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IN THE SPOTLIGHT

The Story of Dr. Tom Jones Jones was raised in Hurricane, West Virginia, now a progressive bedroom community of 6,300 on I-64 between the state capital, Charleston, and industrial Huntington. The local Chamber of Commerce calls the region “Advantage Valley,” which has branched out from depending on the petrochemical and mining industries to embrace automobile-related manufacturing, healthcare, and engineering. A caring community, Hurricane helped prep a young Tom Jones for a bright future.

Thomas R. Jones, M.D.

Now he is The Orthopaedic & Fracture Clinic’s newest spine surgeon. While doing his residency in 2008 in Milwaukee, he helped author what he today refers to as the “best story” of his life. In an interview, he said: “We adopted our oldest daughter, Lana, from Russia in 2008. They have since closed down adoptions to Americans, so we were fortunate getting her out when we did. I was in residency in Milwaukee at the time, and to pay for the adoption had to take a job moonlighting at an urgent care facility in Janesville, Wisconsin. I had to make some pretty treacherous one-hour drives during the winter going to Janesville. To complete the adoption, we had to make three trips to an orphanage outside Moscow. It was surreal. Russia was really different from my expectations. It was a vibrant, almost chaotic city that didn’t appear to have any traffic rules. The people were very friendly. When we arrived the first time, they brought us to an office where the orphanage officials went over Lana’s case in Russian. I kept hearing the term “spina bifida” when referring to her. It made us nervous. I just asked if she was able to walk, and they said, yes. It turned out her spine was fine. For some reason, she had been routed to a special needs hospital even though her only problem was her vision. She had crossed eyes. She was only two and a half then. The first thing we did was take her outside for a walk. Children in orphanages there usually don’t receive a lot of human interaction. She was tiny, but had lots of energy and was just really beautiful. She was delayed in her walking and development, which I attributed mostly to lack of nutrition and human engagement. It was amazing watching her thrive back here in America. Now Lana is amazing, full of energy, and just turned seven. We give (financially) to the orphanage because they are in need of food and medicine for the special needs children. When she gets older, we plan on taking her back to see where she came from.”

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MARCH/APRIL 2013

Contents

THE MAGAZINE FOR GROWING BUSINESSES IN SOUTHERN MINNESOTA

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COVER STORY

Big Soul

Art Director/Staff Photographer: Kris Kathmann

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Interim Advertising Manager: Daniel J. Vance Contributing Photographers: Daniel Dinsmore, Art Sidner Contributing Writers: Carlienne Frisch, Ed Feulner, Michael D. Tanner Production: Becky Wagner Kelly Hanson Josh Swanson

PROFILES

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Circulation: Dave Maakestad

Driving two-lane Highway 14 over slippery Sleepy Eye snow, across gravelly prairie hinterlands, and just a frozen spit or two north of eye-blink Cobden (pop. 36)—to the edges of the Earth—the wayward traveler spies an army of 6,000 evergreens surrounding the North Pole at the corner of Christmas Tree Lane and Evergreen Boulevard.

Old World Flavor

Printing: Corporate Graphics, N. Mankato Mailing: Midwest Mailing, Mankato Cover Photo: Daniel Dinsmore

CIRCULATION 8,700 for March 2013 Published bimonthly

CORRESPONDENCE

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Send press releases and other correspondence: c/o Editor, Connect Business Magazine P.O. Box 452, Nicollet, MN 56074

As you step through Schmidt’s Meat Market’s doorway under the “Willkommen” sign, the old-time smokehouse aroma quickens your taste buds. You walk past a wall displaying numerous awards, and your eyes feast upon the beef jerky, specialty sausages, fresh meat cuts, and other mouth-watering morsels.

E-mail: editor@connectbiz.com (please place press releases in email body) Web: www.connectbiz.com

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ABOUT CONNECT Locally owned Connect Business Magazine has ‘connected’ southern Minnesota businesses since 1994 through features, interviews, news and advertising.

22 37 49 52 56

The Heritage Foundation and the Wall Street Journal have ranked America the world’s tenth most free country. Do you agree?

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Fax: 507.232.3373

Call: (507) 232-3463

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IN EVERY ISSUE

Business Trends Bulletin Board Hot Startz! Press Releases National Opinion

Phone: 507.232.3463

ADVERTISING

COLUMNS

Editor’s Letter Off-The-Cuff

Publisher: Jeffry Irish Editor: Daniel J. Vance

Mankatoan Mike Donohoe has found his anam cara in the writings of the late Irish priest John O’Donohue, author of the popular book Anam Cara: Spiritual Wisdom from the Celtic World.

Christmas Lights

STAFF & CONTRIBUTORS

MARCH/APRIL 2013

Connect Business Magazine is a publication of Concept & Design Incorporated, a graphic design firm offering print design, web design, illustration and photography. conceptanddesign.com

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Copyright 2013. Printed in U.S.A.


EDITOR’S LETTER

No Ordinary Families Family Ties, Family Matters, All in the Family, Family Guy, The Addam’s Family—all these American TV shows became successful by featuring family relationships and dynamics. The same can be said for this issue’s featured companies and our cover story, Mike Donohoe. This March/April, we showcase the Schmidt family of Schmidt’s Meat Market (Nicollet), the Hacker family of Hacker’s Tree Farm, Nursery, and Greenhouse (Sleepy Eye and New Ulm), and on our cover, Mike Donohoe, outgoing president of the Independent Insurance Agents & Brokers of America (IIABA) or Big “I”, a national organization representing 23,000 U.S. independent insurance agencies and their 300,000 employees. Donohoe, along with brother-in-law Jay Weir, co-owns James R. Weir Insurance Agency of Mankato and Edina. Not always, but successful family-owned businesses often have synergies and a laser-like focus seldom witnessed in non-family businesses. Through blood and bonds, they can become better business people and better owners. May you enjoy our latest magazine. Sursum ad summum,

Daniel J. Vance Editor

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CONNECTING BACK

Read the entire articles at connectbiz.com

1 YEAR AGO

MARCH/APRIL 2012 Our introduction to AgStar Financial Services’ Paul DeBriyn—a Newt Gingrich lookalike— concluded this way: “Today, under 56-year-old DeBriyn, Mankato-based, 600-employee AgStar Financial Services manages $8 billion in loan and lease assets involving 25,000 client/stockholders. Its historic and primary boundaries have been 69 Minnesota and Wisconsin counties, but its secondary territory has grown to include substantial swaths of the United States.” Companies profiled: DLC Manufacturing (New Ulm) and Waseca Music. Memorable quote: “…I tried differentiating myself from other people and felt I was always better off being different. So I’d volunteer for many of the odd projects coming up others didn’t want. And I did those projects cheerfully.”—Paul DeBriyn, describing his early career.

5 YEARS AGO

MARCH/APRIL 2008

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WWW.GLOWHEARTH.COM 241 ST. ANDREWS DRIVE, MANKATO, MN 56001

Our cover story was Bryan Paulsen of Paulsen Architects. Companies profiled: Lakeshore Inn (Waseca) and Appletree Press (Mankato). Memorable quote: “I believe good architecture and design can directly impact an organization’s success.”—Bryan Paulsen, referring to the former Midwest Wireless headquarters.

10 YEARS AGO

MARCH/APRIL 2003 Cover story: John Linder of Minnesota Valley Broadcasting. Companies profiled: Timberlake Orchard (Fairmont) and Nissen Investigations (Waseca).

15 YEARS AGO

MARCH/APRIL 1998 Cover story: Jerry Schugel of J&R Schugel Trucking (New Ulm). Companies profiled: Four Flags Over Aspen (Janesville) and Internet Connections (Mankato). CONNECT Business Magazine

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By Daniel J. Vance Photo by Daniel Dinsmore

Mankatoan and outgoing president of national association representing 23,000 independent insurance agencies has contemplative side.

Mankatoan Mike Donohoe has found his anam cara in the writings of the late Irish priest John O’Donohue, author of the popular book Anam Cara: Spiritual Wisdom from the Celtic World. Anam cara is Gaelic for “soul friend.” Author O’Donohue believed people become soul friends when their souls are knitted together in a trusting, mutually appreciative, and transparent environment. You can reveal anything to an anam cara and he or she will always accept you for you. The tome reached best-seller status in 1997, which was the year Mike Donohoe began his annual reflective pilgrimages to the Jesuit Retreat House Demontreville, near Lake Elmo, Minnesota, where he has said absolutely nothing for four consecutive days each year for 16 years. While many of his acquaintances believe the stony silence a significant stretch given Donohoe’s regular rapid repartee, all his true anam caras know those zipped lips have purpose. Author O’Donohue stressed the constant need for contemplation in the chaotic Western world. Given his workload, disciple Donohoe needs contemplation. From 2011-12, Donohoe served as president of the Independent Insurance Agents & Brokers of America (IIABA), also called Big “I”, which represents 23,000 independent insurance agencies and their 300,000 U.S. employees. It’s a big deal. Along with brother-in-law Jay Weir, Donohoe owns the James R. Weir Insurance Agency, which has offices in Mankato and Edina. Independent insurance agencies represent many insurance companies that offer home, business, life, healthcare, and auto insurance, and employee-benefit and retirement products. Big “I” began in 1896 and has been a voluntary federation of associations active in all 50 states. Being president of Big “I” was a big job for a big man trying to solve big problems. He has performed his piece only after finding inner peace. continued >

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Big Soul

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I’ve heard you lived in Cincinnati for four years, from second through sixth grade, literally across the street from arguably the country’s best high school football program, Moeller. They have won four “mythical” national high school championships over the years. You’re a big guy. Did you ever wish you could have stayed in Cincinnati to play for Gerry Faust, who later went on to coach at Notre Dame? My dad was a professional football player for the Chicago Cardinals, which was before the Bears. When I was growing up in Cincinnati, and if you loved football, Moeller was the place to be. I played there for the Hague Jets, a team sponsored by a car dealership. I was a fullback and big. From second grade through sixth, during football season, I had two-a-day practices. My dad would take me to the athletic club to sweat me down before the weekly weigh in. Did Gerry Faust recruit you? Yes. My sister was taking summer school typing classes from Faust. He found out about me and sat on my porch one day and recruited me—as a sixth grader—to play high school football for Moeller. He was a legend there. Also growing up, I was really good friends with Buddy Bell, who went on to Moeller and would play third base for the Cleveland Indians and Cincinnati Reds. He was our sixth grade football team quarterback. I ran into him once when he was playing professional baseball and asked why he hadn’t played football for Faust. He said Faust wanted him to quit baseball. He wouldn’t. So Faust cut him. Why leave Cincinnati? My dad worked for an insurance company. In those days, in order to move up, you spent about four years in each spot on your career path. I was born in Milwaukee, and went to Chicago, Cincinnati, and back to Chicago. After going back to Chicago the second time, my dad didn’t want to move anymore. He was born and had played professional football there. What did you learn from him? My dad was hardworking, competitive, and driven to succeed. My mother took care of us. She was a stay-at-home mom, and the disciplinarian, unless things got really

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Mike Donohoe

bad. I learned from my dad hard work, but more so from him that there were people less fortunate in the world. One cool story about him: on the day he retired at age 56, his company gave him a big bash. Years later, the only thing he remembered about that party was dancing with Mary, the file clerk. He said she had done that job every day for years and no one had paid any attention to her. She had worked harder than all the men making big bucks. My dad said to never forget there are people others ignore, and that my job in life was to pay attention to those people. Looking back, most of the people making the most difference in my life have not been high flyers. You went on to college. I went to St. Mary’s in Winona to play basketball. I’m 6’4”. My dad had coached a guy in high school who ended up being an All-American at Northwestern. That guy became a basketball coach at St. Mary’s. It was a perfect match. I played a lot over four years, received a good education, and had a blast.

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What was your major? I earned a psychology degree, which fits into what I do and even more into my work with the Association. The study of people and what makes them tick—that’s what makes us (insurance) people good in our business. Recently, I watched a TV show about David Kelley, who started in the ‘70s a company called IDEO. He does design work. His company studies human behavior and how people interact with a product and the company makes adjustments to the product based on that interaction. He gets teams together that can include a lawyer, doctor, a computer guy, and a design engineer, for example, and asks them to evaluate new inventions. They figure out what they like and don’t like about a product and suggest design changes. It’s all based on empathy. What an awesome way to go about designing a product. (His company designed the first computer mouse, for example.) I like what he does in terms of collaborative problem solving using people from different professional perspectives. That’s what working with the Association has done for me. I was exposed to the Association on a national level at age 31 in 1983. I was president of the Minnesota Association. It introduced me to people MARCH/APRIL 2013

CONNECT Business Magazine

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Big Soul

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way different and way smarter than I was. They came from all 50 states. What a little shell we live in here in protected southern Minnesota or even Chicago, where I mostly grew up. From the Association, I learned the Midwest was different from the South, West and Northeast. It was so cool having all these people in the same room for everyone’s betterment. When I walked into the national meeting the first time, the chairs were arranged in a horseshoe shape with each state representative having their own microphone. The gentleman leading the Association then was from a giant, international insurance agency in Boston. They were talking about things I had never heard.

