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CONTENTS August • September 2017 • Vol. 16 No. 4 • www.upsizemag.com

PAGE 14

Cover story

Hiring in a tight labor market: Unemployment in Minnesota is lower than it has been since the 1990s and baby boomers are retiring faster than young workers can fill their vacancies. Companies must find creative and efficient ways to attract top-notch talent. BY ANDREW TELLIJOHN

cover photograph by Tom Dunn

PAGE 4

From the editor:

Bb BUSINESS BUILDERS

Editor Beth Ewen discusses the joys, PAGE 5 frustrations and learning experiences that ACCOUNTING come with receiving feedback from readers. Tips for finding the right match in an accountant.

PAGE 12

MANAGEMENT Give your potential advisers a thorough vetting. by Tom Siders, L. Harris Partners

Staff list:

By Adam Hennen, Olsen Thielen & Co. Ltd.

PAGE 20

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

PAGE 8

Meet Greg Hennes from Hennes Art Co. and Brian Anderson from DataTrec, this year’s participants in the Upsize Growth Challenge

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

HIRING Learning from bad hires and avoiding them in the first place.

GROWTH CHALLENGE:

by Angela Lurie, Robert Half

PAGE 24 PAGE 10

CATCHING UP: Permac industries Inc.

Understanding the U.S. Supreme Court’s decision relating to “offensive” trademarks.

Darlene Miller, owner and CEO, talks about staying positive during bad times, shifting gears and thriving as the market comes back.

LEGAL

by Jeffrey O’Brien, Chestnut Cambronne

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.

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UPSIZE AUGUST • SEPTEMBER 2017

piranhas. I have NEVER received a penny from any of the lawsuits I have filed. I IN A LONG CAREER of editing and am disappointed that you did not include writing and, with Upsize, even co-foundexamples of legitimate complaints/lawing a business publication, I have gotten a suits so that your article would actually lot of feedback from readers. I enjoy every do good by protecting the business owner comment, which I keep in a special “hate and provide access for all.” mail/fan mail.” He makes an excellent point, and one But I had never received a comment like I try to keep in mind whenever covering this, from the CEO of a franchise coma controversial issue. Readers, thank you pany, who told a colleague how much he for bringing me up short whenever my loves Franchise Times, another publicapoint of view gets too one-sided. tion where I am editor-in-chief. Many comments I get are completely “One of the trips we did, we took our positive, with entrepreneurs thanking staff out to a cabin and I me for shining the light brought all the Franchise on their business, their Times for the last year struggles, their triumphs. and everyone had to read One of my recent favorthrough one. So everyone ites was from the CEO of was reading it under a tree a new pickup basketball in the woods and had to fitness company, which is right up my alley given come back to the cabin to my long-ago status in high give a report on an article for us to discuss,” the CEO school as a Red River Valsaid. ley Conference (North DaI swear I am not makkota) MVP (which means ing this up. Although I’m most valuable player, I’m not sure how this person’s executive just saying). team members felt about their assignI’m not saying how big that conference ment, I think it’s about the best idea I’ve is; I’m just putting out my credentials as a ever heard — I strive to make our busisharp-elbowed low post of the old school, ness coverage at Upsize magazine and who wracked up double-digit rebounds elsewhere, about inspiring and informing back ... and almost always fouled out late. business owners about how to grow their I had a mean head-fake/1.5-inch jump companies. shot that I taught my son when he was Some comments from readers make 8, though his awe lessened over time as me think, like the thoughtful letter about he grew to 6-foot-five and said my move a column I did earlier this year, detailing wasn’t up to modern standards. frivolous lawsuits around the Americans Everyone’s a critic. with Disabilities Act. Speaking of which: Finally, this email, I had quoted a restaurant owner in Min- received just days into the new year of neapolis, who had been the target of such 2017, made me laugh: “Because of your a lawsuit, and she described a particular article, I am unsubscribing to this publiattorney whom she believed was in the cation. YOU ARE AN IDIOT!!” it said. game only to unfairly extort money from I replied the only way I knew how — business owners. which article? — but never heard back. But this letter pointed out the other side You can’t please all of the people all of the story. “As a polio survivor who is of the time. (And please, keep your hate now in a wheelchair for most of my mobil- mail/fan mail coming. My folder can be ity, I strongly feel that both sides of the infinitely expanded.) issue were not represented. “As a person who has filed approxiBeth Ewen mately 60 ADA lawsuits in four states, I Editor and co-founder feel that the article portrayed most who Upsize Minnesota bewen@upsizemag.com file ADA lawsuits as money-motivated

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EDITOR

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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

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accounting

BUSINESS BUILDERS

Choosing the right accountant by Adam Hennen

TIPS 1. A good accountant does more than just manage your accounts and complete your tax forms. The best also are proactive in anticipating business needs and recommending strategies to save you money. 2. Negotiate over fees. You might not get exactly what you want, but if you don’t ask you won’t know and you’ll set your expectations for the value you expect. 3. Listen to your intuition. You might not always be right, but you shouldn’t ignore it. 4. Ask yourself if you think you can trust your accountant with the intimate details of your business and your life. Your accountant will become familiar with both. 5. Don’t rush your search. Follow a process and consider all the factors that are important to you.

UPSIZE AUGUST • SEPTEMBER 2017

THERE ARE A NUMBER of factors that determine the success or failure of a business venture. Accounting ranks near the top in importance. Accounting is the language for business. If you learn it like a language, you’ll be better able to understand what your business is saying. If you can’t understand the finances of your business, you are setting yourself up for serious consequences, from lost profits to mismanaged cash flow. There are few who know the language better than an accountant, and a good one will save you time and money year after year. Choosing an accountant is no easy task, and it’s not something that should be rushed. There is a process to follow and things to consider. Here are some pointers. Does location matter? It wasn’t long ago when it was important to have your company’s accountant located nearby. Business owners carried their accounting records in by the box so their tax accountants could ready their returns. Technology has made it possible for companies to manage their businesses online, making location less of an issue. If you’re satisfied with working via email, phone calls, video-conferences, or cloud-based accounting software, then your accountant could be on the other side of the world. This gives you freedom to find someone who really comprehends the specifics of your business or industry. Alternatively, you might prefer a warm-blooded handshake from time

to time or find it useful to have your accountant join you for business meetings. If this sounds like you, then you might limit your search to accountants in the neighboring region or to those willing to travel to your business when the time calls for it. Can they serve your needs? A good accountant does more than just manage your accounts and complete your tax forms. The best accountants are proactive, anticipating your business needs and recommending strategies that will save you money and keep you out of trouble. These are just some of the situations that your accountant should be able to assist with: • If you’re just starting your business, your accountant can help you with your business plan, developing realistic financial projections and relevant financial reports that will enhance your chances for success. • Accountants can advise you on your company’s legal structure, helping you find the one that best fits your tax situation and protecting you and your assets from outside business risks. • Due to the large number of small businesses and the relatively low number of IRS auditors, it’s unlikely you’ll face an audit. But if you do, it can be expensive, stressful, and timeconsuming. A good accountant can give you advice on how to work through the process or even handle it for you, taking away a lot of pain and stress.

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• If you’re applying for a business loan, an accountant might help tip the scale in your favor. Banks like to know they will get their money back. Your accountant can help present facts and figures that back up your loan application and can answer any questions your banker might have about revenue projections and expenses. • If you’re buying or selling a business, an accountant can look into the company’s accounts in detail and find out if anything looks wrong. They can also assist you with a business valuation that will help you better understand the value of the transaction. Don’t forget to include your lawyer. Together, the accountant and lawyer should discover all there is to know about the business deal.

along the way that will not only assist in determining the type of accountant you need, but will also help you more clearly understand your own business requirements. Like any other interview, don’t forget to ask for referrals and verify the information. Not sure what questions to ask? Here are a few sample questions to consider:

What about fees? There’s no one method that accountants use to charge their fees. Some bill by the hour, some will work on a monthly retainer, others will bid out a project fee. As a small business owner, hopefully the art of negotiation is already in your toolbox. If not, learn it and be prepared to put it into action. The accountant might not agree with your negotiated fee structure, but if you don’t ask you’ll never know. A quick discussion before the work progresses will ensure a fair price and will help to set your expectations for the value you’re about to receive.

