Upsize Minnesota July/August 2024 by Upsize Minnesota

“It has helped us grow significantly.”

— Sarah Levens, president, Schu Marketing Associates

Inc.

Employees with equity

ESOP conversion ramps up growth at Schu Marketing Associates Inc., improves employee hiring, retention

LEARN HOW TO IMPROVE YOUR ENGAGEMENT ON LINKEDIN WHEN TO INITIATE AN EXTERNAL WORKPLACE INVESTIGATION CATCHING UP: CATHY SEDACCA

An instruction manual can help you know how to do something. But know-how means bringing uncommon skill, insight, and expertise to the table. At Crown Bank, it’s the know-how we bring to every challenge and opportunity that helps make the possible, possible for our clients and our community. What can we make possible for your business?

Cover story

Employee Stock Ownership Plans give small business owners an exit strategy, but also provide retirement plans for employees, build engagement by giving those employees added control over their long-term financial destinies and provide companies with tax-free liquidity that can aid growth

BY ANDREW TELLIJOHN

Cover photograph by Tom Dunn

BUSINESS BUILDERS

PAGE 4

Founder’s Forum:

Mercedes Austin, owner of Mercury Mosaics, talks with Upsize Founding Editor Beth Ewen about being willing to suck for a while when you start something new

PAGE 4

Staff list:

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

Upsize Minnesota (USPS 024-029) is published bi-monthly by Broad Axe Media, 2908 W 71 1/2 St., Richfield, MN 55423. Periodicals postage paid at St. Paul, MN and additional mailing offices.

Postmaster: Send address changes to Upsize Minnesota, PO Box 23238, Richfield, MN 55423-0238

PAGE 6

INSURANCE

Options for controlling costs but still providing useful health insurance benefits by Kevin Kickhaefer, Gravie

PAGE 8 LAW

When you should consider bringing in an outsider to conduct an investigation by Olivia Liz-Fonts, BANC LLP

PAGE 10

MERGERS AND ACQUISITIONS

Consider these options as you work toward getting your number from a business sale by Sean Boland, DSB Rock Island

PAGE 12

SOCIAL MEDIA

Strategies for making the most of LinkedIn by Dave Meyer, BizzyWeb

PAGE 14

WEALTH MANAGEMENT

Diversifying some investments away from your business can reduce risk during difficult times by Richard Brown, JNBA Financial Advisors

COLUMNS

PAGE 22

CATCHING UP

Former Sage Credit co-founder Cathy Sedacca has launched The Collection Dept. with husband Al Sedacca. They’ll work with clients to collect on aging accounts receivable while educating them on how to improve internal collections practices

Activate your purchasing power with a business credit card that optimizes your cash flow. With the right card program, you’ll have the tools you need to purchase equipment, hire that new employee or take on the building expansion you’ve been dreaming about.

Maximize your earnings –and your time.

Scan the QR code or visit businessbanking.usbank.com to schedule your spend analysis.

FOUNDING PUBLISHER

Wes Bergstrom

EDITOR AND PUBLISHER

Andrew Tellijohn atellijohn@upsizemag.com

FOUNDING EDITOR

Beth Ewen bewen@upsizemag.com

DESIGN DIRECTOR

Jonathan Hankin jhankin@upsizemag.com

CHIEF FINANCIAL OFFICER

Dan O’Connell dano@upsizemag.com

PHOTOGRAPHER

Tom Dunn tom@tomdunnphoto.com

HOW TO REACH US

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Main: 612.827.5290 www.upsizemag.com

Mercury Mosaics founder on the courage to be a beginner “Y

ou have to be willing to suck at something new.”

That’s what the founder of Mercury Mosaics, Mercedes Austin, thinks about growing her custom tile-making business to each new level. I’m loving her viewpoint as I embark as a beginner on so many pursuits.

Austin is a ceramics artist who was making and selling individual tiles with beautiful designs. “I wanted to turn being an artist into a day job. I thought, how hard could it be to start my own tile company?” she recalls.

She launched Mercury Mosaics, named for the Roman god of craftsmanship, in 2002. Today Mercury Mosaics has 35 employees and a robust base of custom clients, plus a new front office and design space to complement its production facility in Northeast Minneapolis.

She attracted an equity investor last year, Hill Capital, and launched a new product line called Mosaic Candy Shop, which repurposes leftover tiles as creative kits for kids and adults. With every step, she’s had to be brave enough to be a beginner again.

Take the task of writing the company’s vision, mission and values. “I said, that’s for corporate,” she recalls. “I was letting my ignorance get in the way. We were in business for 17 years before we sat down with eight of us,” and took on the project. “It’s helped us have a common language.”

She recalls other inflection points. “I spent the first 10 years of the company making and selling tiles the way you ‘should,’” she says, meaning the way other mass tile makers do it. “The turning point: we learned the rules and decided to do it differently, and that was where everything changed.”

They started working with commercial designers and architects to create custom patterns for stunning, large-scale mosaic installations. Did they make mistakes at first, with each new change? “One hundred percent,” Austin says.

“You talk about 10 years” of your com-

pany’s history, “and it sounds so genius, but you have to suck at first. You have to pick yourself up,” she says. “The most important thing is when you make a mistake you own your mistake and make it better.”

Austin’s simple words act as profound encouragement to anyone trying something new, like me. A year ago, I left my day job as a business writer and editor, a career where I built up expertise for almost 40 years. I knew what I was doing, times 10.

Since then, not so much. I’ve taken surfing lessons from a dude in Mexico who patiently coached me as I tried and failed five times to get up on the board. When I finally did surf for about 10 feet, I yelled “Cowabungaaaaa!” and he cheered like a maniac.

An amateur musician, I prepared an audition for the Minnesota Chorale but was out of my league—everyone else sounded like Renee Fleming, I swear. I’ll work on my range and try again next year. A leisure sailor, I’m taking lessons in the Apostle Islands next month on a 40-foot boat to become a certified captain. What could possibly go wrong?

I’m taking it from Austin, and you should, too: It’s OK to suck at first. What a freeing idea for any person or any business owner, at any age or stage.

—Beth Ewen founding editor bewen@upsizemag.com

Correction: Upsize incorrectly stated in our June/July issue that Bauhaus produced both alcoholic and nonalcoholic beers containing THC. Bauhaus only produces non-alcoholic beers that contain THC.

www.upsizemag.com

Mercedes Austin

Manage your cash flow in a few simple steps

New health benefit options for small and midsize businesses

by Craig Veurink

by Kevin Kickhaefer

TIPS

1. Set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future

1. Research indicates that the number of people with employersponsored group health care coverage has decreased in recent years.

2. Put cash flow before profits. It might seem counterintuitive, but if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix

2. With level-funded plans, where employers contribute steady monthly payments to cover costs for administration, claims payments and stop-loss insurance, SMBs can safely fund their health plans and control risk.

3. Secure credit ahead of time. Most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected Consider using a payroll service. Having the professionals take care of collecting payroll taxes saves them an enormous amount of time, helps streamline their cash flow

3. Individual Coverage Health Reimbursement Arrangements (ICHRA) give SMBs the option to contribute pre-tax dollars to their employees, who can then use that contribution to purchase a health plan from the individual marketplace.

