement. The U.S. Department of Labor recently presented DEED with its 2014 Performance Excellence Award for Unemployment Insurance Appeals. DEED received the award for creating a new, innovative training program for its unemployment law judges and for developing an online self-service scheduling system for appealing decisions on unemployment insurance benefits.

U.S. crude production holds

Unemployment claims lowest since ’07

■■■

Energy

Snapshot of Minnesota

The federal Energy Information Administration provides the following snapshot of Minnesota’s energy production and energy use: • Minnesota ranked fourth in the nation in ethanol production capacity in 2013. • Minnesota, 21st in the nation in population, was 29th in residential per capita energy use despite its very cold winters. • About 46 percent of the electricity generated in Minnesota came from coal-fired electric power plants; most of its coal supply was brought in by rail from Montana and Wyoming. • Two nuclear power plants near Minneapolis-St. Paul, the Monticello reactor and the Prairie Island I and II reactors, accounted for 21 perercent of Minnesota’s net

Total U.S. crude oil production averaged an estimated 9 million barrels per day in November. Projected total crude oil production averages 9.3 million. The 2015 estimate has been revised downward from previous estimates due to falling oil prices.

Heating costs easing

U.S. population-weighted heating degree days were an estimated 18 percent higher than the previous 10-year average for November. Despite a cold start to the winter, lower fuel prices and the National Oceanic and Atmospheric Administration’s projection of near-normal temperatures for the remainder of the winter are expected to help lessen consumer expenditures on home heating compared with last winter. Lower crude oil prices are expected to help reduce household heating oil expenditures by 27 percent ($632) compared with last winter, with U.S. heating oil prices averaging 20 percent lower at $3.09/gal. Propane prices are expected to be 13 percent lower in the Northeast and 26 percent lower in the Midwest, resulting in households spending 20 percent and 34 percent less on propane in those regions, respectively.

Less stored natural gas

Natural gas working inventories at the end of November totaled 3.41 trillion cubic feet 6 percent below the level at the same time a year ago and 10 percent below the previous fiveyear average. Despite the lower stocks at the start of this winter’s heating season, the Henry Hub natural gas spot price should average $3.98/million British thermal units this winter compared with $4.53 last winter, reflecting both lower expected heating demand and higher natural gas production this winter.

Renewable energy growing

Total renewables used for electricity and heat generation grew by 1.8 percent in 2014. Conventional hydropower generation fell by 4.4 percent , while nonhydropower

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8 • February 2015 • MN Valley Business

renewables rose by 5.1 percent. Nonhydropower renewables generation surpassed hydropower on an annual basis for the first time in 2014. In 2015, total renewables consumption for electric power and heat generation is expected to increases by 4.3 percent as a result of similar increases in both hydropower and nonhydropower renewables. Electricity generation from wind is projected to contribute 4.7 percent of total electricity generation in 2015. Continued growth is expected in utility-scale solar power generation, which is projected to average more than 60 gigawatt hours per day in 2015. Despite the growth, this remains just 0.6 percent of total U.S. generation. While solar growth has historically been concentrated in customer-sited distributed generation installations, utility-scale solar capacity slightly more than doubled in 2013. Utility-scale solar capacity will nearly double again between the end of 2013 and the end of 2015, with about two-thirds of this new capacity being built in California.

CO2 emissions up

Family Law Group Representing: Farmers Business Owners Professionals Individuals

Carbon dioxide emissions from fossil fuels increased by 2.5 percent in 2013 from the previous year. Emissions rose by 1.3 percent in 2014, primarily because of cold weather early in the year. Emissions are now expected to remain flat.

We focus on the following issues:

Ethanol hits weekly record

Ethanol production reached a weekly record of 982,000 barrels per day during the week ending November 21, exceeding the previous record of 972,000 barrels set during the week ending June 13, 2014. Ethanol production in November also reached a monthly average record of 963,000 barrels per day, exceeding the previous record of 959,000 barrels set in December 2011. Ethanol production averaged 931,000 barrels per day in 2014 and will hit 948,000 barrels per day in 2015. Biodiesel production averaged 89,000 barrels per day in 2013, 80,000 barrels per day in 2014 and should be at 84,000 barrels per day in 2015.

• Assisting clients in protecting their farms, businesses, and personal assets;

• Consulting on business planning, and “divorce-proofing” clients’ businesses and assets;

• Addressing custody issues, parenting time, and child support matters;

• Advising clients on aspects of estate planning and probate proceedings – from drafting wills and powers of attorney to creating complex trusts and family limited partnerships for tax planning and business succession purposes;

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MN Valley Business • February 2015 • 9

Minnesota Business Updates

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■ Xcel to double renewables Xcel Energy said it plans to double its renewable energy portfolio and reduce carbon dioxide emissions by 40 percent by 2030. The resource plan would help meet proposed federal regulations aimed at addressing climate change, according to a story by Minnesota Public Radio. Xcel stopped short of promising to retire part of its massive coal plant, the Sherburne County Generating Station. Environmental groups have pushed for retirement of Sherco’s two older units, but Xcel officials said the plant supplies reliable, affordable power and retiring part of it would cost more. Adding wind and solar will allow Xcel to rely less on Sherco’s two older units between now and 2030. But retiring one or more of Sherco’s units would require Xcel to seek alternative sources, such as a natural gas plant, adding cost. The resource plan was filed with the Minnesota Public Utilities Commission, which is expected to scrutinize the plan over the next year or so.

■ Johnson comes off tough year Johnson Outdoors, the Racine outdoor recreation equipment company, said strong sales of new products throughout the second half of its fiscal year nearly offset declines caused by brutally cold weather in the first half of the year. Still, the lower sales volume in the first half of the year, noncash charges in the second half and “a significantly higher year-over-year effective tax rate” hurt earnings, the company said in an earnings report. “Bottom-line results mask the progress made to help ensure a better balance of profitability across our portfolio in the future, notably in outdoor gear and watercraft,” Helen Johnson-Leipold, chairman and CEO said in a statement. Net income for the fiscal year ended Oct. 3 dropped 54 percent to $9.12 million, or 90 cents a share, from $19.3 million, or $1.95, in fiscal 2013. Sales in 2014 were “driven by 7 percent growth during the second six-month period, virtually offsetting declines during the first-six months caused by prolonged harsh winter conditions,” the company said. Johnson’s overall revenue declined 0.25 percent for the fiscal year.

■ GM revives French toast cereal General Mills brought back the French Toast Crunch cereal to the U.S. markets in midDecember amid sluggish demand for cereals. The old favorite is being brought back on popular consumer demand. General Mills stated that, among its cereals, it has received the maximum

10 • February 2015 • MN Valley Business

requests to reintroduce French Toast Crunch cereal. French Toast Crunch fans created a Facebook page, gathered online petition signatures and contacted General Mills’ customer services department demanding the return of the cereal. The toast-shaped, maple-flavored cereal was introduced in 1995 but discontinued in 2006. General Mills’ cereals business had been sluggish for the past couple of years which is partly responsible for its dismal performance over the past few years. Competitive pressures from alternatives such as yogurt, eggs, bread and peanut butter is hurting category growth. General Mills is not the first company to bring back an old favorite this year. In September, Coca-Cola re-launched its Surge soda, a sparkling beverage on e-Commerce site Amazon.com Inc. Surge was launched in 1996 but was taken off the market in 2000s.

■ Former Target CEO got $47 million Gregg Steinhafel, the former CEO of Target Corp., received retirement packages worth a total of $47 million when he left the retailer last year. Bloomberg reported on the retirement plan, citing it as evidence that wide disparities in compensation between U.S. executives and rank-and-file employees don’t end when their jobs do. In contrast, the average Target employee has about $45,000 in the company’s 401(k) plan. Included in the $47 million figure is $7.2 million cash severance payment and $4.1 million in vested stock. Steinhafel joined Minneapolis-based Target in 1979, when the company offered executives deferredcompensation plans that paid a guaranteed 12 percent interest. A spokesman for the company told the Minneapolis/St. Paul Business Journal that the board has since changed its executive compensation program.