Intuition is a powerful tool in business. Though it isn’t always correct, it definitely shouldn’t be ignored. Ask yourself if you can trust your accountant with the intimate details of your business — and your life. If that sounds more like a marriage than a business relationship, there’s a good reason. Your accountant will become familiar with the inner workings of your business and personal life. The best ones are there when you need them and are your partner in everything but your name. Become familiar before you say “I do”, and get ready to grow your business.

• What type and size of clients do you work with? • Are you a CPA, and if so, how long have you been one? • Who will be working on my account? • How do you charge for services? • Are phone calls and routine business and tax meetings included in your fees? • If my company grows, can you grow with me?

The interview process You need to consider several factors before taking action. An interview will help ensure that you find the accountant that best fits your business. You may also pick up free advice

“Ask yourself if you can trust your accountant with the intimate details of your business — and your life. If that sounds more like a marriage than a business relationship, there’s a good reason. Your accountant will become familiar with the inner workings of your business and personal life.” Adam Hennen,

Olsen Thielen & Co. Ltd.

Adam Hennen is a principal with Olsen Thielen & Co. Ltd.: 651.621.8523; ahennen@otcpas.com; www.otcpas.com.

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AUGUST • SEPTEMBER 2017 UPSIZE

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hiring

BUSINESS BUILDERS

Understanding the cost of a bad hire by Angela Lurie

TIPS 1. Job boards and posting sites reach those actively looking for work, but miss skilled professionals —known as passive job seekers —who aren’t searching but might consider your position if it’s the right role. 2. Well-connected recruiters have deep networks and often know who might be a passive job seeker and what opportunities might appeal to them. 3. Don’t focus too narrowly on the resume. Personal interaction should be required early in the hiring process to help discover truly promising candidates. 4. Over-reliance on technology can slow the hiring process. 5. Employers should not wait until they have an opening to recruit. They should be generating a pipeline of skilled candidates constantly through networking and offering referral incentives to existing employees.

UPSIZE AUGUST • SEPTEMBER 2017

NO BUSINESS IS IMMUNE to the challenges related to hiring new employees: creating a job description, sifting through resumes, scheduling interviews and assessing a candidate’s skills and cultural fit. However, some employers may be underestimating the complexity of the hiring process and performing inadequate candidate evaluations.. Hiring managers sometimes focus too narrowly on certain aspects, while skipping over other crucial steps in favor of time-saving shortcuts – making their company more susceptible to bad hires. So, what exactly constitutes bad hire, and just how harmful is it? After taking time to recruit, hire and start the onboarding process for a new employee, the realization that the wrong candidate was selected for the job can be summed up as a bad hire. An employee who is a poor fit for the role and company culture can drain the team’s energy, waste time, weaken morale, exacerbate pressure on colleagues, and increase stress levels. And it can take months to undo costly damage. The true cost of a bad hire A recent Robert Half survey of more than 1,000 business owners and human resources managers revealed that 81 percent of companies have made a bad hire. On average, respondents estimated 45 hours were wasted on hiring and onboarding people who ultimately did not work out. Fifty-three percent reported increased stress on the team that worked with the bad hire while one in five cited decreased confidence in the managers’ ability to make good hiring decisions. The survey found that while a bad hire could be identified rather quickly, correcting the mistake took longer. Fiftyeight percent of small business owners said it took less than a month to realize they made a bad hiring decision; however, it took about nine weeks to let the person go. Nearly five more weeks passed before a replacement started working, with 68 percent of businesses putting the workload on existing staff during the wait.

Avoiding the 5 most common mistakes in hiring For many managers, the task of hiring a new employee can feel like a second full-time job. Without enough time and resources, recruiting mistakes are easy to make. Below we’ve outlined key hiring mistakes and provided some tips to ensure a good hire: 1. Assuming your job posting will attract the perfect candidate Job boards and other posting sites reach only one segment of the market: people actively looking for work. However, many highly skilled professionals are already employed and aren’t currently searching for new career opportunities. That said, these people are often open to pursuing greener pastures if presented with the right role. Reaching these specialized workers requires a specialized approach. Thanks to deep networks within the local business community, well-connected recruiters frequently know who the passive job seekers are and what types of opportunities would appeal to them. 2. Focusing too narrowly on the resume alone The applicant with the best resume is often the best resume writer or someone who is good at matching keywords to those in the job description. By contrast, the strongest job candidates possess the ideal blend of technical and soft skills, corporate culture fit, and motivation to move their career forward. None of these traits can be determined by scanning resumes. Personal interaction – whether by phone, Skype or in-person interview – is required early in the hiring process to determine which candidates are truly promising and which simply know how to present themselves well on paper. 3. Relying on technology to do all the work An over-reliance on technology can slow down the hiring process. Emwww.upsizemag.com

ployers may use technical tools to post ads, but those can take weeks or months to yield results. After that, it takes ample time to sort through and review the resumes received. Smart recruiting involves both art and science; it’s high-tech and high-touch. Posting jobs online or using data analytics to better understand trends about the target candidate pool is essential. Staffing experts can then leverage their networks and industry knowledge to quickly find professionals who will truly excel in the role. 4. Recruiting only when you have a job opening Prudent employers are in recruiting mode day in and day out. They generate a steady pipeline of skilled candidates through active networking. They also strategically use specialized recruiters to find top-notch applicants and keep pace with market and salary trends. Savvy employers also make recruiting the business of everyone in the company by offering referral incentives. If incentive programs are already in place, take time to gauge their effectiveness. Making incentives more appealing will encourage employees to practice “always-on” recruiting. This approach will help fill vacancies quickly with minimal negative impact on the business. 5. Underestimating the costs of a hiring mistake Some employers seem to have the attitude that, “If I make a mistake, I’ll just hire someone else.” But the consequences of a bad hire go beyond losing time and money. Companies also lose the opportunity to hire a candidate that might have been perfect for the role while it was occupied by the wrong person. Also, a decline in morale among existing employees left to pick up the slack

may lead to additional turnover as staff members feel frustrated and burnt out. Minimize hiring risks by asking for help Our research suggests several ways businesses can address deficiencies with their hiring process and curtail hiring risks. Fifty-eight percent of respondents said the best new hires come from referrals, including employees, friends, recruiters and others in their network. Among those who use recruiters, 76 percent said a recruiter could find a candidate they wouldn’t have found on their own. Forty-five percent of business owners noted that the most challenging hiring step is evaluating candidates based on their skills and potential fit; 26 percent admit it takes them too long to fill open roles. Delegating these duties to an outside resource can cut hiring timelines and save money: Forty-three percent said working with a recruiter saved their organization time because the recruiter did most of the work; 36 percent also said they saved money by finding someone more quickly. Finally, when a great candidate is identified, make sure to communicate clearly and keep things moving. Stay in touch throughout the process. Long timelines or lack of information can frustrate candidates and cause them to question the company’s interest and ability to make business-critical decisions. Plus, other firms are more than happy to pounce on the same prospects. The bottom line: bringing aboard the right employees requires time, patience and finesse, but taking too long in the hiring process leaves companies vulnerable to losing out on great talent. The key to hiring success today is taking a comprehensive approach to recruiting, communicating with candidates and delegating efforts to others when needed.