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Such as? For one, agents need insurance companies. An independent insurance agent represents more than one insurance company. Depending on where you live, an independent agent can have difficulty getting contracts to represent insurance companies. Midwest agents typically don’t have many problems because the Midwest has been a profitable place to do business. But there are parts of the country where the economy hasn’t gone well. In 1983, I met an insurance agent from West Virginia who had been doing business from her front porch and making about $40,000

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Big Soul

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Soul Mates CONNECT: You say you have a need for reflection. DONOHOE: It’s important for me to get away to be in my own head. Every year for the last 16, I take four days and go where I can’t talk to anyone—to a Jesuit retreat house north of the Cities. You can’t talk there. A speaker gives you something to think about, and you walk around thinking about what has been said. I also try scheduling time in my day when I can get away from distractions to reflect on what has happened. That really helps me grow as a person—and that’s what we’re all here for. CONNECT: Do you have a favorite book? DONOHOE: Anam Cara is a book of Celtic wisdom. It’s part poetry, philosophy, and psychology. It’s a tough read. It talks about soul friends and how you run into these people durHistorical plaque on The Grandlife. Hotel ing the course of your

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Mike Donohoe | James R. Weir Insurance Agency

in commissions, which wasn’t much to run her business. Because of her geographic location and the amount of business she could offer a company, it was hard for her to attract any company willing to represent her. So she had to write all of her business through the West Virginia Insurance Pool, which normally is a dumping ground for unprofitable-type risks. I met her at the (national) Association meeting and we started talking about her market. I knew the Association should have the clout to give a duespaying member—just like I was—some insurance companies so she could compete. The Association ended up setting up an agency for her to run her business through. She owned it. This gave her access to companies she never had. When I saw her two years later, she began crying. She said she couldn’t thank me enough for helping. That’s the power of agents forming an association. When traveling around giving my stump speech as president of Big I, I often mention the first time I went lobbying by myself. I had an appointment with my congressman. Beforehand, I had gone to all the briefing sessions and knew my talking points. But when I went there, I saw 40 postal union members outside the congressman’s door and the congressman was there with TV lights on. I walked around them all and told an aide I had an appointment in five minutes. The aide said the congressman was tied up and I had to meet with another aide, who didn’t know anything about our organization. I left and today remember

how terrible the whole experience felt. I felt I couldn’t make a difference being there—as if it were a joke even trying. Now, a couple times each year, Association members storm the Capitol. We see everyone in Congress and I see Minnesota politicians. We still get the aides, but I understand the process now. If talking about flood or crop insurance or Obamacare, I know everyone else is talking about the same thing. I know we can influence legislation. How do you differentiate yourself and your cause to make yourself memorable to members of Congress? You’re only a part-time volunteer lobbyist. It’s easy because I live in Mankato and I’m a small businessman. I’m not a professional lobbyist. They listen to me. If I come in saying what will happen if they don’t pass flood insurance and the rivers rise, and I want to sell coverage but can’t because the program is closed—they listen. What we (Association members) do often makes a bigger difference than our paid lobbyist—way more. Let’s talk about other issues. First, joint and several liability. Supposedly, the Minnesota Legislature cleaned that up in 2003, but there is still the issue of the reallocation of uncollectible amounts. That is a big issue for business. Right. Unfortunately, you can’t say for everybody it’s a good or bad thing. I can say for my own customers, I’m not a big fan of it. I don’t buy into it.

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Why? Joint and several liability law enjoins me with the actions of someone else who I may not have had anything to do with or had a small connection. For example, imagine you are in a car accident. The car three ahead of you hits someone, and eventually you are the last car in a chain reaction. Now we have three or four people involved. Really, I had nothing to do with the initial accident. Everybody stopped in front of me. But the way insurance is done,

if you rear-end someone, you are probably at fault. So there’s a big lawsuit and I’m included. I really had nothing to do with the accident in the first place. It was the first driver who screwed up. But because I have liability limits that are higher than maybe the other drivers, I get sucked in. But what happens if all the other drivers in front of you don’t have insurance? Then I’m the guy taking the hit. It’s not

Is your insurance or financial advisor a member?

right. Those are things we counsel our customers on. My job as an independent agent is to tell you about joint and several liability law and protect you—to explain how this (reallocation of uncollectible amounts) could affect you. You can’t get that level of personal service and advice by buying the cheapest policy online. About 20 years ago, Walmart began cutting out the brokers that act as middlemen for food

Brent Friedrichs CSA Midwest Insurance Group President

Chad Ostermann M&M Insurance Agency President-Elect

Tamera R. Phillips CSA, CLTC, LUTCF Midwest InsuranceGroup Past-President

The Mission of the National Association of Insurance and Financial Advisors-Southern Minnesota, is to enhance the professional skills of its members, who assist the public in achieving financial security, by promoting education, ethical conduct, and public relations while encouraging professional relationships among its peers and other professionals. It supports national and state efforts to improve the insurance and financial business environment.

Charles Frauendienst Richard W. Hamer FIC CLU, ChFC Modern Woodmen New York Life of America

Jesse R. Schilling CSA Midwest Insurance Group

Mark W. Sexton Farmers Financial Services

Lana R. Karstens Margaret Koberoski Mike Matuska Phil Janzen Bradley P. Johnson Richard Kakeldey FIC, CFFM Associate Member FIC, LUTCF LUTCF Pratt, Kutzke & Associate Member Attorney at Law Modern Woodmen Attorney at Law Catholic United American Family Associates of America Kakeldey & Koberoski Kakeldey & Koberoski Financial Insurance

Dan Weir Craig Sinning Jeff Welp Warren “Buster” West Employee Benefits CFP Welp Financial CLU, ChFC & Insurance Minnesota Services, Inc. & Principal Financial Services Financial Services Insurance Services Group


Mike Donohoe | James R. Weir Insurance Agency

manufacturers. Walmart wanted to cut their pricing by the five percent the brokers were earning. So they pressured manufacturers to deal directly with them. Do you feel or fear the insurance companies you represent could eventually cut you out by going completely online or by going through master brokers? They could—and it happens. But I represent companies who don’t want that. I don’t work for any company. Nobody tells

Mike whom to represent. I have a company we represent coming in to Mankato next week because they believe we aren’t giving them enough volume. I am going to tell them they can go somewhere else for representation. I am able to control whom we do business with. We have a hands-on approach with customers running contrary to what people looking online want. There’s a quality you can’t quantify in a good independent insurance agent. They are the ones doing everything in the

community. They are on the church board, supporting nonprofits, volunteering at schools, and selling hotdogs at high school games. People come to us for reasons you can’t quantify. They trust us. They often come to us with all their problems—not just insurance problems, but everything, including thing going on at home. What I hear you saying is that insurance, at its core, is a trust industry. When buying

2012 • 2013 NAIFA Board Members

Jeremiah J. Lurken Modern Woodmen of America Secretary

Casey West Jerry P. Groebner Chad E. Salzwedel Barbie J. Schwartz Dennis Jasperson Matthew P. Barnes Principal Groebner MN Financial FSS, LUTCF LUTCF LUTCF, CLTC Financial Group Insurance Agency Services Thrivent Financial Midwest Financial YAT Chair Government Relations Membership for Lutherans Insurance Group Concepts Public Relations Natl. Committee Person Health

Leora Ask John Behrens Jr. FIC, FICF, LUTCF, CLTC CLU, ChFC MN Financial Thrivent Financial Services for Lutherans

Frank Brandt CLU, LUTCF State Farm Insurance

Mary A. McClure Susan Mayer CO Brown Employee Benefit Insurance Services McClure Agency

Ronald H. Meyer CLU, CLTC New York Life

Gloria Butler State Farm Insurance

Mike Callahan MN Financial Services

John Carver CLU, ChFC, LUTCF Farm Bureau Financial Service

Scott Michaletz CIC Kato Insurance Agency

Duane Mock FIC, LUTCF Catholic Order of Foresters

Lon Nagel CLU AXA Advisors

Helen Dale Helen Dale Agency

Gary S. Johnson CLU, ChFC Benefit Resource Group LUTC Chair

Preston J. Doyle CLU State Farm Insurance

Gretchen Rehm Judy E. Ringler-Mountain The Gretchen Rehm LUTCF, CLTC Agency New York Life Lili Liason

Members not pictured: Larry Anderson • Marvin N. Augustin, CLU • Louie Austvold, CLU, ChFC • Lonnie Bristol • Paul Borchert • Richard Chambers, CLU, ChFC, LUTCF • Brad Connors • Charles Danish • Thomas Deike • Janet Doyle • James Fedson • Angie Gode • Paul E. Grabitske • Gordon L. Graham, CLU, ChFC • Michael Graham • Nancy Hansen, CLU, LUTCF, FICI, FIC • Craig Hanson • Molly Harvey • Tyler Hasz • Douglas Helget, CLU, ChFC • Steven Helget • James Hoffmann, LUTCF • Joel Jenkins, CLU, ChFC, LUTCF • Glenda Jewison • Lisa Johnson • Matt Kearney • Shirley Krenik, LUTCF • Kim Mertz, LUTCF • Joseph Michaletz • Joseph Milam • Robert Oshel, CLU • Brent Pattison • Paul A. Peterson • Raymond Peterson • Bradley W. Pratt, CLU • Andrew Roos • Ronald D. Sermon, CFP, CLU • Thad Simpson • Robert Spiegler, CLU, ChFC • Colby Staloch • Cynthia Steiner • Brent Stelter • Richard Stolp, CLU, ChFC • John Tetzloff • Sue Van Boening, FIC • Roger Versteeg, CLU, ChFC, CFP • David Vetch • Lance Wakefield, CLU, ChFC, CASL • Wayne Walgenbach • Paul Weber • Don Wendel, CLU • Mark Windschitl, LUTCF • Joshua Willour


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insurance, people want to be able to trust the agent selling it. That’s the crucial distinction between an independent insurance agent and buying online. I wrote an article once about an insurance agent in Elysian. You should have seen his obituary in the newspaper. He wasn’t just an insurance agent—he was integral to just about everything that happened in town. Independent insurance agents have a special quality. They are awesome.

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Another issue with the Association has been the medical loss ratio for health insurance. Explain what it is and how it will affect your customers? The medical loss ratio came out of Obamacare. What it basically says is 80 percent of the premium you pay or the benefits you receive have to go towards coverage. Twenty percent is left for the agent to run the company and pay commissions. Obviously, when you’re in the insurance business and selling health insurance, you want to make money. So the big fear with medical loss ratios is we’re going to get cut out of being able to sell health insurance because we won’t be able to make money doing it. In Minnesota, it isn’t that big of a problem. We’re still getting paid a commission. Our insurance companies have decided they can work within Obamacare parameters. But if you go to Oklahoma or Mississippi, the agencies that wrote a lot of health insurance are now out of business. Some insurance companies used medical loss ratio as an opportunity to cut out agents. Everyone in the industry has the same concern with the health exchanges being set up under Obamacare. No one knows how agents will fit into the exchange, particularly with health insurance. An independent agent told me recently if the medical loss ratio changes, he would have to lay off employees. Absolutely—or get out of the health insurance business altogether. For example, we don’t do Medicare supplements anymore because you had to do a lot of certification work to keep your licenses and we earned only $36 a year flat commission for each customer. Well, you can’t do that for $36 a year unless you have a huge volume. So when that change came, we sold our book. We got out of it because there was not


Mike Donohoe

enough commission in the product for us to offer it. I am concerned when our customers, who rely on us for help, end up having to buy products like this online without an informed and emotionally connected person to help them make the right decision. It’s the same with crop insurance. Our commissions are always at risk when we’re dealing with a government program that can make cuts. We sold our crop insurance book six years ago. Take me through your career path after St. Mary’s. In 1974, I got out of school and started selling life insurance to college kids. I hated it right away. My dad always said I was too nice of a guy and didn’t have the killer instinct. I went to the training, thought this particular program was a scam, and said I wasn’t going to do it. I decided I wanted to sell property/casualty insurance, like my dad. I called on every insurance company in Minneapolis and couldn’t get a job because I didn’t have the experience. My father-in-law wouldn’t hire me for the same reason. Through connections, I finally accepted a position as a property underwriter with an insurance company contingent on their hiring me for a career training position—when such a position opened. In a career training position, I would spend six months each in four different areas and then pick one of the four for a career. I sat at that desk for a year, waiting. Then one day, a guy came up and introduced himself as the new trainee in the career training program. He would be working with me for six months, he said. They had given that position to someone else. So I went to my boss and told him that if he would lie to me once, he would lie again. I quit without having another job. That’s when my wife and I came to Mankato. I joined what eventually became the James R. Weir Agency, where I’m at today. You became involved with the Minnesota Association of Independent Insurance Agents in 1981, and became president in 1983, when you were 31. Most people that age would think more of spending time building a business rather than an association. You sound like my dad. (Laughter.) At the

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Big Soul

Minnesota Chapter of the aMeriCan CounCil of engineering CoMpanies

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time, I don’t know why I did it except I was smitten by my experience meeting people in the Association.