As open enrollment approaches, now is the time for small and midsize businesses (SMBs) to finalize their health benefits offering for 2025 and begin planning for the next few years.

Small businesses are usually founded by entrepreneurs who have a unique vision and a passion that drives them to work late hours, take chances and believe in what they’re doing. But, just as Thomas Edison once said that genius is 1 percent inspiration and 99 percent perspiration, successfully running a small business requires rolling up your sleeves and putting in significant time on more mundane, day-today matters.

For many SMBs, this process can be daunting, particularly as they are forced to choose from health plans that cater more to the needs of large employers. Making matters worse, they continue to contend with escalating costs for coverage that may not be meeting their employees’ greatest needs.

You can be driven, impassioned and have a great idea to fill a niche or serve customers in new ways, but if you don’t attend to the details of the business, you can create for yourself a heap of problems.

Unwieldy costs are why 35 percent of small businesses don’t offer health benefits at all, according to a 2024 eHealth survey. Unfortunately, it doesn’t look like this trend will be letting up anytime soon.

Here, we’ll look at one of the most important of these business details: managing cash flow. Especially for early startups, knowing how much cash is coming in and going out, and accurately forecasting sales and expenses, is key to maintaining your company’s health.

“When do I start to turn a profit?”

costs to employees, often by offering higher deductible health plans. The result? Benefits that don’t offer true value to employees and their health and well-being, despite the significant investment by both employers and employees each year.

Rather than wonder, set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future.

2. Put cash-flow management before profits

The good news: there are two macro trends shaping the market now that can help alleviate some of the administrative and financial burdens of offering benefits, while still providing high-quality coverage for employees.

Level-funded health plans available to smaller groups

This might seem counterintuitive, since profits are how you survive. However, if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix. Keep things organized and well managed so you can be ready for whatever success comes your way.

3. Secure credit ahead of time

SMBs have historically had two choices for funding their benefits, depending on their risk tolerance: 1) self-fund their health plan — which most small businesses can’t afford or 2) fully fund with carriers setting the price and business owners paying more to lessen risk.

5. Schedule your payments. Don’t go delinquent but do divide your payments into categories such as “must pay,” “important to pay” and “flexible payment terms.” This can help keep sufficient cash on hand.

No matter where you are in your business, keep these things top of mind:

A recent study by KFF, a news and research source for health policy, found the average annual premium for covered workers at small businesses is $8,722, an 8.8 percent increase from last year. We’re already seeing the impact of this in Minnesota, as the number of people with employer-sponsored group coverage decreased from 52 percent to 49.3 percent in 2023.

4. Hybrid models combining ICHRAs with level-funded plans are also an option growing in popularity.

1. Know when you will break even

With these types of increases, it’s safe to assume SMBs will either cease offering health benefits altogether or find other ways to shift

Every small business owner keeps at the front of their mind the question:

Too often, small business owners wait until they need it to secure credit. This can cause a lot of unnecessary stress, or worse. Talk to experienced business owners in your area and industry ahead of time to know how much revenue you’ll need up front. Take a realistic look at the situation and plan. You might have sufficient cash reserves or a rich uncle who is only a call away, but most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected.

But with level-funded plans, where employers contribute steady monthly payments to cover costs for administration, claims payments and stop-loss insurance, SMBs can safely fund their health plan by controlling risk through stop-loss insurance, while also enjoying the cost certainty of fixed monthly premiums. The best part: if claims are lower in a given plan year, employers can potentially

receive a refund at year end.

This cost certainty is likely why level-funded health plans have skyrocketed in popularity — from 13 percent of SMBs taking advantage of this model in 2020 to more than 40 percent in 2023, according to KFF. With level funding’s promise of increased predictability and more controlled risk, we can only expect that number to increase.

Individual Coverage Health Reimbursement Arrangements (ICHRAs)

In 2023, Gravie and Wakefield Research conducted a survey of 500 U.S. health benefits decision-makers and found 71 percent of employers think managing health insurance is one of the most difficult parts of their job. SMBs looking to reduce this administrative burden and offer affordable (tax-advantaged) health benefits should explore Individual Coverage Health Reimbursement Arrangements (ICHRAs) this open enrollment season.

This solution gives SMBs the option to contribute pre-tax dollars to their employees, who can then use that contribution to purchase a health plan from the individual marketplace that best fits their needs.

After learning about ICHRAs, 87 percent of the companies surveyed thought the solution could be a long-term fit for their company. This approach has proven successful for Wealshire, a Minnesota-based dementia and Alzheimer’s care organization with facilities in Medina and Bloomington.

After struggling with rising prices

for their traditional group health plan, and later taking on all of the risk by moving to a self-funded model, Wealshire’s president felt desperate for a solution that offered cost certainty while providing his employees with quality coverage.

Since implementing an ICHRA offering this year, Wealshire has gained more control over their benefits spend, seen strong enrollment numbers and has a satisfied employee population that appreciates more choices.

Along with growing interest in ICHRAs, we’re also seeing that hybrid models — offering an ICHRA in combination with a level-funded plan — can offer a unique and creative solution for SMBs. This approach is particularly useful for employers with segmented employee populations (temporary workers, part-time team members or even full-time employees living in different states) where it makes sense to offer different levels of benefits.

Health benefits represent one of the largest expenses and administrative burdens for SMBs and are often a stressful consideration. But it doesn’t have to be this way. With broadened access to level funding and the rise of ICHRAs, small and midsize employers have more ways than ever to win at the benefits game.

“With broadened access to level funding and the rise of ICHRAs, small and midsize employers have more ways than ever to win at the benefits game.”

Kevin Kickhaefer Gravie

Contact: Kevin Kickhaefer is chief revenue officer and president of commercial markets at Gravie: 844.540.8701; info@gravie.com; www.gravie.com; in/kevin-kickhaefer-9a97186

banking

BUSINESS BUILDERS

Manage your cash flow in a few simple steps

Hiring outside counsel for internal investigations

Workplace investigations are often the result of employee complaints. Though not all reported concerns lead to a formal investigation, employers have a duty to take appropriate action once they know or should have known about alleged misconduct. When initiating an investigation, employers should keep in mind that the investigative process may impact the organization’s reputation more than the alleged misconduct itself.

by Olivia Liz-Fonts

Craig Veurink

TIPS

1. While an internal investigator may understand workplace policies, they may often lack sufficient training in collecting and evaluating information.

1. Set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future

2. When there is risk of litigation, an investigation conducted by an outside investigator can better withstand potential scrutiny by a court.

2. Put cash flow before profits. It might seem counterintuitive, but if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix

Allegations warranting investigation require a prompt and thorough process that ensures accuracy and objectivity. Developing a comprehensive investigation plan is essential to minimize the employer’s risk of liability, but one of the most critical decisions an employer must make when initiating an investigation is selecting the appropriate investigator.

An investigator should also understand how to manage an uncooperative witness and effectively obtain details while addressing any privacy concerns. In cases involving sexual harassment, it is important for an investigator to use trauma-informed interviewing techniques to ensure the witness does not experience further unnecessary distress and to avoid compromising the investigative process. The investigator’s reported findings should be properly supported by evidence and avoid reaching any legal conclusions.

3. Employers have a duty to investigate misconduct promptly and fairly. Launching an investigation of misconduct and developing a comprehensive investigation plan is important in satisfying an employer’s legal obligations.