“The key to hiring success today is taking a comprehensive approach to recruiting, communicating with candidates and delegating efforts to others when needed.” Angela Lurie, Robert Half International

Angela Lurie is a Minneapolis-based senior regional vice president at Robert Half International: 612.337.5446; angela.lurie@roberthalf.com; www.roberthalf.com.

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AUGUST • SEPTEMBER 2017 UPSIZE

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legal

BUSINESS BUILDERS

Understanding the Supreme Court decision on “offensive” trademarks by Jeffrey O’Brien

TIPS 1. The U.S. Supreme Court’s decision in Matal v. Tam removed significant prohibitions on registering offensive trademarks. 2. A trademark helps create a brand for one’s products. An easily identifiable mark instills in a customer trust, confidence and loyalty for a product. 3. Registering a trademark through the United States Patent and Trademark Office is an easy and cost-effective way to establish and enforce trademark rights. 4. The U.S. Supreme Court states that “the public expression of ideas may not be prohibited merely because the ideas are themselves offensive to some of their hearers.” 5. The Matal v Tam decision underscores the importance of trademark registration as a means of protecting a brand.

UPSIZE AUGUST • SEPTEMBER 2017

THE U.S. SUPREME COURT’S decision in Matal v. Tam, 582 U.S. _____ (2017), which held that the disparagement clause contained in Federal trademark law constitutes an infringement of the First Amendment, removed significant prohibitions on registering trademarks for so-called “offensive” trademarks, with implications for professional sports teams, craft beverage manufacturers, and other industries. This article provides background on the benefits of trademark registration and a discussion of the implications of the Court’s ruling. Defining and registering trademarks A trademark is any individual or combination of words, phrases, symbols or designs that identifies or distinguishes the source of one party’s goods from those of another. A service mark does for services what a trademark does for goods. In the U.S., trademark rights accrue through “use,” not registration. This means if you have already begun to use a mark as a trademark, your rights began to accrue as of that date of “first use” (which is commonly referred to as having “common law” rights). Rights under Federal law begin to accrue on the date of your first use in “interstate” commerce (most businesses satisfy the “interstate” requirement, including making goods of services valuable through a website). These rights allow you to protect your trademark from infringement by others who would attempt to use the same mark or a similar mark after your date of first use. Hence, anyone who uses a mark has a legal trademark under common law. Conversely, an owner has a “registered” trademark when the mark is listed either on the Principle Register or the Supplemental Register of the United States Patent and Trademark Office (USPTO). Benefits of trademarks A trademark helps create a brand for one’s products. A service mark does

for services what a trademark does for goods. Trademarks and service marks help establish a company’s brand equity. An easily identifiable mark instills confidence and loyalty in the consumer’s product. A brand’s value to a company can range anywhere between 10 percent and 70 percent of the total value of the company. Registering your mark provides you with tools to protect and enforce them. Benefits of registered trademarks Registering a trademark through the United States Patent and Trademark Office is an easy and cost-effective way to establish and enforce trademark rights. First, registration provides nationwide notice of the registrant’s claim of ownership of the mark and permits use of the Circle-R “®” symbol. That discourages others from using confusingly similar marks and eases searching for similar ones. The process also ensures that confusingly similar marks cannot conflict with one’s own. Second, registration treats the mark as if used nationwide as of the application date, instead of the common-law treatment which limits trademark rights to the geographic area of use or reputation of the mark. Third, registering the mark grants the owner the right to bring an action in federal court for matters concerning the mark, and, in certain cases, obtain significant monetary recovery including attorneys’ fees. Fourth, registration with the USPTO provides a basis for trademark and service mark protection in foreign countries, and provides protection by U.S. Customs to prevent importation of foreign goods that might infringe on the owner’s trademark rights. How to register a trademark The process of registering a trademark or service mark begins by filing an application with the USPTO. The USPTO employs attorneys who will review applications for proper legal and procedural grounds. In many cases, the examining attorney responds to www.upsizemag.com

the application with an “office action.” The attorney highlights any conflicts with the proposed mark, or any other objections to granting registration in the office action. The applicant has the opportunity to respond to any conflicts or problems noted in the office action within six months. After six months, if the applicant does not respond, the application is deemed “dead.” If the application either receives no objections for registration, or if the applicant overcomes any objections within the six-month period, the USPTO publishes the mark for opposition. Any party, who may contest the registration of the mark, must do so within 30 days of the publication date. If no one contests the mark, then the USPTO will register the mark, typically 12 weeks following the publication date. Once you select a mark, the overall USPTO process from start to finish averages between 12 and 18 months. The Lanham Act and the Disparagement Clause The foundation of current federal trademark law is the Lanham Act, 15 U.S.C. § 1051 et seq. The Lanham Act contains provisions that bar certain trademarks from the principal register. For example, a trademark cannot be registered if it is merely descriptive or deceptively misdescriptive of goods, or if it is so similar to an already registered trademark or trade name that it is likely to cause confusion or to cause mistake, or to deceive. The Lanham Act’s “disparagement clause” prohibits the registration of a trademark “which may disparage … persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.” Prior to the Matal v. Tam decision, the highest profile decision involving the disparagement clause was issued on June 18, 2014, when the Trademark

Trial and Appeal Board (“TTAB”) of the USPTO cancelled the NFL’s Washington Redskins’ federal trademarks on the grounds that they were disparaging to Native Americans. The Matal v. Tam Decision Simon Tam, lead singer of the rock group The Slants, sought federal registration of the mark “THE SLANTS” for his group. Mr. Tam chose this name to drain its denigrating force as a derogatory term for Asian persons. The USPTO denied the application under the disparagement clause. Tam contested the denial through the administrative appeals process, to no avail. He then took the case to federal court, where the U.S. Court of Appeals for the Federal Circuit found the disparagement clause unconstitutional under the First Amendment’s Free Speech Clause. On June 19, 2017, the U.S. Supreme Court affirmed the decision of the Federal Circuit, stating that “[w]e have said time and again that ‘the public expression of ideas may not be prohibited merely because the ideas are themselves offensive to some of their hearers’.” Conclusion The Washington Redskins will undoubtedly use the Matal v. Tam decision to seek reinstatement of its trademarks invalidated by the TTAB in 2014. Additionally, certain craft beverage manufacturers known for pushing the envelope with product names, such as Flying Dog Brewery, purveyors of “Raging Bitch Pale Ale”, toasted Simon Tam for his victory in front of the Supreme Court. For most business owners, the disparagement clause would never be an issue, but the case once again underscores the importance of trademark registration as a means of protecting one’s brand.

“For most business owners, the disparagement clause would never be an issue, but the case once again underscores the importance of trademark registration as a means of protecting one’s brand.” Jeffrey O’Brien, Chestnut Cambronne, PA

Jeffrey C. O’Brien is an attorney with the Minneapolis-based law firm of Chestnut Cambronne, PA.: (612) 336-1298; jobrien@chestnutcambronne.com; www.chestnutcambronne.com.

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AUGUST • SEPTEMBER 2017 UPSIZE

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management

BUSINESS BUILDERS

How to properly vet your team of advisers by Tom Siders

TIPS 1. If a potential service provider doesn’t ask about your current issues it should be a red flag. 2. Ask questions of a potential partner about how their experience and relationships inside or outside their firm can help your specific business deal with its challenges. 3. As you vet a potential adviser, ask to speak to some of that firm’s clients, but also use your network to find some who no longer use them to find out why. 4. Once you’ve made a decision, the firm should draw up an engagement letter, which serves as a legal document. If the company does not use engagement letters, start the vetting process over. 5. Ask them to agree to and sign a “service promise” that sets out your expectations for them.

