Upsize Minnesota May/June 2018 by Upsize Minnesota

Build Best, to Build Win the

Unleash your winning potential and gain a competitive advantage. Maximize productivity with game changing, state-of-the-art technologies from Coordinated Business Systems.

Dan Gladden

Minnesota Twins Legend & Twins Color Commentator

800-852-9084 | coordinated.com | BURNSVILLE • RED WING • ROCHESTER • ST. CLOUD • DOWNTOWN MINNEAPOLIS • HUDSON, WI

Official Document Imaging Technology Supplier to the Minnesota Twins

Banking for people on the move.

life moves fast. When conditions change, you need a banker who will help your business stay a step ahead. call us today.

The Place To Do Business â&#x201E;˘ MeMBer FDIC

eDina . 6600 France . 952-285-5800

equal HousIng lenDer

MinneaPolis . 601 MarqueTTe . 612-746-5050

CONTENTS May • June 2018 • Vol. 17 No. 3 • www.upsizemag.com

PAGE 18

Cover story

Getting into the airport: Operating at the airport provides a massive audience and great exposure but there are significant challenges not encountered in more traditional locations. Find out how to make it work. BY ANDREW TELLIJOHN Cover photograph by Tom Dunn

PAGE 4

Bb BUSINESS BUILDERS

PAGE 16

Editor Beth Ewen talked with Lisa Hannum, from Beehive Strategkc Communications, about using wellness as a workplace enhancement tool.

PAGE 6

Untangling the new tax law and how it affects your business

From the editor:

BUSINESS AUDIT

TAXES

Take time as your company grows to assess your changing needs.

by Patrick Moyneur, JNBA Financial Advisors

Staff list:

by Stacey DeKalb and Jason Engkjer, Lommen Abdo

PAGE 22

Who’s who at Upsize magazine, and how to reach us.

PAGE 10

Upsize Minnesota (USPS 024-029) is published bi-monthly for $20 by Upsize Minnesota, 3033 Excelsior Blvd, Suite 10, Minneapolis, MN 55416. Periodicals postage rates at Minneapolis, MN and additional mailing offices. Postmaster: Send address changes to Upsize Minnesota, 3033 Excelsior Blvd., Suite 10, Minneapolis, MN 55416

WORKSHOP:

COMMUNICATIONS

A panel of experts shares advice with buyers and sellers on getting the best deal from your M & A negotiations.

Use your communications strategy to set the company apart.

PAGE 28

by Brian Bellmont, Bellmont Partners

PAGE 14

SBA

Untangling some myths about SBA lending. by John Thwing, Old National Bank

CATCHING UP: 360Wow Inc. Ben Cowan talks about paring down, refocusing on a niche and growing personal service businesses.

Planning now means peace of mind later.

What happens if… THE ECONOMY WEAKENS

RETIREMENT LOOKS VERY TEMPTING…

A DIVORCE OCCURS IN THE FAMILY

YOU DESIRE A CHANGE IN LIFESTYLE

YOUR KID DOESN’T WANT TO RUN THE BUSINESS

THERE’S AN UNEXPECTED HEALTH ISSUE

YOUR BUSINESS PARTNER WANTS TO SELL

CK&Co. can help you proactively prepare your transition with our 4-step action plan. Visit us at lp.ckco-cpa.com/upsize to learn more.

Download our free Succession Planning Guide Online lp.ckco-cpa.com/upsize

tax • audit • accounting business consulting (952) 345-2500 www.ckco-cpa.com

Member of

PUBLISHER

Wes Bergstrom wbergstrom@upsizemag.com

EDITOR

Beth Ewen bewen@upsizemag.com

MANAGING EDITOR Andrew Tellijohn atellijohn@upsizemag.com

DESIGN DIRECTOR Jonathan Hankin jhankin@upsizemag.com

CIRCULATION MANAGER Georgene Bergstrom gbergstrom@upsizemag.com

PHOTOGRAPHER

Tom Dunn tom@tomdunnphoto.com

HOW TO REACH US To subscribe email Georgene Bergstrom, gbergstrom@upsizemag.com or visit www.upsizemag.com With story ideas email Andrew Tellijohn, atellijohn@upsizemag.com To advertise email Wes Bergstrom, wbergstrom@upsizemag.com To order reprints email Georgene Bergstrom, gbergstrom@upsizemag.com To order extra or back issues email Georgene Bergstrom, gbergstrom@upsizemag.com To suggest Web resource links, links@upsizemag.com

UPSIZE MINNESOTA INC. Lake Calhoun Center • Suite 10 3033 Excelsior Boulevard Minneapolis, MN 55416

UPSIZE MAY • JUNE 2018

LIKE MOST small-business owners who fought through the last recession, Lisa Hannum felt wrung out afterward. “I felt personally low energy. I felt something had to shift,” the founder of Beehive Strategic Communications told me. “I went on an extreme personal journey to boost my energy,” and then she began bringing her staffers into the process. “It was to kind of get our mojo back.” We met on a sunny Tuesday in April in her Bandana Square offices, after her company’s weekly professional instructor-led yoga class, which was followed by a healthy lunch, prepared by a rotating staff member who also shares each recipe. Those weekly events were just two examples of what has become a six-year process that has transformed the public relations firm into a working lab for healthful practices. Hannum believes any small-business owner can incorporate their own version into their workplace, and in her mind, every small-business owner must do so in order to build “strong and resilient” employees who can do their best work for clients, as she puts it. Rebecca Martin, vice president of culture and talent, took me on a fast tour around the office, which employs 15. There’s the whiteboard, on which staffers write each Friday three goals and one energizing practice they’re committing to achieve the following week. At happy hour on Thursday, everyone will report how they did. There’s an appreciation jar, in which people write comments about colleagues or clients. They’re read out loud at the annual holiday party. There’s Norm the dog and many other furry friends, which are allowed in the office, to the consternation of myself, one of the few people who will admit to disliking the pets-at-work trend, but of course this story isn’t about one person’s preferences but rather about building an entire culture. There’s the Bagua feng shui board, which displays qualities such as “wealth” and “empowerment” and the corresponding color purple, for example, that exists in each workspace. And there’s the InZone, a meditation room with candles, slouchy chairs and perhaps most importantly, a

shield underneath the first layer of paint that blocks WiFi so people can meditate, power nap or write in peace. “It’s really meant to be an oasis,” Martin says. There’s quite a bit more to the culture, too, and if I’ve lost anyone on the feng shui, the meditation room or anything else, Hannum’s stats should snap you back to attention. The number of sick days taken at Beehive has declined by 60 percent over the last two years. The five-year talent retention rate is more than 95 percent. Revenue has increased 19 percent on average over the last four years, with—wait for it—zero increase in the average number of hours worked per employee. (That remains at 42.) And while Beehive spent as much as $25,000 to $50,000 a year on outside recruiters as recently as three years ago, today that expense is zero, with Martin’s holistic approach yielding better results than in the past. Hannum hears all the time a common refrain: How can she afford to spend so much on creating a culture that supports employee well-being? “When you ask yourself is this really something I could do, you have to think about, can you afford not to?” she replies. “It takes a lot of resilience to be in business today.” I’m hoping Hannum’s approach strikes a chord for all small-business owners. What could your employees create, if you made their well-being your top priority? Beth Ewen Editor and co-founder Upsize Minnesota bewen@upsizemag.com

www.upsizemag.com

PHOTO BY JONATHAN HANKIN

Resilience

SOLUTIONS for Growing Companies

Analyze Your Profits to Spur Innovation By Jason Schilling

very day we watch industries being disrupted by new ideas and technologies. Consider how companies have changed transportation (Uber), vacations (Airbnb), home organization (Alexa), and so much more. The accounting, HR, and operations of a business are not immune to this disruption. Software now allows the newest, smallest business to compete in — and perhaps disrupt — their industry by embracing technology and leveraging its ability to increase profitability. These businesses are more likely to invest in this software due to reduced budgets, nimble procedures, and less staff. Staffing, equipment, and cash flow are common in every business. If not scrutinized, the processes and financial impacts of these areas can choke the bottom line and waste hard-earned profits. Often, the missing piece to innovate is the oversight to analyze the relevant data (of which there is often an overwhelming amount) and make connections. If there is no controller or CFO on staff, an experienced external professional can help pull this information together. When working with your professional advisors, ask them to: •

•

Address how your Accounting, HR, and Operations systems, software, and major procedures impact the business debts, cash flow, and spending. Reveal ideas to improve your financial “score”; shorten lead times; maximize output while minimizing costs; and recognize appropriate staffing levels.

www.upsizemag.com

COMPANY PROFILE

Jason Schilling

Launch…Grow…Evolve and Exit. Throughout the business life cycle, the owners rely on Cummings, Keegan & Co., P.L.L.P. (CK&Co.) to help navigate those changes. Our experience helps them make good decisions, operate a profitable and ethical business, and manage risk. CK&Co. specializes in tax, accounting, audit, and business management consulting for privately-held and family-owned/managed businesses. A member of CPAmerica International, Inc., we provide the care of a local firm with access to national and international resources.