■ American Legion bars battered The American Legion bar in downtown Bemidji served its last beer on New Year’s Eve. After 40 years at its location, Post No. 14 commander Bob Aitken told Minnesota Public Radio that the business just couldn’t stay afloat. “Times have changed,” Aitken said. “Membership has dwindled, and the members we do have don’t drink that much anymore.” Minnesota American Legion communications director Al Zdon said losing Bemidji’s Legion bar is a symptom of a larger problem. “Statewide and nationwide, the American Legion is in a state of decline,” he said. American Legion membership in Minnesota has dropped from 127,000 to 83,000 over the last 20 years. Most members served in the Korean War and Vietnam. Younger veterans who served their tours of duty in Iraq and Afghanistan aren’t signing up. Zdon doesn’t have exact figures on how many bars have closed since the bars are run by individual posts. He estimates roughly 100 bars closed around Minnesota in the last 10 years.

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MN Valley Business • February 2015 • 11

■

Business Commentary

By Ted Ornas

An untapped resource in the tight labor market

hen it comes to the labor force in the United States, the focus has been on the changing demographics and trending labor markets. Major demands will be put on employers looking to fulfill job openings. In our community, as the Greater Mankato Area continues to grow and add new employers, the local need for quality labor will also increase. Now is the time for businesses to think creatively and take a serious look at an untapped workforce. People with disabilities offer a quality labor solution. In fact, dozens of businesses in this area hire people with disabilities through MRCI WorkSource already, yet scores of qualified, trained workers still sit on the sidelines waiting to be hired. According to the U.S. Labor Department, the unemployment rate among disabled workers is nearly 10 times the average population. That doesn’t mean people with disabilities don’t want to work – the labor department will tell you that two out of every three unemployed persons with disabilities want to work. Today, more businesses are developing a workforce that reflects their customer base. They know it’s smart business. In fact, 92 percent of customers favor businesses that hire people with disabilities over companies that do not, according to the National Survey of Consumer Attitudes. And 87 percent of the public would prefer to give their business to companies that hire and support people with disabilities. Job retention, attendance, motivation, and a reliable workforce, are just some of the major issues facing businesses in the 21st century job market. Customers have expectations of prompt service and helpful attitudes. In response, MRCI WorkSource has developed internal training programs designed to provide these workplace and customer service skills to individuals with disabilities seeking employment. The eight-week training program, called Track to Success, has already produced dozens of workers for employers across our community. Graduates receive instruction on communication skills, interpersonal skills, situational judgment, problem solving and all aspects of building and maintaining solid customer service relationships. The program is the definition of a win-win situation. A person with disabilities finds a good job, and an employer receives a great employee. Businesses seek workers with disabilities In today’s labor market, some businesses have initiatives specifically designed to seek out workers with disabilities. Family owned Kwik Trip convenience stores created a retail helper position designed to help store managers. The retail helper has a variety of job duties that could include stocking, cleaning, emptying ice chests, and more. This position helps the store leader at each Kwik Trip perform more of their essential duties.

12 • February 2015 • MN Valley Business

The hours for the Retail Helper are 15 hours a week strictly day hours and no weekends. Although many workers with disabilities have their own transportation, day hours during the week allow someone to take public transportation if necessary. MRCI has helped find retail helpers at six Kwik Trip locations in the Greater Mankato area. Walgreen’s also provides employment opportunities to people with disabilities. Randy Lewis, recently retired as Walgreen’s supply chain and logistics senior vice president. He also is the father of a child with a disability. His experience inspired a new business concept at Walgreen’s distribution centers. Little did he know the business model he implemented would offer so many employment opportunities for people with disabilities. Another unexpected result was more efficient distribution centers. In 2007 Walgreen’s opened a state-of-the-art distribution center in South Carolina. The distribution center included touch-screen computers with large icons and easy to read type for the visually impaired, and flexible work stations. Elevators where installed for those who can’t use stairs. The distribution center is one of the most productive and efficient in the system. Myths & Misconceptions about workers with disabilities Myth Workers with disabilities have a higher rate of absenteeism than workers without a disability. Fact Companies such as DuPont have studies that show workers with disabilities are not absent any more than employees without disabilities. Myth Workers with disabilities get injured and have more accidents on the job more often than workers without disabilities. Fact Industry reports from major corporations find that people with disabilities do not get injured any more than non-disabled workers. Myth People with disabilities are inspirational, courageous, and brave for being able to overcome their disability. Fact People with disabilities are simply carrying on normal activities of living when they drive to work, go grocery shopping, pay their bills, or compete in athletic events.

Here’s What I’ve Learned In my 12 years helping people find employment, I often play the role of teacher. Helping perspective job seekers search for, apply, and interview for a job. In reality, they’ve taught me more. A book could be written about all the employment success stories I’ve witnessed or been involved in. People with disabilities want and need experiences on the job. They want the sense that they belong, and are a part of a team. Like all of us, people with disabilities want to live and work independently, and be productive citizens of society. Consider hiring from this untapped labor force to fulfill your next job opening. MV

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MN Valley Business • February 2015 • 13

Brady Schmidt (left) and Geoff Klein of Coulter, Schnidt & Klein

From retirement to succession Financial planners help businesses plan By Tim Krohn | Photos by Pat Christman

hether an individual or a business owner, planning for retirement becomes an important goal, especially with the approach of middle age. But for the business owner, it’s just one of several important financial planning decisions that need to be made, not just for their own benefit but for their employees and the future of the

14 • February 2015 • MN Valley Business

company. While things like succession planning, insurance or diversifying holdings are topics of concern, it’s often retirement planning – for themselves and their employees - that bring business customers to the door of a financial planner. “What they’re looking for when they come in is what

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Jim Lewis, of Ameriprise in Mankato kinds of retirement plans are available to them,” said Jim Lewis, a certified financial planner with Ameriprise in Mankato. For whatever reason they seek help, most financial planning decisions hinge on tax impacts. “They want to make sure they maximize dollars by minimizing taxes,” said Brady Schmidt, a certified financial planner with Koulter, Schmidt & Kline in Mankato. “We can work on strategies with them along with their accountant and attorney.” Schmidt works with his partner, Geoff Klein, out of their office in the Graif Building in downtown Mankato. With tax laws changing often and becoming more complex, keeping up with tax rules is tougher for CPAs such as Bob Kitchenmaster of Kitchenmaster, Klooster & Begalka in North Mankato. “It’s gotten a lot more complicated in recent years. I blame an incompetent Congress,” Kitchenmaster said. “There’s constant changes and the business customers don’t know if they’re taking advantage of things they should or are being caught by surprise by a deduction or something they didn’t know about,” he said. Beyond retirement planning, businesses owners are most routinely looking for ways to protect key employees — often through “key-man insurance,” and for ways to transfer their business at some point, either to family members or to an outside buyer. Retirement plan options For business owners, socking money away for retirement — for themselves and for their employees — can be done in a variety of ways, but finding the best fit for each

business is important. The financial planners say the size of the company is a key in picking a retirement plan, as well as the retirement goals and amount of money an owner hopes to put away for retirement. Generally, the 401(k) programs familiar to many employees, is reserved for large companies of 50 or more employees. Schmidt said that for smaller businesses, a SIMPLE IRA or SEP IRA plans come with fewer complications and less cost for the business owner. “Recently we had a business owner who contacted us and wanted to do a 401(k). But in the end we did a SEP because he saved $3,000 in cost,” Schmidt said. SIMPLE IRA works for many A SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA plan offers advantages for businesses that meet two basic criteria. First, your business must have 100 or fewer employees, and the business can’t have another retirement plan already in place. Compared to most other types of retirement plans, SIMPLE IRA plans offer lower start-up and annual costs and are less complicated to administer. Firms aren’t, for example, required to file annual financial reports. Employees contribute to the plan, on a tax-deferred basis, through payroll deductions. Business owners can choose either to match the employee contributions — up to 3 percent — of those who decide to participate or contribute a fixed percentage of all eligible employees’ pay. “The availability of the SIMPLE IRA is the biggest

