Upsize Minnesota July/August 2018 by Upsize Minnesota

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CONTENTS July • August 2018 • Vol. 17 No. 4 • www.upsizemag.com

PAGE 16

Cover story

Working with wellness: From flexible schedules to yoga and standing desks, businesses are offering employees more than just a paycheck. And they’re using wellness strategies as a recruitment and retention tool Here’s how. BY ANDREW TELLIJOHN Cover photograph by Tom Dunn

PAGE 4

Bb BUSINESS BUILDERS

PAGE 22

Editor Beth Ewen talks about how helping her husband fix a sailboat resembles business owners adjusting on the fly.

PAGE 6

A panel of experts shares thoughts on staying with a growing company or maximizing its value in a sale. .

Staff list:

by Jim Thomas, Dynamic Development LLC

From the editor:

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

INTERNATIONAL Learn to export in a culturally sensitive manner.

WORKSHOP:

PAGE 24

PAGE 8

CATCHING UP: Pinnacle Services Inc. A tight labor

Fill out your staffing needs with freelancers during peak times.

market and flat government funding challenge the growth of Nicolas Thomley’s services company.

STAFFING by Kathy Northamer, The Creative Group and Robert Half Technology

PAGE 10

SUCCESSION Ensure the long-term viability of your business with a succession plan by Michelle Beck-Howard, G&A Partners

PAGE 12

TAXES

Investigate how new tax laws affect your exit strategies by Dyanne Ross-Hanson, Exit Planning Strategies LLC

PAGE 28

BACK PAGE: The Minnesota Chamber of Commerce talks about its Center for Workforce Solutions.

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

Learning curve

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

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UPSIZE JULY • AUGUST 2018

down cold until something new comes up — in other words, all the time. How do they navigate to get the new job done? For Jeff and me it involved grit, especially when the first day-long ordeal ended in another gut-punch: When we finally got on the water, depleted, one of the spreaders broke, a piece of equipment crucial to the boat’s structural integrity. We would have to take out the boat and take down the mast yet again. Divorce seemed the only option. But instead we fell back on an old standby. We invoked “Amnesty International,” which was the code phrase we adopted the last time we didn’t have any idea what we were doing — when we had our first baby 24 years ago. Delirious with fatigue and crazed with worry, we decided nothing we said or did in the middle of the night could be held against each other the next day. This simple idea helped us survive our babies so it would help us now repair the sailboat. Also, we divided the duties. Jeff “suggested” I stay away from the job site during the re-do, and I accepted his “suggestion,” only showing up at the designated time with sandwiches and some cash to pay our helpers. The result? Three hours total in and out of the water and “The Wind is Our Friend” was back in business. Ever since, it’s been smooth sailing, on the water and in life. Beth Ewen Editor and co-founder Upsize Minnesota bewen@upsizemag.com

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PHOTO BY JONATHAN HANKIN

PUBLISHER

Wes Bergstrom wbergstrom@upsizemag.com

fter 32 years of marriage, I considered my husband and me a well-oiled machine, capable of handling the business of life with unspoken mastery and a clear delineation of duties. At dinner parties, I roast the prime rib; he makes the dessert. For household chores, I do the laundry; he gets the groceries. I didn’t think we’d ever need to hash out anything new again because we had this life management thing down cold. Then we bought a sailboat. It’s an 18-foot Precision we named “The Wind is our Friend.” The first year, the very nice man who sold it to us showed up to help get it on the water. This year, we were on our own. It turns out the seemingly seamless Ewen-Amann partnership has a few yawning gaps. For seven hours — yes, seven — on the Sunday before Memorial Day, Jeff put things together and took them apart, stared and stared at the photos he had taken the fall before, directed our muscle (our son and our daughter’s boyfriend), to put up the heavy mast, then take it down again because something was wrong, then put it up, then take it down. This happened three times, including the time my son dropped it on Jeff’s head. My husband’s method was trial and error, guided by the belief that the only way to learn something is to figure it out step by step on your own. My role was to gasp, and gasp again, fearful that my loved ones would be injured by the towering piece of metal high above their heads. This turned out not to be helpful. Also, I made suggestions as to what we should do, all of which involved some version of calling on the experts. Was there a service we could hire? Would the former boat owner be persuaded to help us again if we bought him lots of beer? Could we YouTube it? As a lifelong reporter, I realized my method is to ask many people about the best way to do something and then write it up for others to learn. What does this have to do with running a business? I was thinking of all the business partners out there who have things

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international business

BUSINESS BUILDERS

Driving global sales growth from a low-cost digital platform by Jim Thomas

TIPS 1. Buyers typically want to gather preliminary product information without talking to a salesperson and assess what they learn before being contacted. 2. The Internet has leveled the playing field for global market development. Customers find you today through an online search. 3. If an SME has not traveled, lived or done business overseas they will encounter some cultural difference. Elevating that trust level starts when an overseas vendor shows that they want to do business in a culturally neutral way. 4. Simple enhancements to a company website’s contact page include the use of an international phone number, the elimination of zip codes and the inclusion of a country identifier box. 5. Don’t expect that you will see a dramatic increase in your leads immediately. It takes global prospects several months to recognize these online changes.

UPSIZE JULY • AUGUST 2018

MANY COMPANIES DREAM about building their global brand and expanding their revenues through overseas sales. According to the U.S. Department of Commerce, 96.5 percent of manufacturing small and medium-enterprises (SME) export. However, SME’s comprise only 18.9 percent of the export value of the U.S. The two major obstacles those SMEs face with exporting are: 1. The lack of resources to identify and qualify export customers, and 2. The inability to competitively navigate import requirements to reach those customers. This article will show SMEs how to simply provide international customers information about your organization on a culturally neutral basis so that you will be perceived as willing to be flexible enough to do business overseas. The SME can then identify the export customer, the first step in the qualification process. Global market development has been an expensive and time-consuming process, involving market and legal research, multiple overseas trips, and numerous trade show visits and displays. One of the greatest impacts of the last Great Recession was how the buying process changed. The Internet has become the great equalizer of marketing communications. Customers find your business today conducting a simple online search. We have all experienced this personally in our own consumer product searches: • •

93 percent of business-to-business purchasers start with an online search Buyers are 70 percent of the way through the product search pro-

•

cess before they talk to a seller Buyers conduct global product searches

Did you know the U.S. makes up only 5 percent of the overall globally available market? And that there is a lot of available market left? Most buyers want to gather preliminary product information without talking to a salesperson. After this information is gathered and assessed the buyer is ready to be contacted. The seller can now hand off the prospect from the marketing people who put information on the website to the salesperson or overseas channel partner (if selected) to provide customer-specific application information. Customers want to hear from a company representative to help them solve their problem with a product. The earlier they make contact in the buying process, the greater the likelihood of a sale. Using the internet, companies can help define overseas buyers’ needs and position themselves as a preferred supplier. SMEs can then start global business development with real overseas customers providing information about their product needs. Prospective customers will explain their market. They will also tell the vendor, you, about competitors and potential channel partners. A business plan can now begin with real customers on a more market specific, focused, manner. If an SME has not traveled, lived or done business overseas they will encounter some cultural difference they may not have expected that will create a lack of trust or empathy on the customers part. Elevating that trust level starts when an overseas vendor shows that they want to do business in a culturally