3. Secure credit ahead of time. Most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected

4. Internally managed investigations can also create the perception of bias which may discourage candid participation from employees.

4. Consider using a payroll service. Having the professionals take care of collecting payroll taxes saves them an enormous amount of time, helps streamline their cash flow

5. Multiple allegations against a single employee or numerous complaints relating to similar misconduct may indicate a broader issue within the organization and, thus, require more extensive investigation.

Employers often rely on their human resources department to conduct internal investigations because HR is familiar with workplace policies, structures and practices. In leading an investigation, HR may be responsible for interviewing witnesses, developing and reporting findings and determining disciplinary action. In certain circumstances, an investigation conducted by HR (or any internal investigator) may be practical and cost-effective for the organization. However, other circumstances warrant the use of outside counsel to best protect the organization’s interests and minimize the risk of liability.

Here are five considerations to help determine when to hire an attorney to investigate:

1. Training and expertise

No matter where you are in your business, keep these things top of mind:

1. Know when you will break even

Every small business owner keeps at the front of their mind the question:

In addition to understanding workplace policies or employment violations, an investigator is responsible for gathering and evaluating evidence. While an internal investigator may understand workplace policies, they often lack sufficient training in collecting and evaluating information. Beyond fundamental interviewing techniques, an investigator must be able to assess credibility when faced with contradictory or inconsistent facts.

Adequate training and overall expertise can also provide an investigator with more credibility and give greater weight to their findings. When there is risk of litigation, an investigation conducted by an outside investigator can better withstand potential scrutiny by a court.

2. Time and resource constraints

“When do I start to turn a profit?” Rather than wonder, set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future.

2. Put cash-flow management before profits

Employers have a duty to investigate misconduct promptly and fairly. Launching an investigation once the misconduct is known (or should have been known) and developing a comprehensive investigation plan is an important part of satisfying an employer’s legal obligations. Delays and interruptions in the investigative process can lead to documents being improperly destroyed and witnesses becoming unavailable.

3. Secure credit ahead of time

The process of understanding workplace policies, developing the scope of the investigation, gathering information, assessing evidence and reporting findings can be time consuming and often requires additional resources.

The time and thoroughness required to conduct an effective investigation can be difficult for an internal investigator with competing work responsibilities and a relative lack of resources. Failure to investigate promptly can negate a defense of due diligence, putting the employer at a higher risk of liability.

3. Neutrality

Employees commonly report work-

place misconduct to HR. As the general liaison between employees and management, HR engages with employees at various stages in their employment. HR’s relationship with employees and familiarity with workplace policies often results in employers relying on HR to investigate.

Although it may seem practical for HR to conduct an investigation, employers should be cautious. Given the nature of HR’s role within an organization, it can be difficult to remain neutral throughout the investigative process. Prior interactions between HR, the accused party, complaining party and any witnesses can create bias and influence several aspects of the investigation. Internally managed investigations can also create the perception of bias which may discourage candid participation from employees.

Employers may attempt to address bias by developing robust investigation plans and implementing company policies that promote fairness. Nevertheless, an investigator’s fact-finding approach and final analysis remain at risk. A common pitfall of internally led investigations is “confirmation bias,” which is the tendency to search for, interpret or recall information in a way that confirms prior beliefs. However unintentional, an investigator’s bias can be detrimental to the investigative process.

A properly trained investigator with no previous knowledge of the incident or prior working relationship with the parties and witnesses can utilize fact-finding strategies that maintain a neutral investigation and allow for a fair assessment.

4. Involvement of high-level employees

When confronted with an allegation of discrimination, harassment or retaliation involving an employee at a management level or higher, the organization’s reporting structure may impact an investigation conducted by an internal employee. Whether the employee is directly involved with the misconduct

or is a witness to the misconduct, their position of power and influence makes it difficult for an internal investigator to ask effective questions without fear of reprisal.

Allegations against a high-level employee can lead to significant legal consequences. An outside investigator’s neutrality, resources and expertise enables them to elicit information and challenge inconsistencies without worrying about potential conflicts with the employees involved.

5. Multiple parties or allegations

Multiple allegations against a single employee or numerous complaints relating to similar misconduct may indicate a broader issue within the organization. As a result, a more extensive investigation may be required to determine the systemic issues contributing to the ongoing misconduct in such cases.

An investigator that understands employment matters can also recommend policy and procedural changes to minimize future conduct violations.

Key takeaway: Always assess the risk of litigation

When workplace misconduct warrants an investigation, choosing the appropriate investigator is critical. Employers should evaluate internal resources to determine whether an internal investigator has the adequate training, sufficient capacity and ability to remain neutral throughout the investigative process.

Employers should also evaluate the scope of the investigation; the involvement of high-level employees, multiple parties or ongoing misconduct will likely require a more extensive investigation conducted by outside counsel.

Partnering with an attorney as your outside investigator allows employers to minimize the risk of liability when internal support is limited or the scope of the investigation is complex. More importantly, an attorney’s resources, neutrality and legal expertise can be leveraged to mitigate risk.

Contact: Olivia Liz-Fonts is an attorney at BANC Law: 612.430.7995; olizfonts@banclaw.com; www.banclaw.com; in/olivia-liz-fonts-3a911884

“Employers should evaluate internal resources to determine whether an internal investigator has the adequate training, sufficient capacity and ability to remain neutral throughout the investigative process.”

Olivia Liz-Fonts BANC Law

mergers & acquisitions

Three scenarios for founder exits

by Sean Boland

Manage your cash flow in a few simple steps

by Craig Veurink

TIPS

1. Set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future

TIPS

2. Put cash flow before profits. It might seem counterintuitive, but if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix

What’s your number?

This is a personal, but critical question that all founders must answer when planning a business exit.

It’s not the number for selling your business. It’s the number you want for an enjoyable life after the business sale. There is a difference.

and into a reduced role as the exit timeline moves closer.

Hiring a sales team can support this transition, but only if the founder is willing to let go of control over the approach and results. Right-fit salespeople must be a cultural fit as well as an industry fit.

2. Put cash-flow management before profits

You can be driven, impassioned and have a great idea to fill a niche or serve customers in new ways, but if you don’t attend to the details of the business, you create for yourself a heap of problems.

To prepare for these changes, the founder should consult with an experienced business broker, investment banker, tax adviser, attorney and personal financial planning advisers, preferably those knowledgeable about business sales, early in the exit planning process.

3. Secure credit ahead of time. Most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected

1. Imagine your second act. What do you want to do? Establish a clear plan for life after business and the income you need to enjoy it.

2. Set a timeline for your exit. It can be flexible, but you need a goal.

Founder exits involve emotional aspects that can impact financial decisions when seeking a buyer or successor. To balance the emotional and practical, here are three hypothetical scenarios for founder exits. There are certainly many scenarios unique to each founder, but try to imagine yourself in one of these common scenarios. It can help you identify many ways of getting to your number with excitement and confidence.

1. External sale and exit

3. Understand the true value of your company. A $10 million company with $2 million in working capital is not worth $10 million.

4. Consider using a payroll service. Having the professionals take care of collecting payroll taxes saves them an enormous amount of time, helps streamline their cash flow

4. Negotiate and be flexible. If both sides pay too much tax in the deal, no one wins.

5. Consider key employee incentives to retain them after the founder’s exit.

3. Secure credit ahead of time

An external sale and exit is one option for founders to leave a business. Here are some factors an owner should carefully consider as part of such a transaction.