AUTHOR BIO •

Look at financial processes and key procedures with the goal of automating whenever possible to eliminate bottlenecks and streamline data flow.

The results can help an owner make changes — tweak a process, change roles, or create new reporting methods — to track the things that matter most. The best processes transform employees from task masters to generators of great ideas. Thus, they become your innovators. After these exercises, owners make decisions differently. Business initiatives are now analyzed against defined benchmarks, creating accountability and an ability to adapt and create change. Any company can innovate in its unique market space. The only requirements are ambition and the ability to resist complacency, along with the wisdom to enlist the services of an experienced and impartial advisor.

Jason Schilling, CPA, is a Manager at CK&Co. For nearly 10 years, he has enjoyed advising clients to solve complex accounting and audit needs. Jason helps clients dig into the numbers and identify trends or opportunities. He enjoys working with clients that want to learn as well as teach us about their business to help facilitate a successful relationship. Clients appreciate his ability to simplify a complex idea, think strategically, and carry an optimistic attitude. Cummings, Keegan & Co., P.L.L.P. 600 S Hwy 169, Ste 1625 St. Louis Park, MN 55426 Jason Schilling, CPA, Manager 952-345-2500 jschilling@ckco-cpa.com www.cummingskeegan.com

MAY • JUNE 2018 UPSIZE



business audit

BUSINESS BUILDERS

Limit risks and keep success flowing with a business audit by Stacey DeKalb and Jason Engkjer

TIPS 1. Review corporate entity documents, including ownership and governance policies, to ensure they are up-to-date. 2. Analyze your standard business contracts to ensure they fully protect your interests and clearly spell out parties’ obligations. 3. Review your employment practices. Include a thorough review of your employment agreements and handbook, to ensure you cover issues such as who owns any intellectual property assets created and the confidentiality of the work. 4. Audit your existing insurance policies in conjunction with insurance experts who can recommend specific types of insurance and identify areas of exposure. 5. If you can’t conduct the entire business audit at one time, prioritize these areas based upon the risk each may bear for your company.

UPSIZE MAY • JUNE 2018

OWNERS POUR ENDLESS amounts of time and resources into growing their businesses. But, just like children, growing companies develop different needs as they expand. Sometimes it’s hard to see what a growing company may need to foster continued success. Conducting a business audit can help identify areas to target for improvement in a company’s operation, including corporate structure, potential liability pitfalls and tax considerations. Here are five areas to consider auditing: Evaluate the current structure of your business. Review your corporate entity documents, including ownership and governance policies. Are they up-todate? Ask whether the company is operating with the best entity form and corporate structure to meet your current needs. The driving factors in this evaluation are most often tax considerations and the separation of liability. Management, together with the company’s team of professionals, should help identify potential areas to improve operational efficiencies and, more importantly, to better separate liability. For example, do you have equipment, intellectual property, manufacturing, retail or other areas of operation you may want to consider spinning off into separate and distinct entities? Do any of these areas present potential liability that, if triggered, could bring down or severely hamper the whole business? Could reorganizing the company’s structure help alleviate these concerns? An in-depth analysis of operations may identify areas to spin-off. Review the important tax considerations involved in a reorganization of the business and the differing administrative factors that impact a company’s reorganization efforts. Once you settle on the proper corporate struc-

ture, the business must coordinate with its trusted advisers — attorneys, accountants, insurance and financial professionals — to prepare the necessary documentation to guide the company through a reorganization. Analyze the company’s standard business contracts. Do your company contracts fully articulate the parties’ contractual rights and obligations? Do your contracts adequately protect your company’s interests? What risks are inherent with the company’s contractual relationships? Proper contracts are generally the cornerstone of every successful business. A business audit helps identify areas for improvement. Regardless of your industry, contracts should be regularly reviewed to not only keep pace with changing laws, but also identify weaknesses and areas to be corrected as the business grows. This review should include contracts with vendors, clients, distributors, independent contractors and joint ventures. Look at the contract from top to bottom including the recitals, definitions, term and termination, representations and warranties, indemnification provisions, limitations on liability, and miscellaneous boilerplate provisions. The review may identify areas for revision, such as risk allocation provisions to help apportion exposure to potential losses. For example, when making representations and warranties, it may be appropriate to attempt limiting or qualifying their effect by narrowing their scope, identifying exceptions, adding materiality and knowledge qualifiers, or limiting their survival period. This review may also include indemnity provisions, additional insured language provisions and the proper insuring agreements. Use the experience you’ve gained operating your business to tailor your standard contracts to the way you want and need to do business.

www.upsizemag.com

meet our BUSINESS BANKING TEAM

952-858-4888 | Follow us on www.upsizemag.com

Member FDIC

MAY â&#x20AC;¢ JUNE 2018 UPSIZE

Review your employment practices. An employment audit can be quite comprehensive. You should review hiring and firing practices, personnel files, job descriptions, wage and hour practices, regulatory issues and perhaps more. Do a thorough review of your employment agreements and handbook, particularly with an eye toward dictating who owns any intellectual property assets created and the confidentiality of the work, assets created, customer lists, etc. This part of the audit should include a review of all confidentiality and non-disclosure agreements as well as non-compete and non-solicitation agreements. Catalog and protect intellectual property (IP). A company’s IP and other intangibles, such as computer code and technological know-how, may constitute a significant portion of the company’s value. For example, your business’ name may bear significant market value and it should be protected through proper registrations and policing. An IP audit provides the company with an opportunity to identify core IP assets, evaluate concerns with ownership or registration of those assets, and ensure that IP rights are properly protected. An IP audit generally requires three steps. First, investigate all potential IP assets, whether service or trademarks, chemical formulations, existing processes, product names. Second, identify all IP rights that apply to the assets identified. Finally, catalogue and develop a schedule for protecting the applicable IP rights. From there, develop practices for continued asset protection. Information Technology (IT) and security concerns should also be reviewed and compliance strategies developed to avoid possible claims or unintended disclosures concerning proprietary information. This process should include developing appropriate

compliance strategies to mitigate firstparty and third-party risk with respect to the company’s IP and IT assets. Ultimately, completing the IP audit will aid future efforts to police and protect the exploitation of IP rights. Regularly review your insurance protection. Do you really understand the types of insurance policies and coverages needed to protect your growing business? Auditing your insurance policies, including insurance coverages and policy limits, in conjunction with insurance experts who can make specific recommendations, can help identify areas of exposure. Companies often neglect, for example, insurance covering employment practices or cyber security. It may work best to have an insurance evaluation done at the same time you address each segment to ensure you have the proper coverage in terms of the entities covered, the products and services covered and any additional insureds that should be named. You may have a trusted insurance agent you will invite to the table or ask for recommendations from people who work on these issues. You may not want to tackle all of these audit elements at once, but rather, select a few critical areas to start with. That selection process itself is valuable because it requires you to prioritize which areas to tackle first. The best option for an audit is to set up a meeting with the key persons in your company and your professional team, including legal counsel, accountants, insurance advisers and financial professionals. Create an action plan and prioritize according to the risk levels identified. Conducting periodic business audits will help make sure your company continues growing and avoids threats that can arise from issues you didn’t even know were lurking.

“Conducting periodic business audits will help make sure your company continues growing and avoids threats that can arise from issues you didn’t even know were lurking.” Stacey DeKalb and Jason Engkjer, Lommen Abdo

Stacey DeKalb and Jason Engkjer are attorneys with the law firm Lommen Abdo: 612.339.8131; stacey@lommen.com; jengkjer@lommen.com; www.lommen.com.