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neutral way. Simple enhancements to the SME’s web site would include: Modifying the “contact us” page • Use an international phone number-not an 800# • Eliminate zip codes, abbreviations and mailing address fields • Add a country identifier box • Ask to enable cookies (a new requirement of the European Union Data Privacy Act) Modifying the seller’s international contact information • State your direct phone number with country code (no 800 number) • Display a separate international contacts page • Identify a separate resource to contact for exports, such as international@example.com • State that you are a U.S. company Enabling some simple tools from Google • Embed Google Translate on your pages • Add Google Analytics on your site Using more culturally neutral conventions for times, dates and measures • Use Greenwich Mean Time and a 24-hour clock to state business hours • Use global calendar conventions: day/month/year or year/month/ day • Add metric conventions and other engineering measure conversions • Add voltage, amps and frequency for electrical products • State whether you modify or customize standard products

Search engine optimization • Produce high-quality Englishbased content • Obtain testimonials from current global customers • Drive contact forms to a unique ID content management system Embracing new available digital technology • Make their site mobile friendly • Benchmark world class web sites It is important to only request required contact information at this stage of the relationship. Is an address required to receive electronic information? Don’t expect that you will see a dramatic immediate increase in your leads immediately. It takes global prospects three to six months to recognize these online changes. There are many great company website examples of how to build a more culturally neutral presence. It is not a matter of company size. The goal is to appear to be the easiest to do business with. This first step is understanding our cultural differences and minimizing them. SMEs will then be able to win overseas customers and reap the benefits of exporting: 1. Increasing sales and overall profits 2. Creating a global brand and higher enterprise valuation 3. Creating new jobs 4. Offsetting slower growth in the domestic market 5. Outmaneuvering competitors and perhaps attacking them on their home turf 6. Creating economies of scale in production

“Global market development has been an expensive and time-consuming process, involving market and legal research, multiple overseas trips, and numerous trade shows visits and displays. One of the greatest impacts of the last Great Recession was how the buying process changed.”

Enjoy the journey!

Jim Thomas, Dynamic Development LLC

Jim Thomas is founder of Dynamic Development LLC, which consults with businesses on international growth: 612.321.6459; jim@jimthomasintl.com; www.jimthomasintl.com. www.upsizemag.com

JULY • AUGUST 2018 UPSIZE

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staffing

BUSINESS BUILDERS

Fill in with freelancers: How to utilize the gig economy by Kathy Northamer

TIPS 1. Consider using freelancers to fill your talent gaps. Use them when you have projects available and then shelve the relationship until you next need them. 2. Establish rates beforehand. Don’t waste time pursuing a freelancer only to find out their pay expectations are outside of your budget. 3. Work with a recruiter. Specialized agencies have access to larger pools of interim professionals than you likely do alone. 4. Onboard them like employers. To get the best work from freelancers, give them the fulltime treatment, especially if they’re on a long-term contract. 5. Give them feedback. Let them know what they do well and also where they could improve.

UPSIZE JULY • AUGUST 2018

BUSINESS IS BOOMING in Minnesota. Unemployment reached an 18-year low of 3.2 percent in February 2018, compared to the nationwide rate of 4.1 percent. Job vacancies were up 16 percent in the state for the fourth quarter of 2017 compared with a year earlier. At the same time, more people than ever are embracing the gig economy. From accounting to legal services, and from coding to graphic design, a growing number of professionals find they can build a satisfying career from freelancing. The appeal is clear: They enjoy being their own boss — choosing what to work on and when they work. Freelancers work as either contingent workers, who companies access through a staffing firm, or as independent contractors. To get the talent you need in this economic environment, consider staffing your team with a mix of full-time and freelance workers. Many of your competitors are already taking advantage of this hybrid approach. In a recent survey from The Creative Group, 58 percent of the marketing and advertising executives polled said their organization hires freelancers. And these gig workers make up, on average, 14 percent of their creative team. This percentage is likely to go up. Millennials in the gig economy Millennials currently make up the largest segment of the workforce. As such, they comprise the majority of gig workers, who prefer a nontraditional work arrangement for its flexibility and freedom. Millennials came to the job market at a time when the economy was shaky. Many watched their parents stick with the same job for a lifetime, only to be laid off during the Great Recession. For

this generation, work is less about remaining loyal to one employer and more about adapting work to their lifestyle. A smart staffing mix Why should you hire freelancers? For the same reason they choose the arrangement: flexibility. Talent is there when you need it. And when a project is over, you can put that relationship on hold until the next time you require these services. And with more talented professionals entering the gig economy, the caliber of freelancers has increased over the years. This is the opinion of 39 percent of the creative executives we surveyed. Skilled freelancers fill the gap for oneoff projects. For example, rather than burdening your IT team with revamping the company website, contract with a freelance web designer. You get a quality product without shortchanging your company’s other tech needs. Working well with freelancers As with any new staff, you need to first find skilled freelancers and then incorporate them into the team. In fact, these two requirements were among the top three challenges our survey respondents listed in working with these professionals. Here are some best practices for recruiting freelancers and getting the most out of their skills: •

Establish rates beforehand. Have you ever spent hours pursuing your ideal job candidate, only to have the process fall through because you couldn’t give the hourly or per-word rate they require? Love it or hate it, pay transparency is your friend. In your job

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posting, list the range you can offer. That way you don’t waste time interviewing freelancers outside your budget, and they don’t waste time pursuing assignments below their pay expectations. Self promote. Amplify your social media branding by highlighting your outreach initiatives, environmental report card and community-building track record. In a few years, Gen Z — the successors to the millennial generation — will comprise about one-fifth of the multigenerational workforce. A significant portion of this cohort — 30 percent, according to our study — said they would take a 10 to 20 percent pay cut to work for a company with a mission they really believe in. Work with a recruiter. A specialized staffing agency has access to a much larger pool of interim professionals than you would have on your own. They can match you with the skilled freelancers you need. The result? An already-vetted and just-right complement to your full-time team with little additional effort on your end. Classify them correctly. There is a significant risk if the IRS does not agree with your interpretation of whether someone on your staff is an independent contractor, contingent worker or full-time employee, and improper worker classification continues to be the basis of numerous lawsuits. Another advantage of working with a recruiter is that a staffing firm can also help you classify your mix of workers correctly.