MN Valley Business • February 2015 • 15

Bob Kitchenmaster of Kitchenmaster, Klooster & Begalka. change I’ve seen in my 23 years doing this,” said Lewis of the program that started in the early 1990s. “Prior to that, small businesses had few options. Smaller companies couldn’t afford a 401(k) program. So the advent of the SIMPLE IRA made retirement a lot easier for owners and employees of small companies.” Schmidt said the SIMPLE IRA is usually a good fit for companies with five to about 25 employees. “It’s very similar to a 401(k) but there’s not as much administration cost. “More and more people are looking at the SIMPLE IRA. If we set one up, we go in an meet with all of the employees and go over it and give a mini-retirement lesson for everyone.” The SEP plan “If you’re talking really small one- or two-employee businesses, you can do a SEP plan. They’re great for sole proprietors,” Schmidt said. Simplified Employee Pension plans can provide a significant source of income at retirement by allowing

16 • February 2015 • MN Valley Business

employers to set aside money in retirement accounts for themselves and their employees. Under a SEP, an employer contributes directly to traditional individual retirement accounts (SEP-IRAs) for all employees and for themselves. A SEP does not have the start-up and operating costs of a conventional retirement plan and allows for a contribution of up to 25 percent of each employee’s pay. But, under IRS rules, employees must get the same benefit as owners. “Whatever you contribute to yourself, you have to contribute the same percentage to all of your employees,” Lewis said. That is why the SEP is more often used by sole proprietors with no full-time employees. “If they have (full-time) employees, the owners often do the SIMPLE because the match is a max of 3 percent by law.” 401(k) for the big boys “A 401(k) is typically for a large corporation of maybe 50 or more employees,” Lewis said. Schmidt said he sees business owners who have started

a 401(k) plan but probably shouldn’t have. “One of the biggest mistakes is a lot of them pick the wrong retirement plans. Maybe they should have a SIMPLE IRA, but they picked a 401(k),” Schmidt said. With a 401(k), employees pick how much they want to invest on a tax-deferred basis with the employer matching a certain amount of the contribution. The company serves as the “plan sponsor” for the 401(k), but it doesn’t have anything to do with investing the money. Instead, the plan sponsor hires another company — often a mutual fund company — to administer the plan and its investments. Employees are responsible for how to invest their money among different types of mutual funds. Profit sharing Another way to provide money that can be pegged for retirement is through a profit-sharing program. Planners say the program isn’t suited for most businesses. “Profit sharing is usually used by some long-term company and the owner wants to maximize what they can put away for themselves,” Schmidt said. “They can pick and choose year to year, too. If a bad year comes, they don’t have to do the profit sharing that year. He said that when a business owner puts money in a profit-sharing plan — money they put away for themselves and for their employees — they get to deduct it from their taxes. “It is locked up until (they’re) 59 1/2 (years old) though, but they get the tax deduction right away.”

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Succession planning When a business owner starts thinking about retiring, they also start thinking about how their business will be transferred to someone else in the future. The certified financial planners say setting up succession plans involves a team approach. “I tend to be the quarterback on it,” Lewis said. “But we get their CPA involved and their attorney to draw things up.” “It’s a major concern for small businesses. You spend your life building your business and what’s going to happen to it? You’re going to leave your business either from

MN Valley Business • February 2015 • 17

death, disability or retirement and who’s going to take over?” If a family member, say a son or daughter, is taking over the business, the succession plan can be fairly straightforward. “But if there are no kids involved, finding buyers can be tough,” Lewis said. “You have to find someone who is capable of running it and who has the wherewithal financially to buy it and to find a bank to finance the deal. Or sometimes the owner is doing a private loan for the buyout,” Lewis said. Owners also need to decide how they want to receive payment for their business. “They have to decide if they want a lump-sum check, a portion of revenues going forward, or a combination of both,” Schmidt said. “A lot of people are interested in looking for another local owner rather than selling to a major corporation, too.” ‘Key man’ insurance ‘Key man’ insurance is a way to protect the human capital in a business. “Maybe you’ve been in business 30 or 40 years and want to slow down a bit and you have one or two key employees and the success of your business is tied to those employees,” Lewis said. “How do you protect that in case they pass away or are disabled?” Schmidt said a common way to protect against the loss of a key employee is for the business owner to buy a life or disability insurance policy on them with the business owner named the beneficiary in case something happens to the employee. He said insurance also can be used by an owner as a way to give key employees a financial incentive to stay with the business. “The owner can contribute to a whole life policy for the key employee and it gives that employee an extra benefit. Basically it’s another way to give them more compensation.”

18 • February 2015 • MN Valley Business

Charitable giving Successful business owners often look for the most effective ways they can contribute to charities and nonprofits of their choice. Kitchenmaster, who is a member of the Leave a Legacy Mankato Area (leavealegacymankato.org) group, said he and other CPAs, financial planners, attorneys and nonprofits who are members can help businesses reach their charitable goals. He said some business owners simply donate annually as a private citizen, while some set company goals to donate a certain percent of profits each year to charity. Some, however, want to make a bigger impact, either during their lives or after they die by leaving part of an estate to charity. “It used to be geared to higher net worth people leaving an estate,” Kitchenmaster said. “But it’s changed with people of any means able to give major amounts if it’s structured over their lifetime. The education piece of Leave a Legacy is that everyone can have an impact.” Besides simply leaving money or property to a charity in an estate, people can do other things such as a charitable remainder trust. With a remainder trust someone can put a certain amount of money in a trust and still earn the annual investment growth from the money. When the person dies, the original amount of money in the trust goes to the charity. And, said Kitchenmaster, there are some charitablegiving plans not many know about but that can be good for the donor and charity. “Farmers have a big advantage in charitable giving, in their working years, if they gift bushels of grain rather than cash,” Kitchenmaster said. “It’s a tremendous tax advantage to them. When you give bushels away, you don’t have to report that as income, so they save income taxes MV and self-employment taxes.”

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MN Valley Business • February 2015 • 19

Josh and Erin Raines recently opened the Kato Cue Club in downtown Mankato.

Right on Cue Kato Cue Club a high tech pool hall

By Heidi Sampson | Photos by John Cross

very year before the pool season kicks off, teams start to draft their first round picks in an attempt to produce a great team for the upcoming season, especially if the group is interested in winning tournaments that could produce a substantial monetary gain for its participant’s. Over the years, Josh Raines, co-owner of the Kato Cue Club, has played with numerous teams of varying skill levels as he honed his own craft for the sport. Since teams are apt to change yearly, Raines can recall a time when his team struggled to develop a name for an upcoming tournament. “A friend of ours was going to sign our team up but we couldn’t decide on a name,” Raines said. “So, while watching Jeopardy, my friend comes back from a commercial break saying whatever the next category is, that is what our team name is going to be. The next category was stuffed animals. That became our team name, stuffed animals.”