No matter where you are in your business, keep these things top of mind:

1. Know when you will break even

Every small business owner keeps at the front of their mind the question:

The company needs a buttoned-up sales cycle. This means all contracts are free and clear of the founder. A buyer doesn’t want to lose contracts or customers when the founder leaves. The founder in this scenario prepares for an external sale and exit by moving out of the hunter/sales role

The higher the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA), also known as the seller’s discretionary income, the higher it climbs up the broker food chain. Some brokers only deal with companies that have millions of dollars in seller discretionary income. With the right preparation, the founder attracts better offers from an investment group or a strategic buyer.

2. Internal sale with passive rental income

In this scenario, the founder has identified an internal buyer or buyers and the value of the business does not include real estate holdings.

To support a more reasonable transaction for the buyer, the founder retains ownership of the real estate and leases it back to the business. The buyer makes a down payment on the business and pays cash and/or rent to the founder.

The exiting founder retains a passive revenue stream from the real estate asset and can defer taking money from retirement accounts and post-tax dollar accounts if there is enough income from the lease. Leases may run for five to 10 years. The founder often sells the real estate to the business owner at the end of the leasing period. When real estate is just as valuable or more so than the company, this option gives the new owners more cash flow to grow the business.

3. Internal sale with deferred income

In this scenario, the founder may want a gradual exit or has plans to consult during the leadership transition. This founder is tied to the sales role or has too much work in progress to exit quickly. The founder agrees to sell to an internal party while taking a paycheck for part of the selling price. For example, in a $5 million transaction, the founder sells for $3 million up front and takes $2 million in deferred compensation over the next five to 10 years. Ordinary income is taxed at a higher rate than capital gains. However, if the deferral period is longer than 10 years, the founder can relocate to a state that does not have income tax, avoiding some state

taxation.

If the buyer plans to use an SBA loan, the founder can finance a portion of the purchase to be paid back over time by the internal buyer. Sellers can provide the required 10 percent SBA loan cash injection if the buyer is unable to do it.

However, the founder may also agree to bankroll the entire transaction through a consulting arrangement. The owner might still have access to company credit cards, vehicles or other perks. Being “the bank” for an internal sale is not ideal; however, it can work in the right circumstances.

The consulting scenario is tricky if there is founder’s syndrome. An active and visible founder may still have influence over customers and loyal key employees. To fix this, the founder can take a consulting fee and not be “in the office.” Eventually, the founder will move to a passive or silent role.

Begin with the future in mind

Finding the right buyer is important for the future of the business as well as employees and customers. There are many scenarios available for internal and external sales, but they require high trust and air-tight terms.

Outside buyers may seem like the better option, but there could be a downside to the business’ legacy and future. What’s your number? Start there.

Contact: Sean Boland is president of DSB Rock Island: 612.630.5076; sboland@dsb-rockisland.com; www.dsb-rockisland.com; in/sean-boland-cpa

“Finding the right buyer is important for the future of the business as well as employees and customers.”

Sean Boland DSB Rock Iasland

social media

How to drive engagement and find leads on LinkedIn

Manage your cash flow in a few simple steps

by Dave Meyer

Craig Veurink

TIPS

LinkedIn is a unique social media network. As the preferred place for business networking online, LinkedIn has its own culture and guidelines for what content performs best. Videos or posts that make a splash on TikTok or YouTube shorts may fizzle on LinkedIn. If you’re not seeing the engagement you expected on LinkedIn, it could be as simple as a content mismatch. Here are some simple guidelines to get the most from “the business network.”

1. Post regularly, but strategically

2. Use LinkedIn’s native posting tools

LinkedIn has a lot of custom post options that you should use to your advantage. Not only do these stand out in the feed, but they are favored by the LinkedIn algorithm (which makes it more likely your post will be seen and shared by others). These include:

• LinkedIn articles — A blogginglike tool within LinkedIn.

TIPS

1. Set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future

Like most social media, LinkedIn’s algorithm rewards steady, consistent activity. According to research by HubSpot, you should aim to post between two and five times per week. This is easier said than done, especially for business owners who may want to post to both their personal and business profiles.

• Polls — Ranked questions or statements where users can “vote” for their favorite.

• Carousel posts — A series of images in a slideshow format.

• Auto-play videos — Short- or long-form videos that play in the feed.

2. Put cash-flow management before profits

• Events — Landing pages sharing a physical or virtual event with the ability to RSVP

1. Aim to post between two and five times weekly. If that proves difficult, write several posts at once when you get some ideas and schedule them to run over time.

2. Put cash flow before profits. It might seem counterintuitive, but if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix

3. Secure credit ahead of time. Most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected

2. Use LinkedIn’s custom post options. They stand out in the feed and make your post more likely to be seen and shared by others.

3. Responding to people who leave comments on your posts shows appreciation while also boosting your engagement on LinkedIn.

4. Consider using a payroll service. Having the professionals take care of collecting payroll taxes saves them an enormous amount of time, helps streamline their cash flow

4. Optimize your personal page, as well. Be authentic. Personalize it while avoiding oversharing.

Instead of posting all your great ideas at once, write a bunch of social media posts when you feel a burst of inspiration and schedule them to post later. You can use a scheduling tool like HubSpot or Hootsuite to plan out your content in advance.

Any of these options are great ways to cultivate engagement, as many of them encourage interaction — like a poll that requires a choice to be made or a carousel that requires a viewer to click through to see the full post.

3. Secure credit ahead of time

3. Long-form content

No matter where you are in your business, keep these things top of mind:

5. Don’t forget key words or hashtags, which will help make sure your post gets in front of people looking for specific subject matter.

1. Know when you will break even

Every small business owner keeps at the front of their mind the question:

Likewise, you can use the same content with strategic language changes by profile to maximize engagement. Let’s say you’re creating a LinkedIn post around a recent blog you found. On your personal profile, the post might be more casual and direct and refer to your personal insights on the article. On your business profile, you might keep the post more high-level and focus on how the article relates to industry insights it may provide your customers. It’s the same core content, customized for each type of profile.

Contrary to many other social networks, longer content performs well on LinkedIn. Posts that are 300 to 500 words routinely get more traction on LinkedIn. The business culture of LinkedIn seems to value deeper insights over short and snappy posts or videos. A clever feature within LinkedIn’s design automatically adds a “see more” link for content that’s longer than three to five lines of text. By design, LinkedIn users expect to interact with posts to read further.

However, long-form content doesn’t mean a “giant wall of text.” Make your long-form posts easy to read with line breaks, emojis, bullet points and links to create a flow and scannability.

4. Respond to comments

It’s important to take the time to follow up with people after they leave comments on your posts. Not only does this show appreciation, but it can boost your engagement on LinkedIn. When you respond to a comment, it sends a notification to the original commenter, prompting them to revisit your post. It also shows anyone else viewing the post that you’re active on the platform and gives them the chance to engage or follow you.

If you see multiple comments on your post, jump in as soon as possible to respond to comments and be a part of the conversation.