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Don’t skimp on onboarding. To get the best work from freelancers, give them the full-time treatment, especially if they’re on a long-term contract. This includes a complete orientation with an overview of the company’s various departments, its products or services, and the vision and mission. If they’ll be based onsite, show them around on the first day and introduce them to other team members. For both remote and office-based contractors, give them access to communication and collaboration tools like Slack or Skype for Business. Offer regular feedback. Take the time to let your freelancers know what they do well and how they could improve. Give reviews not only at the end of the contract, but also regularly throughout the project. This way they can make small course corrections midstream rather than having to redo large chunks of work, which is frustrating for everyone involved.

The gig economy is a valuable resource for Minnesota companies that are short-staffed or in need of a flexible staffing solution. Take advantage of the marketplace’s pool of talented freelancers to grow your business without the risks of hiring long-term employees.

“Take advantage of the marketplace’s pool of talented freelancers to grow your business without the risks of hiring long-term employees.” Kathy Northamer, The Creative Group and Robert Half Technology

Kathy Northamer is district president of The Creative Group and Robert Half Technology: 612.359.4960; kathy.northamer@roberthalf.com; www.roberthalf. com www.upsizemag.com

JULY • AUGUST 2018 UPSIZE

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succession planning

BUSINESS BUILDERS

Succession planning creates company longevity, peace of mind in transition by Michelle Beck-Howard

TIPS 1. If you want your business to survive past your retirement, take the time now to make a plan. 2. Having a succession plan in place can reduce disruption in the case of a crisis, such as the death of the owner or a member of senior management. 3. Business owners will want to start seriously thinking about creating a succession plan about five years before they plan to step down. 4. Factor in the education and previous experience of any candidate for promotion, not just the job that person is doing today. 5. Once a potential successor is identified, the current leader should give that person opportunities to lead projects or teams to evaluate their performance. 10

UPSIZE JULY • AUGUST 2018

More than half of all small businesses in the U.S. are now owned by people over the age of 50. And as the average age of small-business owners and entrepreneurs creeps upward toward retirement age, many are left wondering who will take over when they leave. This question keeps many business owners up at night, particularly those who are looking to start a “new chapter” — one with fewer days spent in the office — in the next five or 10 years. Many have been building their businesses for decades, and the thought that it might not survive long past their retirement can be disappointing. It’s not all gloom and doom, however. There is still plenty of time for business owners to chart the future of their businesses by investing the time to create a solid succession plan. What is succession planning? A staple of strategic human resources management, succession planning involves identifying future potential leaders within the organization and developing them to take over leadership roles when the people currently in those roles resign, retire or otherwise leave the company. Succession plans also help leaders better understand how the skills and people the organization has today stack up against those it will need in the next 10 years to ensure the business can adapt to future challenges. While succession planning is especially critical for organizations whose leader or founder is looking to retire, every company can benefit

from having such a plan. Not only does going through the process of creating a succession plan minimize disruptions in the case of a crisis, such as the unexpected death or departure of a member of senior management. It also provides a sense of stability that strengthens the entire organizational structure. Here’s a short template that company owners can follow as they begin to formulate their own succession planning strategy: Plan now to avoid playing later The single biggest mistake organizations make when it comes to managing leadership transitions is waiting until someone is ready to leave to think about who will replace them. While not all transitions come with the luxury of time, finding the business’ future leader is not something any organization wants to have to do on short notice. Business owners will want to start seriously thinking about creating a succession plan about five years before they plan to step down. This gives the leadership team enough time to figure out exactly what their exit strategy will be, whether that means keeping the company in the family, having another partner or group of employees buy out the owner’s stake or selling the business to a third-party. Whichever of those strategies is in play will help inform the succession plan. Identifying potential successors At the core of any successful succession plan is a solid strategy for

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identifying potential successors. In some cases — such as a familyowned business – the ideal successor may be fairly obvious, but in others the choice may not be so simple. When evaluating potential successors, it’s important to look at the whole person. Their previous experiences and their education all matter, not just what they are doing today. Key factors to look for are a deep knowledge or understanding of your industry, a propensity for forwardthinking that will allow them to foresee and overcome future challenges and an ability to lead and manage people. It’s often helpful to create a leadership profile that outlines these characteristics and other desired skills to use as an outline or rubric when choosing a successor. Creating a written succession plan Up until this point, a succession plan might largely exist only in the mind of the business owner or in informal documents. At some point (typically about five years prior to the business owner’s targeted retirement or exit date, if it’s known), these ideas will need to be formalized and be turned into a written succession plan. This document should include details about the preferred exit strategy, the profile used to identify potential successors, the names of any employees tapped as potential successors and a transition plan for certain key tasks or functions from the current owner to the successor.

continuing to develop the existing talent pool. Once candidates are chosen, the real organizational development work begins. As part of the selection process, the business owner should create opportunities for potential successors to step up and lead projects or teams within the organization so the owner can evaluate their performance and leadership abilities. Generally speaking, the process of training a successor will take between 18 and 24 months. It’s important not to rush this assessment period. However, the more time a business owner gives themselves to evaluate the candidates, the more confident they will be in the decision. While every organization is unique, following this template for creating your succession plan will help preserve your business and your legacy long after you retire.

“While succession planning is especially critical for organizations whose leader or founder is looking to retire, every company can benefit from having such a plan.” Michelle Beck-Howard, G&A partners

Choosing a successor Ideally, business owners will be able to find good candidates within their current workforce. If not, it may be necessary to begin looking outside the organization, while also Michelle Beck-Howard is human resources advisor and client advocate at G&A Partners: 713.784.1181; mbhoward@gnapartners.com; www.gnapartners.com. www.upsizemag.com

JULY • AUGUST 2018 UPSIZE

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taxes

BUSINESS BUILDERS

Revisiting your exit strategy with new tax laws in mind by Dyanne Ross-Hanson

TIPS 1. Tax rates for C-corps were permanently reduced by 40 percent, great news if that’s your corporate structure. 2. To avoid double taxation on asset sales, an owner can convert to a pass-through entity, but must do so five years before a sale to avoid the Built in Gain Tax. 3. Pass-through entities may be eligible for significant dedications, but an equal number of restrictions and limitations exist. 4. The tax law changes likely support a continuation of strong mergers and acquisition activity, for those owners considering a sale outside the family. 5. Given the market conditions, even those planning to transition a company within the family may want to consider testing the market for a sale.