Unique pool team names aside, Josh believes it was the love of the game developed at an early age that evolved into a desire to own a pool hall of his own. That desire coupled with years of playing pool across the United States, assisted in the creation of the Kato Cue Club, which features 14 state of the art pool tables. In particular, their pool tables feature onepiece lights, top-notch rails, tight pockets, and a total of 26 different leveling points within the table itself. “I’m a fan of rotation games,” Raines said. “Since the ball rolls straight here, that ball will never go off of alignment. Whereas downtown, the ball may not get to its location, as it might curve off course. Since I play competitively, when I play in tournaments where the tables are more general tables, if I roll a shot and it rolls off course, I will joke and say that the quality of dinner just went down. For those who people play on the road, alignment of table can be the difference between eating

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20 • February 2015 • MN Valley Business

and not eating, especially when playing for money. So, when one plays pool for a living, you want the table to play well. That is the kind of quality we are bringing to the Kato Cue Club.” Of their 14 pool tables, four of them are 9-foot tables, and 10 are the standard 7-foot pool table. Within the lower level of the Kato Cue Club, are two pool tables especially reserved for c h a l l e nge matches between top amateurs and/or professionals with two cameras positioned on each table for Internet streaming. “We plan to use UStream for challenge matches,” Raines said. “This will allow us to stream matches straight to our website, as well as to be able to comment on the matches as they happen. It’s kind of like what is currently possible with ESPN. As for our equipment, it’s as good as it gets. With our tables, it’s kind of a different approach as this will really hone in a pool players skills.” The club also serves food and serves beer, with a focus on gourmet burgers and appetizers. Burgers are served from 11 a.m. to 10 p.m. Love at a Pool Table For Josh and Erin Raines, co-owners of the recently established Kato Cue Club, they met at a pool hall almost 12 years ago and were married a few years later. “I pretty much knew it was going to be my life when I decided to marry him,” Erin said. With a chuckle Josh stated, “Oh yeah, got to make room for pool.” Over the years, Josh has played competitively all over the United States. Up until the Kato Cue Club project, he traveled the upper Midwest playing pool, as well as actively participating in nationals in Las Vegas. His team brought home a third-place trophy at nationals and he’s finished in the top thirteen in singles. Once the Kato Cue Club is established, Josh plans to continue to play competitively as he’d like to play in the U.S. Open. In November of 2012, Josh and Erin were approved for a pool hall to be developed at a different location in Mankato. Even though the two went through the entire process from loan approval to city approval, something still didn’t feel right. When they went to sign the lease, Josh and Erin found they couldn’t do it and placed their dreams on hold. “It wasn’t that we couldn’t or didn’t want to do the business,” Erin said. “It just didn’t feel right. I’m glad we

didn’t do it, because this place is ideal for us.” With their sights set on establishing a solid pool business with class and stylish sophistication, remodeling of the former Children’s Museum in downtown Mankato began in June of 2014. However, even with the Kato Cue Club becoming a reality, the remodel isn’t the only thing to occupy their time as Josh and Erin also have three young children, Jacoby who is five, Jenevieve who is two, and Jovie who is ten months old. Jacoby, their oldest, was named after Josh’s very first custom pool cue, a Jacoby. The Jacoby cue was named after the cue’s maker, a man who resides in Wisconsin. “Actually,” said Erin, “when we first started dating, we thought if we had a boy we’d call him Jacoby as a joke, but then it didn’t stay as a joke. We actually fell in love with the name.” Offerings of a Cue Club The Kato Cue Club offers table rental by the hour. They also offer daily rates in which, a table could be rented from 11:00 a.m. to 6:00 p.m. or from 6:00 p.m. to 1:00 a.m. for $20. For those who are aspiring pool players, the Kato Cue Club offers pool lessons, as well as weekly, monthly, and annual tournaments for players of all skill levels. For those interested in leagues, the Kato Cue Club also hosts league and junior league events. As an added bonus, the Kato Cue Club lays smack dab in the middle of a region where pool halls do not exist for the avid pool player as the closest pool hall is in Burnsville. However, Josh believes the Mankato area is full of established and potential players waiting for a place to play, a place he hopes to give them. “I’ve seen a lot of different kinds of pool halls,” said Josh. “For instance, Fargo Billiards is rated as the second nicest pool hall in the world. They have 54 tables and over 23,000 square feet of pool space. I think our customers will find that within the Kato Cue Club, there is a little taste of pool from all over the Midwest, right here in Mankato.” MV

MN Valley Business • February 2015 • 21

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MN Valley Business • February 2015 • 23

Jason Tompkins, owner of Ignition Fitness & Sports on Sibley Parkway in Mankato

Igniting a passion Tompkins a champion of fitness By Nell Musolf Photos by Pat Christman

lthough it is February and New Year’s resolutions to get in shape have been forgotten by many people, Jason Tompkins, owner, manager and coach at Ignition Fitness & Sports, 100 Sibley Parkway, doesn’t think that needs to be the case. “During the months of January and February we use the tagline ‘We’re not a resolution. We’re a lifestyle.” Tompkins, who has just celebrated his first year in business this past January, embraces that belief. His wife, Vanessa, is also dedicated to health and Tompkins attributed Vanessa’s recent pregnancy and smooth birth of their daughter, Lily, to their healthy lifestyle as well as their devotion to exercise.

“We went into the hospital at 9:30 in the morning and Lily was born by noon,” Tompkins said as he recalled Lily’s 2014 birth. Health and fitness are central to his life and sharing them with his clients is his passion. Housed in a 5,000-square-foot multi-sports space, Ignition Fitness has ample room for weight lifting, treadmills, stationary bicycles as well as an open area where members can play soccer or practice their golf swings. In addition to adult fitness and sports performance groups, Ignition Fitness also provides a unique opportunity to the Mankato area with 2,000 square feet of turf rental. Most recently, some of the teams renting out the turf have been local soccer and lacrosse teams, along with weekly drop in soccer.

Spotlight

24 • February 2015 • MN Valley Business

From left: Jason Tompkins, Luke Rudburg and Abraham Allen push themselves through a workout. “This space can meet the demands of all the different sports in the area,” Tompkins said. “People can work on their golf swings in here even when it’s freezing outside or kids can practice soccer no matter what season it is.” Getting into the ‘flow’ Ignition Fitness’ workout classes are aimed to help everyone regardless of age and ability. “Our main goal is to meet clients where they are,” Tompkins said. “That’s what we’re all about. We meet the clients where they are and get them to where they want to be.” New clients are initially assessed by Tompkins or fellow coach Luke Rudberg via a movement screening. “There are seven fundamental human movements,” Tompkins said. “We take a look at our adult clients and the movement screening tells us where there is a dysfunction in their movements. Then we know what we need to start working on for improvement.” Using the seven fundamental human movements, Tompkins designed a workout program that covers each movements and strengthens them. On a white board at Ignition Fitness he has listed: Hip, Knee, Push, Pull, Carry, Crawl, Rotation. That list is followed by coaches and members as they work toward their fitness goals. “We want to be able to accommodate anyone who comes in our door,” Tompkins said. “The program I’ve written enables us to do that. As each movement is strengthened, overall health is strengthened too.” Ignition Fitness offers fitness classes for groups as well

as personal training. The complete strength and metabolic classes are taught to groups of six to 12 adult (over age 18) participants. Sports performance classes are for school age athletes between the ages of 12 and 18. The complete strength class focuses on building muscles while the metabolic class is aimed at burning fat. All classes at Ignition Fitness follow what Tompkins termed “the flow.” The flow not only describes the movement from one end of the gym to the next but also the flow of the human body. “We always start with movement,” Tompkins said. “We begin classes with stretching and moving and preparing everyone’s body for the next part of the workout. It’s all a part of the flow of working out.” Tompkins said that the first 30 minutes of an hour long class is devoted to movement while the second half is devoted to strength training. Unlike other workout facilities, Ignition Fitness doesn’t have classes geared toward specific levels of exercise such as beginner and intermediate but instead has participants who are at different levels of training in each class. Tompkins said their system works out very well. “A person who is just starting a class at Ignition Fitness will fit in right away with the other members,” Tompkins said. “He’ll be working at a different pace but he’ll be able to feel like he’s part of the group immediately. That’s the job of the coach to make sure that everyone is working at his or her own pace.” Ignition Fitness has several group sessions scheduled during the day and evening hours and members can also access the gym during other hours.