However, if you see comments trickle in, give yourself a few hours or even a few days before responding. This will help boost activity on the post after it’s already been live for a while and received the initial burst of views. LinkedIn is a slower-moving social network, so you can take more time replying to comments and rekindle engagement.

5. Optimize your personal profile too

Even if you’re focused on growing your business page, it’s critical that your personal LinkedIn page is engaging as well. Take a look at the personal pages of the people in your company who are most often using LinkedIn — this will likely be your CEO, CFO, sales team and marketing team. Make sure each of their profiles follow best practices for an effective LinkedIn bio:

• Bios have a clear goal in mind (convey experience, attract new employees, etc.)

• Written in first person, not third person

• Personalized without being too formal and without “oversharing” on non-business topics

• Authenticity is key — share goals, business thoughts and advice.

The better your personal page, the better it will connect with visitors. Additionally, updating a personal page sends notifications to your connections, which may prompt them to visit your company’s page after reviewing your personal profile.

6. Sweat the small stuff

Finally, don’t neglect details like keywords and hashtags. LinkedIn has its own micro-algorithm for when people search the site. Using keywords in your personal profilee, business profile, articles and posts can help LinkedIn point more people to your page. Use keywords that are relevant to your position/industry — for example “marketing coordinator” or “inbound marketing.” Don’t stuff your page full of these phrases, but make sure to sprinkle them naturally throughout your bio text. Similarly, each post you make should include exactly three hashtags (no more, as LinkedIn appears to only look at the first three based on our testing).

LinkedIn is a unique social media platform, but with a dedicated audience. Since it primarily attracts a business audience, it’s an essential tool for many B2B companies. However, you need to consider the audience of LinkedIn and what type of content performs well in order to drive engagement. Get out there and post — done right, LinkedIn can drive real leads and engagement.

Contact: Dave Meyer is president of BizzyWeb: 612.293.9323; dave@bizzyweb.com; www.bizzyweb.com; in/dave1meyer

“Get out there and post — done right, LinkedIn can drive real leads and engagement.”

Dave Meyer BizzyWeb

BUSINESS BUILDERS banking

wealth management

Diversifying to mitigate business risks

by Richard Brown

Manage your cash flow in a few simple steps

by Craig Veurink

TIPS

1. The singular focus on starting and sustaining a business can leave entrepreneurs exposed to unintended risks from relying on a single income source.

1. Set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future

In the world of entrepreneurship, investing solely in your own business has long been considered an act of dedication and belief in your vision. However, putting all your investment eggs in one basket can carry significant risk.

tion for business owners can involve spreading assets across different investment vehicles, industries or revenue streams to buffer against market volatility and unforeseen disruptions.

2. Put cash-flow management before profits

By diversifying their portfolios, entrepreneurs likely minimize the impact of adverse events on their overall financial health, which can lead to greater resilience in the face of challenges.

2. Diversification for business owners can involve spreading assets across different investment vehicles, industries or revenue streams to buffer against market volatility and unforeseen disruptions.

2. Put cash flow before profits. It might seem counterintuitive, but if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix

Let’s shed a light on the risks small- and medium-sized business owners may face in solely investing in their ventures, as well as the compelling advantages of diversifying assets. Diversification, which can both mitigate risks and open new opportunities for growth, offers valuable insights into strategic business management.

Exploring other investment avenues

3. One strategy would include investing outside the realm of the core business, such as in stocks, which can offer diversification and growth potential while providing liquidity, should owners need access to the capital.

3. Secure credit ahead of time. Most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected

4. Consider using a payroll service. Having the professionals take care of collecting payroll taxes saves them an enormous amount of time, helps streamline their cash flow

4. Diversifying into other areas can offer benefits such as variety and exposure to emerging trends but can also create added illiquidity risks compared to traditional stock market investments.

5. Rental income from commercial properties can create an income stream not reliant on the business owner’s own operations.

The importance of strategic diversification

No matter where you are in your business, keep these things top of mind:

Entrepreneurs often pour their hearts, souls and financial resources into building and sustaining their businesses. However, this singular focus can expose owners and key stakeholders to unintended risks, especially during unforeseen events like economic downturns or pandemics, which can severely impact those heavily reliant on a single income source or market sector.

1. Know when you will break even

Every small business owner keeps at the front of their mind the question:

Recognizing this, the concept of diversification emerges as a crucial risk mitigation strategy. Well-known in investment circles, diversifica -

One strategy to highlight is the exploration of investment avenues outside the realm of the core business. Investing in the stock market can offer small businesses diversification and growth potential, while its liquidity provides flexibility in accessing capital.

3. Secure credit ahead of time

Additionally, professional management and income generation through dividends further enhance the appeal of stock market investments for small businesses. Furthermore, business owners may consider ventures in commercial real estate or investing directly in other businesses, although these options tend to be less liquid, akin to their own business.

Diversifying into these areas can

offer benefits such as variety and exposure to emerging trends, but it’s important to acknowledge the potentially higher level of illiquidity compared to traditional stock market investments.

By expanding investment horizons to include both the stock market and alternative ventures, business owners could enhance portfolio resilience and seize opportunities for income generation while possibly easing industry-specific fluctuations.

Utilizing rental income from commercial properties associated with the business presents a compelling example of diversification. When entrepreneurs opt to retain ownership of real estate assets and lease them to other businesses, they establish a rental income stream that isn’t solely reliant on their own business operations.

This strategic maneuver may not only enhance financial stability, but also preserve liquidity within the business. While this approach empowers business owners with the flexibility needed to potentially capitalize on emerging opportunities and diversify their revenue stream, it does have other risk considerations including the liabilities associated with having tenants in general, and their business’ ability to continue renting the space or make timely rent payments during market fluctuations.

Insights for business owners

Reflecting on past economic downturns, such as the financial crisis of 2008 and the COVID pandemic, offers valuable lessons on the importance of maintaining liquidity and asset diversification. Events like

these confirmed that businesses need a balance of cash and healthy lines of credit on the sidelines to provide another arm of safety and security to help ride out unforeseen income losses.

Many business owners who emerged resilient from such crises credit their success to prudent financial management practices, including considering cash as a diversification tool. Environments like 2008 can also create opportunities and having cash, or “dry powder,” in reserves can allow you to capitalize on those opportunities. Learning from historical experiences and embracing diversification could fortify entrepreneurs against future market uncertainties.

And yet, despite the evident advantages of diversification, navigating asset allocation complexities and investment decisions can prove challenging for business owners. Seeking guidance from financial advisers or other trusted professionals can provide invaluable insights, aiding in the customization of diversification strategies to align with specific business objectives and risk tolerance levels.

Small- and medium-sized business owners should focus on the importance of diversification as a strategic imperative for mitigating risks and unlocking growth opportunities. By expanding their investment horizons beyond their core businesses, entrepreneurs would potentially enhance their financial resilience and position themselves for long-term success in an everevolving business landscape.

Contact: Richard Brown is chairman and CEO of JNBA Financial Advisors: rbrown@jnba.com; www.jnba.com; in/Richard-s-brown-a6390a12

“By diversifying their portfolios, entrepreneurs likely minimize the impact of adverse events on their overall financial health, which can lead to greater resilience in the face of challenges.”

Richard Brown JNBA Financial Advisors

Sarah Levens, president, joined Schu Marketing Associates Inc. as the company was planning a transition to employee ownership.