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How big is James R. Weir Insurance now? Our revenue is about $1.5 million. When I came to Mankato, our revenues were a quarter of that and we employed more people. Technology has changed our business. The only specialty you could say we have is in servicing many social service and nonprofit clients. My partner Jay has a niche with Catholic convents. With that, we’re licensed in 41 states. He goes once a year to a convention attended by 500 nuns. That fits into our culture well. What I really like about my job is the variety. Yesterday, in the morning, I was at a robotics plant. In the afternoon, I met with a manufacturer. Earlier today, I was with a painter. Tomorrow, I’m with a municipality. Every day is different. I never get bored. In order to insure a robotics plant, I have to understand robotics. In order to insure a governmental entity, I have to understand how a governmental entity operates. In order to understand a painter, I have to know what kind of paint she uses. Every day, I’m challenged in a different direction. It is fascinating.

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You mentioned that working with convents fits your culture. Exactly how? We stress a high moral and ethical way of doing business. Ethics permeates our culture. I have a sister with a PhD in ethics. If you stay ethical, you don’t have to worry about your business. I’m not here to make a quick buck, but here to take care of customers. If I take care of them, they will pay me a commission for my work.

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Through your work with the Association, you have met many well-known people inside the DC beltway. Have you been to the White House? Yes, and it was awesome. I went there as a regular tourist— meaning I didn’t have lunch with Barack. But one fascinating thing for me—and politically I’m somewhere in the middle—has been getting to know our Minnesota politicians, such as Walz, Klobuchar, and Paulsen. We have some really good politicians. But go to the South—and it’s different. In my job, I had to do fundraisers. Down South you might see an 80-year-old politician who has been there forever with his hand out asking for contributions. Personally, I’m a huge believer in term limits because the machine forces you to change. Some politicians go with the right intent, but it’s hard to do the right thing if you’re always bucking the tide. You have been heavily involved in trying to attract the next generation of leaders to your industry. That’s my hot button issue. The average age of our members is 53. Those people aren’t going to be there forever. Who will take over when they retire? The younger generation doesn’t yet understand what an independent insurance agent does. What do you mean? Here’s an example. During the course of my travels I have opportunities to talk to economics clubs at colleges. I usually speak with representatives from brokerage houses and big accounting firms. I always ask to go last. These other guys say if you go with them,

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Mike Donohoe | James R. Weir Insurance Agency

What I really like about my job is the variety. Yesterday, in the morning, I was at a robotics plant. In the afternoon, I met with a manufacturer. Earlier today, I was with a painter. Tomorrow, I’m with a municipality. Every day is different. you will work in a firm of 250, live in New York, have fun, and earn $85,000 your first year. Then I speak. I tell students I probably make more money than the other speakers. I have never missed any of my kids’ games. I’ve never missed a school play. I can do my job with a telephone and a laptop anywhere in the world. Why not go back to your hometown where things are more comfortable and less expensive and where you aren’t going to kill yourself with stress and bumper-to-bumper traffic? Many kids don’t understand what we do. You can be in the insurance business and be an accountant, in IT, in marketing, sales or an underwriter at a desk. There are all kinds of advancement possibilities because 60 percent of insurance company employees are over age 45.

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Big Soul

We have two openings here I’m trying to fill with younger people. I have had job descriptions posted at all the universities near here and haven’t heard from anyone. My job leading the Association was to come up with a plan for the industry. Insurance companies are very involved getting the word out. If we don’t get the younger generation involved, what will happen is the independent agents in smaller towns around Mankato, for example, will retire and no one will take their place. Big city companies will do all their business, and that will affect smaller towns. Shifting buying habits have forced changes in your industry. Almost 75 percent of people buying insurance for cars and homes shop on the Internet. What we as Association members have to do is increase our search engine optimization and explain what makes us different from online companies. People make the world go around. I believe eventually all this technology will backfire. We were put on the earth to take care of each other and interact. But you have a whole generation of people growing up that didn’t grow up with your philosophy. Will your industry even exist in 30 years? My son came to listen to my speech once. I talked to the audience about being active in the community. My son said I had a helluva speech, but it was a bunch of baloney. He said his generation buys insurance online. I told him I knew that. What I do will exist in 30 years because enough people will realize they need personal help from people they trust. All it will take for many of these younger people is buying the cheapest health insurance online and finding out they still have a huge hospital bill. It may take my son having a bad accident before he figures out he should have listened to his old man about the higher limits. He’ll come back because he needs someone he trusts to talk about it. A consultative—not a sales approach—helps people trust you. Our Association has 23,000 agencies and 300,000 members. We have developed something called the Consumer Agent Portal (CAP), which uses the number of our agents to raise us up in search engines. So if every independent agent optimizes their websites to point to one spot, a person 20

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Mike Donohoe | James R. Weir Insurance Agency

searching for car insurance, for example, will find the local independent agent right up there with the direct writer agents. I was told once Mankato was one of the most insured cities in the nation. It is. The other interesting thing is business here doesn’t change hands easily. People are loyal to their agents. You have to really screw up bad to lose business. It’s been a fun run. Who thought I would

end up in Mankato? It’s a great place. People say I’m 60 and will be retiring. But what am I going to do? When talking with a friend recently considering retirement, he said he was going to learn how to hunt. I don’t want to hunt and I don’t play golf. My work is my hobby. Why quit when I’m doing what I love, can still make a pretty good buck and take care of people, and have such variety?

THE ESSENTIALS

James R. Weir Insurance Agency Owners: Mike Donohoe and Jay Weir Address: 208 North Broad Mankato, MN 56001 Phone: 507-387-3433 Web: weirinsurance.com

Editor Daniel J. Vance writes from Vernon Center.

ADVERTISE WITH US [CALL 507-345-4537] MARCH/APRIL 2013

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BUSINESS TRENDS

FOOD

As American dietary habits and needs have changed, some vendors and restaurant chains have responded by attempting to fill niches. Their efforts carry risk. From seattlepi.com: In January, McDonald’s and a franchisee paid $700,000 to settle a class action lawsuit alleging a Michigan McDonald’s had “falsely advertised its food as being prepared according to Islamic dietary law.” The settlement beneficiaries included the lawyers ($230,000), a Detroit health clinic ($275,000), the Arab American National Museum ($150,000), and Dearborn Heights resident Ahmed Ahmed ($20,000). Only two U.S. McDonald’s restaurants sell food meeting Islamic (halal) requirements. Both are in Dearborn, home to 150,000 Muslims. Though the restaurants advertised serving only halal McChicken sandwiches and Chicken McNuggets, Ahmed Ahmed claimed

in 2011 the location served him a non-halal sandwich. According to the Qu’ran, Muslims are forbidden to eat pork, animals dying pre-slaughter, blood and blood by-products, and animals slaughtered without Allah’s name invoked. Ahmed’s attorneys alleged McDonald’s sold non-halal chicken sandwiches after running out of halal. McDonald’s and the franchisee denied liability. According to seattlepi.com, “In the settlement notice, (the franchisee) said it has a carefully designed system for preparing and serving halal such that halal chicken products are labeled, stored, refrigerated, and cooked in halal-only areas.” In 2002, McDonald’s settled out of court for

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U.S. Department of Justice in January ordered Lesley (Mass.) University to ’continually provide’ students with gluten-free dining options and pay $50,000 in damages $10 million after Hindu and other groups accused the company of labeling French fries and hash browns as “vegetarian” when the vegetable oil used contained beef flavoring. Halal isn’t the only niche. Over the years, some restaurants have tried catering to customers asking for products free of peanuts, nuts, shellfish, eggs or lactose. The latest trend is toward gluten-free food. According to bostonglobe.com, the U.S. Department of Justice in January ordered Lesley (Mass.) University to “’continually provide’ students with gluten-free dining options and pay $50,000 in damages to ensure the university is in compliance with a federal law that protects people with disabilities. A group of students with celiac disease, an auto-immune disorder triggered by gluten, will receive the money, according to the Justice Department.” In part, a person with celiac disease can experience arthritis-like symptoms, malnutrition, extreme intestinal discomfort, and have a higher risk of contracting cancer. The Lesley University settlement could have wide ranging

ramifications. The Boston Globe reported the agreement said Lesley had violated the Americans with Disabilities Act because students with celiac disease could not ‘fully and equally enjoy’ campus food. Going forward, Lesley University must give up main dining hall space to prepare and store gluten-free foods. Look for other university eateries being forced to comply—and perhaps businesses. Besides having to deal with lawsuit-happy customers, restaurants trying to accommodate for special customer needs—such as halal, vegetarian, and gluten-free—have the added stress of actually preparing the food to specifications. In the Connect Business Magazine reading area, a number of restaurants now offer gluten-free pizza, but not until December had a chain offered gluten-free sandwiches and soups. In a telephone interview, Erbert and Gerbert’s franchisee Mike Steindl said, “(Gluten-free) is now a company-wide initiative and we just wanted to be the leader in the sandwich industry. And we’ve been getting very positive feedback.” Erbert and Gerbert’s has 60 Midwest locations, including Steindl’s four in Mankato, North Mankato, and St. Peter. Steindl added, “We have tried making the whole process gluten-free as possible. We make the sandwiches in a separate area and separate the meat, cheese, and vegetables. If you’re looking for 100 percent gluten-free, we can’t guarantee it. But we have certified gluten-free bread and take every precaution to insure a gluten-free meal. We also have two gluten-free soups that we put in a separate soup wheel with separate ladles.” Gluten-free subs cost more: Erbert and Gerbert’s charges an extra $1.99.


BUSINESS TRENDS

ENTREPRENEURSHIP

From the Small Business and Entrepreneurship Council (SBE Council): There has been a sharp rise the last 15 years in the percentage of new entrepreneurs in the 55-64 age group. SBE Council cited a 2012 Kauffman Foundation report noting that 55- to 64-year-olds in 1996 accounted for 14.3 percent of all new entrepreneurs and in 2011 20.9 percent, a whopping 46 percent increase. Although most people associate new entrepreneurs with being young, the report—citing Bureau of Labor Statistics research— found far more 55- to 64-year-olds becoming new entrepreneurs than 16- to 34-year-olds.

What was the age group with the highest percentage of new entrepreneurs? The 45-54 age group. In 1996, this group had 23.9 percent of all new entrepreneurs and in 2011 about 28 percent, a healthy 16 percent increase. In September 2010, the Bureau of Labor Statistics noted, “The chief reason (for the increase among older Americans) is that younger workers rarely have accumulated the capital and the managerial skills required to start a business, whereas many older workers may be able to acquire these resources through their own efforts or through access to credit. Moreover, research has shown that older workers who have retired from wage and salary jobs may become self-employed to supplement their retirement income.”

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FISCAL POLICY

From CNBC.com: Two vastly differing visions of fiscal policy playing out this year will sharpen red and blue state distinctions.

President Obama won all six. Democrats, on the other hand, have been primarily eyeing income tax rate increases. The poster child has been single partyrule California, which now has a 13.3 percent top income tax rate for high earners. In Massachusetts, Governor Deval Patrick has proposed increasing income tax rates and lowering sales taxes. Finally, in Minnesota, on January 22 Governor Dayton proposed raising overall taxes $2.13 billion, including a cigarette tax hike, an income tax rate increase for high earners, the broadening of the sales tax, and tax loophole closures. The proposed increases would more than offset decreases in the property tax, corporate tax rate, and overall sales tax rate.

After the 2012 elections, Republicans gained complete legislative and gubernatorial control in 25 states—and Democrats in 12, including Minnesota. For the first time in 60 years, 37 states have single-party control. Those parties have the potential to make sweeping changes. Republicans have been eyeing state income tax abolishment or decreases, and sales tax increases. For example, Louisiana Governor Bobby Jindal wants to replace his state’s income and corporate taxes with a sales tax increase. North Carolina and Nebraska have been debating similar measures. Kansas and Oklahoma Republicans this year likely will cut personal income tax rates. For the record, Florida, Ohio, Michigan, Pennsylvania, Wisconsin, and Virginia are six states now under complete Republican control even though

MARCH/APRIL 2013

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By Daniel J. Vance Photo by Kris Kathmann

Sleepy Eye couple fends off adversity in becoming largest wholesaler/retailer of live Christmas greenery in the southern half of Minnesota.