MN Valley Business • February 2015 • 25

Luke Rudburg is manager and coach at Ignition Fitness. Most members attend an hour long fitness class three times a week with a day off in between sessions to rest. Tompkins said that three sessions a week should keep the average adult in good shape. “The day off between work outs is important,” Tompkins said. “You need to let your body recover as you build up muscle and strength.” Ignition Fitness also has after school Sport Performance classes. “We cater to all different types of athletes. Groups consist of junior high swimmers to college athletes and everything in between. The kids really enjoy the workouts and excel in their sports,” Tompkins said. “Our goal is to reduce injuries and build better athletes.” Tompkins does his own workouts first thing in the morning so that he is able to concentrate completely on his clients. “The first rule of coaching is ‘do no harm,” Tompkins said. “Our job as coaches is to watch what our clients are doing and make sure that they are exercising correctly. We take that very seriously.” According to Tompkins, an additional benefit of regular exercise is a sharper mind. “I’ve had several clients tell me that they feel like they are thinking a lot more clearly after an early morning workout,” Tompkins said. “Exercise clears your mind and it’s also good for cognitive development.” Inactivity spurs problems Tompkins has a long term goal of adding more coaches to Ignition Fitness so that he will have more time to devote to writing fitness programs and also for professional development. “I’m a big believer in professional development,” Tompkins said. “Luke Rudburg just spent a week in

26 • February 2015 • MN Valley Business

Boston getting certified as a functional strength coach. The more professional development we have, the better it is for members and also keeps Ignition Fitness cutting edge.” Tompkins, who has a Bachelor of Science in Human Performance with minors in Sport Medicine, Coaching and Adapted Physical Education from Minnesota State University, grew up in Southern California in what he termed a “very fit” family. “My grandmother is in her late 70s,” Tompkins said. “I have told her that she needs to do strength training since that’s very important as people get older but it’s pretty hard to argue with someone who still runs three miles a day.” In addition to regular exercise and healthy eating, Tompkins believes that Americans spend far too much time sitting down either at work or behind the wheel of a car. He said he believes that many of the back problems that he sees at Ignition Fitness are the result of inactivity. “I’m a big proponent of standing work stations,” Tompkins said. “When people spend all day long sitting in front of a computer and plunking away on a keyboard, that’s hard on their bodies, especially the pelvic area. The less people sit, the better.” So even though New Year’s has passed, Tompkins said it’s always the right time to start exercising and suggested that people find fitness classes that adapt to them instead of the other way around. “Don’t join a gym or an exercise class that you can’t see yourself in six months from now,” Tompkins advised. “And find something that you enjoy. We take exercising seriously at Ignition Fitness but we also take the time to share a laugh and have fun.” MV

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Tim Harbo and his wife, Liberty Warren, recently opened The Cheese & Pie Mongers in downtown St. Peter.

Homemade pies, artisan cheese The Cheese & Pie Mongers open in St. Peter By Heidi Sampson Photos by Pat Christman

he Welsh Heritage Farms Apple Orchard & Pie Shop of Lake Crystal was started 34 years ago by Tim Harbo’s parents, Larry and Pam Harbo, as a seasonal business. Today, Tim has some ownership in his parents business and continues to spend a large portion of his spring, summer, and fall seasons at the Lake Crystal location.

With the knowledge gained from first-hand experience in his parents’ business, Tim and his wife, Liberty Warren, couldn’t pass up an opportunity to expand into a year-around business. In December, the two opened The Cheese & Pie Mongers, a business that features artisan cheeses and homemade pies, in St. Peter. “This is a fairly big transition for us because

Feature

28 • February 2015 • MN Valley Business

The shop has more than 130 varieties of artisan cheese on hand. we are going from a seasonal type style of business employment to a year around style of business,” Harbo said. Since the Welsh Heritage Farms Apple Orchard & Pie Shop resides on the West side of Mankato between Mankato and Lake Crystal, the couple wanted to expand into a new, well-traveled area. “We felt that there was a big population of Mankato that doesn’t even go toward the Lake Crystal direction,” Harbo said. “However, everybody seems to go to the cities at some point and time. Since my wife is actually originally from St. Peter and her parents live here, she has community ties to this particular area, which is also really nice. We love St. Peter’s downtown area and it just so happened that this particular building became available for us to purchase right when we were looking for a place to expand into.” The Cheese & Pie Mongers is located in what used to be a gun shop. Harbo and Warren kept the old iron bars from the original gun shop on their windows adding a unique flare to the building’s décor, a classy version of retro home comfort. “We really wanted to make sure that we had cheese and pie in our business’s title,” Harbo said. “We also wanted to have that old retro style of Mongers as a title for both cheese mongers and pie mongers.” Wide artisan cheese selection The cheese side of the business is Harbo’s baby. It’s something he started at the Welsh Heritage Farms with only five different varieties of cheeses. Over the years, Harbo kept finding and trying the various products of

different cheeses makers, a lot of which were located in Wisconsin. “I’ve been to Wisconsin and visited with my cheese suppliers,” Harbo said. “I’ve seen what they are doing and what they are specializing in. Right now, we have around a 130 different varieties. However, I’m working on trying to get some artisan cheese varieties out of Minnesota. At least that’s what I hope my next cheese expansion will include. However, there are not as many Minnesota cheese makers as there are Wisconsin cheese makers.” Of the artisan cheeses available at The Cheese & Pie Mongers, customers will find products from Hook’s Cheese Company, which has aged cheddar from 1 to 15 years, as well as Jack, Swiss, Colby, Bleu, Sheep and Goat cheeses. Other popular Wisconsin artisan cheeses are Harmony Holstein, Sartori, Jim’s Cheese Company, Upland’s Cheese, Holland’s Family Cheese, Blaser’s, and Crave Brother’s. For the pie side of things, Warren and her lead baker, Sheryl Utter, complete all of The Cheese & Pie Mongers needs. Currently, the two make mostly fruit pies but they are working on adding some cream pies to their lineup, such as Banana Cream and Key Lime Pie. “We make all of our crusts from scratch,” Harbo said. “We use grandmother’s recipes. So, it’s real old school, traditional, homemade pies. We carry the standard Apple and French Apple Pie for $12.95. Our berry pies, like Cherry, Blueberry, Peach, and Mixed Berries are all $14.95. We also have a Caramel pecan and that one is $15.95. It is terribly, terribly good.” At any given time, Cheese & Pie Mongers carries about a dozen different varieties of pie depending upon the season and availability of fruits, as they try to purchase their materials locally. For instance, Harbo and Warren

MN Valley Business • February 2015 • 29

bring all of their peaches in from Missouri, the apples are grown out at Welsh Heritage Farms, and their blueberries come fresh from Michigan. The couple firmly believe in fresh fruits, which makes all the difference when creating a homemade pie from scratch. The Cheese & Pie Mongers shop also carries a number of local products, from Madelia’s Harris Honey, to syrup from Eagle Lake, and cutting boards from North Mankato. “We believe that is a good idea to support our local businesses as much as possible,” Harbo said. “Also, we find that people are looking to purchase locally as well, especially in fruits and vegetables and that’s have the battle. I also like finding the cheeses and products that fit what our customers are looking for, because there are so many flavors and varieties available. I know my wife likes baking food from scratch, making a real product from beginning to end. There is a lot of satisfaction in that. However, at the end of the day, a retail business is still talking with people, making those ties, and getting the products that people want. We wouldn’t be doing this if we didn’t enjoy the customers and the community. As for the apple orchard side, I still enjoy getting out there in there in the fresh air and picking apples.” MV