UPSIZE AUGUST • SEPTEMBER 2017

SO, IT’S TIME to find a professional adviser. Whether it’s an accountant, attorney, insurance broker, or wealth adviser, how do you choose? Choosing or replacing an adviser can be a daunting task. How do you determine the criteria you’ll use to judge them? A lot of people head to the internet where they find a barrage of articles with suggestions for basic criteria. Great, right? Well, maybe. Look closer. Often these articles are written by professional advisers themselves and they identify criteria important in the eyes of adviser-authors. Usually, they’re basic facts like certifications/licenses, experience in your industry, experience with the type of work being performed, additional capabilities of the firm, the timing of work, fee structure, and in some case, client references. While the basic facts are relevant, few of the articles go deep enough to address the most important factor in the relationship – factors we call the client experience. What is it really like to be a client of a particular firm? What are the benefits to my business? To find advisers that are not only effective but have longevity, we suggest more “extreme” vetting. In our surveys of more than 8,000 clients of professional service firms, we gained deeper insight into why businesses select specific professional advisers, and why they continue to retain them. The survey uncovered the characteristics clients most desire in a client-advisor relationship, and the extent to which their current advisers meet expectations. The results were surprising, yet consistent. We asked business owners about the top strategic issues they were attempting to solve. Most business owners surveyed include at least two of the following issues, which will likely resonate with you: • Organic revenue growth • Geographic expansion or acquisition • Improving profitability and cash flow

• Better data and metrics to manage the business • Recruiting and retaining qualified employees • Business succession/transition We also asked business owners if they are getting the help they need from their advisers in addressing these issues. A significant percentage said no. The insight to take from this is that when you’re interviewing potential service providers, and he/she doesn’t take the time to ask about your current issues, it should be a red flag. If the potential advisor does ask, be specific, but then get answers to the following questions: • How does your expertise/services help me with my major issues? • Do you, specifically, have the expertise to help with my specific issues, or is there someone else in your firm who can? • If not, do you have relationships with others outside your firm who can? • How many clients do you have that are similar to me in size and complexity? Will I be your largest? Smallest? How important will I be to you and your firm? Our survey also explored whether clients would be willing to refer their advisor/service provider to others. This is a key parameter. A client may be satisfied with a service provider, but one study discovered that 80 percent of businesses who changed providers were satisfied right up to the time of the switch. Only loyal clients will refer to others. Our research indicated that 58 percent of professional service clients would be willing to refer their firm to others. So, 42 percent would not. As you move through the process of vetting a new provider, even one referred by another of your advisers, ask to speak with a few of that firm’s clients. A firm courting your business will gladly provide references. Of www.upsizemag.com

course, they will only provide references that they believe will be positive. So, it’s also wise to use your network to find others who no longer use that specific firm. Examples of questions for reference checks include: • Would you recommend the firm to others? Why? • What aspects about the relationship and client service do you (did you) find most valuable? • Does the firm meet its commitments for quality and timeliness? • Describe the level of communication. Do they keep you advised regarding the progress of their work they are doing for you? • In addition to their current project, are they proactive and do they provide suggestions to improve your business? • Were you ever surprised by their bills? If so, please explain. Once you make your decision, the firm should prepare an engagement letter for your signature. The engagement letter is a legal contract, so read it carefully before agreeing to terms. By the way, if the firm does not use engagement letters, start the vetting process over because you’ve chosen the wrong adviser. Prior to signing the engagement letter, ask them to agree to and sign a client “service promise”, similar to the one below. They may not, but at least you have set out expectations about client service.

•

• • • •

• •

the scope of our work, what we will do, what your staff will do and we’ll find ways to keep our fees to a minimum. We will immediately inform you when we expect a change in scope of our work that will result in additional charges and offer alternatives to getting the additional work completed. There will be no billing surprises — ever. We will always show you how our work adds value to your business. We will not charge for initial meetings to discuss additional new projects. Everyone in our firm who works on your account has a back-up who can assist or step in and we will provide you with their contact information We will proactively look for opportunities to provide business advice We will promptly inform you of changes to our team that supports you and involve you in the process

When retaining a professional adviser, you may be putting your company’s reputation, direction, and even financial health on the line. Looking good on paper and actually being good are two different things. Go beyond the typical vetting process. Extreme vetting is an investment that will pay off in many ways.

“When you’re interviewing potential service providers, and he/she doesn’t take the time to ask about your current issues, it should be a red flag.” Tom Siders, L. Harris Partners

• We [name of firm] will respond or acknowledge all phone calls and emails within 24 hours. • We will spend quality time planning the work so our project time is not wasted on nonessential activities that add no value. • We will always carefully discuss Tom Siders is a partner with L. Harris Partners: 952.944.3303; tom.siders@lharrispartners.com; www.lharrispartners.com.

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AUGUST • SEPTEMBER 2017 UPSIZE

Getting creative

Tight labor markets mean companies must find new ways to attract employees

hen Casa de Corazón needed some new teachers to supplement the staff at its growing Spanish-immersion child care and preschool program, the company fought against more than just a tight labor market. It not only needed to find people qualified as licensed lead teachers, but they also must speak Spanish. So, Casa de Corazón petitioned the government to become a Q Cultural Exchange program, which allows it to sponsor work visas for international candidates. To receive that status, the company had to prove it was providing a cultural learning experience for participants. Check. The company submitted its application in the spring of 2017. It was approved in May and has already brought in six teachers through the program, says Natalie Standridge, executive director. While it’s not perfectly ideal in the sense that those who arrive through the program are only allowed to work for 15 months and then spend a month doing other non-work activities before they must go back home for at least a year, Standridge says it works fine because that timeframe allows them to teach through an entire year of a student’s education cycle. And it gives those students access to teachers who live in the culture about which they are learning.

Natalie Standridge, executive director of Casa de Corazon, petitioned the government to become part of the Q Cultural Exchange, so it could sponsor visas for international applicants who want to teach.

BY ANDREW TELLIJOHN photographs by Tom Dunn

UPSIZE AUGUST • SEPTEMBER 2017

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“We want to be the Victoria’s Secret of the fitness world. Victoria’s Secret owns the space of women’s intimate apparel — bras and underwear, that’s all they do. People walk away from the Macy’s and Nordstrom and JC Penney and Sears and all the department stores and go to Victoria’s Secret. So, we want the same thing.” Luke Carlson, Discover Strength

COVER STORY

“W

e love to have teachers stay with us three, five, seven years and we have several of those,” she says. “However, standard turnover in the early childhood education field is a year. So, at 15 months you are already better than the average. So, we decided it was worth it to do that.” Standridge learned about the option from her attorney, though she first heard about it from several international applicants who found Casa de Corazón and inquired about whether the company sponsored visas. “We’re like, ‘what is this visa sponsorship that people abroad know about that we are not doing,’” she says. “Maybe we need to think outside the box and start exploring that.”

Tight market requires “thinking outside the box”

While not everyone will have available to them an international exchange program to help them find employees, all companies can — and these days must — look for new ways to attract talent. According to Oriane Casale, assistant director of the labor market information office at Minnesota’s Department of Employment and Economic Development, Minnesota’s 3.7 percent unemployment rate is the lowest it has been since 2001. The nationwide rate is 4.4 percent. “We’re pretty low here,” Casale says. Minnesota and the U.S. have been adding jobs since 2011 and we’re in one of the longest post-recession buildups in state history, Casale says. Age demographics are also playing a role. Baby-boomers are retiring and the incoming workforce is smaller than the retiring generation, she adds.