UPSIZE JULY • AUGUST 2018

THE TAX CUTS AND JOBS ACT represents a sweeping overhaul of individual, business and international taxes. And while it has broad impact in every corner of the U.S. economy and everyone in it, the new law impacts business owners more than anybody. Signed into law by President Trump on December 22, 2017, the new law reshapes how owners must approach their exit planning. For example, under the new laws which type of business entity is the most advantageous? How could the new laws impact M&A markets? How do the new laws impact exit planning for family businesses? All of these are critical questions for owners to examine. Summary impact to individuals: • Individual income tax rates were lowered, and brackets expanded. For example, married filing jointly top tax rate, was dropped from 39.6 percent to 37 percent and top income brackets moved from $480,000 to $600,000. • State and local taxes (SALT) and property taxes are now limited to a total $10,000 deduction, bad news for high income tax states and those with high property taxes. • Many changes impact mortgages, alimony, gambling losses, moving expenses, child credits, 529 plans, charitable giving and more. • There was no change to capital gains rates. Summary impact to businesses & exit planning IMPACT #1 Largest corporate tax rate cut in history! Tax rates were permanently

reduced from 35 percent to 21 percent for C-corporations. That represents a 40 percent reduction off the top – which is great news if that is your corporate structure. However, that represents just 10 percent of business enterprises today. With regard to exit planning, if an owner intends to sell their business at exit, commonly the transaction will be an asset sale (or deemed asset sale). Asset sales trigger double-taxation with C-corporations. The first tax is when the corporation sells its assets to the buyer. The second occurs when the corporation distributes the after-tax proceeds to the seller. As such, C-corporations remain disadvantageous upon sale. To avoid this double taxation, an owner can convert to a pass-through entity, i.e. Subchapter S. However, the owner is required to do so at least five years prior to sale, to avoid Built in Gain Tax. IMPACT #2: A big new deduction for pass-through owners … or is it? Sole proprietorships, partnerships, LLCs and S-corporations are pass-through entities for federal income tax purposes. This means that these entities are not subject to income tax. Rather, the owners are individually taxed on the income, taking into account their share of the profits and losses. Owners of pass-through entities may receive a 20 percent income tax deduction on qualified business income through 2025, when it automatically sunsets. A 20 percent income tax deduction off the 37 percent top bracket equals an effective top tax rate of 29.6 percent. That’s potentially good news for the majority of small to mid-market businesses. However, a dizzying array of restrictions and limitations exist. For example, the deduction has industry restrictions. It

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is generally unavailable to professional service firms (legal, accounting, medical, consulting, financial services). Or, if income levels are below $315,000 to $415,000, for those who are married filing jointly, the deduction does not apply. Planning strategy for owners impacted by these restrictions may be to evaluate their business lines to determine if separating them (i.e. revenues) may make sense in order to capture the 20 percent deduction. What is clear is the necessity for owners of pass-through entities to consult with their CPA or tax adviser for more details. IMPACT #3: Continued Strong M&A Markets? All signs seem to indicate that the tax changes support continued strong merger & acquisition activity for owners seeking a sale to outside buyers. Most sellers are pass-throughs, but most buyers are C-corporations (larger strategic buyers and financial buyers such as private equity groups or family offices). Lower corporate taxes free up buyers’ cash and increases the after-tax earnings from successful acquisitions. Fueling cash reserves for large C-corporations also includes “repatriation of earnings,” which brings cash back to U.S. balance sheets. With regard to exit planning, it is even more critical for owners to solidify their exit strategy. If an outside sale is likely, it may be wise to consider their ideal timing. These market conditions are not likely to continue forever. In fact, even if an owner thinks they want to transition to family or key employees, they may want to test this exceptional market. IMPACT #4: Estate and gift tax limitations doubled … until 2025. The amount each taxpayer can shelter from estate/gift/generationskipping taxes doubled from about $5.5 million to more than $11 million. This, in

addition to portability between spouses, means that a married couple can now shelter up to $22 million from estate and gift tax. If an owner’s exit strategy is to pass the business to family, this may represent a once-in-a-generation opportunity — if they act. Gifting strategies are usually implemented in stages over several years. And it’s reasonable to expect that Congress may take further action, even before 2025. IMPACT #5: Reaching financial freedom just got easier. Achieving financial independence is typically the number one goal at exit. Potentially lower corporate and personal income taxes may make reaching financial freedom easier and/or faster. Every owner’s financial independence plan should be reviewed and recalculated. IMPACT #6: Bad news for ESOPs? One of the significant benefits to a C-corp Employee Stock Ownership Plan (ESOP) is that owners can sell stock to the ESOP and avoid the capital gains tax on the sale, presuming they reinvest proceeds into qualified replacement property. However, lower potential corporate and personal rates (as much as 40 percent) may reduce the value of dollars saved using an ESOP. While many non-tax benefits exist for establishing ESOP’s, owners looking to identify an internal transition will need to explore all available options more carefully. Conclusion The new Tax Cut and Job Acts indeed impacts both corporations and individuals alike. As such, it has never been more important for business owners to revisit their exit plan options.

“These market conditions are not likely to continue forever. In fact, even if an owner thinks they want to transition to family or key employees, they may want to test this exceptional market.” Dyanne Ross-Hanson, Exit Planning Strategies, LLC

Dyanne Ross-Hanson is president and CEO of Exit Planning Strategies, LLC., which assists business owners in developing ownership transition plans: 651.426.0848; drh@exitplanstrategies.com; www.exitplanstrategies.com. www.upsizemag.com

JULY • AUGUST 2018 UPSIZE

Build

Advise Moving you one step closer to success

Discover your value in the capital arena

Sell

Rick Brimacomb empowers business leaders in refining strategies, assembling resources and securing funding.

Invest

In partnership with

Visit www.brimacomb.com to learn more.

Tuesday, August 28th

A Luncheon Workshop at the Minneapolis Club

FINANCING OPTIONS

Don’t waste time knocking on the wrong doors. Lenders, venture capitalists and business owners are sometimes at odds when it’s time to raise money. But they agree on one key point: seeking the right type of capital for each company’s stage and strategy is critical. Attend this workshop to find out what fits where. Who should attend: Entrepreneurs, CEOs, presidents, small-business owners and executive managers. Questions from the audience will be encouraged. Cost: $34.00, which includes the program, lunch and parking during the event.

Location: The workshop will be held at the Minneapolis Club: 729 Second Ave. So. — in downtown Minneapolis — at the corner of 8th Street (one way headed east) and 2nd Ave. Enter the parking ramp from the 8th Street side, on the south side of the building.

SPACE IS LIMITED! REGISTER NOW, go to bit.ly/2ObaGKl For questions, please contact the Front Desk team of The Minneapolis Club 612.332.2292 or concierge@mplsclub.org

SCHEDULE: 11:00 – 11:30 — Registration & Networking | 11:30 – 1:00 — Introductions, Lunch & Workshop | After 1:00 — Networking

UPSIZE JULY • AUGUST 2018

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Tuesday, September 25th

A Luncheon Workshop at the Minneapolis Club

FAMILY BUSINESS GUIDE

50% of American businesses are owned and run by families. This workshop will address the unique set of challenges faced by the owners of family businesses. Experts will cover topics such as separating family and work, employment policies, fair compensation, fitting jobs to family members’ skills, succession planning, exit strategies and much more. Who should attend: Entrepreneurs, CEOs, presidents, small-business owners and executive managers. Questions from the audience will be encouraged. Cost: $34.00, which includes the program, lunch and parking during the event.