30 • February 2015 • MN Valley Business

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1021 E. Madison Ave. | 507-388-7583 MN Valley Business • February 2015 • 31

COMMERCIAL ROOFING Flat Roofing • Standing Seam Roofing Roof Coatings (Flat & Metal Roofs)

Three time award winner 2011 - 2012 - 2013

Mankato and Surrounding Areas Mark: 507.779.6639

32 • February 2015 • MN Valley Business

Construction/Real Estate Residential building permits Mankato

(in thousands)

- 2013 - 2014

11000

Residential building permits North Mankato

- 2013 - 2014 (in thousands)

3000

$2,603 $4,420

8250

$1,428

2000

$1,236

5500

1000

2750 0

Source: City of Mankato Information based on Multiple Listing Service and may not reflect all sales

- 2013 - 2014 275

Includes single family homes attached and detached, and town homes and condos

Housing starts: Mankato/North Mankato - 2013 - 2014

16 14

165

110

55 J

Source: Realtors Association of Southern Minnesota

Source: Cities of Mankato/North Mankato

Commercial building permits Mankato

(in thousands)

- 2013 - 2014

Commercial building permits North Mankato

- 2013 - 2014 (in thousands)

2000 1500 1000

$2,440 $1,300

$140 $165

500 D

Source: City of Mankato

Source: City of North Mankato

Interest Rates: 30-year fixed-rate mortgage

Foreclosures: 2013 Year End

— 2013 — 2014

5.5 5.0

4.3%

4.5 4.0

4.0%

3.5 3.0

170 220

220

80000 70000 60000 50000 40000 30000 20000 10000 0

Source: City of North Mankato

Existing home sales: Mankato region

Source: Freddie Mac

County

2012

2013

Percent change

Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan

126 37 46 98 42 49 58 57 17

101 19 27 70 25 43 39 36 24

-20% -49% -41% -29% -40% -12% -33% -37% +41%

Source: Minnesota Foreclosure Partners Council C. Sankey

MN Valley Business • February 2015 • 33

■

Agricultural Outlook

By Kent Thiesse

Uncertain years ahead for area farmers

n the few years prior to 2014, the agriculture community was drawn into a mentality that corn prices of $5-$6 per bushel were the new normal, rather than a temporary price upswing. That type of thinking has changed quite dramatically in past year, as local cash corn prices dropped to below $3.50 per bushel, before rebounding late in 2014. The projected cash corn price for the 2014 crop, which is now in storage, is expected to remain near $3.50-$4 until next summer, which is similar to price expectations for the 2015 crop year. These price projections suggest that farm operators may need to adjust their risk management strategies for 2015 and beyond. The most recent USDA Report, released in January, estimated the U.S average on-farm cash corn price for 2014-2015 an average of $3.65 per bushel, which has increased slightly in recent months. USDA is now projecting the U.S. average soybean price for 2014-2015 of $10.20, which has also increased slightly in recent months. It is important to remember that the 2014-15 USDA price estimates are the expected average prices from Sept. 1, 2014 to Aug. 31, 2015, for the 2014 crop year, and are not estimated prices for the 2015 crop year. Long-term USDA projections suggest average on-farm grain prices near $3.40-$3.80 for corn and $9-$10 for soybeans over the next five years.

Things to consider in risk management: • Calculate realistic crop production breakeven levels. The breakeven cost of producing corn at “trend line” yields will likely be $4 per bushel or higher for many producers in 2015, and above $10 for soybeans. There can be a large variation in breakeven price levels among farm operators depending on yield potential, production expenses, overhead costs, and land costs. Farm operators should also include a charge for an expected return for their management and labor into the breakeven calculations. • Develop a crop marketing plan with realistic price expectations. It is important for farm operators to establish a realistic grain marketing plan for both the remaining 2014 crop that is in storage, as well as the planned 2015 corn and soybean crop. Grain price targets should be based on realistic price expectations, and the calculated crop production breakeven levels referenced earlier. It is best to have targets set to forward price a portion of the expected crop when profit margins exist; however, it is also important to have a strategy to reduce loss if grain prices stay below the breakeven levels. • Utilize a sound crop insurance strategy. A good crop insurance program, utilizing Revenue Protection (RP) crop insurance policies is a very important risk management strategy for crop production in 2015 and beyond. Many producers had RP policies in 2014 with guarantees of $750-$850 per acre for corn. Comparable

34 • February 2015 • MN Valley Business

RP policies in 2015 will likely only have guarantees of $650-$750 per acre. It may be advisable to look at the higher levels of RP coverage (80-85 percent) for 2015, in order to increase the guarantees, especially for producers with higher breakeven market prices, even though the insurance premiums will be somewhat higher.

• Look for ways to reduce production and overhead expenses. There is a wide variation in corn and soybean production costs from farm-to-farm, and the higher production expenses do not always translate into higher yields or greater profits. Overhead costs for machinery ownership and expenses can be another major variable in farm profitability. It is important to remember that there will likely be much lower depreciation allowances for tax calculations in future years. • Pay attention to cash rental rates and land costs. One of the biggest variables in farm profitability is land costs, either cash rental rates or land ownership costs. Based on farm business management records, there is a wide variation in average land rental costs from farm-tofarm. Farm operators should look at breakeven levels (referenced earlier) before finalizing 2015 land rental rates, or before bidding unrealistic land rental rates on new farm land that becomes available. • Keep the cash available segment of the farm business strong. It is important to pay close attention to the “current ratio” and the level of working capital in the farm business. If there is a big decline from year-toyear, it is likely a warning sign of more serious farm financial difficulties. It may be advisable to use excess cash revenues from the farm operation to pay down short-term operating debt, or for prepayment of crop expenses, rather than making extra payments on real estate and term loans. Also use caution on cash expenditures for capital improvements and non-farm assets. • Utilize professional expertise and advice. Most farm operators are not experts at all aspects of production and farm management, and need to utilize professional expertise at times. This group of professionals could include, but is not limited to, farm business management instructors, crop consultants, grain marketing advisors, ag lenders, crop insurance agents, and others. The University of Minnesota FINFIN web site is a great resource to find average crop and livestock production data, for estimating breakeven price levels, and can provide the opportunity to “benchmark” an individual farm compared to similar-type farms, based on actual farm management records: MV Kent Thiesse is farm management analyst and vice president, MinnStar Bank, Lake Crystal. 507- 381-7960; kent.thiesse@minnstarbank.com

Agriculture/Agribusiness Corn prices — southern Minnesota

(dollars per bushel)

— 2014 — 2015 8

16 12

2 0

Iowa-Minnesota hog prices

27 24

$71.88 M

Source: USDA

Minimum prices, class 1 milk Dollars per hundredweight

— 2014 — 2015 30

112

Source: USDA

Milk prices

185 pound carcass, negotiated price, weighted average

— 2014 — 2015 140 $78.23 126

$9.41

$3.51

Source: USDA

(dollars per bushel)

— 2014 — 2015 20 $12.61

$4.23

Soybean prices — southern Minnesota

$24.33

$22.17

Source: USDA. Based on federal milk orders.

Corn and soybean prices are for rail delivery points in Southern Minnesota. Milk prices are for Upper Midwest points.

C. Sankey

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BUSINESS BANKING www.minnstarbank.com Member FDIC

MN Valley Business • February 2015 • 35

Employment/Unemployment Initial unemployment claims

Minnesota initial unemployment claims

Nine-county Mankato region Major November Industry ‘13 ‘14 Construction Manufacturing Retail Services Total*

535 160 64 238 997

Percent change ‘13-’14

796 189 51 229 1,265

Major Industry

+48.8% -18.1% -20.3% -3.8% +26.8%

November ‘13 ‘14

Construction Manufacturing Retail Services Total*

9,139 2,938 1,465 6,827 20,369

Percent change ‘13-’14

12,107 3,118 1,345 6,546 23,116

+32.5% +6.1% -8.2% -4.1% +13.5%

Services consist of administration, educational, health care and social assistance, food and other miscellaneous services. *Categories don’t equal total because some categories not listed.