UPSIZE MAY • JUNE 2018

www.upsizemag.com



communications

BUSINESS BUILDERS

Seven ways to use communications to differentiate your business by Brian Bellmont

TIPS 1. Listen to your constituents, especially those offering negative feedback. Take the feedback and use it to address your issues. 2. Make sure what you say about your company aligns with what you are actually doing. 3. Make sure your communications efforts illustrate the areas in which your company is strong. 4. Engage in real conversations with your audiences, in any way that makes sense. 5. Don’t try to be everything to everybody. Pick a few areas on which you intend for your business to focus in the year ahead.

UPSIZE MAY • JUNE 2018

“HEY, LOOK AT US — we’re different!” It’s always tough to cut through the clutter, especially when it feels like everybody in your industry is saying virtually the same thing and positioning themselves almost exactly the same way. The good news is that your communications team likely has the skills and expertise to hone and share your company’s unique value proposition – and really tell the stories that highlight your organization’s points of differentiation. Here are seven ways to ensure your distinct story comes through: Listen. Start by really listening to your constituents — your clients and customers, your strategic partners, your employees, your industry. Even the ones who offer negative feedback or constructive criticism. Especially them. Take people’s criticisms or pain points and create content that can help address those issues. With the information you gather, you’ll be able to pinpoint and build content — both reactive and proactive – around the specific points of differentiation that set your business apart and give it a competitive advantage. At the Edina-based PR agency I lead, critical listening is a priority. From client feedback to employee insights to industry hot topics and everything in between, we actively and consistently listen, allowing us to address both challenges and opportunities through our communications.

Declare and share. Then it’s time to take the information you’ve gathered and lay out a road map for success. Bring the key players on your team together to talk through what you want to communicate and how you’ll communicate it. We recently put our own agency through the same process we use with our clients. Through this exercise, we developed a refreshed set of key messages and also generated numerous story ideas to drive our agency marketing. We use them as the foundation for everything from our newly updated website to refreshed collateral to client and industry events we produce. Integrate. Make sure what you say about your company aligns with what you’re actually doing by ensuring that your operations and communications are on the same level. If your clients tell you they appreciate your phenomenal customer service but have held back on doing more work with you because they feel your technology is out of date, look hard at elevating your tech game before you go out and talk about it. If you’re going to start a conversation — and by extension invite scrutiny – work to make sure what you say on the outside matches what you’re doing on the inside. Show, don’t only tell. Consider the areas and topics on which your company is an expert.

www.upsizemag.com

WE MOVE IN ONE DIRECTION

FORWARD. C O R P O R AT E D E PA R T M E N T C H A I R

DEAN D. WILLER P / 612.604.6633 E / dwiller@winthrop.com

Our Corporate & Transactions attorneys use the law to help you reach your goals for your business. We work with clients at all stages of growth, from business formation to succession planning and everything in between, focusing on creative solutions and practical advice that helps you move your business forward.

Are you actively demonstrating that expertise through your communications? Do you share insights and tips freely with your audiences? Or do you hoard them until they become paying customers? We call this type of content “thought leadership,” and are big believers that demonstrating your knowledge and sharing useful information with people who aren’t paying customers can pay dividends down the road. Many of our clients tell us they see spikes in website traffic when they publish new thought leadership pieces and they also report that new prospects, customers and clients often reference thought leadership content they’ve seen or heard. Engage. It’s more than just telling your story: Engage in real conversations with your audiences in any way that makes sense. Keep those lines of communication open and meet people where they are and how they prefer to communicate, whether it’s via user conferences, social media discussions, a print newsletter, webinars or in-person discussions. Sharing your expertise can give potential clients and customers something they can actually put into action. One example: Last month we hosted an event that brought together journalists who cover med-tech topics for a discussion on the state of Minnesota’s medical communications, facilitated by our health and medical practice group lead. Sixty clients, potential clients and industry partners spent an evening networking and learning, and all took home valuable, actionable ideas that they’ll implement to improve their businesses. We had an opportunity to genuinely connect with and get to know additional influencers in the medical space. Time very well spent for everyone involved.

Prioritize. Start-ups and established companies alike often struggle with wanting to be everything to everyone. Rather than trying to market every aspect of your work equally, why not pick three things to focus communications on in the coming year? Once you have your key attributes or services identified, develop a suite of content around them — website copy, white papers, earned media pitches, collateral and so on. By going deep in a few areas, you have a better shot at “owning” those conversations. Be authentic. Talking about your products or services and experience is important, but you can be a lot more authentic and personal than that. Let your audiences glean insights into the impact of your work by always finding the people in your stories, whether it’s your employees or those who benefit from what you do. At the same time, communicate why you do what you do. Make sure your values come through and demonstrate how you’re making a difference in the community. Let your audiences know how you can help them, but also talk about what’s important to your organization. Although it takes some internal planning and collaboration, you can utilize your communications strategy to not only tell your story but to help potential customers understand why they should choose you — and make your business stand out from the crowd.

“Although it takes some internal planning and collaboration, you can utilize your communications strategy to not only tell your story but to help potential customers understand why they should choose you.” Brian Bellmont, Bellmont Partners

Brian Bellmont is president of Bellmont Partners: 612.255.1111; brian@bellmontpartners.com; www.bellmontpartners.com.

UPSIZE MAY • JUNE 2018

www.upsizemag.com

CUSTOM APPLICATION DEVELOPMENT A finished project isn’t the end. It’s the beginning of a better team building smarter technology. With our unique consulting and training methodology, Intertech has been helping business grow with strategic, custom application development since 1991.

www.intertech.com

www.upsizemag.com

MAY • JUNE 2018 UPSIZE



SBA myths

BUSINESS BUILDERS

Debunking common SBA myths by John Thwing

TIPS 1. SBA loans don’t have to be difficult. If the application process is more difficult than for other products, it might be a reflection on the lender. 2. Start-ups aren’t the only companies applying for SBA loans. Established businesses with a financial track record often use them, for example, to expand or for buying and occupying commercial real estate. 3. Business owner contributions are still sought from businesses seeking SBA financing. Equity requirements might range from as little as 10 percent for commercial real estate financing to 20 percent or more for startups. 4. SBA financing can help cover intangible assets. The SBA 7(a) program is designed to help lenders appropriately finance them. 5. Turnaround companies may need to look elsewhere. Most SBA lenders avoid funding businesses that are not currently financially stable. 14

UPSIZE MAY • JUNE 2018

I’VE BEEN IN BANKING for over 30 years and, in my time, I’ve seen it all. My niche, though, is working with the U.S. Small Business Administration (SBA) loan programs, helping business owners realize their dreams. The ability to dream big within the limitations of a small business structure is what makes an SBA loan special. But, the name can be deceiving — did you know there is really no such thing as an SBA loan? I’ll explain this and other common SBA myths below. What’s in a name? Though facilitating lending is a core function of the SBA, it does not directly provide loans. Private lenders, including banks, alternative lenders and certified development companies, provide loans that are guaranteed by the federal government, which makes this investment because it recognizes the importance small businesses play in the economy. SBA loans have to be difficult… The relative pain or ease of an SBA loan process is more a reflection of the practitioner than the product. Getting a business loan from a lender always includes sharing financing information, filling out forms and going through a credit approval process. If a lender’s SBA process is significantly more difficult than their other loan products, it may be a reflection of their experience and expertise in SBA lending. …and slow Depending on what is being financed, SBA loans might turn in as fast as a couple of weeks for a simple equipment loan, to 60 days or more for construction financing. The loan timing typically reflects the process timing (construction can take longer due to processes like architecture, bidding, permitting, etc.). It’s only for start-ups While the SBA 7(a) program can be a good funding tool for start-ups, most of my clients are actually established businesses with a financial track record.