SPACE IS LIMITED! REGISTER NOW, go to ClubEFamilyBusiness.brownpapertickets.com For questions, please contact the Front Desk team of The Minneapolis Club 612.332.2292 or concierge@mplsclub.org

SCHEDULE: 11:00 – 11:30 — Registration & Networking | 11:30 – 1:00 — Introductions, Lunch & Workshop | After 1:00 — Networking

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JULY • AUGUST 2018 UPSIZE

living well Businesses, developers emphasizing wellness as an advantage when recruiting, retaining talent

ome of Alexis Walsko’s employees at Lola Red PR will work from home on occasion if the weather is bad or if they have a personal situation to handle. They’re typically ready to get back to the office as soon as possible though. “I have always had the belief that I liked people being in the office,” says Walsko, owner and founder of Lola Red. “I felt there was an energy and enthusiasm that came from the collective gathering and from being together and also that they were learning.” It helps that the employees seem to enjoy being around each other. Often, she’ll find them there even if they aren’t working. And the company’s wellness program, which covers four areas of their lives: physical, social, emotional and occupational, doesn’t hurt either. “I’m really cognizant that we spend so much of our lives at work that it really should Molly Osborn, from Lola Red be fun,” she says. “Personally, PR, uses a standing desk. Her something that I take seriouscompany and others have begun supplying them in an ly is that I would like to help effort to make offices less grow good humans. So, if I can sedentary. create an environment where

people can learn for their professional lives and their personal lives, that to me feels like I’ve succeeded.”

Diverse program with something for all

Walsko says the company culture has always included activities that could be filed under wellness, though a new committee started formalizing the program just within the last couple years. Under each of the four pillars, the company has many perks and activities in which people can participate. For example, as part of physical wellness, employees can take part in the Pride Run 5K or conduct walking meetings. Under the emotional category, the company has weekly meditation, Monday morning affirmations and every-other-month praise break meetings during which employees go offsite, learn about a topic (one month, for example, it was bees) and then co-workers recognize each other for going above and beyond the call of their jobs. In one case, an employee’s client was in Brainerd on vacation and bought a new car. The employee volunteered to drive the car north for them. “That was, literally, just him being nice,” Walsko says. “When you are in a service-related business, that makes a difference.” Public relations, Walsko notes, is one of the more stressful professions out there. So, finding some strategies for having fun and alleviating stress can only be a good thing. “I think people are happier,” she says. “What we see is that to our current clients and potentially new clients, people will say we seem like a very energetic team, we seem to get along, we seem to be happy and invested. If that’s how we deal with each other, that’s also how we deal with them and their business.”

by Andrew Tellijohn

PHOTOGRAPHS BY TOM DUNN

UPSIZE JULY • AUGUST 2018

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Alexis Walsko, founder and owner of Lola Red PR, believes employees spend enough time at work that it should be funwww.upsizemag.com being there.

JULY â&#x20AC;¢ AUGUST 2018 UPSIZE

COVER STORY Working outside the office

While Lola’s employees can’t wait to get to the office, those working at web development firm Creed Interactive are expected to report just twice a week. On Mondays, Wednesdays and Fridays, the team works remotely. The strategy is due to the theory of “deep work” made famous by entrepreneur Jason Fried, who found that employees were more productive with large chunks of uninterrupted time. “We took that to heart,” says Jonathan Anderstrom, president of Creed Interactive. “We built that right into our work environment, where 40 percent of the time you have to work together and it’s highly collaborative. Sixty percent of the time you can meet if you can still want to, but most everybody works remotely.” Creed has nice office space in St. Paul. The two days they are there, they have a lot of status meetings and collaborative discussions dealing with problems people can’t work out alone. The tasks performed by Creed employees often include complex equations, loading variables and advanced calculations that take uninterrupted concentration. “To be together all the time, I can’t get anything done,” Anderstrom says. “I’m putting out fires all the time.” The offices are so desolate the three remote working days that the company started renting its facility out during those times. The timeshare partner eventually moved to a different space, “But it actually worked pretty well,” Anderstrom says. There are times employees will head into the office voluntarily if they are having trouble focusing, but Anderstrom says the setup naturally attracts employees who are highly motivated self-starters.

CONTACTS JONATHAN ANDERSTROM, president of Creed Interactive: 651.356.6996; info@creedinteractive.com; www.creedinteractive.com. ANGELA LURIE is a Minneapolis-based senior regional vice president at Robert Half: 612.339.9001; angela.lurie@roberthalf.com; www.roberthalf.com. KATIE TOGHRAMADJIAN, founder and president of Isthmus Engineering: 651.288.0300; contact@isthmusengineering.com; www.isthmusengineering.com. ALEXIS WALSKO, owner and founder of Lola Red PR: 612.333.1723; hello@lolared.com; www.lolared.com. PAT WOLF, president of Commercial Real Estate Services Inc.: 651.290.8892; patwolf@cres-inc.com; www.cres-inc.com.

UPSIZE JULY • AUGUST 2018

Maintaining balance

After having been in a job that did not allow her to satisfactorily sustain a career while being a mother, Katie Toghramadjian decided to start a business that brought better balance in her life. She never intended to have employees, but as Isthmus Engineering Inc., a highway transportation engineering firm, grew, she made it a goal to ensure they can prioritize their personal lives. “Work can be a priority, but not the priority,” she says. “My employees are more productive if their personal priorities are in line.” It’s been a successful and award-winning strategy. Isthmus has captured multiple awards for its treatment of employees, including a 2017 “When Work Works” award from the Society for Human Resource Management One of the main benefits Isthmus employees have, whether full-time or part-time, is the ability to customize a work schedule that fits your needs. “They commit to what hours they want to work, so it’s predictable, but they set the schedule so that it works for them,” she says. “Whether it’s because they are dropping kids off at school or they don’t want to sit in rush hour if they are commuting or if they want to hit the gym before or after work, they can set their schedule.” There also are a lot of perks in the office. Isthmus has onsite showers – important for those who do hit the gym or those who bike to work in the company’s Lowertown St. Paul neighborhood. The company also invested in stand-up desks, which Toghramadjian says about 80 percent of its employees use either primarily or regularly. There are several spaces in the building where staff can be active and an outdoor patio where employees can work or gather for lunch or social breaks. “I view that as not so much physical wellness, but as maybe the ability to go where they need to go to best focus on their work,” she says. Between the flexibility and the perks, Toghramadjian says her employees are regularly engaged and productive. “The number one thing is the customized work schedule,” she says. “When they are here they work really hard.”

Vital in hiring and retention

Angela Lurie, senior regional vice president at Robert Half International, says a recent company survey indicates that two-thirds of companies of all sizes are providing more wellness benefits than they did five years ago. “With record low levels of unemployment and the demand for talent, for skilled workers, showing no signs of weakening, employers have to find a way to stand out in a competitive job market in order to attract and retain this kind of talent,” she says. “We believe creating some attractive and progressive health and wellness programs is one way employers can differentiate themselves.”