Driving two-lane Highway 14 over slippery Sleepy Eye snow, across gravelly prairie hinterlands, and just a frozen spit or two north of eye-blink Cobden (pop. 36)—to the edges of the Earth—the wayward traveler spies an army of 6,000 evergreens surrounding the North Pole at the corner of Christmas Tree Lane and Evergreen Boulevard. Here, dozens of green-clad elves (disguised as employees) are preparing for the next Christmas season. The proprietors of this enormous Christmas-themed business are Dan and Lynn Hacker, both 60, who own Hacker’s Tree Farm, Nursery and Greenhouse, the largest wholesaler/retailer of Christmas trees, wreaths, and garlands in the southern half of Minnesota. They bleed Christmas green. For example, their living room Christmas tree alone (see photo, left) has more than 3,200 lights and 1,000 Christmas ornaments, including many that have been passed down generations. It all seems so rosy and cozy here in this idyllic winter wonderland. And yet not all has been. In 2007, a physician diagnosed Dan with Lou Gehrig’s disease, technically called ALS, which is a fatal neurodegenerative disease. No cure or effective treatment exists, and the vast majority of people with ALS die within five years. Fortunately, Dan has a rare slower version and could live many more years. He and his wife have repeatedly beaten the odds throughout business and life, and it should come as no surprise they are beating the odds again. What makes their story even more unique has been their dogged determination to find a path for Dan to continue working at this business that began about 30 years ago following another lifethreatening disease. continued > MARCH/APRIL 2013

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At age 17, Dan was placed in charge of a 200-person detassling crew for North Star Seeds in Springfield, and was driving a school bus he shouldn’t have been allowed to drive because of his age. Dan Hacker was raised on a Springfield farm as the oldest of 13 children. He was a chapter president with Future Farmers of America and active in 4H, won awards with both, and developed a work ethic a mile deep doing farm chores and caring for hogs, chickens, and cattle. Being the oldest child developed in him a sense of responsibility. The Hackers weren’t wealthy: his father had only 160 acres. Said Lynn, sitting at a table in the family living room, hands neatly folded, “They (the Hacker children) all learned to take care of themselves, and how to be a family and help each other out. They all learned to work very hard.” At age 17, Dan was placed in charge of a 200-person detassling crew for North Star Seeds in Springfield, and was driving a school bus he shouldn’t have been allowed to drive because of his age. He worked at a Vigorena test farm. After graduating from high school in 1970, he attended the vocational college in Jackson for a quarter before running out of money and returning home to Springfield to work at the feed mill. He worked his way up to manager. On the other hand, Lynn grew up in Door

County, Wisconsin, in an entrepreneurial family that prepared her for handling turnon-a-dime change. Her father sold apples, had a cherry orchard, became a Realtor, bought land, and owned many businesses. Lynn said, “We used to hire Hispanic workers to pick our 200 acres of cherries. When 10 in the early 1960s, I was placed in charge of managing 60-100 of these workers. I was feeling pretty cocky managing all these people and having everyone listen to me. I didn’t find out until years later my father had paid two of the workers very well to make sure everyone respected me. Through that experience, I gained a lot of confidence dealing with people.” She went on to graduate in 1974 with a teaching degree from Dr. Martin Luther College in New Ulm. And that was the year Dan and Lynn found each other. Lynn said, “I had always told my mother I was going to marry a farmer, but she didn’t want me to marry one. She wanted me to attend MLC and marry a pastor or teacher. I loved growing up on a farm. I helped my dad do everything.” Dan and Lynn met near Hutchinson, at


Hacker’s Tree Farm, Greenhouse & Nursery | Sleepy Eye

a Lake Marion dance. Said Lynn, “Daniel was very, very shy. On our fifth or sixth date, Daniel got up to go to the bathroom. All his friends then came over to me, and said, ‘Does he talk?’ I said, ‘What do you mean, does he talk?’ They said that over the years they had heard him speak no more than 20 or 30 words. Yet Dan and I had talked constantly for two or three hours our first night. So I never knew Dan as shy. We had a lot in common. He wanted to be a farmer and I wanted to be married to a farmer. I wanted to travel and he traveled. We wanted to raise a family. I wanted to be a teacher—and I would teach for three years.” At being called shy, Dan couldn’t hold his words. Speaking from his wheelchair, he said, “I am never shy around women. It’s just that Lynn was the first one that had ever said yes, which is why I married her.” The Hackers laughed together. In 1980, their relationship experienced

a jolt—the first of many. Dan had been a hog farmer since the early 1970s, a side business. In May 1980, the market soured, Dan had to sell off, and their “whole world was falling apart,” said Lynn. By then, she had quit teaching to be a stay-at-home mom. Dan had to go work in Springfield for R&W Feeds, and over time would become its manager. Then in October 1980, their second child, 14-month-old son Tom, contracted a rare form of meningitis and unexpectedly died within 12 hours. The Hackers were devastated and wracked with guilt. They had many questions about life and faith, and few answers. “Over the years, we’ve learned to look at life differently,” said Lynn. “Life is short. We are Christians and believe the Lord uses you to help others. Once we got over the initial shock, we decided there were certain things we wanted to pass on to our children. One

THE ESSENTIALS

Hacker’s Tree Farm Founded: 1981 Address: 45372 190th Street Sleepy Eye, MN 56085 Phone: 800-474-6777 Web: hackerstreefarm.com

was to show we have to handle what’s given to us in life and not become depressed or angry at it. Life is a path and we don’t choose our path. The Lord gives it to us.” Lynn paused a bit, before adding, “And when you lose a child, nobody knows how to deal with you and you don’t know how to deal with yourself. My father was very concerned about us. He thought he would try to keep us busy to distract us from the pain.”

“And when you lose a child, nobody knows how to deal with you and you don’t know how to deal with yourself. My father was very concerned about us. He thought he would try to keep us busy to distract us from the pain.”—Lynn Hacker.

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Christmas Lights

Jay Weir

Mike Donohoe

James R. Weir Insurance, founded in 1967, offers insurance packages custom tailored to any business type. Whether it’s insurance for your building, business property, equipment,

Lynn’s father in Wisconsin had 250 acres of untrimmed spruce trees. The Hackers recently had taken emotional and financial hits—they had lost a 14-month-old child and a hog business. Lynn’s father thought Dan could earn money on the side by harvesting and transporting the spruce for distribution to southern Minnesota retailers. After sighing, Dan said, “But his trees were spruce, and so the needles fell off. Our customers weren’t happy. The next year, we bought from a Christmas tree farmer near Cambridge. The year after that, I bought from others, and they were better, and the business just exploded from there.” In time, the Hackers found a Christmas tree farm near St. Cloud, and eventually they would do virtually all the work for that farm, including planting, trimming, and marketing. The Hackers became educated on popular Christmas tree varieties, and learned from experienced people.

In 2012, the Hackers sold more than 10,000 Christmas trees, 30,000 wreaths to customers in 40 states, and 250,000 feet of garland. They hired 40 part-time piece workers. Their Christmas trees were showcased at the Kiwanis Holiday Lights in Sibley Park (Mankato), and in planters in downtown New Ulm.

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Weir working today, to protect your tomorrow. 30

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Lynn chimed in, “Then we needed to figure out how to market our trees. So we went to the local newspaper and asked if they had a Minnesota newspaper directory. We called newspapers and asked who in their town sold Christmas trees. Most gave us that information. Our first retailer was Joe’s Camper Sales in New Ulm. From that, we started our mailing list and sales efforts.” It was a great part-time job. Once again, everything was moving along just fine, until 1985 when Dan discovered one day a pink slip inside his weekly feed mill paycheck. “They said, ‘Hand in your keys, your done,’” Dan said. The Hackers had to eat, and so Dan had to sell. He sold 7,000 trees in 1985 and 19,000 in 1986. In 1985, Lynn hired local farm wives to make 500 wreaths for sale to places like Joe’s Camper Sales and for their own family retail business that had started on the farm. The Hackers began selling garlands made from a machine Dan built.


Hacker’s Tree Farm, Greenhouse & Nursery | Sleepy Eye

Over time, most of their wreaths would benefit nonprofit organizations fundraising in the Dakotas, Nebraska, Iowa, Missouri, Illinois, Wisconsin, and Minnesota. They began mailing wreaths all over the country, and selling Christmas trees into Minnesota, the Dakotas, Iowa, Nebraska, Wisconsin, and Illinois. Into the late 1990s, Dan raised and cut every one of their Christmas trees, including cutting up to 500 an hour with a special machine. He and about 20 students traveled the Upper Midwest, working for hire to trim trees for other Christmas tree farmers. Lynn said, “All trees have to have haircuts if you want to sell them. Dan and his crew would shear up to a million trees every year.” And just when everything was falling in place, once again, the gentlemen owning the land on which Dan grew his Christmas trees decided to sell out to a potato farmer. Suddenly, Dan had to find another source of trees—or be out of business. Fortunately, he had developed contacts with other tree farmers while on his annual shearing expeditions. By 2007, Dan was physically unsteady, and had leg cramps, and leg and foot pain. A physician diagnosed him with Lou Gehrig’s disease. The Hackers’ initial fear upon reading of an 80 percent chance of Dan dying within five years eventually turned to relief upon discovering the disease in him had a slower progression. Lynn said, “The (initial) diagnosis changed our whole outlook on business and life. As with everything in our lives, we always seem to be out of the box and do things differently. Dan’s experience having a slower progression is different than most people with the disease. Often, when someone gets a disease like this, they’re out of a job.

Christmas Lights

Green Trees CONNECT: Have you been hurt by the sale of artificial Christmas trees? LYNN: The Christmas tree market is holding steady because people are going green. If people only knew the kinds of chemicals that are in many Christmas trees coming from overseas— including arsenic. A natural Christmas tree can be recycled immediately, while artificial trees can take more than 1,000 years to break down. People want to know why they should cut down a tree. We have 6,000 trees here for retail sale on six acres. For every tree a customer cuts down, we plant another one in its place. It’s sustainable.” MARCH/APRIL 2013

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Examples of wreaths the Hackers produce.

It’s good we have the type of business we have. Dan has been out there every day telling us what to do—like always. His having ALS isn’t fun, but we’re able to handle it on a daily basis better than how we originally thought.” “I wake up every morning and give it my best,” piped up Dan, the faint hint of a smile on his lips. “Even though I get fatigued easily,

Christmas Lights

Retail Excitement Lynn Hacker, co-owner of Hacker’s Tree Farm, Nursery, and Greenhouse said, “The day after Thanksgiving starts my enjoyment. It’s the culmination of everything. It’s when we start retail sales (on our property). We have families coming out to cut their own Christmas trees— preparing for the true meaning of Christmas, the coming of Christ. We sell wreaths here, and customers can pick out and cut their tree. It’s about helping families start traditions so that it can carry on for generations.” And the Hackers love Christmas traditions: their own living room Christmas tree, for instance, had 3,200 lights and 1,000 ornaments this year. The family business has a second retail location in New Ulm on Broadway, which sells garden center products and bedding plants from April through August. That space transitions over to being managed by A to Zinnia from September through March. A to Zinnia is owned by daughter Heather, who also sells Hacker-raised Christmas trees and pumpkins.

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Christmas Lights


Hacker’s Tree Farm, Greenhouse & Nursery | Sleepy Eye

I still give some instructions and order some of what we buy. I do some marketing and email customers. At times, I still go outside best I can and drive through the Christmas trees on my scooter to tell people what to do. The last couple winters, I’ve gone outside occasionally at 2:00 a.m. (when I have the energy) by myself on the scooter to stoke up the wood stoves in our fourteen greenhouses.” In 2012, the Hackers sold more than 10,000 Christmas trees, 30,000 wreaths to customers in 40 states, and 250,000 feet of garland. They hired 40 part-time piece workers. Their Christmas trees were showcased at the Kiwanis Holiday Lights in Sibley Park (Mankato), and in planters in downtown New Ulm. Their festive roping and wreaths have decorated New Ulm streets for 25 years. Other Hacker retail customers in the Connect Business Magazine reading area include Waseca Floral, Traverse Des Sioux Garden Center (St. Peter), St. James Floral, Joe’s Camper Sales and A to Zinnia (both New Ulm), McCabes Hardware (Sleepy Eye), Trimont Greenhouse, and Bloomer’s Garden Center (Gaylord). So what do retail customers like those above want? “Quality, quality, quality—and service,” said Lynn. “Over the years, we’ve learned quality sells (with our retailers). To them, we also can provide Christmas tree lights, Christmas tree disposal bags, tree stands, and many other products. We can provide a one-stop shop for our retail stores or for a nonprofit group. At times, we’ve even been able to help a retailer with extra trees find another retailer.” Dan and Lynn have been a good pair over the years: Dan has been the dreamer wanting to try new things, while Lynn often has been the cold-water realist. Their three children, who grew up in the business and have their own careers, have some interest in continuing the family business. Said Lynn, “The bottom line is both of us love what we do. When starting in the ‘80s, we didn’t have money to purchase land. Dan’s father had only 160 acres—and we have only 80 acres now. We’ve been farmers nonetheless, but not in the traditional sense. But we still raise plants. We still play in the dirt.” Editor Daniel J. Vance writes from Vernon Center.

