Mn valley mag by Free Press Media

Paul Abdo in the warehouse of Abdo Publishing, where up to 1 million books are stored. Photo by John Cross

Book publishing Mecca Local children’s book publishers internationally known

Also in this issue • The Purple Goose Eatery and Saloon • Noble RV of Madelia • The art of men’s haircuts

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MN Valley Business • March 2015 • 3

HI, I’M JOE TAYLOR. Overton, Texas. What keeps me coming back to the Trail? It’s just absolutely sensational.

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

F E A T U R E S March 2015 • Volume 7, Issue 6

Through the work of three separate families who grew small businesses into major companies, North Mankato is home to three of the top 10 children’s book publishing businesses in the nation. All are now moving deeply into digital.

Brian and Katie Neegaard moved to Janesville in 2008 and began working part-time at the Purple Goose Eatery and Saloon and bought the business a couple of years ago. The Purple Goose serves as the meeting spot of residents in the area.

It’s boom times for men’s haircutting. Visits to four different local venues for men’s haircutting shows laughter and camaraderie are as important as the haircut itself. And a warm towel and a straight-edge razor shave add to the experience.

Brothers Mike and Pat Noble got into the RV business in Owatonna in 2006 and quickly found success. They’ve expanded into four locations, including Rochester, near Shakopee and in Madelia, where Todd Simmons is manager.

MN Valley Business • March 2015 • 5

■ March 2015 • VOLUME 7, ISSUE 6 PUBLISHER James P. Santori EXECUTIVE EDITOR Joe Spear ASSOCIATE EDITOR Tim Krohn CONTRIBUTING Tim Krohn WRITERS Kent Thiesse Heidi Sampson Pete Steiner Tonya Rule PHOTOGRAPHERS Pat Christman John Cross COVER PHOTO John Cross PAGE DESIGNER Christina Sankey ADVERTISING Ginny Bergerson MANAGER ADVERTISING sales Jen Wanderscheid Theresa Haefner ADVERTISING Barb Wass ASSISTANT ADVERTISING Sue Hammar DESIGNERS Christina Sankey CIRCULATION Denise Zernechel DIRECTOR For editorial inquiries, call Tim Krohn at 507-344-6383. For advertising, call 344-6336, or e-mail mankatomag@mankatofreepress.com. MN Valley Business is published by The Free Press Media monthly at 418 South 2nd Street., Mankato MN 56001.

■ Local Business memos/ Company news................................7 ■ Business and Industry trends.........9 ■ Minnesota Business updates....... 10 ■ Business Commentary................. 12 ■ Construction, real estate trends.. 33 ■ Agriculture Outlook...................... 34 ■ Agribusiness trends..................... 35 ■ Job trends..................................... 36 ■ Retail trends................................. 37 ■ Greater Mankato Growth.............. 38 ■ Greater Mankato Growth Member Activities ....................... 40

From the editor

By Joe Spear

Demand grows for words, books While North Mankato has long been the home of the expansive operations of Taylor Corp. printing and publishing, other less visible but equally significant publishing enterprises have quietly gone about their business just down the block. Our cover story this month details the establishment, holdings and growth of three North Mankato book and digital publishers. Capstone, the Creative Company and Abdo Publishing have shipped millions of books to schools and libraries throughout the world. Longtime local families the Coughlans, Petersons and Abdos have grown these companies from small enterprises decades ago to major players in the worldwide publishing market. In fact, the three companies are in the top 10 children’s book publishers in the U.S. The industry, like many printing industries, has been undergoing tremendous change from hard copy print products to digital, interactive publishing. The companies sell to libraries, schools and also do business with retail establishments like Barnes & Noble and Amazon. While some may assume that books and the printed word are on the decline, these companies say the opposite is true. Many have never sold more hard copy books, but they’ve also expanded dramatically into digital and interactive books. It’s clear to see that their markets are not necessarily the books themselves, but the idea of reading and gaining knowledge and education. Those three consumer markets continue to expand exponentially here and around the world. The Coughlan family bought Capstone 25 years ago when it was small and struggling. A year later, the company published 48 titles. As it continued to publish hundreds more books, it also got into a digital subscription service that uses databases to help children learn and then tracks their learning to provide still more targeted products.

6 • March 2015 • MN Valley Business

Some 5 million students are enrolled in the company’s program around the world and it carries titles from some 60 publishers under contract. The company has about 300 employees in North Mankato, Edina, Chicago and Oxford, England locations. Abdo Publishing also started small decades ago with longtime Mankato accountant Joe Abdo and his family. It now publishes 500 new titles per year and employs 120 people in offices in North Mankato and Edina. Abdo Editor in Chief Paul Abdo notes the company goes beyond U.S. markets with major customers in Asia and Canada. The Creative Companies goes all the way back to 1932 in Mankato when George Peterson began a business providing maps and diagrams for teachers as part of the Creative Educational Society. They eventually developed a textbook business and in the 1960s became a children’s book publisher. They too have a distribution center in North Mankato and editorial offices in Mankato. The company has 3,500 books under its belt and issues about 130 new titles per year. All three companies use Taylor Corp. printing services also located conveniently in North Mankato. There’s an agglomeration of printing and publishing related businesses in the Mankato area. In fact, printing and related industries are the second largest employer in the Mankato area, according to Greater Mankato Growth. Those business employee 3,104 people in the area at nine different companies and pay about $88 million in annual wages in Blue Earth and Nicollet counties. So printing and publishing companies make a big difference in Greater Mankato even though many of them may fly under the radar. MV Joe Spear is executive editor of Minnesota Valley Business. Contact him at 344-6382 or jspear@mankatofreepress.com

Local Business People/Company News

■

Mallak earns CFP designation

Mike Mallak, an analyst with Pratt, Kutzke & Associates in North Mankato recently met the examination, experience, and ethical requirements of the Certified Financial Planner Board of Standards and is now a Certified Financial Planner. Pratt, Kutzke & Associates is an independent financial planning and investment management firm founded in 1990. The firm has more than $400 million in assets under management. ■■■

Wall promoted at Bremer

Jolene Wall Augsburg College.

Bremer Bank announced the promotion of Jolene Wall to vice president, private banking in Mankato. Wall joined Bremer in 2011 and has nearly 10 years of banking and financial services experience. Prior to joining Bremer, Wall spent five years at Wells Fargo where she was a personal banker and then promoted to a regional private banker. Wall has a bachelor’s degree in financial economics from the College of St. Catherine and a master’s degree in leadership from ■■■

Eide Bailly earns VAR Star

CPA and business advisory firm Eide Bailly has been selected as a member of the Bob Scott’s VAR Stars for 2014, a group of 100 organizations recognized for their accomplishments in the field of midmarket financial software. Selection for VAR Stars is based on factors such as growth, industry leadership, and innovation. The firms chosen each year represent a wide range of size, revenue and solution offerings. ■■■

Sabatino joins Koeckertiz Realty

Kelsey Sabatino is the newest agent at Century 21 Koeckeritz Realty in New Ulm. ■■■

Kato Roofing earns women’s enterprise status

Kato Roofing, specializing in industrial and commercial roofing, received national certification as a Women’s Business Enterprise by the Women’s Business Development Center – Chicago, a regional certifying partner of the Women’s Business Enterprise National Council. Kato Roofing is the only WBE roofing contractor in the state of Minnesota certified by WBENC. They are also the only certified WBE roofing contractor in the five state region of Minnesota, Iowa, North Dakota, South Dakota, and Wisconsin. WBENC’s national standard of certification includes a review of the business and a site inspection. The

certification process is designed to confirm the business is at least 51 percent owned, operated, and controlled by a woman or women. Vicki Hagen is president of Kato Roofing. ■■■

Mankato Motors CarSoup dealer of month

Mankato Motor Co. was recognized as the CarSoup. com Souper Dealer of the Month for January for the southern Minnesota region by CarSoup.com. Dealers were honored for their achievements in the area of digital marketing. As one of the few dealerships receiving the award, Mankato Motor Co. and Justin Frauendienst, Internet Sales Manager, were honored for their commitment to putting the customer first, and for being on the cutting edge of technological advancements. The dealership serves Mankato, Rochester, Fairmont, Belle Plaine, New Ulm and the Twin Cities. ■■■

Mickelson named to Partnership’s board

Nicole Griensewic Mickelson, executive director for Region Nine Development Commission, has been appointed the treasurer of the Greater Minnesota Partnership’s Board of Directors. The Greater Minnesota Partnership is a nonprofit corporation devoted to advocating for state economic development policies and resources that benefit Greater Minnesota. The Partnership consists of businesses, chambers of commerce, economic development authorities, cities and nonprofits from throughout Greater Minnesota. The board determines the Partnership’s priorities and sets its legislative agenda. ■■■

McCabe, Reid promoted at MinnStar

MinnStar Bank announced the promotion of Ryan McCabe to assistant vice president/credit analyst and Linda Reid to vice president/loan officer. McCabe, a CPA, has been with MinnStar for more than a year. Reid has been with the bank for 25 years and has worked her way from teller, loan assistant to loan officer through her years at MinnStar Bank. ■■■

Gossett named asst. VP at First National

First National Bank Minnesota appointed Ben Gossett as assistant vice president. He earned his college degree in finance from Minnesota State University and joined First National Bank Minnesota in 2010. First National Bank Minnesota is a $200 million community bank headquartered in St. Peter.