We are often helping a current business expand, buy and occupy commercial real estate, or helping someone buy an existing business. SBA loans are for itty-bitty businesses Most people would be surprised at how many businesses can be considered a small business concern. Depending on industry, businesses earning tens of millions of dollars in annual revenue or having hundreds of employees can be eligible for SBA financing. I don’t need funds of my own Like most lenders, the SBA will typically require business owners to contribute cash equity into the transaction being financed. Equity requirements might range from as little as 10 percent for commercial real estate financing, to as much as 20 percent or more for start-ups. The SBA provides very specific guidance and definitions around equity, so talk with your favorite SBA expert to understand the requirements for your situation. You can’t finance goodwill Experienced SBA lenders understand that goodwill, such as brand equity or a portfolio of clients (also referred to as blue sky or intangible value) is often a legitimate part of a business purchase. For service and e-commerce businesses, the entire price of a business may be goodwill. The SBA 7(a) program is designed to help lenders appropriately finance intangible assets. Commercial real estate = 504 program The SBA 504 program is an excellent tool for financing commercial real estate and long-term equipment, but it is not the only SBA program for real estate. The SBA 7(a) program can also finance commercial real estate — often on a longer term and with a shorter prepayment penalty period. A good SBA lender should help you understand all available financing options, including SBA 504, SBA 7(a), and conventional bank financing. www.upsizemag.com

For additional resources check out: Current SBA SOP: https://bit.ly/2rquBLL Current SBA Size Standards https://bit.ly/2rr49Ru Local Technical Assistance — St. Thomas SBDC: https://www.stthomas.edu/centers/sbdc/

I can finance a “turn-around” Most SBA lenders avoid funding businesses that are not currently financially stable. Both the SBA and the lender would typically want to see historic debt service coverage of at least 115 percent (i.e. the business needs to show it can make the payments and have some wiggle room). I can refinance an SBA loan at one bank with an SBA loan from another bank SBA policy typically prevents SBA loans from being refinanced with new SBA loans. One possible exception would be if the current lender has denied a new loan request. In that case, another lender may be able to either refinance an existing loan or have it transferred to them with SBA approval. I don’t need to give a personal guarantee or pledge available personal assets An SBA lender’s job is to help you take advantage of a business opportunity by providing funding. Another important part is to make sure you understand the obligations that come with the opportunity. A personal guarantee is almost always an SBA policy requirement for any owners of 20 percent or more of the business entity. Depending on what the loan is for and the amount of collateral in the business, the lender may also be required to take a lien position on personal assets, such as your home and/or vacation and

investment property. A good SBA lender should quickly help you understand the business and personal obligations required to move forward. The SBA loan rate is set by the government While the U.S. SBA does set rules around the rates lenders can charge, the SBA loan market is a competitive marketplace. Lenders compete for SBA loans just like other types of loans, and the rate or rates options offered may vary from bank-to-bank. The relative financial strength of the business and owner might also influence the rate offered by the lender. My business can only have one SBA loan Most owners and their business(es) are eligible for up to $5 million in total SBA funding. That $5 million can represent multiple loans in various SBA programs – 504, 7(a), Express Revolving Line of Credit, etc. But remember, eligible does not equal qualified or approved. The request still has to make financing sense to the lender. My personal credit and legal history don’t matter for an SBA loan Lenders typically have similar personal criteria for SBA and conventional bank loans. They like to see a good personal credit report/ score (varies by lender), and hopefully no significant past legal or financial problems such as bankruptcies, foreclosures, short-sales or felonies. If you have any of these in your past, it is best to disclose them as early as possible in the loan process. Bottom line — work with a proven SBA expert when you need business capital. Experience, expertise and responsiveness are key criteria for a good lender, no matter the size or name of the bank.

“Bottom line — work with a proven SBA expert when you need business capital. Experience, expertise and responsiveness are key criteria for a good lender, no matter the size or name of the bank.” John Thwing, Old National Bank

John Thwing, aka The SBA Guy, is senior SBA business lending officer at Old National Bank: 952.476.5236; SBAGuy@oldnational.com; www.oldnational.com. www.upsizemag.com

MAY • JUNE 2018 UPSIZE



Taxes

BUSINESS BUILDERS

What Minnesota businesses should keep in mind about the new tax law by Patrick Moyneur

TIPS 1. Businesses under $25 million in revenue will now be able to utilize the cash method of accounting. 2. When coding business expenses, have separate accounts for meals and for entertainment. And document clearly who, what, when, where and why for each category. 3. Bonus depreciation, previously in the tax law, has returned. It allows for 100 percent deduction of fixed asset purchases from 2017 through 2022 with a declining scale through 2026. 4. It might be a good time to bring all your financial advisers, from tax attorneys to attorneys, to discuss how the changes will affect your business and personal finances. 5. Many of the tax law changes are nuanced, so talk to your tax professional before instituting major changes.

UPSIZE MAY • JUNE 2018

THE TAX CUTS AND JOBS ACT, signed into law at the end of last year, is set to have a significant impact on both businesses and individual Minnesotans. The changes are numerous and complex, and they’re no doubt going to affect businesses of all sizes — not to mention owners and employees. JNBA Financial Advocates, the wealth management firm where I’ve served as a senior advisor for the past 17 years, recently brought together a panel of CPAs to talk about the new law. Here are six important general takeaways Minnesota businesses should consider: Some significant shifts are underway. The standard deduction has increased for 2018. It’s going to be $24,000 for a joint return, $18,000 for head of household and $12,000 for single filers. At the same time, the personal exemption is being suspended. “The thought is that this is being incorporated into the standard deduction,” says Patty Moskalik, a CPA at E.T. Kelly & Associates. Deductions are also in flux. The medical expense deduction has been lowered, and other tax deductions now have limits. “One of the major changes for individuals is the state and local tax deduction, particularly for Minnesota residents where we have a high state income tax,” Moskalik says. The deduction for state and local sales tax, income tax and property tax is now being capped at 10 percent or $10,000, where there was no limit before.

In some cases, things are about to get simpler. Businesses under $25 million in revenue will now be able to utilize the cash method of accounting. Instead of using the accrual method — recording sales when they’re made and payables when they’re accrued — they’re now able to record their taxes based on what they collect and spend during the year. “That’s a nice change for businesses of this size in that they’re allowed to simplify the way that they do their accounting for taxes and control the timing of expenses and revenue,” says Kevin Besikof, a CPA with Lurie, LLP in Minneapolis. In other cases, they’ll get more complicated. For instance, meals and entertainment is another category that has been significantly changed. Historically, entertainment expenses have been 50 percent deductible. Going forward, they are not deductible. And meals provided for the employer’s convenience used to be 100-percent deductible. Those are limited to 50 percent deductible going forward. “There is some gray area in that,” Besikof says. “I recommend at this point that people, when they’re coding their business expenses, have a separate chart of account, one for meals and one for entertainment. He says it makes sense to really specify and document the “who, what, where, when and why” to identify the purpose of the meals and entertainment. “And then when the rules get finalized, determine what’s deductible and what’s not.”

www.upsizemag.com

Some pass-through businesses will see a major benefit. One of the most significant and complex areas of the new law affects pass-through businesses — S Corporations, partnerships or LLCs, and Schedule C businesses. As a general rule, the law allows for a deduction of up to 20 percent of the qualified business income from those entities. But, whether or not your business qualifies depends on a number of factors including whether your business is one of a number of specified services. A specified service business would not qualify for the 20 percent deduction whereas a qualified trade or business would. A specified service business is identified as business in financial, medical or law, or any other business where its primary asset is the reputation of its owners or employees, Besikof says. As you might expect, there’s a considerable amount of discussion around defining exactly what a specified service business is and who qualifies for the deduction. “There are a lot of requirements to meet but if you meet those, those people will get a big benefit,” says Moskalik. Businesses can take advantage of fixed-asset deductions. Another key change for business is related to how assets are purchased and expensed. “One of the goals of the tax changes was to encourage purchasing of fixed assets,” says Besikof. To do that, bonus depreciation, which had been a concept previously in the tax law, was brought back. It allows for 100 percent deduction of fixed asset purchases from 2017 through 2022 with a declining scale then allowed through 2026.

This is a good time to align your financial approaches. In any case, but especially when a complex and sweeping new law like this takes effect, make sure your financial approaches — and your advisers — are on the same page. One point I think is particularly critical: It’s a good idea to bring all of your advisers together, including attorneys and tax professionals, to talk through what a changing climate could mean for your business and, if you’re an owner, your personal taxes. Your financial adviser can act as quarterback to ensure that everybody is contributing to your financial bottom line by handling their areas of expertise, nobody’s stepping on toes and that all of your professionals are pointed in the same direction. Now is the time to focus on planning to look at both short- and long-term goals and adjust your strategy as necessary. While there is still a lot of murkiness around the new law, one thing is clear: There are multiple elements to be aware of regarding the new tax law, and many of them extremely nuanced. So it’s a good idea to discuss the topic in greater detail with your accounting professional of choice before making any changes. PLEASE SEE IMPORTANT DISCLOSURE INFORMATION at www.jnba.com/disclosure.