Comment on this story at connectbiz.com

Christmas Lights

Fun Fact Dan was active in 4H until 2007. He raised Minnesota State Fair Champion hogs in 2004, ’05, and ’07. MARCH/APRIL 2013

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OFF-THE-CUFF

As 2012 was ending, many southern Minnesotans were reminded from media reports of the Dakota hangings of 150 years ago in downtown Mankato. This wasn’t southern Minnesota’s greatest day ever—it was one of our worst. In part, the Dakota weren’t given legal counsel or translators. The greatest day in southern Minnesota history belongs to an October date about

100 years ago, one the Mankato Daily Review said then would be “long remembered by the people of this community and vicinity.” By early October 1911, nearly every southern Minnesotan had heard U.S. President William Howard Taft would be “invading insurgent territory,” i.e., visiting Daniel J. Vance Mankato, Minnesota, Editor as part of a crosscountry tour. Waiting for him would be U.S. Senator Moses Clapp, an “insurgent” Republican, who, like many Minnesotans, was aligned with former Republican U.S. President Teddy Roosevelt, Taft’s same-party nemesis. In many respects, Clapp versus Taft was like Ron Paul versus Mitt Romney—the new versus old guard. Just six days before Taft was scheduled to arrive in Mankato, Clapp called Taft’s veto of an Arizona statehood bill the “black-

est chapter in all tyranny outside of the absolute despotism of an unbridled king.” Strong words. Clapp was setting up nicely a confrontation with the Chief Executive— especially given the context of a Presidential assassination attempt that had occurred only a day before Clapp’s rant. On “President Taft Day” on October 24, Mankato storefronts were adorned with colorful bunting and American flags and pictures of hefty Taft. American flags hung over Front Street. Citizens along the parade route decorated homes. The Presidential train and a hard rain arrived almost simultaneously just before 11:00 a.m. A band played as Mankatoans cheered and waved little American flags. As portly Taft waddled into a top-down Packard convertible to begin his parade of Mankato, he removed his silk hat, and “the rain drops pelt(ed) his bald spot,” wrote the Mankato Daily Free Press. At the Normal School (now MSU), Taft, from inside the drenched Packard, gave a five-minute speech to cheering teachers in which he concluded, “If I could vote (in Minnesota), I would vote to raise the salary

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of these teachers assembled here, for they are deserving of it.” A block later, he urged a group of school children to go home, take off their shoes and change out of their wet socks. The Presidential Packard rolled past the German Catholic School, the German Lutheran School, and Union School to cheering thousands. At the courthouse, Judge Lorin Cray, former president of Mankato Citizen’s Telephone Company (HickoryTech), introduced the President for a brief and extremely wet outdoor address. Along Front Street, Taft heard the melodic strains of New Ulm’s Second Regiment band, Mankato’s Twentieth Century and Harmonia bands, and Mapleton’s band. At a packed opera house, Taft and Governor Eberhart were greeted with deafening applause. Moments later, the President was impressing 160 highbrow guests at the Elk’s Club at Hickory and Second, where the chief executive feasted and entertained for two hours. The menu included celery, olives, consommé tulienne, paupiettes of pike,

au vin blanc, filet of beef, pique with fresh mushrooms, cauliflower, grilled sweet potatoes, chocolate praline cake, and coffee. The President ate everything except the sweet potatoes. This all happened while Taft dined dangerously close to scowling Senator Clapp. The St. Paul Pioneer Press published the following article on October 25, 1911: (As background, from 1900-04 Taft had been Governor-General of the Philippines, a U.S. territory.)

happy and effective. At the head table sat Senator Nelson and Senator Clapp, just far enough from each other to insure physical peace, while Governor Eberhart, former Congressman Tawney, Congressmen Anderson, Davis, Hammond and Miller were all close enough together to make it important and more comfortable for them to give their undivided attention to the president. After a brief reference to the hearty welcome he had received in Mankato, the President, announcing he was going to choose his own topic, sprang his description of party divisions as follows: “I am glad to be here, and as I look up and down these rows, to see that we are all gathered in here, Democrats, Republicans and all, without regard to the party. It is a little difficult these days to define what a Republican is or what a Democrat is. There are as many colors and shades as there were in the Philippines when they organized the national assembly. They had first those who were slightly ‘conservative.’ There were none that were very ‘conservative,’ because that did

MANKATO: “El Partido Independista Explosivista” is likely to become the battle cry and shibboleth of the Republican supporters of the President in their contests with the progressives, if the rest of the country takes the expression with anything like the enthusiasm and glad hurrah that greeted its coinage by the President this afternoon in his address at the banquet at the Elk’s club. The conditions and surroundings all conspired to make the President’s description of the divided political parties most

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OFF-THE-CUFF

not go there, but there were some that were slightly conservative that called themselves ‘El Partido Progressista Independista.’ They were progressives toward independence. That did not constitute the large body who were going to the people on a somewhat more energetic platform. So they called themselves ‘El Partido Independista Immediatista.’ They wanted independence at once. But there were some that really thought that those two parties were cold in their patriotism and their desire for an immediate change and immediate establishment of the republic they were looking to, so they organized a party, ‘El Partido Independista Urgentista.’ Then they organized another party which, in order to nail it to the mast and have it understood, they called ‘El Partido Independista Explosivista.’ Now, whether we have any parties of that sort in this country I am not going to say, but I only want to say that this is not the only country where they have great varieties.” There was just an instant’s pause. The application was so obvious the first thought was the President had a personal intent in making it apply to some of the guests. But the President was standing, laughing heartily and beaming good-natured on all the guests impartially, just as the good storyteller does when he has a new one and knows he is making a hit with it. Instantly pandemonium broke out, and the guests rose and cheered until they were

hoarse. Within a few minutes ‘El Partido Independista Explosivista’ was rolling off the tongues of every man in Mankato and those who could get it off glibly were busy rehearsing the delinquent. Before the train left Mankato, the politicians had been busy classifying the factions according to the Philippine example. There were some differences of opinion as to the best state representatives of the first three parties named by the President, but there was not a dissenting voice on the proposition to place Senator Clapp at the head of the Minnesota ‘El Partido Independista Explosivista’ party.

centered upon the little city in the valley of the Minnesota which was for four hours today the host to President William H. Taft and the temporary abiding place of the chief executive of the greatest nation on earth during that period. When it is considered that the President’s trip has taken him over a very wide expanse of country and that thousands of towns and cities along the route he has covered have been vying with one another in an endeavor to secure the privilege of entertaining him, Mankato may well feel highly honored that for even so short a period she has had as a guest of honor the first citizen of our country.”

The Mankato Daily Review said Taft’s words summed up well the nation’s divided political climate and could play a prominent role in American politics. Yet the President’s entire visit itself would be forgotten in time—even in Mankato. In 1948, during President Truman’s visit, The Mankato Free Press forgot Taft’s 1911 parade and speech and said President Coolidge’s midnight train ride through town had been the only other time a sitting President had visited. President Taft departed the Great Western Depot and Mankato at 2:30 p.m. headed for Madison Lake. Wrote the Mankato Daily Review on October 24: “This is President’s Day in Mankato and the eyes and thoughts of the people throughout the land were

If desiring to read more about President Taft’s memorable visit and other seldommentioned area stories, you can find Unique Mankato Stories at the Blue Earth County Historical Society bookstore. All proceeds benefit BECHS. Given the annual tourism dollars reaped by Madelia from the Younger Brothers Capture, it would seem someone in Mankato could do likewise by reenacting President Taft’s parade and speech. After all, this was Mankato’s greatest day. Thanks again for reading southern Minnesota’s first and only locally owned business magazine, founded in 1994 and serving 8,700 business decision makers in nine counties. See you next issue!

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BULLETIN BOARD

Local Chamber & Economic Development News

Any chamber of commerce, convention and visitors bureau, or economic development organization in our reading area—large or small, from Amboy to Waterville—can post on our free bulletin board. For details, email editor@connectbiz.com.

honorees—the Chamber’s annual banquet was a GIANT success!

Le Sueur Julie Boyland, Le Sueur Chamber

For decades, a sure sign of spring has been the unveiling of the Le Sueur Area Retail and Business Expo. The Expo, held at the Le Sueur Community Center, will be Friday March 15 from 3-8 p.m. The Expo will offer cooking and gardening demos, plus exhibitors from construction, landscaping, new vehicles, health and wellness, education, and many other industries. The Expo will feature a wine tasting event with live background music.

Blue Earth Cindy Lyon, Blue Earth Chamber Blue Earth Area Chamber announces its 72nd Annual Banquet Honorees: Gary Agren (Community Service Award) and Blue Earth Drug owners Rich Belau, Gina Zierke, and Ryan Milbrand (Business of the Year). The drug store has survived changing times and served the area communities for 125 years. Congratulations

Fairmont Bob Wallace, Fairmont Area Chamber

Over 350 people from businesses have attended “Top 20 Training,” which has been a community collaboration effort spearheaded by Police Chief Greg Brolsma and led by Top20Training presenters. Fairmont is the nation’s very first community to embrace Top20Training community-wide. Participants learn immediately applicable tools to help develop their individual potential and that of others at work or home. It’s a really great way to create even more positive and effective workplaces, homes, and communities.

Mankato Shelly Megaw, Greater Mankato Growth

Everyone from our regional business community is invited to attend the Greater Mankato Business Showcase on April 9 from 4-7 p.m. at Verizon Wireless Center in Mankato. This popular annual event gives attendees an opportunity to get together with more than 500 individuals from businesses throughout Greater Mankato to learn about the products and services they provide, as well as sample food from a variety of area restaurants. For more information, visit greatermankato.com/business-showcase.

Mankato Julie Nelson,

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Fairmont Stephanie Busiahn, Fairmont CVB March and April are full of arts and cultural events in Fairmont. On March 9, Legacy Irish dance band appears at Red Rock Center for the Arts at 7 p.m. On March 15, Deuces Wild! Dueling Pianos appears at Fairmont Opera House at 7:30 pm. On April 13, rock out at Fairmont Opera House to the ‘80s with band Power Balladz. We invite you to enjoy the arts, culture and southern Minnesota hospitality of Fairmont.

Madelia Karla Grev, Madelia Chamber of Commerce Upcoming 2013 events: On March 12 the Chamber hosts Ag Night; July 11-14 is Park Days and The Blazin Barbeque Blast; the Chamber Golf Outing is August 7; the Younger Brothers Capture celebration is September 14; Pheasant Phest occurs on October 5; the Governor’s Opener is October 11-12; and Razzle Dazzle goes November 15-16. Park Days and The Blazin Barbeque Blast (July 11-14) includes a barbeque cooking contest sanctioned by the Kansas City Barbeque Society.

Mapleton RoxAnne Gosson, Mapleton Area Chamber Mapleton Area Chamber hired a new coordinator, Rita Caron, a long-time resident of the Mapleton area bringing a fresh outlook on the growing of Mapleton. Also, the Chamber has been planning its next big event, the Annual Easter Egg Hunt, held at Mapleton Community Home on Saturday March 30. Plan on attending this awesome event boasting activities for small children, including a real Easter egg hunt held indoors. Hope to see you then!

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New Ulm Barb Marti, New Ulm Retail Dev. Corp. There’s a multi-million dollar renovation underway at the historic Grand Hotel. Built in 1856, this three-story downtown showpiece is home to the Grand Center for Arts and Culture, the Artisans at the Grand restaurant, and the Grand Kabaret, an entertainment bar showcasing live music. Current changes underway include an expansion on the building’s back side for an elevator and the addition of a wood-fire oven inside for the restaurant.

New Ulm Terry Sveine, New Ulm CVB Like much of Minnesota, the month of March is dedicated to shows of all types. In New Ulm we have these: March 1-3, Figure Skating and Ice Show; March 8-9, Farm Show; March 9-10, Black Powder Trade Fair; March 12-17, Camper and Outdoor Show; March 22-24, Home Show. All but the Black Powder Show (Turner Hall) are at the Civic Center at 12th North and Washington. Come be entertained and learn a thing or two!

Mankato Mary Oudekerk, 504 Corporation The 504 Corporation provides 10- and 20-year, below-market, fixed-rate financing for commercial real estate, construction, and equipment purchases. Businesses must contribute at least 10 percent of purchase price with up to 90 percent financed by a local bank loan and separate 504 loan. Currently, the 504 loan’s 20-year fixed rate is below 4.5 percent. We’ve been processing/servicing SBA loans for 30 years. A $2,000 incentive available for 504 loans through our nonprofit corporation. Contact mary@504corporation.com.