MN Valley Business • March 2015 • 7

Profinium Ins. hires Lancaster

Mark Lancaster management.

Profinium Insurance added Mark Lancaster to serve as the agency’s Mankato president. He has more than 15 years of financial services experience. He is located in the existing Mankato office of Profinium in the Landkamer building. The company’s new office tower facility downtown is near completion. Profinium has locations in Fairmont, Truman, Owatonna and Mankato and has $420 million in assets under ■■■

Eckberg joins Morken

Joel Eckberg, CPA, has partnered with the Mankato accounting firm Morken, Morken & Co., which will now be known as Morken, Eckberg & Co. Eckberg holds a Bachelor of Science degree in accounting from North Dakota State University. Eckberg has more than seven years of previous public accounting experience providing tax, consulting, and assurance services to clients, with an emphasis in the agribusiness industry. ■■■

AMPI names new leadership

Leaders of New Ulm-based Associated Milk Producers Inc. have chosen to take a team approach to fill the company’s top management spot. The AMPI board of directors appointed longtime employees Donn DeVelder and Sheryl Meshke as co-presidents and CEOs. DeVelder and Meshke were executive senior vice presidents before being named co-presidents and CEOs. The move followed the resignation of Ed Welch, who had been with the dairy marketing cooperative for 31 years, and president and CEO since 2008. DeVelder has spent more than 30 years with AMPI. Meshke has been with AMPI for nearly 25 years. ■■■

Ptacek, Golberg is in the audit department. Meissner and Hoppe are in the accounting services department. Ptacek will move from her part-time position to a full-time position in the tax department. ■■■

Powers earns photography award

Interiors and Architectural photographer Jordan Powers of Mankato has been awarded “Best Of Houzz” by Houzz, a leading platform for home remodeling and design. The owner of Mankato Home Tours, and Jordan Powers photography was chosen by the more than 25 million monthly unique users that comprise the Houzz community for architecture and design photography and customer service. The Best Of Houzz for Architecture & Interior Design Photography is awarded to photographers whose images were most popular among Houzz users. ■■■

Kaisershot wins U.S. Bank honor

Mary Kaisershot, U.S. Bank branch manager at Raintree Road in Mankato, won U.S. Bank’s Quarterly Pinnacle Award, the company’s highest employee achievement honor. Kaisershot was among a select group of top performing employees nationwide to win U.S. Bank’s award for outstanding achievement and superior performance. ■■■

Hillsheim joins Landmark

Christi Hillesheim has joined Century 21 Landmark Realtors as a sales associate. Hillsheim recently completed her training and licensing through Create 21, which includes 12 extensive training sessions. Hillesheim came to Mankato in 1992 to attend MSU and has served as PTO President and volunteer in District 77 schools.

Eide Bailly adds staff

Eide Bailly announced the following new hires: Derek Golberg, Clarissa Meissner, Jordan Hoppe, and Sara

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Business and Industry Trends

Energy

Crude oil at ’09 prices

January was the seventh consecutive month in which monthly average North Sea Brent crude oil prices decreased, reaching $48/barrel, the lowest since March 2009. The price decline reflects continued growth in U.S. tight oil production and strong global supply, amid weaker global oil demand growth, which contributed to rising global oil inventories. In January, estimated Organization for Economic Cooperation and Development total commercial oil inventories reached their highest level since August 2010. The Energy Information Administration forecasts that Brent crude oil prices will average $58/barrel in 2015 and $75 in 2016, with 2015 and 2016 annual average West Texas Intermediate prices expected to be $3/barrels and $4/barrels, respectively, below Brent.

U.S. oil production near record

Total U.S. crude oil production averaged an estimated 9.2 million barrels per day in January. Forecast total crude oil production averages 9.3 million barrels a day in 2015. Projected crude oil production averages 9.5 million barrels per day in 2016, close to the highest annual average level of production in U.S. history of 9.6 million barrels per day in 1970.

Gas around $2

Driven largely by falling crude oil prices, U.S. weekly regular gasoline retail prices averaged $2.04 on January 26, the lowest since April 6, 2009, before increasing to $2.19 on February 9. EIA expects regular gasoline retail prices, which averaged $3.36 in 2014, to average $2.33/gal in 2015. The average household is now expected to spend about $750 less for gasoline in 2015 compared with last year because of lower prices. The projected regular gasoline retail price increases to an average of $2.73 in 2016.

percent decline in hydropower and a 6 percent increase in nonhydropower renewables. Wind is the largest source of nonhydropower renewable generation, and it is projected to contribute 5.2 percent of total electricity generation in 2016. EIA expects continued growth in utility-scale solar power generation, which is projected to average almost 80 gigawatthours per day in 2016. Despite this growth, solar power averages only 0.7 percent of total U.S. electricity generation in 2016.

Plenty of natural gas

Ethanol output falls

Natural gas working inventories on January 30 totaled 2,428 Bcf, 24 percent above the level at the same time in 2014 and 1 percent below the previous five-year (2010-14) average. EIA expects the Henry Hub natural gas spot price to average $3.34/million British thermal units (MMBtu) this winter (2014-15) compared with $4.53 last winter (2013-14), reflecting both lower-than-expected space heating demand and higher natural gas production this winter. EIA expects the Henry Hub natural gas spot price, which averaged $4.39 in 2014, to average $3.05 in 2015 and $3.47 in 2016.

Renewables to grow

Total renewables used for electricity and heat generation will grow by 3.8 percent in 2015. Conventional hydropower generation increases by 5.7 percent, while nonhydropower renewables generation increases by 2.9 percent. In 2016, total renewables consumption for electric power and heat generation increases by 2.9 percent as a result of a 3.2

After reaching a record monthly average of 978,000 barrels per day in December 2014, ethanol production in January 2015 is estimated to be 969,000 barrels per day. Ethanol production averaged 933,000 barrels a day in 2014, and EIA expects it to average 938,000 barrels per day in 2015 and 936,000 in 2016. Biodiesel production averaged an estimated 80,000 barrels per day in 2014 and is forecast to average 84,000 barrels pwer day in both 2015 and 2016.

CO2 emissions grow

EIA estimates that emissions grew 0.9 percent in 2014. Emissions are forecast to increase by 0.3 percent in 2015 and 0.5 percent in 2016. These forecasts are sensitive to both weather and economic assumptions.

MN Valley Business • March 2015 • 9

Minnesota Business Updates

■

■ Best Buy holiday sales up Best Buy announced earnings from the holiday period - the nine weeks ending on January 3. Highlights from the report include a 2.1 percent year-over-year increase in revenue and a 2.6 percent year-over-year increase in

comparable sales. “A compelling merchandise assortment, strong multichannel execution, and a more favorable year-over-year macroeconomic environment drove these better-thanexpected results,” said Best Buy president and CEO, Hubert Joly. “We were also able to capitalize on the product cycles in large screen televisions and mobile phones. These two categories were the primary drivers of our year-over-year revenue growth, more than offsetting significant weakness in tablets.” Despite technical issues plaguing Best Buy’s website on Black Friday and over the weekend, online sales grew 13.4 percent to $1.49 billion. Best Buy attributed the increase to improved inventory availability made possible by the chain-wide rollout of their ship-from-store capability and increased traffic driven by greater investment in online digital marketing.

■ Fastenal sales slow Fastenal Co. on reported weaker-than-expected sales in the December quarter amid a construction slowdown, and said that price discounts for large customer accounts have been hurting profit margins. However, the company said it expects sales to rebound now that the holiday season is over. Winona-based Fastenal is a distributor of nuts, bolts, hand tools and other supplies to the manufacturing industry. Though it started a turnaround last year, the company had been hurt by an overall construction slowdown and economic uncertainty. In response, the company in July 2013 started hiring more employees in an effort to focus on sales growth. It has also invested more in its distribution and internal manufacturing capabilities. Fastenal said that this investment has generally helped growth and that it will continue the expansion. Slowed construction, especially during the winter months, continues to be a source of weakness.