“It’s a good idea to bring all of your advisers together, including attorneys and tax professionals, to talk through what a changing climate could mean for your business and, if you’re an owner, your personal taxes.” Patrick Moyneur, JNBA Financial Advisors

Patrick Moyneur is a certified financial planner and a vice president and senior advisor at JNBA Financial Advisors: 952.844.0995; patrick.moyneur@jnba.com; www.JNBA.com. www.upsizemag.com

MAY • JUNE 2018 UPSIZE

OPERATING at the

AIRPORT Logistics make it challenging, but the visibility can prove worthwhile

ichelle Gayer was pretty skeptical when first approached about trying to take Salty Tart, and its selection of pastries, breads and cakes, into Minneapolis-St. Paul International Airport. She’s primarily familiar with seeing national brands and other big-name companies operating there. And she had been a supplier to another operator there previously until the companies could not agree on payment terms. So, it took a lot of meetings, plenty of financial discussions and some cajoling by a potential licensing partner, in her case Mid-

field Concession Enterprises, before she would agree to have her concept make a run at space in Food Truck Alley at MSP. “I was hard to get,” she says. “Totally skeptical.” Even now, as Midfield runs day-to-day operations at MSP’s version of Salty Tart, which is performing well, Gayer admits to being just “skeptically optimistic” about the move. Her team is at the airport daily delivering freshly made product. The rules and regulations, logistical hurdles — Salty Tart doesn’t deliver via the airport’s hired third-party logistics firm, but instead delivers right at the curbside – and other challenges, such as finding employees or parking, have her firmly in the camp of having no desire to run an operation there by herself. “I wouldn’t even consider it,” she says. But since the dayto-day responsibilities lay with Midfield, she adds, “I’m okay that we’re there.”

Different model

Several local restaurant concepts are represented at the airport. Some are located in Food Truck Alley, which was designed to represent that trend on the street.

Liz Grzechowiak, assistant director of concessions and business development, acknowledges the uniqueness of the airport concessions model. “Typically, you can tell when someone is really green,” she says. “They’ll call and ask the question ‘what’s your lease cost per square foot.’ You have to pull back.” That’s because the Metropolitan Airports Commission, which operates MSP and six reliever airports, is obligated by the state to put its concessions real estate and other contracts through a competitive bid process. And the contracts are lengthy, so the opportunities don’t arise often. “It comes in cycles,” she says. “Those cycles have a tendency to be few and far between.”

by Andrew Tellijohn

PHOTOGRAPHS BY TOM DUNN

UPSIZE MAY • JUNE 2018

www.upsizemag.com

Salty Tart owner Michelle Gayer was skeptical about getting into the airport. She says it took several conversations with a partner before she agreed to sign on to a process she would not enter into by herself.

www.upsizemag.com

MARCH â&#x20AC;˘ APRIL 2018 UPSIZE

COVER STORY For those who have an interest, Grzechowiak says airport staff has an ongoing “interested parties” list. Those who request it will receive information when opportunities arise. Airport officials also aim to help potential business partners get a sense of the differences between operating at the airport and a more traditional location on the street. When MSP started hosting those events in advance of its recent concessions overhaul, more than 300 people attended. The event included a meet-and-greet opportunity for small business operators to meet larger partners who were planning to place bids. Those meetings are important, Grzechowiak says, because the airport typically does not do direct leases with small business. Instead, it uses a “batch” model. So, if there are 50 total locations available, they might be broken into several packages, each with several locations. But the packages are large enough where a small business owner isn’t likely going to be competitive alone. Build-out costs starting at $400-per-square-foot, staffing challenges, parking and security are other barriers to small business operators. “If you think it’s difficult staffing your business street side, it’s even more difficult doing it in the airport,” she says. The best route into airport concessions for a small business, then, is partnering through a lease agreement with one of the “prime” concessionaires with the experience and resources to successfully navigate the world of airport food and retail operations. During a recent two-phase concessions overhaul, about 40 percent of 80 total locations went to local brands. So, while you might still find a Burger King, a Wendy’s or a Chili’s at MSP, you’re almost as likely to find locals, like Salty Tart or Black Sheep Pizza or Republic or any number of the other popular purveyors you might find in Edina or St. Paul or Minneapolis or Woodbury.

Definitely interested

and says he could not have done it alone. “The nature of the specifics of the RFP itself are so detailed that unless you have worked alongside a company that has done this, it would be incredibly intimidating and almost too daunting to proceed,” he says. “I could not have done it alone. Once you know that, then the real work starts with really getting comfortable with the process.” He started two years ahead of the bid process, going to meetings, researching and talking to people from the industry. He did a ton of pre-bid preparation and interviewing potential licensing, but he didn’t expect to be selected. He decided to bid, in part, because there was low risk for him. If he didn’t win, he says, little would be lost. If he did, he’d have space in the high-visibility building with someone else doing most of the day-to-day heavy lifting. O’Reilly partnered with SSP America to open the Republic location at MSP, which comes complete with live music performances. He was involved in interviewing the general manager before that person was hired and he does consult with SSP on menu changes. SSP covered the build-out costs, staffing and day-to-day operations. The companies communicate regularly. And, assuming the restaurant performs well, he gets a check at the end of the month. While he acknowledges he couldn’t have done it alone, O’Reilly is thrilled with Republic’s airport outlet. “If you are lucky enough to win what really is the downside?” he says. “There are only X number of restaurants at the airport and the airport is really smart about not oversaturating. They can tell you which locations are going to be the busiest. There are things we can’t control on the street side. From what I’m watching, it’s performing well and I’m content.”

Long-time MSP operator now entering other airports

While it’s an entirely different business model and it inMatty O’Reilly, owner of the Republic restaurant, is thrilled cludes many challenges, it is possible to make a living running to be in the airport, but he also acknowledges the learning curve concessions in the airport. Pady Regnier, CEO of St. Croix Airport Retail Inc., had 10 stores in three mall locations, including the Mall of America, CONTACT THE EXPERTS when she got involved with a concessions overhaul at MSP 16 MICHELLE GAYER, Salty Tart: 612.874.9206; info@saltytart.com; years ago. She spent quite a while learning the industry. www.saltytart.com. “I jumped in and figured it out as I went along,” says Regnier, who adds that strategy might not work now. Build-out LIZ GRZECHOWIAK, Minneapolis-St. Paul International Airport: costs have gone from around $250-per-square-foot when she 612.713.8746; liz.grzechowiak@mspmac.org. started to around $1,000-per-square-foot in some airports www.metroairports.org. now. “You have no room for error if you want to operate yourMATTY O’REILLY, Republic: moreilly2@me.com; www.repubself.” licmn.com. But the choices, at least upfront, were the same: Do you want to operate yourself, license or franchise, or come in as a supPADY REGNIER, St. Croix Airport Retail: pady@airportretailers. plier for other operators. Will you want to work the long hours? com; www.airportretailers.com. Is it worth it to deal with the headaches of finding employees, 20

UPSIZE MAY • JUNE 2018

www.upsizemag.com

COVER STORY “There are 90,000 people in the building every single day. The brand exposure on an international level can change your business.” — LIZ GRZECHOWIAK, Minneapolis–St. Paul International Airport getting them cleared by the Transportation Security Administration to work at the airport, only then to lose some of them because getting there and parking to work can be a hassle? “If it’s not right, don’t be afraid to say ‘I dodged a bullet,’ Regnier says. She also spent several years in advance of the procurement she initially won building relationships with MSP’s staff and with operators. Finally, she researched various certifications, learning that as a woman-owned business operator, she was eligible to become an Airport Concessions Disadvantaged Business Enterprise. That helped her become an attractive partner for the larger operators, who typically must incorporate minority- and women-owned firms into their packages. “This is a vehicle that can make a small business more attractive to work with larger operators who have more financing available,” she says. So, for Regnier, the answer several years ago was yes, she wanted to make a go of it in the airport. And it has worked out so well that she has now closed her mall stores to focus on expanding in airports around the country. She has 27 locations in five airports. Some she runs herself. In others, she is a joint venture partner, meaning she has various specific management responsibilities in tandem with a larger operator. Regnier just recently decided not to renew her Mall of America lease. She loves the mall, but airports have similar characteristics. “You have the energy, this is the place to be,” she says. “It has constant traffic, happy customers if they are not too crabby about the TSA, a dynamic customer base. If you are trying to build your brand, you’ve got the best eyeballs in the world.” She adds: “If you’re not looking at airports for an opportunity to build your brand in a pretty fast way you are missing a big opportunity,” she adds. “It’s where the most coveted eyeballs are.”

www.upsizemag.com

Upcoming opportunities?