Sleepy Eye Julie Schmitt, Sleepy Eye Chamber The Sleepy Eye Chamber of Commerce held its annual dinner and meeting. Receiving the 2012 Shining Star award was Patricia


Local Chamber & Economic Development News

events. They also market and promote artists by serving as a liaison between artists and promoters. On Valentines Day, Le Bon Entertainment hosted a dance at the community center from 5:30-8:30 p.m. Also, Springfield Chamber businesses in February hosted “February Chocolate Fridays.” Participating businesses gave out chocolate treats and offered specials throughout the month. See springfieldmnchamber.org.

Mankato Anna Thill, Greater Mankato Convention & Visitors Bureau

Waseca Colleen Carlson, Waseca Area TVB

Greater Mankato Convention & Visitors Bureau has spent the last year establishing a new brand for Greater Mankato as a visitor destination. The culmination of that work resulted in a new look and feel for the destination’s promotional front and a focus on the community’s key tourism related assets, which are trails, culture, and sports. The CVB will launch the new brand mid-March and work with partners to help the brand permeate throughout the community.

The Waseca Area Tourism and Visitors Bureau volunteer board launched an in-depth project to create a Cultural Heritage Tourism experience for tourists in the Waseca region. The working sessions will identify historical, cultural, natural, agricultural resources, assess current tourist attractions and amenities, and uncover new collaborative partners, volunteers, and programs. These cultural heritage resources are being mapped and marketed on the Discoverwaseca. com/visitors website to help tourists plan vacation itineraries and tell the Waseca area story.

Waseca Kim Foels, Waseca Area Chamber

Ericksen of Miller Sellner; 2012 Extraordinary Volunteer of the Year was Beverly Bartz; and 2012 Big Chief is Mayor Jim Broich. Seven businesses were recognized as Business Gives participants: Chuck Spaeth Ford, First Security Bank, McCabe’s Ace Hardware, KNUJ/SAM 107.3, Sleepy Eye Herald Dispatch, Schutz Family Foods, and Mathiowetz Construction.

Springfield Marlys Vanderwerf, Springfield Area Chamber Le Bon Entertainment is a mobile DJ service company servicing southwest Minnesota and specializing in weddings, parties and local

Waseca Chamber of Commerce celebrated 60 years serving members and businesses. The 2013 Community Awards Recognition honorees: Special Olympics Mn. South Central Lakers (Human Rights award), James Zimmerman (Rotary’s Service Above Self), Waseca County Relay for Life (Community Development), Dr. Edward Frederick (Waseca County Distinguished Agricultural Leadership), Bernie Gaytko of First National Bank (Boss of the Year), Ben O’Brien (Distinguished Young Professional), Peggy Hildebrandt (Community Service). This was a celebration people working hard for Waseca. Any chamber of commerce, convention and visitors bureau, or economic development organization in our reading area—large or small, from Amboy to Waterville—can post on our free bulletin board. For details, email editor@connectbiz.com.

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Left: Ryan and Lynnita Schmidt. Below: A selection of Schmidt's smoked meats.

Nicollet family business continually improving, improvising, upgrading, and becoming better. By Carlienne A. Frisch Photos by Kris Kathmann

As you step through Schmidt’s Meat Market’s doorway under the “Willkommen” sign, the old-time smokehouse aroma quickens your taste buds. You walk past a wall displaying numerous awards, and your eyes feast upon the beef jerky, specialty sausages, fresh meat cuts, and other mouth-watering morsels. Take your time in choosing from among the products displayed in more than 130 feet of service cases and you’ll likely carry a hint of wood smoke (and the meats it flavors) with you the rest of the day—a scent more enticing than any from a Parisian perfumery. It has been more than 65 years since Gerhardt Schmidt, who learned the meat business in Arlington, Minn., and his wife Esther, purchased Nicollet Meat Market and hung the family name on their new enterprise on Pine Street. The original Schmidts’ has segued to Schmidt’s, with the apostrophe representing sole ownership by company president Ryan Schmidt, the third generation to carry on the family smokehouse tradition. Wearing a red shirt with the store’s name, 47-year-old Schmidt is indistinguishable from the rest of staff until he introduces himself and leads the Connect Business Magazine reporter to the office. There, the smokehouse aroma is less noticeable until Schmidt’s wife, Lynnita, lets it waft in as she enters the room. Schmidt settles behind his desk and begins to reminisce. “It’s been a family business since 1947,” he says. “My grandparents provided custom meat processing to Nicollet area farmers while building a retail business. My earliest memories of the meat market are when I was around 10 and got my first work experience. I helped Grandpa move sausage, and I wrapped product and stocked shelves. When 14, I began working summers in the slaughtering plant, where I also learned from Grandpa. We still slaughter beef, pork and lamb. We still have holding pens. Farmers bring in the stock or we pick it up.” continued >

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Old World Flavor

My earliest memories of the meat market are when I was around 10 and got my first work experience. I helped Grandpa move sausage, and I wrapped product and stocked shelves.

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When taking over in 1975, Gerhardt and Esther’s sons, Gary and Bruce, incorporated the business and expanded the sausage making. They used their father’s recipes, including those for venison and other wild game. Gary, who taught at what is now South Central College in North Mankato, focused on business aspects, while Bruce handled day-to-day operations. In 1983, they more than doubled square footage with the purchase of the neighboring Nicollet Oil Company property and construction of a building adjoining the old plant. The expanded retail enterprise was nicknamed “The Meating Place.” They added a new smokehouse in 1990, which was wood-fired, like their old smokehouses. They later purchased more neighboring property and again expanded the retail area, which now accounts for 80 percent of business, with farm animal and wild game processing each accounting for 10 percent. In 30 years of ownership, they increased the employee base from five to more than 40. During the busiest months (November and December), Schmidt’s now employs 55 workers, including 20 full-time. When Ryan Schmidt bought into the business in 2005, he had both the practical experience and education for the job. “While a student at MSU, I often worked inside the plant, cutting beef and pork, manufacturing sausage,” he says. He graduated in 1989 with a double major in business (accounting and finance), having taken a year’s break to join a friend in San Diego, where he worked in the meat department of a La Jolla grocery store while waiting to establish the California residency needed for reduced college tuition. His avocation sidetracked his plans. “I wanted to be a ski bum,” he says, “but after having surgery to correct a snow ski accident injury, I returned to Mankato to complete my degree. After graduation, I returned to San Diego, where I worked as a construction laborer. I adjusted to having a desk job when hired for an accounting position with a manufacturer.” Eight years later, Schmidt moved to Minneapolis, where he hoped to open a satellite Schmidts’ Meat Market. After developing a business plan, he realized his dream wasn’t feasible. “It would have been hard finding good employees because the economy was booming,” he explains. “And government regulations


Schmidt’s Meat Market | Nicollet

restrict the resale of sausages we make in Nicollet in other locations. So I worked as a financial consultant with various clients.” It was in a client’s office he met Lynnita, who also has a business degree, and they married in 2002. She works both in the meat market and the office. In 2005, Schmidt decided it was time to return home. He explains, “Dad was looking at retirement and Uncle Bruce was not quite there yet. My sister and two cousins (Uncle Bruce’s children) were not

Old World Flavor

School Days The old adage is “those who can, do, and those who can’t, teach.” But people like Gary Schmidt benefit countless students by teaching from experience. From 1971-1997, he taught at South Central College in North Mankato while handling marketing and accounting for the family business. His brother, Bruce, and both of their wives were involved in retail. “I first taught in the school’s business department and then in small business management,” said Gary Schmidt. “Through that adult program, the other instructor (Dean Otto) and I mentored more than 400 business owners through a student-teacher relationship in which we tried to address issues and concerns at the site of the student’s business, one-on-one. (Students also attended monthly seminars.) Similar programs across the nation on the tech college level have closed, but SCC’s program, patterned along farm management programs, is still going.” The brothers grew up in an apartment above the meat market. Gary served in the U.S. Navy before earning bachelor’s and master’s degrees in business education from Minnesota State. He later received specialized training and certification in small business management and entrepreneurship from the University of Minnesota. Bruce, who served in the National Guard, earned a bachelor’s degree in speech pathology. He worked as a speech therapist before assuming co-ownership of Schmidt’s.

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Schmidt’s carries more than 70 products, including 15 kinds of brats, nine flavors of beef sticks, six different jerkies, and various kinds of bacon, links, patties and loaves, as well as head cheese and sausages that include “gretzwurst,” a German-style breakfast sausage containing steel-cut oats. interested in the business. I bought my dad’s half in August 2005 and became partners with my uncle. I needed his guidance to help me relearn the business, especially production. Even though Uncle Bruce has since retired, he continues to fire up the old-style traditional gravity smoke houses (and a modern one). You just throw in the wood and light a match. He lives in Nicollet, and I live in North Mankato, so he does the late-night firing. My mom still works in the business, behind the retail counters three days a week. During busy times my dad works retail and helps out with production.


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He continued, “After Uncle Bruce retired, I moved up existing production employees so I could concentrate on the business. My production manager, Brian Schatz, has a hands-on background similar to mine. He worked as an apprentice in Germany under a master butcher and in a Minnesota supermarket before Schmidt’s hired him as a meat cutter over a decade ago. Mark Gudmundson, my

Old World Flavor

Beefy Resume • Member, Nicollet Chamber of Commerce • Member, Minnesota Association of Meat Processors • Member, American Association of Meat Processors • Supporter, Nicollet County Pork Producers and similar local organizations • Supporter, Minnesota Deer Hunters Ass’n and other wildlife organizations. MARCH/APRIL 2013

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Old World Flavor

retail manager, attended a (now defunct) meat-cutting program in Pipestone, Minn. and worked in several supermarkets before being hired here. So we have a German and a Norwegian as managers.” He smiles. “Those two nationalities cover most of our demographic in this area.” The role of visionary falls to Schmidt. He says, “I’m always looking for new ideas, such as hot items for the younger generation. One innovation, raspberry-chipotle bacon, was suggested by one of our seasonings suppliers. It won Grand Champion and Best of Show awards from the 2012 Minnesota Association of Meat Processors.” Schmidt’s also had the Grand Champion Polish sausage and Reserve Grand Champion jalapeño and cheese beef sticks in the show. Flat iron Philly steak garnered Schmidt’s second place in the Beef Council’s Innovative Beef Product category. There were three championships in 2011, and numerous awards in previous years. Schmidt’s carries more than 70 products, including 15 kinds of brats, nine flavors of beef sticks, six different jerkies, and various kinds of bacon, links, patties and loaves, as well as head cheese and sausages that include “gretzwurst,” a German-style breakfast sausage containing steel-cut oats. There’s also the appropriately named “cannibal,” a seasoned raw ground beef intended for eating raw. “Although we have a database of thousands for custom processing, most of our business is cash-and-carry,” Schmidt says. “We had 120,000 transactions last year. We pull from a large area, even from the metro area.” Schmidt hasn’t created an eat-in area in the market because, he says, “We’re short on space,” and customers either take purchases (sandwiches, jerky, fresh salads, juice) back to their office or eat in their car on the way to a destination. “I’d like to have a larger, more modern facility,” he says. “The old part of the building, constructed in the late 1800s, has a higher floor

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The trend is to exotic and bold flavors, such as in brats and beef sticks and in marinated chicken breasts. People experience these flavors when they travel, and they want to have them. level than the new facility, so we have to move product two feet up or down. If we had more space, I would build additional smoke houses and have larger coolers, larger packaging and production areas, and a larger retail area.” Although the meat market is known area-wide as a destination store, Schmidt advertises to drivers with three billboards on U.S. 14 and one on U.S. 169 near St. Peter. Somewhat concerned about the effect of reduced traffic if a four-lane bypass of Nicollet is constructed, he comments, “It’s my job to worry about things like that.” “Being in business for more than 65 years, word-of-mouth is our best advertising,” he says, “but we also have a few print ads each year in association with sales events, holidays, or times like deer season. We sponsor the morning recipe show on KNUJ, a New Ulm radio station, and have coupons in flyers such as Smart Savings magazine. We have a website and promote our new products on Facebook


Schmidt’s Meat Market | Nicollet

because that’s what’s hot.” Lynnita turns from the computer on which she’s been working, and adds, “When I wrote about the raspberry-chipotle bacon on Facebook one morning, it was gone by afternoon. I had to go back on and say, ‘We’re making more of the product.’” Schmidt says, “Years ago, when families were larger, we sold beef quarters. Now people buy for one day or a few days. They’re looking for quick meals to prepare or need no preparation. The trend is to exotic and bold flavors, such as in brats and beef sticks and in marinated chicken breasts. People experience these flavors when they travel, and they want to have them. We want to offer unique and fresh products. Our boudin brat did well last summer. I got the recipe off the Internet from Mardi Gras in New Orleans and made it unique by adding our own seasoning. Our products also