UPSIZE AUGUST • SEPTEMBER 2017

“We’re just looking at a much-reduced labor force growth,” she says. That means it’s a worker’s market. Employers are having a hard time filling jobs — as evidenced by the record 97,000 job vacancies seen in the fourth quarter of 2016 — and that’s not going to change anytime soon. “This is going to be the new norm for the next 15 years or so,” Casale says. One thing employers may want to consider, she says, is considering the quality of jobs they are trying to fill. In this market, making a job enticing in any way possible is a good strategy. “If they can take two part-time jobs and make one fulltime job, and make that job much more attractive to workers, they will probably be able to recruit more easily and they’ll probably be able to recruit a higher quality of worker,” Casale says. “In a tight labor market, the quality of the job makes a lot of difference.” One other thing to keep in mind: Employers need to know that potential employees have the advantage right now and they might come asking for more than you’d initially planned to offer. “If you’re applying for a McDonald’s job and you can tell the employer ‘I’m going to show up for every shift you give me, I’m going to show up on time, I’m going to show up with a smile on my face, I’m going to show up ready for work — and I want 50 cents more per hour’ — I think that employer is going to have to consider it,” she says.

Not the “same old” manufacturing job

With those labor stats in mind, it’s important for companies to be proactive in keeping an eye out for talented people before they actually have a need. Operating plans are more frequently integrating workforce succession planning and companies are recognizing the need to recruit more frequently, says Bob Kill, president and CEO of Enterprise Minnesota, which serves as a voice for Minnesota’s manufacturing industry. With the workforce aging, the issue has more than doubled in importance for manufacturing companies in recent years, according to the organization’s annual survey. “Succession planning is often talked about at the executive level,” he says. “Sometimes it is more important to do it at the professional level and the manufacturing floor level.” One thing manufacturing firms should keep in mind as a selling point, Kill says, is that with improving technology and more complex jobs out there, they can market the profession as being home for more attractive careers than ever before. Some companies are developing leadership academies,

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or mentorship programs, allowing machinists who want to advance to work their way to higher-level jobs. Others have found ways to upgrade facilities with more natural light and modern looks. Companies need to be flexible and willing to change for the modern worker. “The smart ones have realized we have to do more around visibility so that we have a culture that is more attractive to people, either to change jobs and join us, stay with us a bit longer or attract young people,” he says. “Part of recruiting is thinking about this strategically and thinking about it the way young people think about it versus the way us baby boomers might think about it.”

Bringing flexibility and new age benefits

Winona-based Minnesota Metal Products suffered a couple lean years and lost some employees in 2015 and 2016, but resumed hiring again late last year and has added 10 new employees, says Joe Plunger, CEO. He says the company has tweaked its benefits. For example, it moved up eligibility for vacation time from one year to six months, to be more attractive to potential candidates. “The younger generation looks more critically at worklife balance, so we’ve installed an earlier eligibility for vacations to give them an opportunity to get some time

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Héctor Martín López Castro works with Sage Manning, a student at Casa de Corazón.

out,” Plunger says. Implementing a referral bonus also led to three new hires. Any employee that makes a referral receives a $100 bonus if the new person makes 30 days and another $200 after three months. Then, due to a recommendation received in a peer council meeting, Plunger says the company shifted its advertising for job openings from local shoppers and newspapers to the website Indeed.com. “It seems to be a site that is frequented, I suppose, by the millennials,” he says. “For our entry level work that’s a lot of the audience we’re dealing with. For my last several hires, it’s been very successful. The responses are quick and there have been more responses than we ultimately needed for employees.” Another manufacturer, Permac Industries Inc., recently agreed to help a young man pay the tuition for his skillsbased educational program. He was a high school gradu-

AUGUST • SEPTEMBER 2017 UPSIZE

COVER STORY Minnesota Metal Products has beefed up its benefits so that new hires can take vacations sooner and instituted a referral bonus for employees who help bring a new co-worker aboard.

in math skills. … We have equipment that is a half-a-million, a million dollars. We’re not going to put someone out there to push buttons.”

PHOTO COURTESY MIDWEST METAL PRODUCTS

Using Kolbe Index for measuring the fit

ate who didn’t want to go to college but who wanted a career, not just a job. “Our vice president took him to two different schools, South Central and Dunwoody college, to show him the opportunities,” says Darlene Miller, owner, president and CEO at Permac. Miller sits on the foundation for the Precision Machined Products Association to help schools make sure students are getting the training they need and to let them know the jobs can be viable careers. The company also has an employee profit plan through which individuals can earn bonuses based on individual and team performance, and employee-protégé programs so new hires can learn the ropes. “It’s very hard to find the talent we need,” Miller says. “It’s not the same kind of job you had five or even two years ago. Technology changes so quickly. Everything is computerized. We need the smartest and the brightest 18

UPSIZE AUGUST • SEPTEMBER 2017

With companies fighting for supreme talent, those who hire workers also need to find ways to streamline their recruiting process so they don’t lose qualified workers who are interested in working for them. Some firms have started asking candidates to take a Kolbe Index. Kolbe is different than other indexes on the market because it’s all about how you take action. Kolbe and its research partners have been able to prove that this intuition is consistent over time, says Erin Werde, president of Affiance Coaching Inc. “It’s about that gut, it’s all about that innate drive that we often times don’t label,” she adds. Werde says she encourages companies to look at three things when they are considering a candidate: the cognitive side and the experience they bring to the position; the affective side, such as motivation; and the Kolbe piece — do they have the drive expected by the company. “It really helps define which candidates we really want to go after, what candidates are we willing to increase compensation for, which candidates are we really holding out for,” she says. It also helps weed out candidates that would not be a good fit and it can be done quickly, Werde adds. “I can work with a client upfront to help them articulate what they are looking for in a position,” she says. “Once they have candidates in the pipeline, the only additional step is having them take a Kolbe index, which ideally should take no more than 20 minutes. I don’t see it adding on a great deal of time to the candidate’s investment.”

Bringing in a search firm

Another option for small- and mid-sized employers is engaging a search firm. Search firms aren’t just for large employers hiring executives SkyWater Search Partners does most of its work in the small-to-mid-sized client realm. The company fills between 250 and 300 positions across several industries each year.

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COVER STORY A lot of those clients reach out because they don’t have internal recruiting and hiring personnel, says Kurt Rakos, partner. “Many of them are very profitable, very successful, but at their size of business, it doesn’t make sense to hire a talent acquisition department,” he says. “We target those customers.” Rakos says the firm has experienced two cycles of recession-to-full-employment. During the high-employment times, he says, searches become more difficult. Employees are typically happier during good economic times, so it is more difficult to pull them away from jobs. It’s also likely they already have made a job change or that their current employers are willing to pony up to keep them around. Furthermore, he adds, while companies need to be thorough in vetting candidates, they must also be decisive, because quality potential hires probably have more than one opportunity right now. “The candidate now has the leverage,” Rakos says. “They’re demanding more and there are less looking. If you have a crucial important position, not only should we be talking about all those variables, we should be talking about a fast, efficient successful time frame to make sure you are checking all the boxes, but you’re not losing the candidates to other companies who can move faster.” Small businesses, Rakos says, often have about six-tonine-week-windows where they try to fill important, well paying, mid-level positions they themselves open before they start looking for a backup plan. Those plans often include search firms. “They look at it as ‘now I have to make that investment,’” he adds. “It’s like if I don’t get someone in that role we’re losing out. We’re losing out on market share, we’re losing out on opportunity.”

incarcerated or people with disabilities with more frequency. “Employers understand this trend is around for a while,” he says. “They’re adapting. Many are adapting quickly.” The Chamber itself is pitching in. In conjunction with RealTime Talent, it launched MN Job Match, which uses statistically validated questions to match talent to jobs. Posting jobs costs $39 for 30 days of scoring, screening and stack-ranking candidates, according to the chamber. It’s been used in other states, including Ohio and Michigan, Blazar says, and companies have reported getting less conventional applicants that they’ve ended up hiring. “It makes matches where other systems — other online job boards — would not,” Blazar says. “It’s another tool.”