MSP completed phase one of its concessions overhaul in 2017, with 35 retail units and 15 restaurants. Construction started after the Super Bowl this year on locations won in phase two. They will all open by December 2019. Grzechowiak says the next significant food opportunity will come in 2022, when the Terminal 2 program will be revamped. Retailers will soon have an opportunity to bid on some retail merchandise units, which are upscale kiosks. While these opportunities may seem a ways into the future, she adds that it’s important to start early – at least two years from the time you know there is going to be a lease. Then you can start working to find the right partner and make sure you have time to get any questions answered. Businesses that contact airport staff now also will be on the radar in the event that a location doesn’t work out and needs to be replaced. The airport won’t make that determination alone, but can pass along names to its operator partners. While concessions are possibly the most visible opportunity at the airport, Grzechowiak says there also are opportunities to become product suppliers. Construction opportunities arise for small businesses from time-to-time, as well. MSP, says spokesman Pat Hogan, is a part of the state’s Targeted Group Business program, aimed at finding opportunities for small, minorityowned businesses to partner with large operators. So, while getting into the airport can look daunting, Grzechowiak adds that it can be a tremendously worthwhile leap of faith. “There are 90,000 people in the building every single day,” she says. “The brand exposure on an international level can change your business.”

MAY • JUNE 2018 UPSIZE

WORKSHOP: Mergers & acquisitions

Nailing the sale

How to maximize the “Super Bowl” of your career By Andrew Tellijohn Photographs by Tom Dunn

ou don’t get many chances to sell your business. It might, in fact, be a one-shot deal. So, experts say, make sure you make the most of the opportunity by having a good management team that allows the business to function even if you’re on a long vacation. Regularly upgrade your technological systems so you’re getting the most productivity for your investment. Make sure you bring on a team of advisers that can help find multiple potential buyers and determine what your company is worth. And, when you are about to sell, don’t forget to consider the ongoing value of your digital assets. This advice and more came from a panel of experts during a session on mergers and acquisitions, co-hosted by Upsize and Rick Brimacomb’s Club Entrepreneur.

Know the basics, but also assemble your team

Among the basics, says Lisa Holter, a shareholder at the law firm Fredrikson & Byron, is knowing the different possible frameworks of a potential deal. There are stock deals, where entire companies are sold, including shares, units and membership interests. In asset deals, on the other hand, the selling entity still exists after the deal is over, but individual assets will move to the buying company. “A stock deal is subject to one level of tax,” she says. “An asset deal, if you are a corporation, is subject to two levels of tax. There are different mechanisms to accomplish the two types of transactions. They have different tax implications.” Panelists told attendees that while they may be incredibly intelligent, adept at business and sitting on a financial gold mine of a company, they should enlist the aid of several professionals who have a background in business deals. 22

UPSIZE MAY • JUNE 2018

Rick Brimacomb

www.upsizemag.com

WORKSHOP: Mergers & acquisitions

“In my experience it takes three to six months to do a deal. If it’s an auction process, you’re going to look at a longer timeframe.” — Lisa Holter, Fredrikson & Byron

“Key takeaways from my perspective are, for both buyers and sellers, to set up their team of experts early on in the process,” says Melissa Johnston, a senior vice president at Highland Bank. “There are a number of resources out there for buyers and sellers to really put together a solid team.” Pinching pennies on professional fees when you are at this stage makes no sense, she adds. “This is the financial Super Bowl of your life and it’s not an area that you want to be skimping on,” she says. “Make sure your team of financial advisers understand their role, they are not overlapping and they are really interested in your success.” Along with that, she adds, companies should shop around for business bankers with the same experience, even if that means partnering with someone other than their day-to-day banking partner. Talk with peers, talk to experts and find the right fit. “Just because their depository institution makes business loans doesn’t mean that institution is the right partner for them to do an acquisition,” Johnston says. “It’s important to find a good banker that knows how to structure these types of deals and can be a good sounding board for you as a buyer as you are going through the due diligence process.”

Finding the right potential buyers

Part of the reason it’s important to assemble the team, the experts say, is that they know the nuances it takes to maximize a seller’s value or to get the best deal for a buyer. Holter had a client who had entered into a letter of intent to sell before seeing her. The terms, she says, were not optimal and once the agreement expired, she reworked the plan going forward. “I set him up to have more leverage in negotiating as he gets into the meat of the deal,” she says. Peggy DeMuse, business broker with Sunbelt Business Advisors, says her role is to help business owners understand the value of their business and, when they are ready to sell, to maximize the value. Sunbelt is knowledgeable about what buyers might be searching for their next purchases and they provide a setting where it’s possible to get multiple offers. “Make sure you are getting a fair price,” she says. “One buyer is really not a buyer and you have no leverage. If you start down that path with a buyer, it’s the perfect time to bring in some professional advice. You need professional advice to make sure you are not leaving money on the table.” “Unless you’ve got some pressure on that buyer,” she says, “what we see on a regular basis is that buyer will

“One buyer is really not a buyer and you have no leverage. If you start down that path with a buyer, it’s the perfect time to bring in some professional advice. You need professional advice to make sure you are not leaving money on the table.” — Peggy DeMuse, Sunbelt Business Advisors

www.upsizemag.com

MAY • JUNE 2018 UPSIZE

WORKSHOP: Mergers & acquisitions

“Just because their depository institution makes business loans doesn’t mean that that institution is the right partner for them to do an acquisition.” — Melissa Johnston, Highland Bank

take three months, six months, maybe nine months, do due diligence, kick things around and then say ‘maybe, maybe not,’” she adds. DeMuse says Sunbelt has found in recent years that there are a lot of buyers out there in their mid-40s to mid-50s who have had significant careers with good companies, who have saved a fair amount of money but suffered a recent layoff or got burned out. “They decided they want to take this time in their lives to start their own business or own their own business and have something they can take a lot more control of,” she says. “That’s a good buyer for us.” There also are a lot of younger business owners building portfolios filled with small companies. They get them running, put managers in place and then move on to find the next purchase. “People are saying ‘hey, I’m not trusting the stock market as much as I used to, I don’t want to have all my apples in that one basket, so I’m going to build my own basket,’” DeMuse says.

Technology matters

When it comes to maximizing business value, technology is important, but it’s equally vital that companies purchase

their technology in a way that enhances the value of the company while not draining cash flow, says Dan Moshe, founder of Tech Guru. For example, he says, there is a sense from the past that if a company was going to get a premium for its business in a sale that its software needed to be intellectual property. Unless the potential seller is a software company, he says, it’s better to buy an existing software program and then make it fit your needs. “Take software that has been designed for your industry, then customize it to what makes your business unique and special,” he says. “Sometimes it’s tempting to take software off the shelf and meld your business into that software. Then you become kind of vanilla.” Moshe adds that it’s also helpful when companies can stay toward the top of the “adaption continuum.” By that, he means, companies don’t necessarily need to be the first to purchase a new technology, but make sure once they are tried, tested and proven, they should make sure they purchase what they need to ensure the company functions as efficiently as possible. Tech Guru, for example, recently moved to a system where its financial reports are done live by dashboard continuously rather than through the traditional desktop business software.

“Sometimes it’s tempting to take software off the shelf and meld your business to that software. Then you become kind of vanilla.” — Dan Moshe, Tech Guru

UPSIZE MAY • JUNE 2018

www.upsizemag.com

WORKSHOP: Mergers & acquisitions

“I think we could have saved them a significant amount of money had they just had a five-minute conversation with us before making this change.” — Sam Romain, Dominate With SEO

“That way, we can make changes and react to changes in demand or excess capacity or not enough capacity really in real time before it’s too late,” Moshe says. Potential sellers also must keep in mind the value of their digital assets, says Sam Romain, co-founder of Dominate With SEO. He’s seen companies that were getting hundreds of commercial leads every month lose almost all of them because they didn’t manage their digital assets properly. “I don’t know what a customer is worth to a bank, but I’m sure it’s a lot of money,” he says. “I think we could have saved them a significant amount of money had they just had a fiveminute conversation with us before making this change.”

Final pieces of advice?

When asked for some final advice, Holter reminded sellers should be prepared for the process to take a while. “In my experience it takes three to six months to do a deal,” she says. “If it’s an auction process, you’re going to look at a longer timeframe.”