Employees with equity

ESOPs provide owner exit strategy, worker retirement plans

Schu Marketing Associates Inc. has been entirely employee owned since 2020 when founder Steve Schumacher decided to retire. He’d previously sold 30 percent of his shares to his workers in 2016.

But the independent manufacturer’s representative that sells for the plumbing and building materials industries began its transition to employee ownership more than a decade earlier.

“The succession of Schu Marketing was important,” says Sarah Levens, current president and the founder’s daughter. “Originally, he was a sole proprietorship. He was the guy. So, over time, he had to transition a lot of his responsibilities to others.”

That’s when Levens, who started as an operations manager, and several other executives joined Schu Marketing as it began the process of becoming an employee stock ownership program (ESOP)-owned company.

Education important to successful transition

ESOPs, for employees, are a retirement plan, just like a standard 401(k) that gets invested in the stock market, except the plan involves accumulating shares of stock in your employer’s company instead, says Kyla Hansen, a partner at John A. Knutson & Co. (JAK).

Incidentally, she adds, ESOP-owned companies often still offer a 401(k) program alongside the ESOP, though they may no longer contribute.

The move to employee ownership has paid off significantly for Schu Marketing. The company has nearly doubled its employee count. Employee recruitment and retention are tremendous, Levens says. Workers are engaged.

“Because we’re a sales agency, the engagement and motivation of our employees is key to our success,” she says. “We felt that an ESOP would be a good way to get some engagement

by Andrew Tellijohn photographs by Tom Dunn

COVER STORY

or increased engagement from our employees. It really has proven to work very, very well.”

But initially there were challenges. Levens says the company lost a few employees early on and buy-in wasn’t immediate because management didn’t realize the importance of educating the team.

“I think it was a lack of understanding,” she says. “But those folks who did stay, and the folks that we’ve added to our team since then, we’ve done a better job of educating them on what an ESOP is and how it’s going to benefit them.”

And that’s the idea of an ESOP and other employee ownership plans. The employees have a stake in what happens, so they are engaged and work harder. They see how their efforts benefit the bottom line of the company and, thus, their own retirements.

Schu has 39 employees now, up from around 20 during the transition. The company has introduced an ESOP Communications Committee, to which employees are elected, that puts on events, researches and publishes newsletters for staff and generally provides information about the ESOP. Recently, several employees participated in the National Center for Employee Ownership conference.

“We’re always learning,” Levens says. “It didn’t start out that way. Frankly, ESOPs were confusing to me at the very beginning. I remember our attorney saying ‘It’s going to take repetition. You’re going to need to hear it

more than one time.’ And he was absolutely right.”

Early steps

Hansen suggests doing some research upfront. A good place to start, she says, is at the website for the Minnesota Center for Employee Ownership (MNCEO).

ESOPs, for example, can be a great option for small business owners, but might not make sense for companies with fewer than 20 employees, five years of profits and at least $250,000 in earnings before interest, taxes, depreciation and amortization (EBITDA), she says.

That is both because of the need to fulfill Internal Revenue Service limits and spread value across the wage base and because there are significant upfront and ongoing costs that would eliminate any “bang for the buck,” she says.

Typically, a company would hire a third-party trustee to help negotiate the transaction and that person would hire a valuation firm. “The trustee can’t pay more than fair market value, otherwise they are harming the participants,” she says. “So, you have to be okay with not getting the highest price if you’re becoming an ESOP. If you really want to give back to your employees, it’s a great way to do that.”

Process

Making sure you’ve got good advisers upfront is vital, says Bob Kovell, who owns Kovell Advisory Service and has worked with ESOPs in several roles for decades, including as a transaction adviser and board director.

He recommends getting an attorney, a financial adviser and a reputable company to help provide a valuation. Once the valuation is in place — say it’s worth $5 million —

Companies considering ESOP transitions should have enough employees to ensure disaggregation of ownership and enough EBITDA to ensure the ability to pay upfront and ongoing obligations associated with the plan.

COVER STORY

the company would take out a loan for that amount and then lend that money to the ESOP.

Each year, the company, through its profits, would contribute to the ESOP, much like it would for a 401(k). Then the ESOP turns around and uses that to pay the company back for part of the loan. As that loan is paid off, the employees of the company — the beneficiaries of the ESOP — gain equity because now the stock is worth $5 million and the loan is less than $5 million.

Equity can go up further each year, Kovell says, as part of an annual valuation. If the company has grown and is worth more, even better for the ESOP beneficiaries.

“There are complications,” he says. “Every year there needs to be an appraisal. That’s a cost and there are legal costs to set this thing up. You need to have a plan and you need to have a trustee of the ESOP who will look out for the benefit of the employees.”

Trustees can be internal from company management or external. Kovell and others suggest an outside trustee to avoid any potential conflicts of interest.

“There are a number outside trustee organizations that do this,” he says. “Some of the banks do it, some organizations have trust companies that do it.”

Kovell echoes other experts who say good ESOP candi -

dates have 20 to 25 employees, stable revenue patterns, good cash flow and a succession plan to ensure strong management.

“Some cyclical industries may not be good candidates,” he says.

For business owners whose companies meet those standards, Kovell says, ESOPs can be a great way to reward loyal employees and “give the rank-and-file employees a chance to participate in ownership,” he says. “That’s a very powerful thing.”

Things to think about

One of Levens’ advisers at Schu Marketing is Dan Markowitz, a partner at Boulay Group who works with hundreds of ESOPs.

He likes companies considering transitioning to employee ownership to have even higher employee counts — a minimum of 25 employees — and EBITDA at either

Schu Marketing Associates Inc. became partially employee owned in 2016 and converted to a 100 percent ESOP in 2020.

COVER STORY

“We felt that an ESOP would be a good way to get some engagement or increased engagement from our employees. It really has proven to work very, very well.”

— SARAH LEVENS, SCHU MARKETING ASSOCIATES INC.

$1 million or more or $750,000 in EBITDA with a plan for how to get to $1 million before he’d recommend moving forward.

Same reasons. The 25 employees, he says, helps satisfy a requirement for disaggregated ownership, he says, and you have to have enough payroll to be able to make contributions to the plan. The $1 million will ensure the

CONTACT:

KYLA HANSEN is a partner at John A. Knutson & Co.: 651.641.1099; khansen@jakcpa.com; www.jakcpa.com; in/kylahansen

KIRSTEN KENNEDY is executive director of the Minnesota Center for Employee Ownership: 763.639.4111; kkennedy@mnceo.org; www.mnceo.org; in/kjkennedy4mn

BOB KOVELL is an ESOP board director and transactional trustee at Kovell Advisory Services: 320.493.2013; bob@kovellas.com; www.kovellas.com; in/bob-kovell-81b882168

SARAH LEVENS is president of Schu Marketing Associates Inc.: 763.593.5616; customerservice@ schumarketing.com; www.schumarketing.com; in/sarah-levens-31013412

DAN MARKOWITZ is a partner with Boulay Group: 952.841.3027; dmarkowitz@boulaygroup.com; www.boulaygroup.com; in/dan-markowitz-9b612310

ability to cover the transaction fee and ongoing costs. For companies within or beyond those ranges, ESOPs can be a great option for owners in their 40s or 50s who want to stay involved but are looking for some liquidity.