Old World Flavor

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• Siblings: One sister, two years younger. • Favorite school subject: Math. • Least favorite class: Business law—too many rules. But much of what I learned applies to what I do. • Family: Wife Lynnita, sons Carson, nine, and Tyler, seven. • Hobbies: Golfing, hunting, downhill snow skiing, summer family time at parents’ cabin on Lake Jefferson, and coaching sons’ school sports. • Words that describe Ryan Schmidt: Focused, consistent about the business, and (Lynnita’s answer) a leader by example. • Proudest accomplishment: Growing the business more than 50 percent over the seven years since I bought into it. I want to continue what has been developed over the last 65 years. • Most valued intangible: The people who work here and their passion for what they do, which shows in product and in customer service. MARCH/APRIL 2013

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Old World Flavor

THE ESSENTIALS

Schmidt’s Meat Market Phone: 507-232-3438 Address: 319 Pine Street Nicollet, MN 56074 Web: schmidtsmeatmarket.com

are unique because we use the traditional smokehouse. The heavy wood smoke sets us apart, making our summer sausage the backbone of this business.” Schmidt buys beef and pork from national distributors, focusing on specific lines and brands, such as Black Angus beef from Nebraska. The stock slaughtered on site is custom-processed for the individual customer and stamped “not for sale.” The farmer can make pre-slaughter arrangements, however, with neighbors who purchase a quarter or a half an animal and receive it after processing. Schmidt’s days begin around 5:30 a.m. He works 60 hours a week, heading home by 6:30 p.m. He and two managers rotate weekend duty. During November and December, when the first crew of sausage makers arrives at 2:30 a.m., Schmidt works 100 hours weekly. “What sets us apart, sets any business apart, is extraordinary customer service,” Schmidt said. “We’re a full-service meat market. We have unique sausages. It’s fun to work the holidays and overhear conversations like ‘Grandpa, every year I come to visit for Christmas, you’ll have to bring me here’ (to Schmidt’s).” Lynnita adds, “It’s wonderful seeing the next generation coming in and already having their favorite flavors. Our product is such a part of people’s family tradition. A customer’s mom may be gone, but the daughter continues to buy summer sausage here.” Schmidt’s Meat Market is open 7:30 a.m.-5:30 p.m. Monday through Friday, and 7:30- a.m.-4:30 p.m., Saturday. It’s closed Sunday. Carlienne A. Frisch writes from Mankato.

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HOT STARTZ!

Very New or Re-formed Businesses or Professionals New To Our Reading Area

ST. PETER

Bright Pixel Design

ART SIDNER

Matt Borowy opened Bright Pixel Design in his St. Peter home within the last year. He spends half his time designing homes and home renovations, and the other half doing 3D illustrations for developers and corporate architects in Iowa and Minnesota. Much of what he enjoys working on today came from a curious childhood spent in Two Harbors and later Waseca, where he graduated from high school in 1993. “My father was a graphic artist and a talented fine artist, and had his own sign company,” said Borowy in a telephone interview. “Through him, I saw how a small business was run. To a certain extent, I’m following in his footsteps today.” Since eighth grade, he has been interested in architecture and the “built” environment, such as buildings, roads, and bridges. After high school, he graduated from a technical college in the Twin Cities and in 1996 began working for an international architectural firm as a draftsman. He said, “In that job, I found I had a skill working on threedimensional modeling of buildings. I was able to work with the best designers and learn on the job.” In time, he was recruited by a Mankato architectural firm and would work there from 2002-12. He began Bright Pixel Design within the last year. “Now I draw on my experience from everything I’ve done,” he said. “Half my time I do design work on new houses and

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renovations. The other half is doing 3D illustrations. As for the latter, architects sometimes can’t afford to have a dedicated 3D artist on staff, so I’m able to help them on a project-by-project basis.” He also enjoys designing smaller renovation projects for homeowners. He said, “I like working from home. It’s a great commute. In my job, there’s always something new—it’s not dull at all working on these projects.” Borowy is a St. Peter Area Chamber member and on the St. Peter Historic Preservation Committee.

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HOT STARTZ!

Very New or Re-formed Businesses or Professionals New To Our Reading Area

LE SUEUR

The Branch & Dandelion Rose

and gluten-free dips and tortilla chips.” The business also sells fine artwork, hand-carved walking sticks, Stuffies, Archipelago boutique lotions, wind chimes, birdhouses, and more. She added, “I like the diversity of my job, such as being able to mix with people, doing customer service, and going to market. We can’t compete with big box stores, so it’s my job to find what isn’t overused—to find what is unique.” THE BRANCH & DANDELION ROSE Address: 207 South Main Street Telephone: 507-665-2004 Hours: 9-5:30 M-F; Saturdays 9-3

ART SIDNER

The Branch owner Bernie Ingersoll and Dandelion Rose owner Mary Sasse joined forces last May and now share the same building at 207 South Main. The Branch is a full-service fresh flower shop handling parties, funerals, weddings, and bouquets and roses for customers. Ingersoll delivers in and out of town. She learned a great deal early on from her mother, who was “very creative, and always making us outfits and decorating our rooms,” said 49-year-old Ingersoll. “She also was a chef and worked at the Holiday House, Mankato Golf Club, Adrian’s, and Applewood.” After graduating from Mankato East in 1981, Ingersoll earned a degree in retail floristry. Eventually, she moved to Le Sueur and purchased The Branch in 1996. She said she especially enjoys working with flowers and the “warm and fuzzy” feeling she experiences seeing a person’s face light up after receiving them. Her building partner and friend, 54-year-old Mary Sasse, began working in retail as a high school junior when she helped start The Cellar in 1974 in the basement of the Lady Bug, a Le Sueur clothing store. The Cellar sold teen shirts and accessories. She graduated from Le Sueur High in 1976, and after a stint with Emma Krumbees General Store and years as a full-time mother, she started Dandelion Rose last May. Sasse said, “In part, I sell unique delicious food, such as beer bread, special seasonings, Popdkerns, gourmet hand-crafted Jubilee candies, gourmet coffees, varieties of wild rice soups,


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LE SUEUR

Your Time Fitness While growing up in Frost and attending Blue Earth Area schools, Kris Krause had far more energy than most children. Her mother tried channeling her endless enthusiasm—first into dance classes and then gymnastics. “I was the kid cartwheeling around the backyard and the one upside down rather than standing on my feet,” said 34-year-old Krause in a telephone interview. She learned gymnastics at Perpetual Motion Gym in Fairmont and in high school joined the Blue Earth Area High gymnastics team. She participated in all-around, which included floor, bars, beams, and vault. When she was in tenth grade, her high school team made the state tournament. After graduating from Blue Earth Area in 1997, she attended Rasmussen College and later became a Twin Cities travel agent. She said, “I had gone down the unhealthy path of too much food and beer in college. I had gone from doing gymnastics two hours a day to sitting in school all day. I gained about 50 pounds in five or six years. In my job, I wasn’t physically active.”

About ten years ago, she began asking herself: How did I get to this point? How did I let myself go? “So I started eating healthier, walking, taking care of myself, and I signed up for my first 5K,” she said. “That’s when things started changing. I was smitten by the fitness bug and enjoyed motivating the people around me. I decided I wanted to teach classes.” Over a three-year period, she built up a part-time business teaching classes and training clients. This January, she opened Your Time Fitness. She offers one-on-one personal training for $45 an hour and small group training (maximum 10) for $40 monthly per person. With the latter, clients receive the services of a personal trainer and enjoy a discount. Her sessions involve coaching, motivating, and teaching. Appointment only. She said, “What I like best is helping people with their fitness journey.” YOUR TIME FITNESS Address: 214 Valley Green Square Telephone: 507-412-9669 Web: yourtimefitnessmn.com

ART SIDNER

To be considered for one of three spots in the May Hot Startz!, email the editor at editor@connectbiz.com. Businesses considered must have started—or changed greatly in form—within one year of our publishing date. Professionals chosen must be new to our reading area.


PRESS RELEASES

To submit a press release for publication:

Think differently about work. Think Manpower. Mankato 507.345.4201 us.manpower.com

Email: editor@connectbiz.com Fax: 507-232-3373

BLUE EARTH

FAIRMONT

Express Diagnostics Int’l

Mayo Clinic Health System Fairmont

Express Diagnostics Int’l attended the 38th annual Arab Health Exhibition in Dubai, United Arab Emirates, and at the show introduced new products, including DrugCheck DC1000, AnemiaCheck, POC Quantitative Hematocrit Test, and TruTouch 2500 instant alcohol detection and identification instrument.

Mayo Clinic Health System Fairmont Auxiliary donated $90,000 to the medical center in Fairmont for oncology and infusion renovation projects.

From Express Diagnostics Int’l: EDI formed a partnership with Blinded Diagnostics that offers an extensive line of drugs of abuse and alcohol screening tests for clinical trials.

From the Chamber: New members include Cutting Edge Fitness. Wes Pruett of HR Advisors earned Center for Conflict Dynamics certification to use the “Conflict Dynamic Profile,” which helps individuals and groups gain conflict competence. Dr. Scott Burtis of Burtis Chiropractic Center received his master’s degree in human nutrition. For the eighth consecutive year, Bryan Sweet (and his team) of Sweet Financial Services was named to Raymond James Financial Services 2013 Chairman’s Council.

Fairmont

Le Sueur

USBank named Chris Pierce as Fairmont market president.

From the Chamber: New businesses include Dandelion Rose and The Branch,

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Metropolitan Financial (Josh Kor), and Kris Krause (Certified ACE Personal Trainer).

Madelia From the Chamber: Luther Memorial Home employee work anniversaries include Barb Dahm, Michelle Engelby, Lana Lopez, and Casey Delacruz (15 years), and Dawn Miller (35 years); January Business of the Month was Reihs Farms; new Chamber board members include Marnie Kortuem (Madelia Community Hospital), Nancy Grosland (Alliance Bank), and Dianne Gronewold (Farmers State Bank). Noble RV, which has locations in Rochester and Owatonna, purchased the former Dick Olson Motors building site on Highway 60.

Mankato Doug Lago, formerly of Emmet County State Bank, was named United Prairie Bank Mankato market president. Matthew Michaletz of Kato Insurance Agency earned Certified Insurance Counselor designation from the Society of Certified Insurance Counselors. Oleson + Hobbie Architects hired interior designer Jessica Bergeleen. From Eide Bailly: the firm hired Becky Schendel (financial institutions compliance team and audit department), Denise Engels (accounting services associate), Kyle Bahe (audit associate), and interns Jennifer Rothmeier, Jenna Brekke, Brandon Zabel, Yousef Sarameh, and Baylee Amy; the firm also hired June Lonnquist as financial

assistant to Ryan Spaude in Eide Bailly Financial Services. Carlson Craft unveiled a new logo that has “Carlson” and “Craft” in contrasting fonts. Heintz Toyota hired Tom Beerling as used car manager and Al Clennon as sales consultant. Cory Genelin and Andrew Tatge were elected partners to Gislason & Hunter. Southwest Minnesota Housing Partnership opened 60-unit Sibley Park Apartments in January. Rachel Mattison was hired as sales & event manager of Courtyard by Marriott Hotel & Event Center. Blethen, Gage and Krause Law Firm named Kevin Velasquez as a partner. Metro Sales rehired Kevin Case as a new account representative. From First National Bank Minnesota: the new Mankato branch president is Kenneth Kuehner; and the new chief credit officer, Michael Favre. Marco purchased Midwest Office Automations, which as offices in Sioux City and Storm Lake, and six-location Mason City Business Systems.

MANKATO

Blue Earth County Blue Earth County Commissioner Vance Stuehrenberg was elected secretary/treasurer of the Association of Minnesota Counties.

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PRESS RELEASES

COOL ROOF

James R. Weir Insurance launched a new website and Facebook page. Jay Thompson was named senior business relationship manager of Wells Fargo Business Banking. Snell Motors hired Rob Prahm as Snell Auto Wash manager. Tim Robinson of United Prairie Financial Network was named to the Minneapolis/St. Paul Five Star Wealth Manager list. All American Foods has SQF (Safe Quality Food) certification in all facilities. HickoryTech declared a March 5 payable quarterly dividend of $0.145 per share. Greater Mankato Rotary Club announced 7th Annual Service Above Self Award winners: Karen Wahlstrom, Jerry Bambery, and Kiwanis Holiday Lights. From Greater Mankato Growth: New members include La Terraza Mexican Grill and Bar, Dickey’s Barbecue Pit, Jordan Sands, Creative Ad Solutions, ezIT, and Rural Strategies. Coughlan Companies, the holding company for Capstone, Mankato-Kasota Stone, and Jordan Sands, was recognized for philanthropic community initiatives with a 2012 Minnesota Keystone Honored Company Award in the mid-sized business category. The Minnesota Thoroughbred Association board of directors named Jay Dailey of Pro-formance Realty as president. Brady Schmidt, of Coulter, Schmidt & Klein Private Wealth Advisors completed

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MSU College of Business Call Karla VanEman today! (507) 345-4040

Minnesota State University College of Business advisory council announced Abdo, Eick & Meyers will provide a $25,000 gift for a $200,000 Advisory Council Executive Suite in the future College of Business Global www.MankatoRealEstate.com Solutions Center.