■ General Growth buying properties General Growth Properties is emphasizing its expansion in street retail in top U.S. shopping districts with its biggest urban deal, the purchase of half the Crown Building on Manhattan’s Fifth Avenue, according to Bloomberg. The real estate investment trust plans to expand the

10 • March 2015 • MN Valley Business

retail portion of the Crown Building, which also has office space, by 25,000 to 125,000 square feet, CEO Sandeep Mathrani told Bloomberg. General Growth will spend $888 million to buy its share of the property, the company said in a statement. “The Crown Building is widely recognized as one of the most valuable and sought-after corners, not only in New York City, but the world,” Mathrani said on the company’s earnings conference call. “Our growth strategy here is simple: re-lease some of the existing retail space at today’s rents, which significantly exceed in-place rents, and convert non-retail space to retail to maximize value.” General Growth is purchasing more urban properties as rents climb amid rising tenant demand for space in prominent shopping districts in major U.S. cities. The company last year bought stakes in four street-retail properties — three in New York and one in Miami — for about $600 million, including a 50 percent stake in Manhattan’s 530 Fifth Ave. for $150 million. The company also owns or has interests in urban shopping properties on Chicago’s Michigan Avenue and in San Francisco. Chicago-based General Growth, the largest U.S. mall owner after Simon Property Group, isn’t the only REIT expanding into street retail. Acadia Realty Trust said in December that it paid $144.3 million for an 88.4 percent stake in 840 N. Michigan Ave. on Chicago’s Magnificent Mile.

■ Target settles lawsuit Target Corp. reported that it has agreed to pay $4 million to settle a lawsuit brought upon it by North California prosecutors that had alleged the retailer of charging higher prices than advertised. The lawsuit also alleged Target of misrepresenting the weights of products and failing to insure the price scanners were accurate. Marine Country prosecutor Ed Berberian said that a fundamental right of consumer is to be charged the lowest advertised price and consumer should bring to notice of retailers any instance where they feel they have overcharged by the retailer and demand to be charged at the lowest advertised price. The company said that the problem arose due to the promotional boards not being taken away after the end of a particular promotion and has asked customer who believe they have been overcharged to bring their receipts and help in resolution of inaccuracies.

■ U.S. Bank has record results U.S. Bank’s results for fourth quarter and full-year 2014 show the country’s largest regional banking group had its highest-ever net interest income figure of $2.74 billion for the fourth quarter of 2014 despite the negative impact of shrinking net interest margins seen across the banking industry, as its loan portfolio swelled by well over 5 percent in 2014, according

to Forbes. Besides strong growth in its payments business, U.S. Bancorp also benefited from a $124 million gain on its equity interest in Nuveen Investments. In fact, the bank witnessed a year-on-year increase in revenues across each of its offerings except for commercial products.

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■

Business Commentary

By Tonya Rule

Businesses must pay attention to Affordable Care Act penalties

he latest discussions around the looming and potential penalties employers face under the Affordable Care Act, more commonly known as Obamacare, are no longer just the “pay or play” penalties for employers who either do not offer insurance or offer inadequate or unaffordable insurance to their employees, but rather other penalties that can make the “pay or play” penalties look insignificant. This is not to say the “pay or play” penalties are a thing of the past, they are still in place and businesses will start being exposed to them in 2015. These looming penalties are associated with businesses who reimburse employees for individual health insurance, regardless of whether the reimbursement is done pre-tax or post-tax. The penalty for employers currently doing this—$36,500 per employee per year for employers large and small! That’s a far cry from the $2,000 “no insurance penalty” or the $3,000 “unaffordability penalty” that only large employers thought they were facing for their employees starting in 2015. Before understanding these penalties, let’s first step back and understand how we got here. Revenue Ruling 61-146 along with Code Section 106 specifically laid the groundwork for employers to be able to pay individual insurance premiums directly to the individual’s insurance company or to reimburse the individual for those premiums upon proof of payment. These reimbursements were excluded from the employee’s gross income under Code Section 106. This type of payment plan is referred to as an Employer Payment Plan (EPP). The market reforms put in place under the ACA have two specific requirements that need to be mentioned. They prevent group health insurance from placing annual limits on certain benefits, and they require nongrandfathered plans to provide certain preventative care without cost-sharing requirements. Notice 2013-54 issued on Sept. 13, 2013, detailed penalties for plans not abiding by the market reforms. It also specified that if employers were providing EPPs pre-tax, they are considered to be providing group coverage and will then fail the market reforms, as the amount of the individual coverage would be considered an annual limit, which under the market reforms is not allowed. However, it also stated that employers who were utilizing these EPPs and providing these payments post-tax were not part of this notice. Therefore, it was advised that employers start taxing these EPPs, rather than offering them pre-tax, in order to avoid the costly market reform rules. Fast forward to Nov. 6, 2014, in which the DOL in conjunction with the IRS and Treasury put out a short FAQ (frequently asked questions) which specifically stated that employers reimbursing employees for individual insurance premiums, whether that

12 • March 2015 • MN Valley Business

reimbursement is done pre-tax or post-tax, will be subject to the costly $100-per-day excise tax under Code Section 4980D, per person. Keep in mind these excise taxes are considered penalties, which are non-deductible when it comes to filing income tax returns. The date these excise taxes kicked in for this reimbursement was Jan. 1, 2014. The problem gets worse when it comes to 2 percent S corporation shareholders. These shareholders, who had individual health insurance plans, are required to have the company reimburse them for their premiums paid personally in order to take the self-employed health insurance deduction on the front page of their individual tax return per Notice 2008-1.The Nov. 6 guidance, although only issued in an FAQ, states that by reimbursing these individual premiums, the S corporation will be subjecting itself to the $100-per-day penalty per shareholder who was reimbursed. Without this reimbursement from the S corporation, the shareholder loses a valuable deduction on page one of their individual tax return. However, it should be noted that the market reforms do not apply to plans with “less than two participants.” Obviously, the tax rules and the market reforms are in conflict with each other. For now, businesses need to weigh the potential benefits of pre-taxing or post-taxing individual coverage or subjecting themselves to a penalty of $36,500 per employee per year. The recommendation is to stop offering reimbursement of insurance premiums for individual coverage, regardless if that reimbursement is done pre-tax or post-tax. However, there is nothing to stop a business from giving employees bonuses for whatever dollar amount they choose. It’s of the utmost importance, however, that businesses do NOT label this bonus as an insurance reimbursement, as this will then lead to the penalty. Businesses need to keep in mind the potential impact bonuses have on employee’s overtime rates as well as employee expectations should the posttax bonuses get too costly for the business once they’ve started. The rules surrounding the Affordable Care Act are continually changing. It’s essential that businesses, large and small, keep up with these changes to make sure they do not inadvertently get caught on the wrong side of the penalties. There are many questions surrounding health care reform, insurance costs and the Marketplace. Go to www. eidebailly.com/healthcarereform to learn more. MV Tonya M. Rule is a CPA, senior tax manager and health care reform specialist with Eide Bailly.

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Tom Ahern, CEO of Capstone.

Well read Local book publishers major players

By Tim Krohn | Photos by John Cross and Pat Christman

ou could take an easy walk around upper North Mankato and visit three of the top 10 children’s book publishers in the nation. “All of our warehouses are within a one wood of each other,” said Tom Ahern, CEO at Capstone. Inside the warehouses of Capstone, the Creative Company and Abdo Publishing are millions of books shipped to libraries and schools across the country and the world. The names of the three companies, started by local families, may be familiar to many. Yet they’ve long

14 • March 2015 • MN Valley Business

operated with a relatively low profile in the local area. “Our picture books are known for their art and illustrations and are in museum shops around the country and known internationally,” said Kate Riggs, managing editor at Creative. “We’re sometimes known more internationally than at home.” Paul Abdo, editor in chief at Abdo Publishing, said that beyond the U.S. market, Canada and Asia are major customers. “A lot of countries want English language books to learn English from.”

Cover Story

Ted Williams is a senior graphic designer at Capstone. While they all compete in the same market, the relationship between the companies is Minnesota Nice. “It’s a pretty collegial competitive market, unlike some others I’ve been in,” Ahern said. “We’re all trying to do good things and change kids’ lives — how angry can you get at a competitor for that?” Capstone Twenty five years ago the Coughlan family, known for its history in Kasota stone quarries, banking, Mankato Screw Products and more recently the Jordan Sands silica sand mining operation, bought a small, struggling publishing firm called Capstone. The next year it published its first books – 48 titles – and has grown exponentially ever since. Over the years, a large number of imprints and digital sites have come under the Capstone umbrella, including the Pebble, Pebble Plus and PebbleGo brands, Compass Point Books, Picture Window Books, Red Brick Learning, FactHound.com, Stone Arch Books, the Graphic Library brand, Capstone Interactive Library, Heinemann Global Library, Raintree (U.K.), CollectionWiz and DC SUPER HEROES. Ahern was brought on as CEO seven years ago after 25 years in the education technology industry. “When I came on we were 90 percent publishing and selling to libraries. The Coughlan brothers had high hopes for growth and I had a background in digital. They said ‘we have enough people in print, we need someone in digital.’ ” The company’s move into digital was first with CD books that have audio and interactive components. PebbleGo was started as an online children’s research data base. “The first one we launched is on animals, so we have 300 animals where, from kindergarten to second