Local non-farm jobs

Minnesota Local non-farm jobs

- 2013 - 2014

Nine-county Mankato region

130,468 127,867

133000

(in thousands)

2000

111000

1000

100000

Local number of unemployed

- 2013 - 2014

Nine-county Mankato region

8000

- 2013 - 2014

95,612 121,877

150000

4,971 4,042

6000

Minnesota number of unemployed 200000

10000

100000

4000

50000

2000 0

2,902 2,845

3000

122000

- 2013 - 2014

Mankato/North Mankato Metropolitan statistical area

Unemployment rate Number of non-farm jobs Number of unemployed

Unemployment rates Counties, state, nation

(includes all of Blue Earth and Nicollet Counties) October

2013

2014

3.4% 57,064 2,010

2.5% 59,206 1,500

Source: Minnesota Department of Employment and Economic Development

36 • February 2015 • MN Valley Business

County/area Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan Minneapolis/St. Paul Minnesota U.S.

October 2013 3.5% 3.5% 4.3% 4.5% 4.4% 3.2% 3.4% 4.5% 5.2% 4.3% 4.3% 7.0%

October 2014 2.6% 2.8% 3.6% 3.4% 4.4% 2.2% 2.6% 3.6% 4.5% 3.2% 3.2% 5.5% C. Sankey

Retail/Consumer Spending Vehicle Sales Mankato — Number of vehicles sold - 2013 - 2014 1200

884

1000

798

800

- 2013 - 2014

500

$406

$387

400

200

400

100

200 J

Source: Sales tax figures, City of Mankato

Lodging tax collections Mankato/North Mankato $56,900 $45,279

60000

Source: Sales tax figures, City of Mankato

Mankato food and beverage tax

- 2013 - 2014

85000

50000

$55,837 $59,000

68000

40000

51000

30000

34000

20000

17000

10000 0

(In thousands)

300

600

Includes restaurants, bars, telecommunications and general merchandise store sales. Excludes most clothing, grocery store sales.

Sales tax collections Mankato

Source: City of Mankato

Stocks of local interest

Dec. 5

Jan. 13

Percent change

Archer Daniels

$58.29

$47.23

-18.9%

Ameriprise

$136.26

$124.46

-8.7%

Best Buy

$35.90

$39.69

+10.6%

Crown Cork & Seal

$51.23

$47.18

-8.0%

Eventis

$27.38

$23.48

-14.2%

Fastenal

$47.08

$44.49

-5.5%

General Growth

$27.51

$30.29

+10.1%

General Mills

$53.12

$52.58

-1.0%

Hutchinson Technology

$3.70

$3.82

+3.2%

Itron

$41.35

$38.64

-6.6%

Johnson Outdoors

$29.10

$29.02

-0.3%

$162.31

$159.70

-1.6%

Target

$73.63

$74.14

+0.6%

U.S. Bancorp

$46.20

$41.15

-11.0%

Wells Financial

$28.08

$27.09

-3.5%

Winland

$0.72

$0.90

+25.0%

Xcel

$34.82

$36.34

+4.3%

Gas prices-Mankato — 2014 — 2015

$3.25

$1.93

1 0

Gas prices-Minnesota — 2014 — 2015

$3.25

4 3 2

$1.93

1 0

Source: GasBuddy.com C. Sankey

MN Valley Business • February 2015 • 37

Greater Mankato’s

Demographic Landscape By: John Considine III, Business Development Resource Manager, Greater Mankato Growth

In December, the U.S. Census Bureau released their 2013 five year demographic estimates from the American Community Survey. The American Community Survey is the only source of small area estimates for social and demographic characteristics. It gives communities the current information they need to plan investments and services. In order to provide some insight to what these tables of “raw data” mean for our community, Greater Mankato Growth sorted through the data and came up with some key statistics. The guiding question being: What makes us unique as compared to other metropolitan areas in Minnesota? The answer was simply, our workforce. We compared the metropolitan areas of Duluth, Minneapolis-Saint Paul, Saint Cloud, and Rochester to the Mankato-North Mankato Metropolitan Statistical Area (MSA). Our MSA is made up of Blue Earth and Nicollet Counties.

Mankato-North Mankato is the smallest of all of the comparable MSAs. With a population of individuals 16 years of age and over of 79,506. That is nearly half the size of the next closest MSA, Saint Cloud (150,211). However we have the highest rate of residents in the labor force among all of the MSAs: 73% (58,108). Refining it further, we also have the highest rate of employment: 69% (54,565). These nearly 55,000 people enjoy the shortest average commute among all Minnesota MSA’s. What types of businesses are they heading to? Table one shows the different industries Greater Mankato citizens work in. Notably, there is a high concentration of individuals in the education and health care which can be associated with being a greater Minnesota regional center. By having these types of industries in our communities, other industries benefit such as manufacturing (drawing on the post-secondary talent pool) and retail (with out-oftowners doing their “big shopping trips” after a doctor appointments).

Greater Mankato Growth

Table One Industry

Count

Percent

Educational services, and health care and social assistance

15,573

28.50%

Manufacturing

8,498

15.60%

Retail trade

6,615

12.10%

Arts, entertainment, recreation, accommodation and food services

4,730

8.70%

Professional/scientific/management/administrative/waste management services

3,125

5.70%

Construction

2,815

5.20%

Finance and insurance, real estate, rental and leasing

2,345

4.30%

Transportation and warehousing, utilities

2,202

4.00%

Other services, except public administration

2,163

4.00%

Agriculture, forestry, fishing and hunting, mining

1,982

3.60%

Public administration

1,659

3.00%

Information

1,436

2.60%

Wholesale trade

1,422

2.60%

38 February2013 2015• •MN MNValley ValleyBusiness Business 1 •• JANUARY

So who makes up this highly employable workforce? The counties within our MSA have one very distinctive workforce trait. Blue Earth County has the highest percentage of 1824 year olds out of the 87 counties in Minnesota. Nicollet County has the 13th highest. Table two below shows the counties in Minnesota with the highest percentages of 18 24 year olds. When viewing this information, there is a high correlation between percentage of individuals in that specific age demographic to the presence of a university or college. That is not to say all 18-24 year olds are college students, but what is important to note is this age group is new to the workforce and has yet to hit their top earning potential through education, training and experience.

Naturally 18-24 year olds earn less than other age demographics and that is reflected in the average household income. However, the Mankato-North Mankato MSA has a higher income than the Duluth MSA and a comparable income to the Saint Cloud MSA. The higher cost of living is reflected in the Minneapolis-Saint Paul MSA income figures. In the Rochester MSA, the dominance of the Mayo Clinic and the associated higher paying health care sector is seen with an average household income exceeding $80,000. Table three highlights the average household income for each of the five metropolitan areas. This middle of the road income figure shows a balance of business profitability and resident affordability.

The significant presence of this age group in our workforce creates opportunity for our region. It is a talent supply that has potential to work in any industry.

The U.S. Census Bureau’s 2013 benchmark of our region highlights many workforce strengths and opportunities Additional information can be found at greatermankato.com.