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COVER STORY

The 428 Building in St. Paul is expected to be among the first WELL Core & Shell certified facilities in the state for its natural light, fitness amenities, filtered air and water and other wellness considerations.

That’s regardless of size and resources. It can be a large, varied program or it can be as simple as including healthy snack options in the office candy jar and swapping out a few less healthy options for higher quality items in vending machines, she says. One important step, Lurie says, is getting employer buy-in. Find out what they want and customize the program depending on the office culture. “Survey your employee group to determine what kind of health and wellness programs they would find important,” she says, adding that physical, emotional and mental health should all be considered. These perks also are important in skilled labor jobs. Standing desks might not be a fit there, but perhaps subsidized health care premiums for gym attendance might. “There are still ways companies can promote overall health and wellness,” Lurie says. “In some cases, let’s be honest, they’re probably more important. Some of those skilled trades require a lot of repetitive motion and require you to be healthy in order to perform your job, both mentally and physically.” The big thing is these programs are a way to generate goodwill while standing apart from your competition. “Get creative,” she says. “You’ve got to find a way to differentiate yourself from the other employers competing for the same talent. These health and wellness programs are one way to create a significant differentiator.”

St. Paul developer incorporating wellness in rebuild

Wellness initiatives are even starting to affect construction. St. Paul-based Commercial Real Estate Services Inc. is in the process of renovating the former Woolworth building in downtown St. Paul. While maintaining many of the historical features of the building has been a focus, so has creating a

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wellness-focused office space on which it believes future occupants may be willing to pay a slight premium. Upon completion, the new 428 building is expected to be among the first WELL Core & Shell certified facilities in the state and the first to receive both that new certification as well as LEED Silver. “What we’re known for is taking older retail buildings and repurposing them into new office buildings,” says Pat Wolf, president. “This is really important for me personally. I’m all about health and nutrition. In terms of adopting this kind of certification for the building, I’m all over it. Because this is the way I want to live.” The WELL certification takes into account seven factors: air, water, light, fitness, comfort, mind and nutrition. The 428 building features a prominent, open stairwell right inside the front door, more visible than the elevators, that attempts to get people to walk to the building’s next level rather than ride. The air and water will be significantly filtered. Huge windows allow in natural light. There will be a bike storage room, lockers and showers, as well as a designated fitness area. “We’ll be focusing on these things and changing the way the occupants feel about the space,” Wolf says, adding that studies indicate there is a meaningful return on investment related to buildings constructed with these factors in mind. The building, which will include a floor available for coworking along with three floors of office space likely for smalland medium-sized companies, should be available for lease soon. “People are going to feel good about coming to work,” she adds. “They’re going to be more productive. They’re going to have less sick time and down time. And, by the way, I can use this as a retention and attraction tool. With today’s unemployment, who isn’t facing a lot of challenges with just getting and keeping talent.”

JULY • AUGUST 2018 UPSIZE

WORKSHOP: Grow or go?

Grow or go?

Experts discuss maximizing the value of a business, now or in the future By Andrew Tellijohn Photographs by Tom Dunn

re you still excited to run your business? Do you have the skillset to take that company to the next level? The economy is rolling and merger and acquisition activity is hot. That’s leaving many business owners with a decision to make: Is it time to explore a sale? Experts from the technology, banking and brokerage sectors discussed that during a workshop co-sponsored by Rick Brimacomb’s Club Entrepreneur and Upsize magazine at the Minneapolis Club in late May. With the hot economy at play, business owners buried in the day-to-day storm of running a business might get caught off guard by the possibility of an unexpected acquisition offer. That’s not a bad thing, experts say. When the opportunity arises, business owners should take them seriously. It doesn’t necessarily mean they have to sell all or part of their company, but it’s good to go through the process. And it’s also true that the challenges and risks associated with staying in control of a growing company can increase along with the entity’s size. “Growth from zero to $1 million is generally easier to achieve and has less risk in it than $1 million to $2 million, $2 million to $5 million or certainly from $5 million to $50 million,” says Chris Jones, managing partner with Sunbelt Business Advisors. “When you get higher up the mountain, there is more risk. Maybe it still excites you, but maybe it doesn’t.” It’s important for owners in these situations to assess both their skillset and their desire to continue running the business. “One of the best questions you can ask is ‘are you still excited when you get up in the morning to run your business,’” Jones adds. “Do you still have a clear vision of where you want to take it? Are you excited about taking it there and do you have the capabilities to get it there?”

UPSIZE JULY • AUGUST 2018

Rick Brimacomb

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WORKSHOP: Grow or go?

“You should take it as a compliment when someone approaches you about buying your company. It doesn’t mean you are ready, but it can teach you a ton.” Chris Jones, Sunbelt Business Advisors —

Make plans early

While an acquisition offer can come out of the blue, experts say it’s good to have plans or at least preliminary thoughts on an exit strategy well in advance of actually having to make a decision. Micah Thor, president of Tech Guru, has been a part of acquisitions. He’s discussed with his business partner whether his company was ready to sell. And he’s been involved thirdhand in due diligence discussions as clients have pondered an offer. The experiences have taught him to plan ahead. “We have been approached multiple times for acquisitions and pursued some of those offers to a certain point,” he says. “The first time it ever happened was truly a huge compliment and an ego boost. It was this big number and we got visions in our head of a successful exit way earlier than we thought was going to happen.” That deal fell apart early on, but the experience led Thor and his partner to discuss what their ultimate exit strategy might look like. The company set a goal for growth and decided once they reach that, they’ll reevaluate. If it is time to consider selling at that point, they plan to take some time before taking an offer to make some strategic upgrades, Thor says, much like when one puts a house on the market. “We’re going to set a three-year runway to that sales point and make investments in the company that will result in the biggest return,” he says. Planning ahead can really pay dividends, agrees Melissa Johnston, senior vice president with Highland Bank. In 2011, she met with a specialty construction

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client who was looking to expand. They looked over his financial records, figured out what he needed right away, then started regularly keeping in touch. Over the next few years, as the company grew, the client implemented EOS principles that allowed him to start putting the right management team and structure in place so he could start stepping away a bit. By 2016, the owner was ready to move on. “He had a steep growth trajectory and could have benefited by staying in the business and potentially sold it for a lot more,” Johnston says. “But he didn’t want to.” So, they teamed up with an investment banker and, in late 2017, sold the business for a multiple of seven times profits. “Having those conversations early on and having a good banking partner who understands your business who can help anticipate your needs, especially when you are in a growth mode, is how banks can fit in the picture,” she says.

Making the business attractive

So, if you have decided you’re looking for an exit, what is a buyer going to want? One thing business owners need to get better at is articulating their “differentiating value,” Jones says. “If you don’t have a differentiating value ... you are a commodity. But if you have a DV, whether it’s your technology or the way you motivate employees, or your people, or your approach or how you monetize, shout that from the mountaintops. That will drive the value way up for your business.”

JULY • AUGUST 2018 UPSIZE

WORKSHOP: Grow or go?