Karon Dubke, senior photographer at Capstone. grade, you learn about their habitat and about their life,” Ahern said. “Now we have five sciences, space, geography, Native Americans.” The online data bases are sold to schools on a subscription basis. “We’re hitting a 95 percent renewal rate with the subscriptions.” Ahern said the dive into digital allowed the company to get its rich stock of books to a new online audience. “We decided to get more aggressive into converting all this great content we had in our warehouse. We were kind of a Blockbuster and became a Netflix. Libraries are great, but kids are going to a lot of places outside of books.” The company converted to digital the content of thousands of its books and created “myON,” which they bill as the world’s largest online digital library. “There’s much deeper interaction. Actors’ voices can read the book to you, there’s a touch-sensitive dictionary, you can take a quiz after reading each one and it assesses

MN Valley Business • March 2015 • 15

Paul Abdo, editor-in-chief (left) and DeMar Borth, COO of Abdo Publishing. the child’s level of reading. Each book covers a different curriculum level.” The program also helps create an individual profile of each student. “Do they like science, Civil War, history? We give them things they’re interested in. We marry up the books of their interest and their reading level and let them choose,” Ahern said. “It’s someone no one else has done before. Now we have 5 million students enrolled in the system all over the world. We have 60 publishers that have come under contract with us to have their books in our library.” He said they were worried that the heavy dive into digital would cannibalize the core library business Capstone had always been involved in. “Interesting enough, our library business is as big as when we launched (digital).” He said a key to keeping the book side strong is through creative, innovative content. “We have Scooby-Doo stories with multiple endings. We have a Wile E. Coyote series of book. But they’re all tied to curriculum standards.” The company continues to produce more than 800 book titles per year, aimed at pre-Kindergarten through 8th grade. Capstone’s 300 employees are housed in offices in North Mankato, Edina, Chicago and Oxford, England. Having Taylor Corp., the massive printing company, based in North Mankato helps Capstone, as well as the other book publishers. “Taylor is our biggest printer. We do some trade market too, Barnes & Noble, Costco, Dollar General, Amazon — so we print worldwide depending on what we’re doing.” Ahern said the combination of digital and print has the company performing better than in its past and said more

16 • March 2015 • MN Valley Business

is coming. “myON is so successful in schools and school libraries that we’re looking at inspiring more learning through digital solutions. In the next year, the next big thing is coming,” said Ahern, although he didn’t provide more details. Last year, Ahern and Bob Coughlan were named the prestigious Ernst & Young Entrepreneurs of the Year for the Upper Midwest. “Bob and I won, but we have a lot of employees here who get up each day and think of cool ways to engage kids. Our employees are very ingenious.” Abdo Publishing Joe Abdo, along with daughters Jill (Abdo) Hansen, Lynne Abdo, and Melody (Abdo) Borth founded Abdo & Daughters in 1985. With just a few employees the Mankato family, best known for its Abdo, Eick & Meyer CPA firm, published a handful of nonfiction books. The business grew over the years and in the mid-1990s Jim and Paul Abdo joined the company. The company now has five divisions: Abdo Publishing, Spotlight, Magic Wagon, Abdo Kids, and Abdo Digital. With 120 employees, Abdo publishes about 500 new titles per year and has its warehouse and customer service center in North Mankato and editorial offices in Edina. Paul Abdo said the company generally does an initial print run of about 5,000 copies of each title and does reprints if they sell well. Focusing on school and public libraries, Abdo, like the other local book publishers, has been pushing strongly into digital content. “Digital has really taken off in the schools the last couple of years. But believe it or not, we sold the most print books

Top: Books are readied for shipping across the country at Abdo Publishing. Bottom Left: Ann Freir handles calls at the Abdo Publishing call center. Bottom Right: Amanda Blooflat in the warehouse at Abdo Publishing. in our history last year. The pre-K to 5th grade, they still read a lot of books,” Abdo said. The company’s eBooks are targeted more to middle and high school kids. “Schools pay for one book or device or they can buy a multiple-school license. They can pay a subscription and tell us how many kids they have and then they have usage of the books forever.” Abdo uses writers from all over the world and gets much of its illustration work from Europe. Abdo said they are constantly looking at new common core standards used by schools and look at the curriculum in large states and states with strong schools, such as New York, California and Minnesota, to help them base their decisions on the types of books to produce. Their books are sold by an in-house team that calls on schools as well as 100 or so independent reps. “We also use distributors, including Amazon and we have an international sales manager to sell internationally.” On the fiction side, Abdo has licensing agreements with Marvel, Disney, DC comics and others. “We look at the most popular things out there, so if a Spider Man movie is coming out we get a Spider Man book going.”

Abdo at one time had its own bindery but began working with Taylor Corps.’ Corporate Graphics, which then purchased the bindery from Abdo and uses it to bind their books and those from other companies. “We’ve been working with them a long time. They do a great job and our warehouse is literally down the street from them. It makes it really easy,” Abdo said. Like the other local publishers, Abdo works with a variety of groups to donate books to inner city schools and other groups. Creative Company The Creative Company traces its roots to 1932 when George Peterson started The Creative Educational Society in Mankato to produce maps and diagrams for teachers and students and sold chalk games and sets of rubber stamps. The company branched into publishing textbooks and in the 1960s George Peterson Jr. joined his father, and the newly named Creative Education Inc. began a transformation that made it a leading children’s publisher. Today, The Creative Co. has almost 3,500 books to its

MN Valley Business • March 2015 • 17

Top: Kate Riggs, managing editor at Creative Right: The Creative building in upper North Mankato credit and is led by third-generation owner and publisher Tom Peterson. It publishes some 130 titles for schools and libraries annually. Riggs said the company has three distinct book imprints: Creative Education, which annually publishes more than 110 nonfiction books for schools and libraries; Creative Editions, which publishes picture books; Creative Paperbacks, encompassing both fiction and nonfiction. And Creative Digital was started a few years ago. “Anything published in printed form is also in an eBook. We work through several distributors and schools pay a subscription or sometimes a one-time payment,” Riggs said. Riggs, too, said demand for the printed books remains strong. The company’s paperback nonfiction is sold in classrooms and at the retail shops at museums and zoos. “The paperbacks have been steadily growing in recent years. It’s nice because it crosses over into retail exposure like Barnes & Noble.” The company has even produced small books that were put in kids’ meals at Chick-fil-A restaurants. Riggs said budget constraints cut many school library budgets a few years ago. “The school library market dropped and that pushed us into retail and other opportunities that hadn’t been open to us before,” Riggs said. “The schools were using money for technology instead of books. It pushed innovation and new channels for us.” Creative Co. also has an extensive foreign rights base. “We co-produce a lot of picture books that get published in

18 • March 2015 • MN Valley Business

other languages. They’re very popular in Korea and other places.” With about 30 full-time employees, Creative Co. has a warehouse and offices in North Mankato and its editorial office in downtown Mankato on Broad Street. The company does much of its printing at Corporate Graphics and uses a printer in Italy. Like the other publishers, Creative uses a stable of freelance writers to produce its books. The writers, from the region and around the world are often journalists, writers, teachers, former librarians and historians. “We’re always looking for talented writers,” Riggs said. “It’s kind of tough with the nonfiction writing. Many people write well but nonfiction is a skill that needs to be honed.” Riggs, who does some writing herself and has been with the company for nine years, said it’s a rewarding business. “I’m proud to work for this company because of the work we do. I feel so strong about it.” MV

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Brian and Katie Neegaard with their kids Blake (with mom) and Brayden inside the Purple Goose Eatery & Saloon in Janesville.

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By Heidi Sampson | Photos by Pat Christman

hortly after getting married, Brian and Katie Neegaard moved to Janesville in 2008. For the couple, the town was situated directly between both of their full-time day jobs - Katie works as executive director of Job Plus Inc. of Waseca and Brian a quarry supervisor for Vetter Stone in Mankato. Even with their already busy lives, the two sought out additional employment at the Purple Goose Eatery and Saloon in Janesville shortly after getting settled in their new community. While working for Judy Jacobs, Brian worked in the kitchen while Katie worked in the bar and served food. Both worked evenings and on

weekends. By March of 2013, the Neegaards took over ownership of the Purple Goose Eatery and Saloon when they were offered the opportunity to purchase the business. “We’ve always wanted to,” said Brian, “well, probably more me than Katie but we’ve always wanted to do something like this. We had the opportunity approach us and we decided to dive in with both feet. However, if it weren’t for our great staff, this probably wouldn’t even work because we have to be at our other jobs too.” Now the couple has two young children, the Purple Goose, as well as their full-time day positions to occupy

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20 • March 2015 • MN Valley Business