Table Two Geography

% of Total Population

County Rank of 18 - 24 year olds based on percent of total population

College or University

Blue Earth County, MN

11679

19.09%

Yes

Stevens County, MN

1499

16.46%

Yes

Winona County, MN

7470

15.84%

Yes

Clay County, MN

6912

12.44%

Yes

Beltrami County, MN

5270

12.27%

Yes

Stearns County, MN

17314

12.08%

Yes

Scott County, MN

21139

11.02%

Ramsey County, MN

51443

10.26%

Yes

Benton County, MN

3779

9.90%

Table Three

Average Household Income

Duluth Metro

Mankato - North Mankato Metro

Minneapolis St. Paul Metro

Rochester Metro

St. Cloud Metro

$59,642

$65,950

$85,965

$80,284

$66,045

MN Valley Business • February 2015 • 39

Greater Mankato Growth

Total 18 - 24 year olds

NEW BUSINESS

Moulin Rouge 1434 North Broad Street, Mankato

Eskens Peterson Law Firm 525 South Front Street, Mankato

NEW BUSINESS

NEW LOCATION

Ummies Bar and Grill 530 South Front Street, Mankato

PrimeSource Funding 1751 North Victory Drive, Suite 500, Mankato

G & K Rental 1521 Madison Avenue Mankato

NEW BUSINESS

50TH ANNIVERSARY

Broad Street Antiques 1434 North Broad Street, Mankato

Tire Associates 305 Lundin Boulevard, Mankato

Growth in Greater Mankato

Greater Mankato Growth

Navigating through greatermankato.com Resources available on Greater Mankato Growth’s website, greatermankato.com

Research and Reports One of the ways Greater Mankato Growth tries to help inform individuals, businesses and organizations in the Greater Mankato area is by compiling various research and data and putting it into a format that is accessable and easy to read. The research and reports section on the Greater Mankato Growth website provides quick access to in-depth information that takes a closer look at specific topics to help empower all area citizens. Updated regularly, the research and reports section currently features the Region 9 Labor Market Profile, 2014 Talent Supply & Demand Report and a recently conducted study on How Demographics Impact Poverty Statistics. To access recent research and reports visit greatermankato.com/research-reports.

40 February2013 2015• •MN MNValley ValleyBusiness Business 1 •• JANUARY

5:00 - 7:00 pm February 3 March 3 April 7 May 5 June 2 July 7 August 4 September 1 October 6 November 3 December 1

Pub 500 Children’s Museum of Southern Minnesota Community Bank MTU Onsite Energy First National Bank Minnesota & Tavern on the Avenue Cambria Unique Specialty & Classics Mayo Clinic Health System - Eastridge I+S Group Blethen, Gage & Krause Gislason & Hunter

2015 Business After Hours Sponsored by:

7:30 - 9:00 am February 18 March 18 April 15 May 20 June 17 July 15 August 19 September 16 October 21 November 11 December 16

Between the Bridges Healing Center Pepsi-Cola of Mankato Hilltop Florist & Greenhouse Brunton Architects & Engineers McDonald’s Restaurant Brennan Companies,Vanderberg Cleaning Services & Friesen’s Family Bakery & Bistro in Old Town Center Minnesota Valley Federal Credit Union Monarch Meadows South Central College Enventis Wells Federal Bank

2015 Business Before Hours Sponsored by:

November Business Before Hours hosted by Emergent Networks

December Business After Hours hosted by Country Inn & Suites Hotel & Conference Center

December Business Before Hours hosted by Unique Specialty & Classics

Business After and Business Before Hours gives representatives from GMG member businesses at the Engaged Level or higher an opportunity to get together with one another to exchange ideas and learn about each other’s businesses. For more information on these and other member events, visit greatermankato.com/events.

MN Valley Business • February 2015 • 41

Greater Mankato Growth

November Business After Hours hosted by Mankato Clinic

Cavalier Calls on the Newest Greater Mankato Growth Members

Cavaliers

Pieology Pizzeria 1600 Warren Street, Suite 3 pieology.com

Advantage Chiropratic 430 South Broad Street, Suite 130 advantagechiromn.com

Eatery Tap 1521 Tullamore Street facebook.com/eaterytap/info

Friesen’s Family Bakery and Bistro 515 North Riverfront Drive mankatobakery.com

Heintz Toyota Scion of Mankato 1234 Raintree Road heintztoyota.com

Miller Motors 104 Minnesota Street tire-guy.com

Greater Mankato Growth, Inc.

Annual Meeting

Greater Mankato Growth,Visit Mankato and City Center Partnership look forward to sharing their accomplishments of 2014 and plans for 2015 at this year’s annual meeting.

March 12 11:30 - 1:00 pm

Greater Mankato Growth

Centennial Student Union Minnesota State University, Mankato Tickets and information available at: greatermankato.com/annual-meeting Sponsors

42 February2013 2015• •MN MNValley ValleyBusiness Business 1 •• JANUARY

2015 Guide to Visiting & Living in Greater Mankato

The 2015 Guide to Visiting & Living in Greater Mankato - A Useful Business Tool Look for these kiosks around town

By Kathryn Reeder, Brand Manager

A fun approach, in a magazine-like format, is used to showcase Mankato’s convenient location, outstanding business development, community services, citizen commitment, premier health and award-winning school system. This format engages visitors and residents alike, enticing them to take a deep dive into Mankato.

The Guide to Visiting & Living in Greater Mankato directly reflects Mankato’s tourism brand essence: Trails + Culture & Sports, highlighting Mankato’s extensive trail system, rich culture and plethora of sporting events year round.

The guide can be downloaded on the Visit Mankato website at www.visitmankatomn.com or guides can be requested via mail by calling the Visit Mankato office at 507-385-6660. The guides are also dispersed throughout the community and are available in kiosks at local hotels, attractions, the universities and the regional airport.

The guide includes maps, Mankato must-do’s and mustsee events, a special tribute to the Minnesota Vikings 50th Anniversary in Mankato and a listing of restaurants, accommodations, shopping and more. The 2015 Guide to Visiting & Living in Greater Mankato is a great recruitment tool for local and regional businesses to use when recruiting and informing prospective employees who are relocating to the area. The tips from local residents, events calendar, recreational activities and history, combined with a useful map make for a solid introduction to the Greater Mankato community.

Guides are also distributed to travel information centers around the state, the Mall of America and the Minneapolis – St. Paul International Airport. Visit Mankato encourages residents, non-residents, business owners and employees alike to pick up a copy of the 2015 Guide to Visiting & Living in Greater Mankato; there’s always a new fun fact to learn about the community in which we live and love.

MN Valley Business • February 2015 • 43

Greater Mankato Growth

Visit Mankato’s 2015 Guide to Visiting & Living in Greater Mankato is now available. The guide features the attributes of Greater Mankato, showcasing how Mankato has something to offer for everyone; whether it be adventures, one of a kind events, family get-a-ways or invigorating cultural experiences.

HI, I’M JOE TAYLOR. Overton, Texas. What keeps me coming back to the Trail? It’s just absolutely sensational. I have people tell me what they’ve spent playing one round at Pebble Beach and a night at the hotel, or going to Pinehurst for a couple rounds. We do the entire week, travel, hotel, green fees, good meals and everything for the price of one day at these places. And it’s absolutely a sensational place to come. TO PLAN YOUR VISIT to Alabama’s Robert Trent Jones Golf Trail, visit rtjresorts.com or call 1.800.949.4444 today. facebook.com/rtjgolf twitter.com/rtjgolf

I+S GROUP STRENGTHENING TODAY’S MANUFACTURING WITH EFFICIENT, COST-EFFECTIVE SOLUTIONS. When ISG begins an industrial project, we know that the role of a new or renovated facility is to improve operations and ultimately strengthen company brand. In today’s fast-paced and ever-changing industrial environment, it is more important than ever to efficiently utilize our clients’ resources including facilities, energy, structures and real estate. Whether designing new facilities, renovating existing spaces or performing deferred maintenance projects, our expert designers and engineers are prepared to provide solutions and spaces that are cost effective, functional, sustainable as well as secure and safe to meet the needs of a growing company, ensure the wellbeing of the occupants and increase overall productivity.

ARCHITECTURE

ENGINEERING

ENVIRONMENTAL

PLANNING