“That’s a perfect scenario,” he says. “They want to give back to their employees, they understand what it means from a recruiting and retention perspective. There are a lot of positives too. You can control your exit from a business versus a third-party sale because you are still running it.”

ESOPs can also help companies expand, as there are tax breaks involved.

“You’re really creating a growth engine for these clients because they’re basically operating on tax-free cash flow,” Markowitz says.

Potential stumbling blocks

But it’s not easy. There are challenges, both upfront and ongoing. ESOPs are regulated by the Department of Labor and, while it may be rare, the agency does occasionally audit such transactions and that can lead to bad press about the ESOP format, Markowitz says.

Much like with other transition strategies, owners looking to exit through ESOPs also need to focus on succession planning. “Smaller companies that haven’t figured out who’s going to run the business if the shareholder is going to exit, that can be a stumbling block,” he says.

Succession is even more important for ESOPs, however, because they always need to consider growing to ensure they can maintain sufficient cash flow. “One of the things that allows it to cash flow is that good management team,” Markowitz says.

Companies also must keep in mind repurchase obligations. Markowitz says a good guideline is keeping those

obligations at less than 40 percent of EBITDA because at that level “you are still in a good position because you are still able to invest in your business.”

Robust ecosystem

ESOPs — and other forms of employee ownership — are becoming more popular. “We have a very robust ecosystem around ESOPs,” says Kirsten Kennedy, executive director of MNCEO.

She acknowledged the tax benefits — whatever portion of the company the ESOP owns pays no federal or state corporate income tax — that come along with the employee ownership format but adds that smaller companies can also explore worker-owned cooperatives, which have lower barriers and can start with as few as four individuals, or employee ownership trusts.

There is only one employee ownership trust in Minnesota, she says, adding there may be a couple more in the next few years.

Kennedy is in the process of creating a working group aimed at spreading the word on employee ownership. She’s received support from the McKnight Foundation to do so. “Less than 5 percent of people in Minnesota have

even heard of employee ownership,” she says.

While ESOPs and other employee ownership strategies may not be for everybody, the transition has been helpful at Schu Marketing.

One recent job posting produced 60 responses. The company interviewed 20 and hired three. Levens attributes part of that demand to being able to say the company is employee owned.

But even now, there are still challenges. As Markowitz mentioned, Levens has been meeting recently with her advisers working on strategies to ensure there are enough funds available to pay out the shares of employees nearing retirement.

“That’s not necessarily a challenge, but more of a consideration and something more mature ESOPs need to think about,” she says, adding that despite those ongoing issues, the ESOP has been a winning proposition at Schu Marketing all along. “It has helped us grow significantly.”

catching up

by Andrew Tellijohn

The art of collecting

Cathy Sedacca seems to have a habit of starting businesses her clients wish they didn’t need — but then really coming in handy when they do.

In addition to contributing a couple articles in recent years, Sedacca appeared in Upsize as part of an Upsize/Club Entrepreneur event in 2018, when she was co-founder and director of sales and marketing for Sage Business Credit, an asset-based lending and factoring company that served small businesses with lending needs between $100,000 and $4 million.

The company differed from factoring companies in that in addition to its lending services, it would provide coaching aimed at helping its customers become bankable for more traditional credit options. But factor-

Cathy Sedacca, one-time co-founder of Sage Business Credit, has now started The Collections Dept. to help companies collect late receivables.

ing companies, while handy, often are seen as an option for companies challenged with cash flow who would struggle to get financed by traditional banks.

How she ended up here

She and co-founder Karen Turnquist built Sage over seven years before selling in late 2019 when Turnquist was ready to retire. Sedacca thought about bringing on a new partner or other investors but was unsure about the future of factoring or about the prospects of finding the right person or people to replace Turnquist.

“It’s like a marriage,” Sedacca says. “You are more financially tied to that person than you already are to a spouse. You’ve got to make sure it is the right person. The more we talked and looked and talked to people, the

more I just felt like I was okay getting out and trying something different.”

A few months after selling, she joined Integrated Consulting Services, a Bloomington-based fractional CFO firm dedicated to helping small businesses with revenue between $5 million and $30 million. ICS clients were typically struggling with the ups and downs of cash in seasonal businesses, falling behind on their own debt or growing sales with stagnant profitability.

She was there through the end of 2023. But she started The Collection Dept. on the side in 2021, working on a few side projects. She left ICS to do this full time and this time her partner will actually be her husband, Al Sedacca, who has been in collections for much of his career.

“I’m excited to start something new

and something that is back in my own wheelhouse,” she says, adding that she spent about 25 years in factoring and asset-based lending, where clients sell their accounts receivable invoices in order to speed up cash flow. “The things you have to be really good at as a factor are trade credit and collections, because that’s how you underwrite and how you get paid back. What I basically figured out is there are a lot of companies that don’t know how to do either of these things and they wind up with cash flow problems.”

Building a collections strategy

Thing is, in most cases, when companies end up with a lot of late receivables, it isn’t that their customers don’t want to pay. It’s usually a paperwork issue — an invoice got lost or buried in emails. Bigger companies

The

Collection Dept.

Description: Boutique agency that helps small businesses collect sluggish accounts receivable Headquarters: Minnetonka

Founded: 2021

Co-founders: Cathy and Al Sedacca Employees: 2 with one in waiting Website: www.thecollectiondept.com

with automated systems will reject invoices and not pay if there is a digit off or if there isn’t a purchase order number.

“There’re a million reasons why an invoice may not be paid and it’s not because someone’s trying not to pay you or because they don’t have the money,” she says.

Sedacca notes that most small businesses don’t have people dedicated to making follow up calls on late payments and, because they’re thought to be contentious calls, nobody wants to make them.

“I saw these companies all the time, they came up to me saying ‘We need more money,’” she says. “Have you tried making a couple of calls? And they haven’t. Collections is something that you have to do regularly. It’s not something you can just do once and then expect everything to work.”

The Collection Dept. will come in and work alongside a client’s existing team, teaching them the questions to ask, the red flags to look for from companies that might be struggling financially and how to hold those customers accountable.

“We’ll teach them all that and get out of the way,” she adds.

She also works with clients to create systems that include setting limits on the amount of business a company is willing to finance over time.

“If I go to Lowe’s and want to buy a refrigerator, they offer financing, but I have to fill out a credit application,” she says. “I don’t just automatically get a refrigerator for 24 months free.”

Old business, new strategy

Sedacca spent more than 20 years in finance, specifically factoring, helping companies that needed assistance collecting on bad debt.

Factoring — and the companies that engage in the practice — have long collectively had beat up reputations because they charge higher interest rates and take a significant cut of the return.

“I didn’t like that factoring was such a seedy industry,” she says. “I think fac-

The Collections Dept. COO and co-founder Al Sedacca spent much of his career building the skills to excel at collections.

tors are taking advantage of companies when they are down.”

But she thinks factoring can be a great option for companies that have had losses or that are starting out without a credit history or are temporarily tied too heavily to one customer.

“Those are all reasons you’re not going to get a bank loan, but you can still factor your receivables,” she says.

Much like with Sage, Cathy Sedacca says, The Collection Dept. is offering clients coaching that will ultimately help them handle such calls themselves.