The Neegaards bought the Purple Goose in 2013. their time. Each rotates working evenings at the Purple Goose so that one of them can be home with their children. Brian is also an active member of the Janesville Fire Department. “When I’m cooking, I relax,” said Brian. “Like I said earlier, without the right staff this business would be chaos and it’s not. All of our crew members understand that the Purple Goose is like an extension of our family. We have a kitchen manager that takes care of the ordering and tracking of sales and a bar manager that handles that side of the business. For us it’s about having those key people in place and making sure they have enough knowledge to do their jobs. I count on them to make decisions for me when I’m not here. That’s really what makes this work.” Versatile, Friendly Service The Purple Goose Eatery and Saloon offers home cooked meals, soups and a 15-foot salad bar. They also offer full service catering on and off site. On site, they host weddings and business events in a dining hall that can accommodate up to 250 people. For those interested in displaying a video, wedding collage, or even business statistics, they have a 12 foot projection screen, while the sound system comes complete with a wireless microphone. “I price accordingly based on what their choices are, all the way down to the plates and napkins,” said Brian. “So we really do tailor our catering service to our customers’ needs. All of our catering prices are based on market price. Unfortunately, I can no longer lock in a price for a catering

job two weeks prior to event like I used too, so everything has to be based on that day’s price. However, we try to stay as affordable as possible. Most of our catering meals fall between that $8 and $12 price range but the price does shift from there based on how they want to customize their gathering.” The Purple Goose employs seven full-time employees and numerous part-time staff. They also have those who come in specifically for catering events, while many of the local high school students also help out in the evening with dishes and things of that nature. “Our biggest niche is the food and friendly service,” said Brian. “This is a clean, family orientated business. I can’t tell you how much I love cooking, talking with customers, and meeting new people.” So far, 2015 has shown the biggest growth for the Purple Goose Eatery and Saloon and it’s only just begun. Brian and Katie would love to see the Purple Goose possibly add on a future game room or expand their off sale inventory. However, their struggle would be in finding a building close enough to expand their facilities. “This year I am hoping to grow the catering side by 10 to 15 percent,” said Brian. “We will have to see what the year brings. However, I can’t stress family enough both within our work environment and biologically. I don’t have a culinary background. Everything I do, I’ve learned from my parents and my grandparents, without them I wouldn’t be where I am today. As for our customers, we do have a bar but the Purple Goose is more restaurant then bar, as

MN Valley Business • March 2015 • 21

75 percent of our business is restaurant. We also host a lot of fundraisers and benefits for the community. If the Purple Goose weren’t here, the community wouldn’t have any place to go for those types of events. I think that’s a business owner’s responsibility to the community, to give Banking | Mortgage | Insurance | Trust | Wealth Planning

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MN Valley Business â&#x20AC;˘ March 2015 â&#x20AC;˘ 23

At Dan’s Barber Shop, from left: Mark Weingartz, customer Gary Rabenhorst, Jerry Krueger and customer Jerry Gulden

The kindest cut Barbering is back! By Pete Steiner Photos by John Cross It’s boom times for men’s hair-cutting. Styling isn’t only for women anymore. Just check the pages of Esquire or GQ or this magazine: it’s not only actors and rock stars with impressive locks. If you’re in business, it helps if you seem to have invested something in your hair; at least it should be professional, clean and neatly trimmed. But beyond that, the stop at your favorite barber or stylist just might be the best part of your day. Recent visits to four different venues for men’s haircutting revealed this truth: laughter and camaraderie are as important as the haircut itself. “It’s so nice for them to be able to share their stories,” says Ellen Koenigs, owner of Y-Barbers. “There’s an intimacy there.”

•••• “We want to be known as a Barber Shop,” says Koenigs, who employs two other male barbers, but also two stylists for women. That fact acknowledges that hair care today is much more inclusive, with men and women often being served in the same shop. Koenigs has worked in salons and barbershops. In fact, she started cutting for her Dad, Bernie, to pay her way to a business management degree at MSU. She took some time off to raise her kids before becoming a master barber, which includes school and 1,500 hours of apprenticeship, plus a test. Eventually she bought her Dad’s business – a good move, because, she says, “barber shops are trendy

Spotlight

24 • March 2015 • MN Valley Business

Some old-fashioned straight razor work. again. Shaves are coming back.” In a nod to the increasing diversity in our community, Koenigs hired Richmond Clark as one of her barbers. Clark, an African-American who trained at Texas Barber College in Dallas, says, when he arrived in Mankato seven years ago, “there was no place I could get my hair cut.” Obviously, the different texture of Afro hair requires different techniques. “I saw a need for a black barber here.” While about 70 percent of his clientele is AfricanAmerican, Clark is equipped to handle all customers with his easy-going manner: “We’re going to offer all of your haircutting needs, including eyebrows, ears, mustache, a straight-edge shave. It’s different from a stylist.” A partial list of posted prices reflects available services: Men’s cut: $19; Hot Lather Shave, $25; Beard Trim, $9; Men’s Color, $35. Customers are split about 50-50 between appointments and walk-ins. •••• It might have been sometime in the ‘70’s, post-Beatles, and with the Hippie Era waning; the close-cropped “heinie” and the flat-top had been obliterated, but men still sporting “longish” hair now wanted it trimmed. And women became major players in cutting men’s hair. Lona Skaja, who began working at her mother’s beauty school at 15, eventually opened her own Golden Comb Salon at Five Corners in 1974. It was there she remembers first cutting a man’s hair: “Longer hair was so common then. But they

were wanting it presentable, a professional business look. My clientele was about ten percent men – at $3.50 a cut!” An independent contractor today, Lona rents a station at Urban Escape in Old Town. She estimates, of her 250 regular clients now, almost half are men. “I think they like the attention, the pampering.” What about the small talk so key at barber shops? She smiles, “Sometimes they ask for advice about women.” And, she adds, “I do try to keep up on sports! I think I’m easy to talk to. They tell me about their personal lives.” Skaja says the most trending male look now is trim and clean-looking. So, is it a good career? “Definitely! I still have fun. You gotta work hard, but you can make a decent living.” •••• Modern men’s styles are many – maybe a classic Fitzgerald/Gatsby look, or a neo-Kennedy. You can imitate Ewan McGregor or Hugh Jackman or David Beckham. Trimmed on the sides and wavy and heavier on top is popular now. At Liv Aveda, assistant manager and master stylist, Whitney Landwer says she’s always browsing magazines and observing real men as she goes out and about, to keep up on what’s current: “It’s kind of a crazy thing, isn’t it!” she exclaims as she discusses how trendy men’s hair has become. Landwer started doing laundry at Liv Aveda as a high school job 11 years ago, then began cutting hair seven years ago to pay for school. She went to

MN Valley Business • March 2015 • 25

Aveda Institute in Minneapolis for a year, and at 26, “I’m a lifer!” About one-fourth of her longtime clients are male, typically a businessman between 30 and 55. “Here, it’s a little more spa experience – they get their hair washed before getting it styled. I think they enjoy the sensual scalp massage with the hot towel treatment on the face.” She admits the salon cross-promotes other services. What would she say is most popular? “A lot of our male clients enjoy pedicures!” Landwer says almost all of her stylists have at least some male clients, one even has about 80 percent men. Clients often ask what might look good – “that’s a huge part of them trusting us” – and it’s why her stylists attend regular classes to keep up with trends and techniques. The staff has very low turnover, and are offered health, 401-k, paid vacation and other benefits. “Not many salons offer all that, but here, it’s a career, not just a job. And I love it!” Asked if anyone ever requests a more traditional style, Landwer grins: “We have a girl who can do a killer flattop!” •••• Dan’s Barber Shop, tucked into a wing of the Belle Mar Center, just celebrated 50 years of hair cutting in the same location. Mark Weingartz bought the shop back in 2009, and it’s still steeped in tradition. The classic red, white and blue barber pole hangs outside the door, and the walls are filled with taxidermied trophy fish, Chuck Schueneman’s boxing trophies, and photos - of hunting trips, Dan’s motorcycle trips, skydiving, even a vintage black-andwhite of Ira J. Hensel, who opened the first barber shop in North Mankato.

26 • March 2015 • MN Valley Business

The interviewer slipped in on a blizzardy afternoon, expecting few customers, maybe a one-on-one. But no, with one already in the chair and several waiting, you get caught up in the conversation. Mark is off this day, his partner Jerry is doing the talking – and the listening. For both men, this is a second career. Jerry applies hot lather on a man’s neck and above his ears. Grabbing a straight-edge razor between thumb and forefinger, he deftly trims his customer for a smooth, neat look. “You gotta get over the fear factor,” he winks, wiping down the straight edge. After a career as a machinist, this new job suits him fine: “You meet a lot of different and interesting people. It’s a good little business.” Next up, an African-American ex-Marine who wants his sides shaved an inch or so above his ears and the top sculpted. Now that he’s out of the service, he can also grow a beard, and he wants that trimmed to narrowly follow his jaw line. He’s an MSU student, coming to Dan’s for the first time: “I like the smaller shops,” he says. Another customer awaiting his turn confesses, “I been to two barbershops my whole life: one in (hometown) Spencer, Iowa, and this one the past 17 years. I catch up on all the B.S. here.” A framed poem hanging on the wall, written a decade ago for Dan, still rings true: 40 years of cutting hair/super guys this barber pair Loyal customers at their door/always coming back for more! •••• Back at Y-Barbers, Richmond is between customers. He’s at the pool table, trying to sink the 8-ball in the

corner: “(Barbering) is like bartending. People want to share, to get things off their chest.” About a year ago, the shop moved into the historic Mutch Hardware building in lower North Mankato. Koenigs tells how Y-Barbers got its name: it was originally located in the basement of the long-ago-demolished YMCA at the corner of Second and Cherry (now Earl Johnson’s parking lot.) She knows the names of the original four barbers: Oddie Tuven, Bob Klimpel, Dave Miller, and Gene Halverson. The interviewer relates that Dave Miller was his childhood barber. Overhearing that, a customer on his way out says, “Dave Miller cut three generations of my family’s hair!” “He hated the Beatles – blamed them for the decline of barbering!” Laughter all around. Seems barbershops are back big-time. To a person, everyone interviewed for this story would certainly agree with Koenigs: “We want to be part of the community. Like Cheers, where everybody knows your name!” MV

MN Valley Business • March 2015 • 27

The crew at Noble RV in Madelia includes, from left: Todd Simmons, Jarett Galvin, Jeremy Tubbs, Christine Miller, John Puhlman, Anthony Rothfork and Jeff Sauer.