Tapping into chambers can help

Kurt Rakos, SkyWater Search: 952.767.9000; krakos@skywatersearch.com; www.skywatersearch.com.

Bill Blazar, senior vice president of public affairs and business development for the Minnesota Chamber of Commerce, says workforce challenges are the number one issue facing Minnesota businesses. He’s also hearing employers say those entering the workforce aren’t as ready to work as they were in the past. “That’s a recipe for a worker shortage,” Blazar says. The chamber is trying to help. Some members are asking their long-time workers to stick around past the traditional retirement age until they are 70 and must start collecting Social Security. Others have become more flexible about letting employees work from home. And still others are dipping into different talent pools — actively seeking out immigrants, people who have been

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Bill Blazar, Minnesota Chamber of Commerce: 612.292.4658; bblazar@mnchamber.com; www.mnchamber.com. Oriane Casale, Minnesota Department of Employment and Economic Development: 651.259.7383; oriane.casale@state.mn.us; www.mngov/deed. Bob Kill, Enterprise Minnesota: 612.455.4208; bob.kill@enterpriseminnesota.org; www.enterpriseminnesota.org Darlene Miller, Permac Industries Inc.: 952.894.7231; dmiller@permacindustries.com; www.permacindustries.com. Joe Plunger, Midwest Metal Products: 507.452.7231; joe@midwestmetalproducts.com; www.midwestmetalproducts.com.

Natalie Standridge, Casa de Corazón: 763.416.3992; natalie@casaearlylearning.com; www.casaearlylearning.com. Erin Werde, Affiance Coaching Inc.: 952.253.2586; erin@affiancecoaching.com; www.affiancecoaching.com.

AUGUST • SEPTEMBER 2017 UPSIZE

WORKSHOP: Upsize Growth Challenge

Itching to expand

Upsize Growth Challenge participants outline challenges By Andrew Tellijohn

Photographs by Jonathan Hankin

hen this year’s Growth Challenge winners, Brian Anderson and Greg Hennes, came face-to-face in the offices of Minneapolis-based Winthrop & Weinstine in early August, they bantered as if they had known each other for a lifetime. Turns out they had. Anderson and Hennes were neighbors growing up in Owatonna, MN. Both are now business owners in the Twin Cities. They were reunited in early August in downtown Minneapolis, presenting as leaders of their respective company as they each sought the advice of a panel of business experts on the challenges their businesses currently face.

DATATREC

nderson, CEO of Eagan-based DataTrec, started Anderson Cargo 27 years ago. The specialty logistics provider made a career out of focusing on unique services to clients with very specific needs. “If it is standard stuff, we don’t want it,” he says. “In fact, we turn it away.” It’s been a good “lifestyle business” that has treated his family well, but he feels it’s not the future. That lies in a start-up: DataTrec. DataTrec formed to focus specifically on moving high-value electronic gear that is not packaged from one location to another for businesses of any size or location “which changed the dynamic considerably,” he says. “Because the valuation of the equipment went up into the millions and the value of the content, from operating systems, client lists, and credit card information to (health insurance privacy laws), made security and chain of custody issues much greater. We continued to do that and we got

UPSIZE AUGUST • SEPTEMBER 2017

Greg Hennes (left), Hennes Art Co., and Brian Anderson, DataTrec, grew up on the same block in Owatonna. Now they’re successful CEOs seeking insights on how to take their businesses to the next level of growth.

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WORKSHOP: Upsize Growth Challenge

“I think you’ve got to pick a market, whether it’s a strategy where we’re going to own Minneapolis SMB moves or we’re going to own Minneapolis SMB moves and the big boys, but it seems to me the strategy is really dependent on the customer base.” — Dean Willer, Winthrop & Weinstine pretty good at it.” So, with a website and a sales rep, DataTrec was formed. The company has built several custom containers to assist with the moves. The competitors are bubble-wrapping and boxing, he says. “You can imagine, if it was your business, the anxiety that resides when you do that,” Anderson says. “You’re taking your whole system down. Are we going to be able to log in Monday morning? What’s the cost if we can’t log in? It’s a huge stress that reaches the CEO suite.” Anderson declined to identify DataTrec’s clients but says that several well-known companies locally and beyond have used the service and are “amazed” at the result.

So, what’s the challenge?

Now Anderson believes the company has built the momentum and expertise it should utilize to build market share across the country before competitors — currently van line, moving and storage companies — catch on. Nobody owns the market, which Anderson says is estimated at about $750 million. But the market is changing fast. Security concerns are causing companies

to move servers to colocation facilities. We’re at the early stages. He thinks with aggressive growth DataTrec can capture $50 to $60 million in four to five years. “We need to go to the market and find money and take it out to 20 cities,” he says. Upsize Growth Challenge Experts love Anderson’s business, but also wondered if he might want to focus on a specific niche. Right now the company will move data centers for large or small companies anywhere in the U.S. or even the world, and it’ll do it fast. Dean Willer, an attorney with Winthrop & Weinstine, suggested determining whether his target was large businesses, which sales people could target without necessarily expanding into other markets, or small businesses, which might take the direct contact that would come from establishing a presence elsewhere. When asked by the experts whether the greatest opportunity was national growth or doing moves for local companies, Anderson indicated that going national after large companies has more upside and “would be your steady churn” while business for smaller firms would also likely develop along the way. “It seems to me the strategy is dependent on the customer base,” Willer says. “We recently decided to pick a niche and focus on a particular industry, that being CPA firms. … That is really valuable. I feel like it was easier to go to market when you have a really specific offering. It’s easier to talk about it and sell it and have people who can refer you.” — Dan Moshe, TechGuru

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AUGUST • SEPTEMBER 2017 UPSIZE

WORKSHOP: Upsize Growth Challenge

“If you find the right recruiting firm, someone who can specialize in the creative world, they are going to have the right filters and the right contacts to give you. This is a person of a higher level within your company. You don’t want to be using an automated way to find that person.” — Melissa Johnston, Highland Bank Dan Moshe, founder of TechGuru says he might even want to focus on a specific industry, as his own firm did recently. “Everything is easier since we became more focused,” he says. Jon Cassens, a director with DS+B | CPAs + Business Advisors, told Anderson he should consider partnering with potential competitors, paying them a referral fee, and having them do the physical marketing in other markets. “You can still have your physical marketing,” he says. “Your capital investment is much less. “ Regardless of the decision, there are banks, venture capitalists and angel investors out there looking to invest in companies like this, says Melissa Johnston, business banker with Highland Bank. “Work with someone internally or externally to build your financial plan and then find the right investors,” she says.

HENNES ART

ennes is president and CEO of Hennes Art Co., which customizes art programs for corporate, hospitality and healthcare companies. It’s his second foray into the corporate art consulting business. He started Art Holdings in 1989, building it up to about 60 employees and $8 million in revenue before selling in 2009. When he got back into the business, his intention was to keep the company small. “I wanted to be able to run my business on a laptop from a boat,” he quipped. He was doing $400,000 to $500,000 in sales per year out of his house. Since moving into a showroom space three years ago, however, his sales have been growing at 60 percent per year. He hired his first employee last year and is now up to five. Revenues should approach $1.5 million this year and he’s

UPSIZE AUGUST • SEPTEMBER 2017

looking to hire a business development person to flesh out potentially another $1 million in projects that he has been unable to act on so far. The company works from an 11,000-square-foot facility near the Minneapolis Farmers Market. There they do smaller custom framing jobs. Production for the company’s more volume assignments is outsourced.

So, what’s the challenge?