“We’ll help them get to bankable,”

Contact: Cathy Sedacca is co-owner and CEO at The Collections Dept.: 612.802.1784; cathysedacca@thecollectiondept.com; www.thecollectiondept.com; in/catherinesedacca

she says. “We’ll coach them on how to get control over their cash flow, we’ll introduce them to CFOs so they can understand their numbers better, understand their cash flow better and make better decisions — and then we’ll introduce them to banks.”

She acknowledges that in doing so, she may cost herself business, but she thinks it’s a differentiator for The Collection Dept. and the right thing to do. That’s borne out, she says, in receiving client referrals and, in a couple cases, businesses returned to Sage even after becoming bankable because they liked the flexibility and working relationship.

“I believe it comes back to you,” she says. “At the very least, I feel better about it. I’m not taking advantage of people.”

Lessons learned

Sedacca says one thing she’s learned over her years is that many people want to but are afraid to start a business. She encourages people to have faith and take the leap.

“Why wouldn’t you be successful,” she says. “There’s an abundance of opportunity out there. I think people are afraid they are going to fail. They’re afraid it’s not going to work.”

In starting The Collection Dept, she’s taking the mindset that there are companies out there selling similar services and there isn’t any reason she won’t be able to find a market.

“There’s no reason why I shouldn’t be able to build a successful business doing collection work or finance or any of the things that businesses are out paying for,” she says. “Businesses are out looking for this stuff. There’s no reason my company shouldn’t be as successful as the next one.”

“There’re a million reasons why an invoice may not be paid and it’s not because someone is trying not to pay you or because they don’t have the money.”

Cathy Sedacca, The Collection Dept.

UPSIZE RESOURCE DIRECTORY

BANK

Crown Bank

6600 France Avenue South, Suite 125

Edina, Minnesota 55435

Ph: (952) 285-5800

www.crown-bank.com • Jeff Wessels, President & COO

At Crown Bank, we want to be partners in your possibilities. Because possibilities are what the future is made of. From something as personal as growing your savings, to something as big as growing your business, our bankers and staff have the expertise and energy to partner with you to make that happen.

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Email: allison.hinton@usbank.com

Phone: 619.341.4332

At U.S. Bank, we help you earn more without asking you to do more. That means more money, more purchasing power and more expertise, so you can focus on running your business. Let us find the best business credit card for you and turn your hard work into easy money.

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Integrated Consulting delivers Chief Financial Officers to small businesses on a fractional basis. From projections to cash flow tools to assistance with all things financial. We provide 30 years of expertise on a small business budget.

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763-546-8201 www.Lingate.com

Greg Loeschke — Managing Principal

Exit Planning Strategies, LLC, a firm dedicated to offering business owners objective, fee based, financial consulting in the development of intentional ownership transition plans. We direct an inter-disciplinary process to explore planning options, map realistic exit strategies and to develop an Action Checklist, to accomplish an owner’s unique objectives.

LAW FIRM

Bassford Remele

100 South 5th Street, Suite 1500 Minneapolis, MN 55402 www.bassford.com

612.333.3000

Bassford Remele is in the business of meeting legal challenges. Our trial lawyers solve disputes for corporate clients in Minnesota and across the nation and we have a depth of experience in many industry areas. When businesses seek solutions, from the conference room to the courtroom, they seek Bassford Remele.

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

Our leadership development engagements and cohort-based leadership programs – Prouty L3 and Prouty i•will – link behavior to team performance in your workplace through the lenses of Leading Self, Leading Others and Leading the Business. We focus on STRETCHing participants to lead business within internal and international divisions. Give us a call or stop by.

MEDIA

KYMN Radio

Rich Larson, General Manager rich@kymnradio.net

507-645-5695

For nearly 60 years, KYMN Radio has been a friend to Northfield, Rice County and Southern Minnesota. Our listeners count on us for news, weather, community based programming on local arts, local politics, the Twins, basic frivolity, and an eclectic music playlist that goes on for days. Listen FM 95.1, AM 1080 and at kymnradio.net.

Founded in 1945, Lingate Financial Group is a leading provider of lower middle market merger & acquisition advisory services, representing privately held businesses of all types with revenues of $5 – 50 million. Lingate helps business owners with marketbased valuations, business sales, mergers, acquisitions, recapitalizations, and internal transitions among family members, partners and management.

MERGERS & ACQUISITIONS

True North M&A

Lisa Meyer, lmeyer@sunbeltmidwest.com; 612-361-4918 Peggy DeMuse, pdemuse@tnma.com; 651-288-1627; www.tnma.com

We help business owners achieve their exit goals. True North Mergers and Acquisitions serves companies with $5 million to $150 million in revenue and their strategic advisors. We specialize in business owner exits, business valuations, and acquisition services in the lower middle market. If you are considering exiting your company, contact our team today.

UPSIZE RESOURCE DIRECTORY

NETWORKING CLUB

The Capital Club

www.capitalclubmn.com

The Capital Club (CAPS) is a sports-centered, business-networking group designed for established and emerging leaders in the Twin Cities. Members gather monthly over breakfast to hear from notable sports figures and accomplished individuals who share their journeys, stories and strategies for success. For more information, contact Patrick Klinger at patrick@ agilemarketing.com.

PEER GROUP

Coalition9

PO Box 834

Lester Prairie, MN 55354-7832 www.coalition9.com

Aaron Eggert | aaron@coalition9.com

Leadership is lonely. We build your tribe. Coalition9 memberships provide peer advisory groups with an emphasis on personal and professional growth. As a member, you will experience interactive learning while connecting to the resources and people that will help you be your best. Our vision: Changing business nine leaders at a time™

STRATEGIC PLANNING

Prouty Project

6385 Old Shady Oak Road, Suite 260

Eden Prairie, MN 55344

952.942.2922 | www.proutyproject.com

Bethany Krueger | stretch@proutyproject.com

VENTURE CAPITAL

Brimacomb + Associates

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

We start with a blank sheet of paper to elevate your clarity on vision and purpose, create alignment in your strategy to achieve your vision and gain commitment to execute. What are your “market, product/ service, people, and financial” strategies over the next 1-5 years? Can you articulate your strategic plan on one page? Join us in our Creative Think Tank to stretch your thinking and ignite your creativity.

KeyeStrategies

Minneapolis, MN

Keyestrategies.com 763-350-5563

Julie Keyes, Founder/CEPA

“KeyeStrategies LLC advises business owners in Transition and Exit Planning. Julie Keyes is both a Certified Exit Planning Adviser (CEPA) and Value Growth Adviser. She is also a faculty member for the Exit Planning Institute’s Global organization and President of its local Chapter.”

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.

WEALTH MANAGEMENT

JNBA Financial Advisors

8500 Normandale Lake Blvd., Suite 450 Minneapolis, MN 55437

952.844.0995 www.jnba.com

Cärin Viertel, Director of Client Services

Being a small business we understand the needs of small business owners. And with 40+ years of experience in providing conflict-free advice, our proactive and integrated approach allows our multi-generational teams to put clients first when delivering customized financial life planning and investment strategies to help maximize their resources.

Business Broker

Cell: 612-801-2299

Direct number: 612-361-4918

Email: lmeyer@sunbeltmidwest.com

Business B roker

Cell: 612-730 - 8921

Direct number: 651-288 -1627

Email: pdemuse@sunbeltmidwest.com