A Noble business Noble RV has four locations By Heidi Sampson Photos by John Cross

hile searching for a business idea capable of stimulating passion in customers, Mike Noble attended a national recreational vehicle tradeshow in 2004. The show sparked the initial idea for Noble RV of Owatonna, as brothers Mike and Pat Noble, began their own recreational vehicle business in March of 2006. Within in six years, their business quickly spread to Noble RV of Rochester. Ten months after Noble RV of Rochester’s grand opening, Noble RV of Madelia would open on Highway 60 in February of 2013. The location was previously occupied by Dick Olson Chevrolet, which had closed a few years prior. “I visited the Madelia location with a Realtor shortly after the business closed,”

Mike said. “I knew the location would be a perfect set up for us. The facility was in great shape and very little would have to be done in terms of renovations. So I knew the switch from vehicles to recreational vehicles would be seamless.” After his tour of the facility, he watched the location’s listing online for close to a year, patiently waiting for the price to fall into place. Noble’s waiting and watching paid off when the Madelia site finally became an option for purchase. The only component missing for the newest location was a general manager. Noble approached Todd Simmons who had been working at his Owatonna location, and asked if he’d consider moving to Madelia and heading up the newest branch of

Feature

28 • March 2015 • MN Valley Business

John Puhlman works on an RV. Noble RV. Simmons readily accepted the challenge moving from Owatonna to Madelia, while the Noble brothers finalized the purchase of the Madelia location. Noble RV’s Madelia facility is a 12,000 square foot building with a 5 acre lighted parking lot capable of housing between 100 and 150 recreational vehicle units. “Camper owners tend to trade their recreational vehicles in on average seven times throughout their lives which, translates into every three to four years,” Mike said. That doesn’t mean it’s only those who purchase a brand new camper, that figure includes those who buy used as well. For us, that means providing our customers with a top of the line recreational vehicle from manufactures they can trust.” A month after the Madelia opening, Noble RV of Minneapolis located on Highway 169, south of Shakopee and north of Jordan, began operation. Despite sometimes trying economic times, the Noble brothers’ four successful expansions, all within seven years of the Noble RV of Owatonna’s initial start, was proof of a passionate market niche. “We grew up camping as children,” said Mike. “I think one really has to love the lifestyle to love selling recreational vehicles.” Reliability a key The four Noble RV locations work together to offer their customers a wide selection of new and used inventory from travel trailers, park trailers, fifth wheels, toy haulers, motorhomes, truck campers and folding campers. They also provide their customer’s access to several manufacturers in the RV industry from Thor Industries,

Keystone, Crossroads, Dutchmen, Coachmen, Heartland, Forest River, Palomino, and Livin Lite. According to Mike, Keystone’s Montana has been the top selling recreational vehicle for 13 years. “It’s critical to buy recreational vehicles from solid manufactures who’ve been around for years,” said Mike. “They carry a name customer’s can trust and they will continue to be there to stand behind their product long after the initial purchase.” If peace of mind associated with a manufacture’s brand name wasn’t enough, Noble RV says it is also the only dealership in the state to offer its customers a lifetime warranty on every new camper purchased, at one of their locations. They even offer those who purchase up to a twoyear-old pre-owned camper, a lifetime warranty as well. Noble has two mobile trucks that will assist customers at their vacation destination, seasonal site, or at their recreational vehicle storage location, to make repairs or perform routine maintenance on their customers’ RVs. “Today’s recreational vehicles have the same kind of technology as what’s seen in top end homes,” said Mike. “They have everything from home refrigerators to washer dryer units, vacuum cleaners and electric auto level. It’s all about ease of use and comfort. Although the perception is that only the rich go camping that couldn’t be further from the truth. The majority of recreational vehicle owners are actually middle class individuals looking for a vacation that is affordable and relaxing.” Noble RVs radius of business extends roughly 250 miles. However, they have sold recreational units as far away Boston and Texas. They’ve even sold a unit internationally, which was shipped to Kuwait. The owners in all three

MN Valley Business • March 2015 • 29

examples, never stepped foot in their recreational vehicle before the purchase, having only seen photos and video clips. If one were looking for a recreational vehicle to purchase, Mike would say the best time to buy depends upon what the customer is looking for. If the customer is looking for the best selection, right now is the optimal time for choice of color and floor plan, as most anything a customer could want is available. Common popular items may get reo r d e r e d Noble RV in Madelia is one of four Noble locations in the state. throughout the been sitting on the lot for a year. year, especially recreational vehicles that hold the most Although customer satisfaction is important to Noble popular floor plan. However, that’s not always a guarantee RV, so is their relationship to their employees. The Noble as once the units on site are sold, it takes roughly 8-11 brothers say they strive to hire career minded individuals, weeks to get a new recreational vehicle that’s special those who will stay with the business for the long haul. ordered. Mike said it’s important to keep his 50 employees, seven One new motorhome, Freelander Coachman Class C of which reside in Madelia, content with the knowledge sleeps six to eight individuals, is 21 feet long, and can be that their employer is solid. As a result, when camping purchased for $52,000. sales slow through the winter months, Noble RV has never “That’s $400 a month, which is cheaper than owning a laid an employee off at any of their locations. Jeep Cherokee,” said Mike. “We sold 20 of those units last “I will take out a loan if it keeps my people employed year and plan to sell at least that, if not more, this year. until business picks up in the spring,” Mike said. “I firmly These motorhomes really are pretty incredible, they even believe in employee satisfaction, as well as in obtaining have a built in generator.” those who plan to make a career of this lifestyle by offering Traditionally, fall has been the best time to purchase a consistency and reliability.” MV recreational vehicular unit. However, for those seeking the best financial deals during the early spring thaw, they should consider looking for recreational units that have

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- 2013 - 2014 (in thousands)

3000

$2,519

8250

$1,030 $297

2000

5500

1000

2750 0

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

- 2013 - 2014 275

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

Housing starts: Mankato/North Mankato - 2013 - 2014

165

110

55 J

Source: Realtors Association of Southern Minnesota

Source: Cities of Mankato/North Mankato

Commercial building permits Mankato

(in thousands)

- 2013 - 2014

Commercial building permits North Mankato

- 2013 - 2014 (in thousands)

2000 1500 1000

$2,268 $1,170

$138 $56

500 D

Source: City of Mankato

Source: City of North Mankato

Interest Rates: 30-year fixed-rate mortgage

Foreclosures: 2013 Year End

— 2013 — 2014

5.5 5.0

4.5%

4.5 4.0

3.9%

3.5 3.0

168 122

220

80000 70000 60000 50000 40000 30000 20000 10000 0

Source: City of North Mankato

Existing home sales: Mankato region

Source: Freddie Mac

County

2012

2013

Percent change

Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan

126 37 46 98 42 49 58 57 17

101 19 27 70 25 43 39 36 24

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

Source: Minnesota Foreclosure Partners Council C. Sankey

MN Valley Business • March 2015 • 33

■

Agricultural Outlook

By Kent Thiesse

Crop insurance targeted by Congress, Obama

he federal crop insurance program is the main risk management program used by crop farmers in Minnesota and across the U.S. In Minnesota, nearly 95 percent of the state’s major crop acreage is covered by crop insurance. The Obama administration and some members of Congress are currently pushing for major changes in the federal crop insurance program. At the same time, other members of Congress and agricultural leaders are stressing the need to maintain a strong crop insurance program as the centerpiece of a risk protection program for crop producers. In the late 1990s and early 2000s, the federal government offered increased premium subsidies and developed new products in order to encourage greater participation in the crop insurance program. The concept was to have a self-selected risk management program that allowed farm operators to make individual decisions on crop insurance coverage for their various farm units. The federal government also wanted to eliminate the need for ad-hoc disaster programs that were enacted on annual basis several times during that time period, as a result of natural disasters in varying crop producing areas of the U.S. There have been very limited ad-hoc federal disaster programs related to crop production in recent years, even though we have experienced some major natural disasters. Most corn and soybean producers in Minnesota buy revenue protection (RP) crop insurance policies, which protect against the combination of yield losses and price reductions during the growing season. A base revenue level is established on a farm unit using the historic average crop yield times the average crop price at the beginning of the crop insurance coverage period. For RP policies, the insurance coverage level purchased by farm operators is a percentage of that base revenue, ranging from 50 percent to 85 percent. However, the 80 percent and 85 percent coverage levels have become quite popular for