CONTACT THE EXPERTS PEGGY DEMUSE, business broker, Sunbelt Business Advisors: 651.288.1627; pdemuse@sunbeltmidwest.com; www.sunbeltmidwest.com. LISA HOLTER, shareholder with Fredrikson & Byron P.A.: 612.492.7082; lholter@fredlaw.com; www.fredlaw.com. MELISSA JOHNSTON, senior vice president Highland Bank: 952.858.4798; Melissa.Johnston@highlandbanks. com; www.highlandbanks.com. DAN MOSHE, founder and CEO, Tech Guru: 612.235.4895; dan@techguruit.com; www.techguruit.com.

Owners should plan to spend evenings and weekends putting together documents buyers will want for due diligence purposes. And it will be extra important for the company to hit its financial targets. “Don’t plan vacations during that time frame,” she says. “There is going to be an opportunity for the buyer to renegotiate the price during negotiations and that due diligence period.” She and Johnston urged business owners to inform only key employees who can help assemble information – realizing the likelihood that retention bonuses may be necessary to keep them on board. Be wary of informing the entire team, however, Johnston adds. “If your employees start finding out that you are selling, it could be really bad for everyone involved,” she says. “Those people could get spooked about the sale and leave.” Moshe expounded on technological investments and encouraged business owners to make sure that when they transition to cloud-based applications, that they make training employees a priority “so everyone is using them consistently with your brand to help deliver great service to customers.” To DeMuse, the most important thing a business owner can do to increase the value of the business is put together a good management team and disappear for a while. “Be that owner that can be gone for a month and the company can run on its own,” she says. And companies should keep an eye on their online reputation. There are some strategies that can help shed a positive light on your business, adds Romain. But “it’s good to plan ahead and try to get ahead of any skeletons you may have in your closet before you try and sell your business,” he adds. “These strategies take a while to fulfill and implement.”

SAM ROMAIN, co-founder, Dominate with SEO: 612.371.2030; sam@dominatewithSEO.com; www.dominatewithseo.com.

www.upsizemag.com

MAY • JUNE 2018 UPSIZE

UPSIZE RESOURCE DIRECTORY business machines Loffler Companies, Inc.

accounting Cummings, Keegan & Co., p.l.l.p

BANK Highland Bank

St. Louis Park, MN • Apple Valley, MN 952-345-2500 • www.ckco-cpa.com Kathy J. Klang, CPA/ABV

Rick Wall, CEO | 952.858.4753 Jay Hammond, President | 952.858.4810 952-858-4888 | highlandbanks.com

Business owners in all phases – new and emerging, established, and those planning a succession or exit strategy – rely on Cummings, Keegan & Co., P.L.L.P. for a complete range of tax, accounting and auditing, and business management needs. Clients receive a tailored client experience – driven by client preferences, needs, and goals.

Founded in 1943, Highland Bank is focused on small business lending and is an SBA “Preferred” Lender, making us uniquely qualified to help your business obtain the financing it needs expeditiously. Work directly with the decision-makers who will treat you like a business partner. Member FDIC.

Innovate. Deliver. 1101 East 78th Street, Suite 200 • Bloomington, MN 55420 952-925-6800 phone 952-925-6801 fax www.loffler.com • Jim Loffler — President Loffler is your one call for office technology and services. Our integrated solutions from digital printers & copiers (Canon, Konica Minolta, HP, Lexmark, OCE & Toshiba) to telephones, IT services, dictation, document management software and on-site managed services improve your productivity and bottom line. Our fast, reliable and professional customer service makes Loffler your first choice.

ACCOUNTING Olsen Thielen CPAs

Bank North American Banking Company

COMMERCIAL PHOTOGRAPHER Tom Dunn Photography

Roseville, 651-483-4521, Michael Bromelkamp Eden Prairie, 952-941-9242, Thomas Pesch www.otcpas.com

Offices located in: Roseville, Minneapolis, Woodbury, Hastings Brad Huckle, President and Chief Lending Officer www.nabankco.com

308 Prince Street Studio 242 Saint Paul, MN 55101 651-368-2047 www.tomdunnphoto.com Tom Dunn tom@tomdunnphoto.com

Our goal at North American Banking Company is to give business owners all of the banking services they need and make it a great experience. Our bankers are seasoned professionals in all areas of business banking. You will find it’s easy to do business with bankers who are focused on you. We’re not your average bank.

Tom is a commercial photographer who has been helping businesses tell their unique story with photographs for websites and marketing materials since 2006. Tom works closely with his clients to understand their business and branding strategy and creates images that support their mission and success.

We strive to provide an exquisite client experience that is dedicated to building strong relationships while providing a hands-on approach to business consulting. In addition to the traditional CPA services, we provide valuations, employee benefits, HR, and back-office accounting. We also have extensive experience working with start-up companies, mergers, recapitalizations and financing. Depend on Our People. Count on Our Advice. SM

Member FDIC

ADVERTISING • MARKETING Risdall

BUSINESS BROKERS Sunbelt Business Advisors

commercial real estate The Ackerberg Group

1300 Godward St. NE, Suite 6000 Mpls MN 55413 Contact: Peggy DeMuse, pdemuse@sunbeltmidwest.com 651-288-1627 www.sunbeltmidwest.com

Lake Calhoun Center, Suite 10 3033 Excelsior Boulevard • Mpls, MN 55416 612/824-2100 • www.ackerberg.com Stuart Ackerberg • stuart@ackerberg.com

Thinking about buying or selling a business? Sunbelt is the world’s largest seller of private companies. We work with business owners to help them understand the current value of their business and how to maximize their net proceeds at the time of sale. Sunbelt will provide business owners with a completely confidential, no-obligation value range. www.sunbeltmidwest.com.

The Ackerberg Group creates vibrant neighborhoods in Minneapolis’ urban core by combining astute development, renovation, investment, management and brokerage services with passion for social and ecological sustainability and the arts. Since 1964, Ackerberg has created office, industrial, retail, residential and mixed-use projects that have transformed neighborhoods through the development of long-standing relationships with neighbors and tenants alike.

business machines Coordinated Business Systems, Ltd.

computer consulting Intertech

851 W. 128th Street• Burnsville, MN 55337 (952)894-9460 (p) (952)894-9238 www.coordinated.com • Jim Oricchio – President

1575 Thomas Center Drive • Eagan, MN 55122 www.intertech.com • Ryan McCabe at rmccabe@intertech.com or 651.288.7001

Coordinated Business Systems is Minnesota’s premier independently owned and managed provider of document imaging technology and managed IT and network services. In addition to providing the latest hardware and software, our mission is to offer custom designed managed print services, document management and managed I.T. and Network services programs to help business of all sizes improve profitability, increase productivity, lower costs and maintain their competitive edge.

Intertech consultants are leading software developers who focus on more than simply “heads down” programming. We provide comprehensive software services – consulting, project delivery and mentoring – for all leading technologies, most notably Java, .NET and mobile. Intertech consultants are highly experienced and among the IT industry’s top contributors at conferences, technology journals and user groups.

With over 40 years of success, Risdall is one of the longest-standing marketing agencies in Minnesota. We harness creativity, technology, and data to help brands live fully and effectively online- creating vital digital visibility that drives engagement and business growth. Our experienced team can provide your organization with the strategy required to create integrated programs that drive bottom line success.

BANK Crown Bank Kevin Howk, President 6600 France Avenue South, Suite 125 Edina, Minnesota 55435 Ph: (952) 285-5800 www.crown-bank.com Imagine a bank that actually helps you get what you want. Instead of red tape, loan committees and canned lending formulas. Work with a decision-maker who can back you up from start to finish.

Member FDIC

UPSIZE MAY • JUNE 2018

ADVERTISING SECTION

www.upsizemag.com

UPSIZE RESOURCE DIRECTORY insurance O’Rourke Agency, Inc.

mailing services Braemar Mailing Service Inc.

41 North 10th Avenue Hopkins, MN 55343 952-932-7219 (phone) 952-932-2820 (fax) www.orourkeagency.com Tim O’Rourke

7379 Washington Ave S • Edina, MN 55439-2417 tel: 952-767-0300 fax: 952-767-0345 www.braemarmailing.com cu@braemarmailing.com

Our agency has provided personal and business insurance services for the past 30 years. We proudly represent a number of outstanding insurance carriers, including Chubb, Metropolitan, Progressive, Travelers and Kemper. Call us for all your insurance needs!