“If you can try to diversify your revenue before you list your business for sale it’s going to add another multiple.” — Melissa Johnston, Highland Bank

Repeatable revenue and a diverse customer base can also help drive value. Potential acquirers today are looking for more than project-by-project revenue. “Now more than ever sophisticated buyers are looking for that recurring revenue model, subscription-based revenue,” Johnston says. “They’re afraid of the project-based (profit and loss), so all income statements aren’t created equal. If you are a business owner trying to sell, think about what is your revenue comprised of. If it is recurring, and it is locked in, it’s more valuable than project-based revenue.” Johnston adds that buyers have walked away from potential opportunities when they find 25 percent or more of a target’s revenues are attributed to two clients. “That’s key,” she says. “If you can try to diversify your revenue before you list your business for sale it’s going to add another multiple. … It can definitely detract from value with high concentration.” Jones agrees on both points. Showing evidence of recurring revenue streams is a huge benefit “if you want to see a broker or (mergers and acquisitions) adviser get excited.” And, he adds, a business owner can sell with a limited customer base, but it’s often reflected in the terms of the sale. “We sold one with a 95 percent concentration with one customer,” he says. “But our client had to take significant terms. Those terms were to be adjusted if the revenue from that client fell off.” 22

UPSIZE JULY • AUGUST 2018

There are some technological enhancements that can add to the value of a business up for sale, Thor adds. But it’s likely too late in the process, if a business is in due diligence before making upgrades. “If your technology is outdated, that’s something that is going to get picked apart,” he says. While buying a lot of new software applications probably won’t add to your return, because technology becomes outdated quickly, one thing that might make sense is upgrading old computers. Another might be switching to a cloud-based strategy that allows for getting rid of a bunch of servers, Thor says. Intellectual property is another attractive point. “I would highlight the heck out of that,” Jones says. “There is a huge amount of value in that.”

In the meantime …

If you do decide to entertain an offer, recognize that it’s a lengthy process. Six months to a year is normal for smaller companies as a snapshot, Jones says. Longer for larger or more complex businesses with fewer targeted buyers. In the meantime, there are plenty of things business owners can do while they wait. Websites and social media issues are often overlooked these days. “Have someone look at your website and guess how much revenue you produce,” Jones says “I bet they guess less, unless you have a wonderful website.” Many websites themselves, he adds, are outdated and underwhelming. Also, people lose sales because potential buyers can’t find social media pages or they

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WORKSHOP: Grow or go?

“If your technology is outdated, that’s something that is going to get picked apart.” — Micah Thor, Tech Guru

find unresolved complaints on those pages. “It’s the first place a buyer is going to go “You may never get a chance to talk to them after the visit your website or your social media pages. … Look at your website honestly and see that it reflects what your company is.” That’s a good practice anyway, adds Thor. Tech Guru has found that “most of our sales are done before we even talk to them,” he says. “They’ve scoured our website. They want to make sure we are not sociopaths and find out how much we cost.” Businesses should spend some time well in advance of a sale cleaning up books, making sure the financials provide an accurate representation. And don’t, Johnston says, give all employees a raise 60 days before a closing. That delayed one sale, she says, because it forced the

CONTACT THE EXPERTS MELISSA JOHNSTON, senior vice president, Highland Bank: 952.858.4798; Melissa.johnston@highlandbanks.com; www.highlandbanks.com. CHRIS JONES, managing partner, Sunbelt Business Advisors: 651.288.1624; cjones@sunbeltmidwest.com; www.sunbeltmidwest.com.

buyer to reforecast financials. And make sure the bookkeeper is good. “The person who is doing the analysis, the bookkeeping, is just as important as the quality of the financials,” Jones says. “Make sure you have good people doing your financials.” Business owners who plan to exit the business upon a sale also need to work on putting together a management team that will be able to carry on the company’s work once a deal is done. “If you can’t be here without your phone blowing up, that’s going to hurt your multiple,” Jones says, adding that sellers generally recognize that the people they are acquiring are among the biggest asset. “The humans in the deal are going to cause interesting issues.” Regardless of whether an owner decides to continue growing the company themselves or sell it, they should look at the process as a positive. Someone thought enough of the business to consider making an offer to buy it. And if it doesn’t result in a sale now, it can be a fantastic learning experience for down the line. “You should take it as a compliment when someone approaches you about buying your company,” Jones says. “It doesn’t mean you are ready, but it can teach you a ton.”

MICAH THOR, president, Tech Guru: micah@techguruit.com; www.techguruit.com.

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JULY • AUGUST 2018 UPSIZE

catching up by Andrew Tellijohn

TIPS 1. Recognize your weaknesses and add people to your staff who complement your skillset. 2. Stay aware of shifts in company culture. It will inevitably change as the company grows, but if you stay on top of it, you can plan it and better help shape it. 3. Bring on staff who can compensate for skills you lack. 4. The availability of qualified staff is down at crisis levels and it could get worse, but remember that it’s cyclical and won’t last forever. 24

UPSIZE JULY • AUUGST 2018

icolas Thomley started Minneapolis-based Pinnacle Services Inc. back in 1999 with a $20,000 loan from his grandmother and a significant dose of passion for the idea of helping people with developmental disabilities and mental illness maximize their opportunities. The company blew through that money in a hurry, quickly opting to add a bank loan. Pinnacle has grown substantially in the nearly two decades since, but he’d like to be doing more. Growth, however, has been stunted in recent years by the inability to find more quality employees and the tight spigot he says the state Legislature has on funding for programs like this. “It’s a struggle to find good people,” he says. “We simply can’t pay enough. We’d like to pay a lot more. We’re really tied to the Legislature. And it’s probably the worst hiring environment I’ve seen. It’s impossible to find good people and retain them. It’s really a struggle to grow or expand or do more.” That’s not to say Pinnacle hasn’t had some successes over the years. The company has grown significantly in 10 years since it was first featured in Upsize. Revenues have doubled from just under $8 million in 2007 to around $17 million in 2017. And the company now employs more than 300 staff, half of whom work full-time. The growth, Thomley says, stretched to the limit Pinnacle’s headquarters in Minneapolis and the company now has overflow space in another building. But they need more. “We’re scrambling to find as many

Nicholas Thomley good people as we can just to fill the needs that we have,” he says. The company started out focused on working with people who have intellectual disabilities. Over time, Pinnacle has begun serving additional populations, including people with mental health issues and, more recently, seniors and some people who have suffered brain injuries. “It’s broadened,” Thomley says. “We’ve served someone as young as 18 months. I think the oldest person we’ve ever worked with is 108. It’s a www.upsizemag.com

PHOTO COURTESY OF PINNACLE SERVICES INC,

Staffing struggles and stagnant funding stifle growth at Pinnacle Services Inc.