corn and soybean producers in recent years. The final crop revenue on the insured farm unit is the actual crop yield times the crop price at harvest time. If the actual crop revenue is lower than the guaranteed insurance coverage, a crop insurance indemnity payment is made for that crop on that farm unit. In 2013, crop insurance policies protected nearly $10 billion of liability on growing crops in Minnesota on 17.5 million crop acres. This included $6.3 billion of liability protection on 8.6 million acres of corn, $2.7 billion on 6.6 million soybean acres, and $364 million on 1.2 million acres of wheat. Crop insurance coverage is also important for producers of sugar beets, canning crops, and other crops. In 2013, Minnesota farmers received over $1.2 billion in crop insurance indemnity payments to offset crop production losses and revenue reductions, resulting from natural disasters and reduced crop prices. Minnesota producers are likely to receive significant indemnity payments again for the 2014 crop year, as a result of lower than average yields in many areas of the state, along with lower crop prices in the fall of 2014. However, back in the drought year of 2012, when many areas of the U.S. incurred major crop losses, crop insurance indemnity payments in Minnesota were much lower than other areas, due to more favorable growing conditions and better crop yields in most areas of the State. The premiums paid by farm operators for crop insurance coverage are subsidized by the federal Government, with an average subsidization rate of near 62 percent of the total premium amount in 2014. Typical expected farmer-paid premiums for area farmers in 2015 are about $6 per acre for 75 percent RP coverage, $11 per acre for 80 percent RP coverage, and $21 per acre for 85 percent RP coverage. The Environmental Working Group and other groups have

34 • March 2015 • MN Valley Business

recently raised concerns that there are currently no limits to individual farm operators for either crop insurance premium benefits, or the level of total crop insurance indemnity payments received. Farm groups have argued that crop producers already pay gradually increasing premiums in order to receive the most desirable levels of crop insurance coverage, and that indemnity payments are only paid when there are yield reductions, or significant revenue reductions due to lower crop prices. Farm size, crop value, and individual adjusted gross income have never been criteria for receiving Federal crop insurance benefits. The 2014 Farm Bill included payment limits of $125,000 per eligible individual for commodity farm program payments, but did not include any limits on crop insurance premium subsidy levels or indemnity payments. Beginning in 2015, the Farm Bill requires producers to comply with federal conservation and wetland requirements on their crop acres in order to receive crop insurance premium benefits. Otherwise, the farm operator will need to pay the full premium cost for crop insurance. The Obama Administration recently proposed a crop insurance spending reduction of $16 billion over the next 10 years (2016-2025), or an average reduction of $1.6 billion per year, which is a 17 percent reduction in spending allocation. The current projected federal spending on crop insurance programs is estimated at about $9 billion annually The spending reductions proposed by the administration would be accomplished by reducing the premium subsidy levels on some crop insurance products, and limiting prevented planting coverage. They would also put restrictions on subsidizing the popular harvest-price option that is available with RevenueProtection policies, and is utilized by a majority of Midwest corn and soybean producers. The harvest-

Agriculture/Agribusiness Corn prices — southern Minnesota

(dollars per bushel)

— 2014 — 2015 8

16 12

2 0

$9.17

$3.59

Source: USDA

Iowa-Minnesota hog prices

Source: USDA

Milk prices

185 pound carcass, negotiated price, weighted average

— 2014 — 2015 140 $88.63 125

Minimum prices, class 1 milk Dollars per hundredweight

— 2014 — 2015 30

110

$23.28

$59.58

65 50

(dollars per bushel)

— 2014 — 2015 20 $12.19

$4.20

Soybean prices — southern Minnesota

$20.38

Source: USDA

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

price option permits producers that incur yield reductions greater than their coverage level (ex. – 80 percent of average yield) to have added crop insurance protection if crop prices are higher at harvest time than the base price on March 1. This option allows farm operators to forward price a higher percentage of their crop production at profitable prices, while still having insurance protection against the possibility of very low crop yields at harvest time. Some members of Congress have called for limiting the total crop insurance premium subsidy to $50,000 per individual or farm operation, or to have the premiums included in the farm program payment limits. This could make needed levels of crop insurance too expensive for fairly typical-size Midwest farms, thus increasing the overall financial risk for some farm operations. There have also been proposals to limit the amounts of annual crop insurance indemnity payments to producers, either on a per acre basis, or a whole-farm basis. Some would like to have crop insurance benefits included in the $900,000 AGI limit that is in the 2014 Farm Bill for farm program

Source: USDA. Based on federal milk orders. C. Sankey

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payment eligibility. In recent years, there have been other proposals to reduce or restrict crop insurance benefits; however, these proposals have never gotten too far in Congress. However, there now seems to a bit more momentum behind proposals to change crop insurance, with support from the Obama Administration, as well as from some budget conservatives in Congress. Due to the current and expected future low commodity price levels, federal spending on the commodity programs in the Farm Bill over the next few years is expected to

www.ummc.co

significantly exceed the original spending targets. This will likely further the call to enact crop insurance reductions. MV Kent Thiesse is farm management analyst and vice president, MinnStar Bank, Lake Crystal. 507- 381-7960; kent.thiesse@minnstarbank.com

MN Valley Business • March 2015 • 35

Employment/Unemployment Initial unemployment claims

Minnesota initial unemployment claims

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

286 235 85 330 1,036

Percent change ‘13-’14

375 188 56 217 836

Major Industry

-2.8% -36.3% -34.0% -34.2% -19.3%

December ‘13 ‘14

Construction Manufacturing Retail Services Total*

14,294 6,374 1,648 7,297 29,613

Percent change ‘13-’14

12,096 4,957 1,593 7,450 26,096

+28.0% +7.1% -2.9% +2.0% -11.8%

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

Local non-farm jobs

Minnesota Local non-farm jobs

- 2013 - 2014

Nine-county Mankato region

129,259 125,494

133000

2000

111000

1000

Local number of unemployed

- 2013 - 2014

Nine-county Mankato region

Minnesota number of unemployed

8000

109,216 137,950

150000

4,872 5,862

6000

- 2013 - 2014

200000

10000

100000

4000

50000

2000 0

2,875 2,825

3000

122000

100000

- 2013 - 2014

(in thousands)

Mankato/North Mankato Metropolitan statistical area

Unemployment rate Number of non-farm jobs Number of unemployed

2013

2014

3.5% 56,499 2,050

2.6% 58,869 1,594

Source: Minnesota Department of Employment and Economic Development

36 • March 2015 • MN Valley Business

Unemployment rates Counties, state, nation

(includes all of Blue Earth and Nicollet Counties) December

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

December 2013 3.6% 4.4% 5.4% 6.8% 4.4% 3.4% 4.5% 5.4% 5.1% 4.3% 4.4% 6.5%

December 2014 2.7% 3.8% 4.5% 5.6% 4.0% 2.5% 4.0% 4.3% 4.7% 3.3% 2.7% 5.4% C. Sankey

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

884

1000

798

800

$406

$387

400

100

200 J

Source: Sales tax figures, City of Mankato

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

60000

Source: Sales tax figures, City of Mankato

Mankato food and beverage tax

- 2013 - 2014

85000

50000

$55,837 $59,000

68000

40000

51000

30000

34000

20000

17000

10000 J

Source: City of Mankato

Gas prices-Mankato — 2014 — 2015

- 2013 - 2014

500

200

400

(In thousands)

300

600

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

Sales tax collections Mankato

Stocks of local interest

Jan. 13

Feb. 10

Percent change

Archer Daniels

$47.23

$46.48

-1.3%

Ameriprise

$124.46

$136.03

+9.3%

Best Buy

$39.69

$38.16

-3.8%

Crown Cork & Seal

$47.18

$49.50

+4.9%

Eventis

$23.48

$24.00

+2.2%

Fastenal

$44.49

$42.57

-4.3%

General Growth

$30.29

$29.39

-3.0%

General Mills

$52.58

$53.09

+1.0%

Hutchinson Technology

$3.82

$3.66

-4.2%

Itron

$38.64

$36.99

-4.3%

Johnson Outdoors

$29.02

$30.00

+3.4%

$159.70

$164.48

+3.0%

Target

$74.14

$76.21

+2.8%

U.S. Bancorp

$41.15

$44.19

+7.4%

Wells Financial

$27.09

$27.15

+0.2%

Winland

$0.90

$1.00

+11.0%

Xcel

$36.34

$35.58

-2.1%

$3.55

$2.18

1 0

Gas prices-Minnesota — 2014 — 2015

$3.57

4 3 2 $2.18

1 0

Source: GasBuddy.com C. Sankey

MN Valley Business • March 2015 • 37

Visits to area businesses provide an opportunity for communication, assistance and so much more.