Since 1985 business mailers who value personal service and meticulous attention to detail have found one company rich in both. We are postal experts and list brokers who offer a full service lettershop and data management services. Your mailing, unique or ordinary, in large quantities or small, receives Braemar-style attention to detail. We are proud of the work we do and the customer service we provide.

it managed services Tech Guru — The Caring Technology Company

SBA LENDER Highland Bank

612.235.4895 - www.techguru.mn

Rick Wall, CEO | 952.858.4753 Jay Hammond, President | 952.858.4810 952-858-4888 | highlandbanks.com

Tech Guru’s Caring Technology Services offering is built for businesses and non-profits with 25-250 employees that want consistent uptime. By being responsive, collaborative, and security-minded, Tech Guru helps organizations maximize returns on IT investments, minimize technology risk, and achieve their strategic visions.

GROW OR DIE Move your business forward with investment capital generation, deep-level network connections and strategic refinement consultation from Brimacomb and Associates. We partner with emerging companies and professional services firms to offer unparalleled access to professional resources, executive suites and financing sources.

www.brimacomb.com 612.803.3169 • rick@brimacomb.com Follow us on

LAW FIRM Lommen Abdo

SUCCESSION PLANNING Lommen Abdo

1000 International Centre, 920 Second Avenue South Minneapolis, MN 55402 612-339-8131 | 800-752-4297 www.lommen.com | Contact: Jesse Beier

1000 International Centre, 920 Second Avenue South Minneapolis, MN 55402 612-339-8131 | 800-752-4297 www.lommen.com | Contact: Cameron Kelly

Looking for a business lawyer who speaks plain English and not legalese? Contact Lommen Abdo where we focus on small, medium-sized, family and closely held businesses. Our attorneys operate like your outside general counsel – providing you effective legal advice and sound business strategies. We are upfront about our costs and will work with you to budget legal expenses.

You owe it to yourself, your family, your co–owners and your employees to have a business succession plan in place in the event of incapacity or death. Every business and every family is unique and your succession plan needs to fit your goals for your business and your family. Contact us to design a plan that meets your goals.

LAW FIRM Winthrop & Weinstine, P.A.

venture capital Brimacomb + Associates

Capella Tower, Suite 3500 225 S. Sixth St. • Minneapolis, MN 55402 Tel: 612.604.6400 • www.winthrop.com

TCF Tower, Suite #1600, 121 South Eighth St., Minneapolis, MN 55402 612-803-3169 * www.brimacomb.com Rick Brimacomb, rick@brimacomb.com Chief Strategy and Relationship Officer

Winthrop & Weinstine has a long tradition of representing entrepreneurs and rapidly growing private and public companies across the Upper Midwest and the United States. Our mission is to help fuel the growth of great companies. We are committed to providing outstanding service, sound advice and strong execution. We offer flexible fee arrangements including fixed fees, “success” fees, hourly fees, blended fee arrangements and performance-based agreements. www.upsizemag.com

Results-oriented advisory firm with unparalleled access to executive suites and financing sources. Emerging companies and established professional services firms rely on our depth of knowledge and deep-network connections to grow client lists, assemble project resources and secure new sources of funding.

ADVERTISING SECTION

MAY • JUNE 2018 UPSIZE

catching up by Andrew Tellijohn

Staying focused: Reined in franchising strategy has 360Wow Inc. growing rapidly

TIPS 1. As you grow and you need employees, don’t settle for mediocrity. Letting someone go, having that tough conversation, is emotionally challenging and it can put your business in a compromising position. Work to get the right people in the right seats. It changes everything. 2. Have a focused niche. The business has been much easier to run since narrowing to the complementary service businesses. Before that, it was hard to give any of the businesses the focus they needed. 3. Don’t be the smartest person in the room. Have advisers who are willing to share ideas and help keep the business focused. 4. It’s not all about work. 5. Happy employees equal happy customers. 28

UPSIZE MAY • JUNE 2018

en Cowan was just getting through some struggles with the city of St. Paul in 2009 after regulations related to 24-hour staffing at fitness facilities significantly slowed his ability to open two Snap Fitness locations when Upsize first tracked his story. He did get those open — his third and fourth locations overall. Eventually, he opened another one in Falcon Heights and, later, bought another in St. Paul. But while he was growing in the fitness industry, he also was expanding his franchise holdings into home services and personal training. By 2015 it was becoming a bit much, he acknowledges. “At that point, I had six fitness centers, a mobile personal training company, a box business, a moving company and 1-800-Got-Junk,” he says. “I had 10 entities. I had too much going on. I had three little kids. So, I really looked to scale back the portfolio. “I said ‘I’m going to focus on the home service businesses,’ which I felt were a larger opportunity than going the fitness route,” Cowan says. Nowadays, he’s focused solely on those businesses, which are run separately under the parent company 360Wow Inc. They are: •

•

customers’ locations to dispose of difficult to remove items through recycling, donation or the trash

One of the reasons he likes this niche is the possibility of cross marketing the businesses. Not every customer who is moving, for example, will need junk removed. But some might. And there is potential for adding synergistic companies in related home service industries. Cowan is considering expanding, most likely through the franchise route. But if he does, or more likely when, he’ll stay focused on that category. He’s a lot more focused now than he was earlier in his days as an entrepreneur and he also has added a senior management team that he You Move Me, a moving com- credits with bringing him back in line pany that strives to provide a if he starts thinking outside the curstress-free human touch for rent niche. customers on one of their more “We have customers that use all stressful days of our services and, as the parent Shack Shine, a house detailcompany gets known throughout the ing service that provides winmarket, now as you’re hiring one of dow washing, gutter cleaning our brands to come into your home, and power washing services you know it’s the same management 1-800-Got-Junk, which team and same great employees that goes to residential or business you’ve experienced in the other busiwww.upsizemag.com

360Wow Inc. Description: Parent company to several home service brands in the Twin Cities, including 1-800-GotJunk, You Move Me and Shack Shine. CEO: Ben Cowen Headquarters: Minneapolis Founded: 2005 2017 Revenue: $4.6 million Employees: More than 100 Web: www.360wowinc.com

nesses,” he says. “We don’t have it figured out yet, but it’s definitely an opportunity we are aware of and chasing.” Growth is coming fast. The company has exceeded 100 employees and it reached $4.6 million in revenue in 2017. He’s expecting to do $5.5 million this year and has a goal of doubling that by 2020. Part of the strategy is the company’s motto: Happy employees equal happy customers. Cowan works to keep those employees happy in several ways, including dedicating 7,000 square feet in a new 20,000-square-foot warehouse building solely to providing a good experience for his team. There is a kitchen/break room where employees are served breakfast every morning. There is a gaming area. There are cookouts during the summer and more. “It’s a fun place for people to come hang out when we’re in between jobs,” Cowan says. “Most employees don’t walk into an experience like this.”

The employee piece, he figures, is key at a time when most companies are struggling in the face of unemployment rates under 4 percent. Cowan’s company is getting referrals that provide the best of those who are available or looking for a new opportunity. “We’re building this empire of home service businesses with a focus on those two things as what we believe will be our differentiator and key to success,” Cowan says “People know if they come work for us it’s going to be an awesome experience. That fuels the customer side. … It’s easy to teach the right employees how to be awesome with customers. We kind of feel like we’re on to something.” That’s quite a change for someone who started out his career climbing the corporate ladder at Cargill. In fact, he acknowledges that his parents figured out he should be an entrepreneur before he did. At six, he says, they remind him he had his first fix-it shop, with a wood sign indicating people could drop off their electronics. “I at least advertised that I would fix them,” he says, admitting that “in reality I just took them apart and tried to put them back together. That was the first one. Then I had a lemonade stand and a paper route.” Cargill was a great company to work for and learn from, but nearly a decade in the desire to build his own path overtook him. “The stuff I know today and implemented, I learned at Cargill,” he says, adding that it became clear to him that “I need to do my own thing. I just knew that if I was focused on it I would succeed.”

Ben Cowan, CEO of 360Wow Inc., focuses on keeping employees happy so they’ll want to provide great service to customers at his three home service business brands.

Ben Cowan, CEO of 360Wow Inc.: 612.930.4464; info@360wowinc.com; www.360wowinc.com

www.upsizemag.com

MAY • JUNE 2018 UPSIZE

TRANSFORM your paper-filled office to digital.

Business-critical information needs to be secure, visible and retrievable. An effective document management solution captures, stores and moves data efficiently throughout an organization. Emerge from the clutter with a digital transformation.

COPIERS & PRINTERS • DOCUMENT MANAGEMENT • IT SOLUTIONS

Learn more at www.loffler.com • 952.925.6800