Pinnacle Services Inc. Description: Provider of assistance to people with developmental disabilities and mental illness in finding housing, jobs and other necessities. Founder: Nicolas Thomley CEO: Jill Cihlar Headquarters: Minneapolis Founded: 1999 Revenue: About $17 million Website: www.pinnacleservices.org

a pretty broad spectrum of age and varying disabilities.” The necessary skillsets for a potential hire at Pinnacle vary depending whether the client is a semi-independent adult versus a highly-dependent adult or child, but regardless, it takes a well-trained person with the right temperament. “They are caring people,” he says. “They wouldn’t be going to work doing the things they are doing if they weren’t. If you can’t pay them what they would make driving Uber, that’s really challenging. With an aging population, the need for caregiving is only going to increase.” The business side Funding isn’t the only challenge Thomley has dealt with over the years. One he wishes he’d handled better was the culture shift that came along with the significantly increased employee count. In the early days, the company culture was fairly intimate. He acknowledges that’s

not quite as true today, in part because he didn’t notice it early enough or plan for it. “The shift in culture … is going to happen one way or another,” he says. “One of the things we missed was actively engaging and planning for that shift. We knew we were growing, but I don’t think we really thought about the bigger we get, the more difficult this cohesive culture will be.” Thomley also acknowledges that while he has a passion for the business, he also often gets distracted by new ideas. In a nod to his own challenges in dealing with daily operations, he hired a chief operating officer, Jill Cihlar, whom he ultimately promoted to CEO. Cihlar now handles most of the day-to-day functions at Pinnacle so he can focus on strategy. “She’s much better at systems and executing, pushing everything forward” Thomley says. “I get distracted by the next thing. That’s a big one. We wouldn’t be where we are without her.” Not giving up Thomley has started other businesses since opening Pinnacle and he’s in the early stages of researching another that would focus on affordable housing for people with disabilities. He acknowledges frustrations related to the pace of Pinnacle’s growth, but he retains the passion for the cause that pushed him to initially start the company. “Pinnacle is the first company I started,” he says. “It’s got a lot of meaning to me. There is an emotional attachment to it in a lot of ways. We’ll get through this rough patch. We’ll come through the other side and things will start moving forward again.”

“We’d like to pay a lot more. We’re really tied to the Legislature. And it’s probably the worst hiring environment I’ve seen. It’s impossible to find good people and retain them. It’s really a struggle to grow or expand or do more. — Nicolas Thomley

Founder of Pinnacle Services Inc.

Nicolas Thomley, founder of Pinnacle Services Inc.: 612.977.3100; nicolas.thomley@pinnacleservices.org; www.pinnacleservices.org.

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JULY • AUGUST 2018 UPSIZE

UPSIZE RESOURCE DIRECTORY accounting Cummings, Keegan & Co., p.l.l.p

BANK Highland Bank

COMMERCIAL PHOTOGRAPHER Tom Dunn Photography

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.

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.

ACCOUNTING Olsen Thielen CPAs

Bank North American Banking Company

commercial real estate The Ackerberg Group

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

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

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.

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 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

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.

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.

business machines Loffler Companies, Inc.

insurance O’Rourke Agency, Inc.

BANK Crown Bank

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

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

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UPSIZE RESOURCE DIRECTORY LAW FIRM Lommen Abdo

mailing services Braemar Mailing Service Inc.

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

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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.

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LAW FIRM Winthrop & Weinstine, P.A.

SBA LENDER Highland Bank

venture capital Brimacomb + Associates

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

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Winona, the Business Education Network is focused on manufacturing jobs in the Winona area. It turns out that community is blessed with about 100 diverse manufacturers. But many of the young people graduating from high school are not aware of the job opportunities in their community. There are seven of these around the state. The fourth is a series of meetings and seminars we’ve been having which are designed to help employers identify and then hire out of underutilized portions of the workforce. Even though the overall unemployment rate is quite low, there are some parts of the workforce that are underutilized: older women, individuals with disabilities, some veterans, individuals who have a criminal record. Turns out there are a lot of talent in these populations, employers are searching for. It’s of great but conventional HR systems aren’t good use to anybody who is trying to prepare at identifying and then employing people people for work. It has real-time informa- from these populations. tion about the nature of job openings We have found no silver bullet for solvand the skills those jobs require. Also, if ing Minnesota’s workforce programs, but employers have a job open and they want we have created these initiatives that we to figure out who the competition is in think will go a long way. filling that job or what they have to pay, Tellijohn: How can small businesses RealTime Talent can provide that kind of access these services? data. Blazar: On the Minnesota Chamber MN Job Match is an online service website (bit.ly/2LuhCnw) they can go to designed to match job applicants and job the Foundation portion and they’ll find the Business Education Network link. openings. What sets this service apart Tellijohn: Are you working with other is that it requires both applicants and organizations around the state? employers to answer a series of questions aimed at understanding the nature of Blazar: It depends on the initiative. The Business Education Network we’re the workplace and the kind of opening doing with local chambers of commerce. the are trying to fill. It also asks the job seeker questions about their experience, The Minnesota Job Match involves local as opposed to their credentials, and about chambers as well as several industry trade associations and organizations set up to the kind of environment they’d like to work in. help individuals find jobs, such as Lutheran On the basis of the description, the Social Services, Jewish Family Services or employers’ responses and the applicants the state’s workforce centers. They all have resume and responses, it stacks and ranks access. applicants. We think it has the ability to make matches where other online contact: BILL BLAZAR, services will not. Minnesota Chamber of The Business Education Networks, which we developed with local chambers Commerce: 612.292.4658; of commerce, is aimed at exposing largely bblazar@mnchamber.com; high school students to career opportuni- www.mnchamber.com. ties in their communities. For example, in

MN Chamber establishes Center for Workforce Solutions

healthy economy, baby boomer retirements and the declining birth rates of the 1970s and 80s mean hiring new employees has never been harder in Minnesota. That’s led the Minnesota Chamber of Commerce, through its foundation, to start the Center for Workforce Solutions, which will house several initiatives it thinks might help the state’s employees find the workers they need. Andrew Tellijohn, Upsize’s managing editor, spoke with Bill Blazar, the chamber’s senior vice president of public affairs and business development, to find out how these programs can help bridge the state’s talent gap.

Tellijohn: What drove the Chamber Foundation to take this step? Blazar: For the last eight or nine years the Minnesota Chamber, through its Grow Minnesota program, has been hearing about the challenges Minnesota employers face recruiting the talent they need to change and grow in our state. We probably visit around 700 Minnesota companies per year. I can’t remember the last time we did one of those visits where the employer did not highlight the challenges they have staying fully staffed. It’s a persistent drag on Minnesota’s economy. Over the years we have developed a variety of programs aimed at closing Minnesota’s talent gap. Those programs were pretty much scattered around our organization. We thought to make them better organized and make it easier to measure their effectiveness, we would bring them all together under the Center for Workforce Solutions. Tellijohn: What are the four programs? Blazar: RealTime Talent provides realtime data and analysis about the availability of workers and the kinds of talent 28

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