Greater Mankato Growth

By John F. Considine III, Business Development Resource Manager, Greater Mankato Growth

Greater Mankato Growth (GMG) is just one of several key organizations for businesses in the Greater Mankato Area. The assistance these organizations provide can take many forms, but they all start the same way: a conversation with the business leadership so the organization can best understand their needs. GMG’s approach to starting this conversation is going out and meeting folks where they work through the Grow Minnesota! Program. Grow Minnesota! is the Minnesota Chamber of Commerce’s business assistance program. Communities across Minnesota follow this model for conducting face-toface conversations with business owners/CEOs. The primary purpose of the visit is to ask what we can do

to help them thrive and grow in the community. Each Grow Minnesota! visit involves some standard questions. Any critical business information shared is kept confidential. In order to ensure each business has an opportunity to discuss a comprehensive list of topics (ex: workforce, community strengths, or public policy) some standardization must be incorporated. However, as the conversation evolves, the subject matter is dictated by the business. So if the business wants to dive deeper into “workforce” - then “workforce” it is. First and foremost this program is designed to be sure the lines of communication are open. The program consists of a conversation

38 MArch 2015 1 •• JANUARY 2013••MN MNValley ValleyBusiness Business

between a business owner, a representative of GMG and generally local officials. In the case of a larger business, it may also include other staff from the company. Some businesses may want others in the company to participate in the conversation. For example, they may want a human resources person there to talk about training opportunities or someone from plant operations to explore area supply chain capacities. All are fair game during the visit. GMG has been actively conducting these Grow Minnesota! visits for 12 years and is looking to increase the number of visits even more. But these visits are so much more than just a visit from GMG, it is a way to connect to other organizations and businesses. GMG staff can refer you

Grow! Minnesota visits allow GMG staff and volunteers to learn more about area businesses and find out what can be done to help them thrive in the community.

Grow Minnesota! visit to Dotson Iron Castings

to specialty consultants, collaboration opportunities with other business owners, or connect you with local officials to address any concerns.

The Mankato/North Mankato Metropolitan Statistical Area (MSA), made up of Blue Earth and Nicollet Counties, set all-time high job figures (two times) in 2014. With this type of growth, it is important to understand from which industries it is coming. The Grow Minnesota! program not

In addition to helping businesses, Grow Minnesota! provides us with an opportunity to thank businesses. Area businesses do not have to be here and we owe them our thanks for investing in our communities, providing work for our local talent, and supporting the rest of the community through their volunteerism and charitable giving.

for Grow Minnesota! Or would like to schedule a visit, check out: greatermankato.com/grow-minnesota. John F. Considine III is the Business Development Resource Manager for Greater Mankato Growth, where he is responsible for providing information and services that are useful to area businesses and in efforts to position the Greater Mankato marketplace.

The Greater Mankato region was second in the state with Grow Minnesota! visits in 2014, visiting over 70 businesses.

If youâ&#x20AC;&#x2122;re interested in volunteering

MN Valley Business â&#x20AC;˘ March 2015 â&#x20AC;˘ 39

Greater Mankato Growth

GMG wants to be sure to address barriers facing a business. The conversation needs to be productive and it must be recognized that some barriers may require long range policy resolutions. However, if a barrier is brought forward enough by multiple businesses, the right partners can be brought to the table to address it.

only confirms which industries are growing but provides insight into why they are growing. The reason could vary from local market conditions to an international trend. With this documented information, local economic development organizations like GMG can present the marketplace as a prosperous location for business.

Growth in Greater Mankato NEW BUSINESS

NEW BUSINESS

Orthodontic Specialists of Southern Minnesota 1591 Tullamore Street, Mankato

Burrito Wings 302 Stadium Road Mankato

Eatery Tap 1521 Tullamore Street Mankato

Cavalier Calls on the Newest Greater Mankato Growth Members

Cavaliers

Greater Mankato Growth

Bradley’s on Stadium 1600 Warren Street, Suite 17 Mankato bradleysonstadium.com

D&K Powder Coating 1415 First Avenue, Suite 1 Mankato dkpowdercoating.com

India Palace 1511 Madison Ave Mankato indiapalace.org

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

Employee Recruitment Toolbox The employee recruitment toolbox offers a variety of information to showcase top recognitions of the region and proudly promote what it’s like to live, work and play in Greater Mankato. The information is provided in multiple formats including sharable documents outlining some of the regions awards and accolades, videos highlighting the community and links you can easily copy and paste into recruitment documents. To view the recruitment toolbox visit greatermankato.com/toolbox.

40 MArch 2015 1 •• JANUARY 2013••MN MNValley ValleyBusiness Business

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

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

2015 Business After Hours Sponsored by:

January Business After Hours hosted by Open Door Health Center

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

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

2015 Business Before Hours Sponsored by:

January Business Before Hours hosted by Planet Fitness

MN Valley Business • MArch 2015 • 41

Greater Mankato Growth

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

Why Membership Matters It can be a challenge to convey the direct impact membership has on a business’s bottom line. Certainly we like to think each of our members knows their investment in our organizations means better things for their business and our local marketplace. But how do we quantify that a membership with Greater Mankato Growth (GMG) “means better things for their business”? Last year, for the first time, Greater Mankato Growth set out to identify some interesting data points or “associated impacts” to help quantify what a membership with Greater Mankato Growth means for member businesses. Here is what we found:

Those businesses GMG interacts with have a survival rate 50% higher than the national average.

Of the 181 businesses the Ambassadors have visited in the past three years, 164 are still in operation today.

Out of the nearly 200 Mankato Magazine’s Reader’s Choice Best of Awards given out over the past two years, 67% of the award winners were members of Greater Mankato Growth.

Of the nearly $500 million in capital investment projects in the marketplace over the last three years, 72% of these business improvements and expansions came from our member businesses.

For more information on membership visit greatermankato.com/your-membership-your-choice or contact Karen Toft, Member Relations Director, at ktoft@greatermankato.com or 507.385.6643.

Greater Mankato Growth, Inc Annual Meeting Greater Mankato Growth

Greater Mankato Growth,Visit Mankato and City Center Partnership invite you to celebrate the successes of the past year, get a sneak peak into what’s next and honor the organizations volunteers of the year recipients at this year’s Annual Meeting.

March 12 11:30 - 1:00 pm Centennial Student Union Minnesota State University, Mankato We would like to congratulate our 2014 Volunteer of the Year Recipients: Greater Mankato Growth:Yvonne Cariveau Visit Mankato: Cindra Kamphoff City Center Partnership: Ann Vetter, awarded posthumously Tickets and information available at: greatermankato.com/annual-meeting. Sponsors

42 March 2015 1 •• JANUARY 2013••MN MNValley ValleyBusiness Business

Subway showing company spirit

Mayo Clinic Health System vendor booth

Gain Recognition as a Health and Fitness Supporting Business By Kathryn Reeder, Brand Manager, Visit Mankato

It’s a new year and for many people during this time of year, their goal is to become a ‘new you’. In fact, according to USA.gov, the number one New Year’s resolution for 2015 is to lose weight. People are setting their goals high for 2015; changing their lifestyles to be healthier, aiming to be more active and even adding a running event to their 2015 timetable. This year marks the sixth annual Mankato Marathon, presented by Mayo Clinic Health System and the race management team has exciting plans to increase 2015 attendance.

With the Mankato Marathon being such a significant event for the Mankato community, it is important to keep Mankato citizens and businesses informed and involved. Sponsorship, vendor presence, product placement, team participation and volunteering are all great ways for businesses to get involved with the Mankato Marathon. In 2014 nearly 4,500 runners participated, coming from 26 different states. Sponsorship opportunities range from bronze up to platinum, including anything from sponsoring a water stop along the course to being the t-shirt sponsor of the Mankato Marathon. Businesses are also welcome to have a vendor presence and/or product placement presence at the Scheels and Under Armour Sport & Health Expo, which all runners attend to pick up their race bag. Interested in running in one of the races? Businesses are also encouraged to sign up as an employee group and participate in the races together. A corporate discount is offered to employees who sign up in groups of 10 or more and branded company apparel is an awesome additional exposure opportunity on race day. For a more detailed list of sponsorship and exposure opportunities, go to mankatomarathon.com/sponsors/opportunities or contact Chris Willaert, cwillaert@visitmankatomn.com or 507.385.6663.

MN Valley Business • March 2015 • 43

Greater Mankato Growth

“In our sixth year, we are taking it a step further and embracing our unique race attributes as the ‘Bold Race, Exceptional Place’ that we have grown to be,” said Anna Thill, President of Visit Mankato. “The Mankato Marathon is an event that supports the health of our participants through the healthy choices needed for training and running or walking a race and also the economic health of our community through the impact of bringing guests into our community. We want to keep this momentum growing year after year.”

E 1965 FLO O D

ANNIVERSA RY

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