While the company’s growth is strong, everything Hennes Art does is extremely manual. He can supply almost anything. Online vendors have millions of images available and local artists can customize several projects that can be made suitable for his clients and presented in different ways. But with this company and his previous one, he’s worked with several web development firms to come up with a project management software that would automate the process for his clients in an easy to use way online. To date he’s been unable to find a developer who could design a program that worked. “I’m willing to spend the money to create a system

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WORKSHOP: Upsize Growth Challenge “A differentiator is your hands on, one-on-one with those developers or with that design person. That’s something you don’t want to lose when you go toward automation. I don’t think you ever want to lose that because it seems like a big part of what you are passionate about.” — Jon Cassens, DS+B | CPAs + Business Advisors

that will really help us grow without adding a lot of overhead,” Hennes says. “I’ve presented this to a handful of web development firms and they all say it’s going to cost $100,000 and it might not work. That’s where I’m gun shy. His competitors are companies like Crate and Barrel or West Elm. They have shopping carts on their websites and designers are gravitating toward that. He says if he could come up with an online tool to compete with that, he could do the art in higher quality framing for less money. “If we can offer that kind of a service we would probably double our sales almost overnight with our existing client base,” Hennes says. “It would allow us to go after more national design firms. Right now we sell regionally and deliver nationally.” Growth Challenge Experts told Hennes he should take another look at what management programs are

CONTACT THE EXPERTS BRIAN ANDERSON, DataTrec: 651.209.0047; brian.anderson@datatrec.com; www.datatrec.com. JON CASSENS, DS+B | CPAs + Business Advisors: 612.630.5071; jcassens@dsb-cpa.com; www.dsb-cpa.com. GREG HENNES, Hennes Art Co.: 612.377.2630; greg@hennesart.com; www.hennesart.com MELISSA JOHNSTON, Highland Bank: 952.858.4798; Melissa.johnston@highlandbanks.com; www.highlandbanks.com.

already on the market that could be repurposed for his needs, so he could save on cost. TechGuru’s Moshe says $100,000 is a lot of money for a small business. “For every industry, I’ve found there is something out there,” he says. Moshe and other experts noted, however, that while automation might be Hennes’ main goal, he might want to focus on his staffing instead. Having a tech person on staff might help find that application he needs, Moshe says. Given the presence of a significant backlog of projects, Winthrop & Weinstine’s Willer indicated he’d focus on hiring a business development person. “I’d be developing as much as I can now so you can broaden your customer base while it’s affordable to hire someone for $150,000 to $200,000,” he says. “It’s an expensive hire but the person is going to do a lot of work for you.” Johnston, from Highland Bank, agreed and suggested that Hennes find a recruiter. “If you find the right recruiting firm, someone who can specialize in the creative world, they are going to have the right filters and the right contacts to give you,” she says. And DS+B Cassens adds that while automating some of his processes might make sense, Hennes must make sure he maintains personal relationships with clients. “A differentiator is your hands on, one-on-one with these developers or with that design person,” he says. “That’s something you don’t want to lose.”

DAN MOSHE, Tech Guru: 612.235.4895; dan@techguruit.com; www.techguruit.com. DEAN WILLER, Winthrop & Weinstine: 612.604.6633; dwiller@winthrop.com; www.winthrop.com.

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AUGUST • SEPTEMBER 2017 UPSIZE

catching up by Andrew Tellijohn

Confidence, commitment to change pulled Permac through difficult period

TIPS 1. If you are not willing to take a risk your chances of getting into a new market or making a major change decrease. 2. It was a conscious decision to change what we were doing. Sometimes when you are backed into a corner you have to think a little more deeply. 3. Show confidence. Employees see the look on your face. Show everyone you believe and they’ll believe too. 4. Be willing to take the time to learn how to do the change the right way. Sometimes being willing to forego revenue for a period pays off in the end. 5. In a crowded industry, it might pay off to seek your niche in a complex, difficult segment found undesirable by competitors. 24

hen Darlene Miller appeared in Upsize back in 2009, Burnsville-based precision parts manufacturer Permac Industries Inc. was struggling. Most of her clients were suffering through the downturn, some having lost as much as 50 percent to 75 percent of sales. But Miller, president and CEO, was boldly optimistic. “We’re in survival mode, but we ARE going to make it,” she told the Editor Beth Ewen at the time. She was right. It wasn’t easy. Permac’s own sales dropped about 40 percent at the bottom of the recession. But the company also used the recession as a chance to retool the business. When Miller spoke to Upsize in 2009, Permac had just started work on a new contract in the aerospace and defense industry — a market that required much more complex work than the customer base the company typically worked with prior to the downturn. The aerospace, defense and medical device markets became Permac’s new focus during the downturn. Commodity work, such as making simple parts for basic hydraulic equipment, motorcycles and similar products, used to be the company’s core, but that share has fallen to around 20 percent of its sales. “We totally had to retrench ourselves,” Miller says. “When the downturn happened, we were serving a lot of different industries. … It really dried up. They’re great customers, they’re still customers. But we’ve still seen a downturn from them.” The other 80 percent of Permac’s business comes primarily from those new industries that provide steady,

UPSIZE AUGUST • SEPTEMBER 2017

complex work in stable industries less affected by volatile markets. The change took place after Permac’s management team gathered during the worst of the downturn. Those officials made a conscious decision to shift gears and to start seeking more complex projects, for clients in those new industries, that require the use of exotic metals like Monel, Inconel and titanium. “They call them exotic metals because they are very hard to machine,” she says. “We decided we were going to take on tough stuff - stuff that people did not want to do, that my competitors would look at and say ‘no way.’” Eight years later, the company isn’t just still here, as Miller predicted. It’s thriving. Revenues are slowly catching up to the level where they were pre-recession. Growth is steady. Machines are running pretty much around the clock, even on weekends. It didn’t come without pain— and further dents to sales when the management team decided the company should pursue the certifications necessary to prove its mettle in the new areas of expertise, Miller says. The process for earning the AS 9100 certification that proves the ability to work with aerospace components took a significant amount of time and documentation, but it has paid off in better processes and well-trained employees. “That took us a good couple years to get through that certification and training,” she says. “You have to retrain all your people.” The most difficult part of the transition was convincing employees that company management was aware www.upsizemag.com

Permac Industries Inc. Description: Custom manufacturer of precision parts for customers in many industries, including medical, aerospace and defense Founded: 1966 Headquarters: Burnsville CEO/President/Owner: Darlene Miller Employee count: About 30 Web: www.permacindustries.com

there would be a period where sales would drop as workers learned the new skills. “It was so hard for the guys in the shop because they would say ‘we don’t want to disappoint you,’” she says. “It was a real mindset of consciously saying ‘we know that and it’s going to be a hard learning curve, but if we don’t do that we’re never going to excel and we ARE going to excel.” While the company had high-technology equipment before the shift, it has added more. That includes three Swiss machines often used in aerospace and defense parts. That added to the learning curve, Miller adds. Another sign that the change paid off, however, was the hire of a salesman with an aerospace background who travels the world making sure Permac is on the radar of the industry internationally. Perhaps hindsight helps, but Miller now can say the pain was worth it. Had the downturn not taken place, she thinks the company eventually would have made a similar transition, but she can’t say for sure. www.upsizemag.com

Because it’s hard to make significant changes when you’re busy, it’s likely such a move wouldn’t have made as much sense and had the same level of commitment it did during the recession. “This was such a leap of faith,” she says. “I’m not sure we would have done that. It’s really hard to know. It was a totally conscious decision to change. I would hope I would have. But when you are forced into a corner, sometimes you have to think a little deeper.” But it has definitely been a positive move. “We got through it. We’re so much better for it today,” she says. “So, to be perfectly honest, I’m kind of glad we had to go through it.” And the best part, she says, is that the customers Permac now serves are likely to be a bit more recession-proof than its primary targets from the past. “Prior to this we had fewer customers who had a higher percentage in our business than we do today,” she says. “We have a much more diverse base today. That makes a huge difference. Medical devices are going to continue. Aerospace is going to continue. And as much as we hope defense is not needed, it’s obviously going to continue, so those are three industries we feel really good about.” Now the focus is on continuing to grow, training employees to keep up with technology shifts, considering the addition of new machinery and finding the right people to help pick up the pace even faster. “We are busy,” Miller says. “We are thrilled. We wish we could find more skilled and talented people to join our team. We keep trying to do that because the growth is there, we just need the talent to help supplement it.”

“We got through it. We’re so much better for it today. So, to be perfectly honest, I’m kind of glad we had to go through it.” — Darlene Miller Permac Industries Inc.

AUGUST • SEPTEMBER 2017 UPSIZE

UPSIZE RESOURCE DIRECTORY accounting Cummings, Keegan & Co., p.l.l.p St. Louis Park, MN • Apple Valley, MN 952-345-2500 • www.ckco-cpa.com Kathy J. Klang, CPA/ABV 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.

bank

BUSINESS BROKERS Sunbelt Business Advisors

Crown Bank Peter Dahl, CEO Kevin Howk, President 6600 France Avenue South, Suite 125 Edina, Minnesota 55435 Ph: (952) 285-5800 www.crown-bank.com

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

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.

ACCOUNTING DS+B | CPAs + Business Advisors

BANK Highland Bank

business machines Coordinated Business Systems, Ltd.

222 South Ninth Street #3000 Minneapolis MN 55402 Phone: 612-359-9630 www.dsb-cpa.com Contact: Sean Boland | Managing Principal

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

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

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.

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.

DS+B is a connected, proactive and accessible® team of accounting and tax experts, offering personal attention and services tailored exactly to what you need, when you need it. Our CPAs are ideally-suited to working with privately-held businesses and entrepreneurs — providing you financial guidance and accounting solutions that keep your business dream headed in the right direction.

ACCOUNTING Olsen Thielen CPAs

Bank North American Banking Company

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

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.

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.

Depend on Our People. Count on Our Advice. SM Member FDIC

advertising • marketing Risdall tel: 651.631.1098; fax: 651.631.2561 www.risdall.com John Risdall, Ted Risdall, Tom Wilson, Josh Dahmes Founded in 1972, Risdall Marketing Group is the sixth largest and seventh oldest ad agency in Minnesota. With more Web Marketing Awards than any other agency on the planet in the last four years (not to mention the two Clios we just won), we are the world’s leading interactive agency, as well as the Minnesota leader in industrial, high technology, medical technology and business-tobusiness advertising.

UPSIZE AUGUST • SEPTEMBER 2017

bank Venture Bank 4470 W. 79th St. Circle, Suite 100 Bloomington, MN 55435 763-398-3333 www.venturebankonline.com Christine Young, VP & SBA Program Officer Venture Bank is a Business Bank that specializes in finding creative solutions for the loan and deposit needs of business customers. Venture Bank is a Preferred Lender with the Small Business Administration and is one of the most active SBA lenders in Minnesota.

ADVERTISING SECTION

business machines Loffler Companies, Inc.

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.

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

www.upsizemag.com

UPSIZE RESOURCE DIRECTORY commercial real estate The Ackerberg Group

internet marketing Risdall

LENDER Connect2Capital

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

tel: 651.631.1098 fax: 651.631.2561 www.rla.net John Risdall, Ted Risdall, Tom Wilson, Josh Dahmes

801 Nicollet Mall, Suite 1700W Minneapolis 55402 www.connect2capital.com Contact: Maddie Larson, maddie@crfusa.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.

As the world’s leading interactive agency, we offer our clients the most extensive assortment of web tools including Search Engine and Social Media optimization. And when it comes to winning awards, nobody does it better. Since 2007, we’ve won more Web Marketing Awards than any other agency on the planet. And last year, we also won two Clios.

Connect2Capital is a non-profit lender with people right here in your community who will work with you to find the best loan for your small business. We offer small business loans from $50,000-$4 million for permanent working capital, owner-occupied commercial real estate and leasehold improvements, business equipment, and refinancing existing debt.

computer consulting Intertech

it managed services Tech Guru — The Caring Technology Company

mailing services Braemar Mailing Service Inc.

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

612.235.4895 - www.techguru.mn

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

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.

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.

EXPORT MANAGEMENT Hollingsworth International

LAW FIRM Lommen Abdo

6190 Olson Memorial Hwy, Golden Valley, MN 763-231-1444 • www.hollingsworthinternational.com Dick Bottorff, Principal • Jim Thomas, Sales

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

Hollingsworth is an Export Management and Distribution company. We specialize in increasing export sales by developing international markets for US based manufacturers. We offer export management, logistics and overseas distribution. We have bilingual staff on site. Contact jim@hollingsworthinternational.com

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.

insurance O’Rourke Agency, Inc.

law firm Winthrop & Weinstine, P.A.

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

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

www.upsizemag.com

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.

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. ADVERTISING SECTION

AUGUST • SEPTEMBER 2017 UPSIZE

UPSIZE RESOURCE DIRECTORY mergers & acquisitions Franklin Partners

SECURITY Floyd Total Security

222 South Ninth Street, Suite 3050 Minneapolis, Minnesota 55402 612-436-0891 www.FranklinPartnersInc.com Chip Myers

9036 Grand Ave S. Bloomington, MN 55420 952-881-5625 www.floydtotalsecurity.com

Founded in 1994, Franklin Partners achieves exceptional results for established and growth-oriented private companies in mergers and acquisitions.

A MINNESOTA COMPANY PROTECTING WHATS IMPORTANT TO YOU SINCE 1953. SECURITY SYSTEMS, ALARM MONITORING, ACCESS CONTROL, CCTV, AND LOCKSMITHING. FREE ESTIMATES LET FLOYD STAND WATCH FOR YOU! TOTAL SECURITY TM

LET FLOYD STAND WATCH FOR YOU

networking resources The Network Connect

STRATEGY & SUCCESSION L. Harris Partners

13643 Duluth Circle Apple Valley, MN 55124 612-865-9933 • www.thenetworkconnect.com Contact: Dick Sommerstad sommerstadpc@gmail.com

6900 Shady Oak Road, Suite 210 Eden Prairie, MN 55344 952-944-3303 www.lharrispartners.com

The Network Connect is a business referral and resource network that serves as a catalytic gateway to new opportunities for businesses, investors, talent, and service providers. We bring technology, talent, and capital together. Contact us today to get connected.

We help business owners develop and implement strategies that improve financial results. Our holistic approach to consulting involves strengthening value drivers; this leads to enhanced enterprise value, minimized taxes, and maximized net proceeds upon transition out of the business.

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

SBA LENDER Highland Bank

SUCCESSION PLANNING Lommen Abdo

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

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

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.

SBA lender Venture Bank

venture capital Brimacomb + Associates

4470 W. 79th St. Circle, Suite 100 Bloomington, MN 55435 763-398-3333 www.venturebankonline.com Christine Young, VP & SBA Program Officer

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

Venture Bank is a Business Bank that specializes in finding creative solutions for the loan and deposit needs of business customers. Venture Bank is a Preferred Lender with the Small Business Administration and is one of the most active SBA lenders in Minnesota.

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.

UPSIZE AUGUST • SEPTEMBER 2017

ADVERTISING SECTION

www.upsizemag.com

WANT MORE CUSTOMERS? CALL ELL C Y M

CEO DALL , S I R TED 6683 963) 2 1 6 (

INTEGRATED MARKETING AGENCY

Winner of over 200 Web and Digital Awards. Minnesota’s 8th largest marketing agency.

Find out more at risdall.com/upsize

TRUST our nationally recognized service team

Let’s face it, copiers break. Loffler’s team of 97 professional technicians has been recognized as #1 in the country for fixing copiers right the first time. TRUST. It’s what we’ve built our reputation on.