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requirements to become a Certified Financial Planner.

NEW ULM

August Schell Brewing Company August Schell Brewing Company released the seasonal Bock and Schmaltz’s Alt.

New Ulm A 162,000 sq. ft. Menard’s Mega Store opened at 2200 Westridge (Highway 14 near Walmart). Lou Geistfeld, president of Citizens Bank Minnesota, was named 2013 “Banker of the Year” by NorthWestern Financial Review magazine. From the Chamber: New members include the Goosetown Roller Girls; Citizens Agency promoted Nick Hage to agency manager; NU-Telecom acquired Sleepy Eye Telephone Company; Chad Aukes of NU-Telecom completed training to become an Apple Certified Mac Technician; SouthPoint Financial Services hired Bob Skillings; Citizens Bank Minnesota launched a program with employees to encourage shopping local small business; and Steve and Kerry Hoffman earned the 2013 Farm-City Hub Club Service to Agriculture Award.

North Mankato South Central College Center for Business and Industry hired Anne Willaert as director of professional and continuing education. Brunton Architects hired Scott Wullschleger, AIT, Assoc. AIA, and for business development, Joel Schafer. Three Eagles Communications changed 95.7 KMKO to a mainstream rock format.


St. James St. James Rehabilitation hired physical therapist Danielle Mueller. Tabitha Johnson became the new St. James Chamber of Commerce director. Mayo Clinic Health System St. James earned the Joint Commission’s Gold Seal Of Approval. Sue Mohr became a St. James Mayo Health System Hospital board member. New Chamber members include St. James Area Foundation, St. James Railroad Days Committee, and Habitat For Humanity.

St. Peter From the Chamber: New members include Jake’s Pizza and Bright Pixel Design; Lone Star BBQ & Grill opened at 408 S. Third; and Winterfest was held January 25-February 3 and encompassed a variety of events celebrating Minnesota winters.

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ST. PETER

LPL Financial Peter Nelson of LPL Financial (in Nicollet County Bank) was named a Twin Cities area recipient of the 2013 Five Star Wealth Manager award.

ANOTHER DISTINCTIVE PROJECT BY DEICHMAN CONSTRUCTION

Waseca From the Chamber: New members include Wiste’s Meats (Janesville), Brite Idea Marketing & Consulting, and Franklin’s Tower Financial; The Chamber Ambassadors recognized the new Waseca Community Education and Recreation facilities and welcomed new director Cori Sendle; Waseca Art Center moved to downtown and renovated; and Starfire Event Center opened with a party and banquet capacity of 400.

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NATIONAL OPINION

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Experience the Eide Bailly Difference. Professional services with a personal touch — call today to learn more.

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“Land of the free.” It’s right there in our national anthem. As well it should be—the personal liberties we enjoy are the envy of many around the world.

a bit over the last year. We held onto the No. 10 slot mostly because Ireland declined enough to wind up in 11th place. As recently as 2008, the United States ranked seventh worldwide, had a score of 81 (on a 0 to 100 scale, with 100 being the freest), and was listed as a “free” economy. Today, the United States has a score of 76 (its lowest since 2000) and is “mostly free,” the index’s second-highest category. Before explaining why, let’s back up and touch on how the editors of the index—published annually since 1995 by the Heritage Foundation and The Wall Street Journal—determine the scores. Each country is evaluated in four broad areas of economic freedom: 1. Rule of Law: Are property rights protected through an effective and honest judicial system? How widespread is corruption—bribery, extortion, graft and the like?

Freedom is no accident. It requires constant vigilance. It takes economic lib2. Limited Government: Are taxes high or erty, an area where the low? Is government spending kept under United States has becontrol, or is it growing unchecked? gun to slip quite a bit 3. Regulatory Efficiency: Are businesses lately. How would you able to operate without burdensome and Ed Feulner say the United States redundant regulations? Are individuals compares to other able to work where and how much they nations? There’s no need to guess. We can want? Is inflation in check? Are prices pinpoint it exactly by using an annual guide stable? known as the Index of Economic Freedom. 4. Open Markets: Can goods be traded Top three, you think? Top five? Nope. Last freely? Are there tariffs, quota or other year at this time came the news the United restrictions? Can individuals invest their States had dropped to 10th place. Now, the money where and how they see fit? Is 2013 index is out, and we can see the United there an open banking environment that States hasn’t budged from that spot. encourages competition? In fact, we’re lucky we didn’t fallthe out ofEide the Bailly Experience Difference. top 10 altogether. Our index score declined For the most of course, Professional services with a personal touch—call today part, to learn more. the United


Today, the United States has a score of 76 (its lowest since 2000) and is “mostly free,” the index’s second-highest category. States does very well on these measures. Finishing 10th out of 177 countries, after all, is impossible if you don’t have a large degree of economic freedom. Property rights are strong in the U.S. Our court system is independent. Business startup procedures are efficient. The labor market is flexible. In certain key areas, however, the United States is lagging badly. The biggest decline since last year comes in the area of regulations. Simply put, it’s becoming costlier and more complicated to start up or maintain a business. More than 100 major new federal regulations have been imposed since early 2009 at an annual cost that exceeds $46 billion. Small wonder we’re stuck in a “jobless recovery.” Yet, regulatory freedom is hardly our weakest spot. Indeed, we’re above the global average in that category, and all the others—except one: limited government. In short, it’s not so limited anymore. The United States has the highest effective corporate tax rate in the developed world and the top individual income tax rate has been raised to 39.6 percent. We’re also saddled with a capital gains tax and excise tax. The overall tax burden is 24.8 percent of total domestic income, meaning government confiscates nearly $1 out of every $4 earned.

Total government spending is another Achilles’ heel for the United States. It amounts to 42 percent of gross domestic product. That’s unacceptably high. It shows no signs of abating. Under current policies, government spending is headed in one direction only: up. That’s why we have to get serious about cutting government down to size, overhauling our tax system, and transforming costly entitlement programs. Or will this be our last year as a top-10 finalist in the index? Ed Feulner is president of the Heritage Foundation (heritage.org). This column first appeared in The Washington Times.

keep them healthy and happy. occupational medicine services Mankato Clinic Urgent Care @ Adams Street is your provider of Occupational Medicine Services. Our staff will collaborate with you to help manage risk factors, keep your employees healthy and happy and get them back to work quickly and safely after an injury. No appointment is necessary for most examinations. Just walk in for prompt, professional service. For additional information call 507-385-4075 or visit www.mankatoclinic.com

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MARCH/APRIL 2013

It’s not quite on a par with 9/11 truthers or Obama birthers, but recently a number of liberal commentators have descended into the fever swamps of denialism by rejecting the most basic facts about our debt and deficit. Mind you, they are not arguing about the best policies to reduce the debt — tax hikes vs. spending cuts — but actually denying that the problem exists at all. Paul Krugman, for example, pronounces the debt problem “mostly solved.” Matt Yglesias of Slate asks, “What sovereign debt crisis? There certainly isn’t one in the United States.” Bruce Bartlett, every liberal economist’s favorite former conservative, adds that “our long-term budget situation is not nearly as severe as even many budget experts believe.” Bolstered by a study from the left-wing Center on Budget and Policy Priorities, the debt deniers claim that a combination of economic growth, tax hikes, and projected (but not yet realized) spending reductions have already significantly reduced deficits. They argue that a mere $1.2 trillion in additional tax hikes over the next ten years, and the resulting savings on interest, would enable us to “stabilize” our debt at a mere 73 percent of GDP by 2022. Now there’s something to get excited about: stabilizing our debt at an amount equal to nearly three-quarters of the value of all goods and services produced in this country each year. Yippee!

But even if you think that’s good news, it’s not really the truth. The 73 percent figure actually represents only that portion of the federal government’s debt classified as “debt held by the public,” primarily those U.S. government securities that are owned by individuals, corporations, and other entities outside the federal government itself. Debt held by the public currently totals roughly $11.6 trillion and is expected to rise to roughly $19.1 trillion by 2022. Left out of this analysis, however, is roughly $4.9 trillion in “intragovernmental” debt, which consists of the debts that the federal government owes to itself, through more than 100 government trust funds, revolving accounts, and special accounts, such as the Social Security Michael D. Tanner and Medicare Trust Funds (worth $2.7 trillion and $344 billion respectively). The combination of debt held by the public and intergovernmental debt yields our current $16.4 trillion in total red ink. The debt deniers justify ignoring intragovernmental debt on the grounds that only debt held by the public competes with investment in the nongovernmental sector. Moreover, while interest on debt held by the public is paid in cash and creates a burden on current taxpayers, intragovernmental-debt holdings typically do not require cash payments from the current budget and don’t present a burden on today’s economy. Intragovernmental debt can also be considered somewhat “softer” than debt held by the public, since the government can control when and whether trust-fund debt is paid through, for example, alterations to the Social Security benefit formula. Prominent liberals are now insisting that we face no debt problem at all. But the federal government, and deficit doves, cannot simply write off intragovernmental debt as inconsequential. As opponents of Social Security reform often argue when asserting the program’s solvency, the securities held by the Social Security Trust Fund are backed “by the full faith and credit of the U.S. government.” Eventually the securities held by the various trust funds and other


accounts will have to be redeemed, just as if intragovernmental debt were debt held by the public. No matter how you treat intragovernmental debt today, repaying it should be included in any projection of future government spending. Therefore, a fair accounting of our debt should include both that held by the public and intragovernmental debt. By that accounting, we currently owe 102 percent of GDP, and by 2022 our national debt will be 118 percent of GDP. Moreover, by cutting off the trend line in 2022, the debt deniers ignore the enormous unfunded liabilities of Social Security and Medicare, the costs of which will kick in mostly beyond this limited budget window. According to Social Security’s board of trustees, the discounted present value (the amount that would have to be set aside today, earning 3 percent interest, in order to pay future shortfalls forever) of that program’s unfunded liabilities is more than $20.5 trillion. And, according to the most optimistic estimates by the Obama administration itself, the discounted present value of Medicare’s unfunded liabilities is more than $42 trillion. And that is an estimate that assumes Obamacare actually reduces health-care costs. True, those obligations represent the “softest” form of debt. But “soft” does not mean debt that can be completely dismissed. According to generally accepted accounting principles (GAAP), by which private corporations abide, promises to pay future benefits are generally categorized as debt. After all, those benefit payments are called for under current law, and it would take congressional action to change them. Unless and until Congress reforms Social Security and Medicare, those obligations exist, but debt deniers are especially vehement in their opposition to precisely such reform. By their very failure to reform Social Security and Medicare, the deniers harden the program’s future liabilities. If we include all this debt — public debt, intragovernmental debt, and unfunded liabilities — we currently owe at least $79 trillion, 500 percent of GDP, and perhaps as much as $127 trillion, 800 percent of GDP. That said, these future liabilities will be paid not out of today’s but out of future economic production, which will inevitably

be larger. Measurements of the discounted present value of future liabilities are extremely sensitive to assumptions about future interest/discount rates. Therefore, a better way to calculate the true size of the national debt might be to measure the share of a country’s future GDP that will be required to finance that debt. By this measure, the United States faces a debt equal to an additional 9 percent of its future GDP forever. However, this may underestimate the tax burden required to pay the debt, because a country’s tax base is only a fraction of its GDP. Accordingly, the tax increases required to pay the debt would need to be much larger as a percentage of the current tax base than as a percentage of GDP. For example, the payroll-tax base equals slightly less than one-half of GDP, implying that the 15.3 percent U.S. payroll-tax rate would have to be more than doubled to pay our debt. Similarly, the income-tax base is roughly 36 percent of GDP, meaning that revenue from income taxes would have to more than double, requiring massive rate increases just to pay what we owe. Taxes at such levels would almost certainly depress both investment and consumption, substantially slowing economic growth. Indeed, the debt is likely reducing economic growth already. The International Monetary Fund looked at the relationship between debt and economic growth, concluding that, from 1890 to 2000, countries with high debt levels have consistently experienced slower economic growth than those with low debt levels. Similarly, economists Carmen Reinhart and Kenneth Rogoff concluded that countries with debt totaling more than 90 percent of GDP have median growth rates one percentage point lower than countries with lower debt levels, and average growth rates nearly four points lower. The slow economic growth that the United States has seen coming out of the recession is likely due in part to our high levels of government debt. Perhaps this was all thought up by President Obama’s Muslim Kenyan overlords to hide the Mossad’s role in 9/11, but I sort of doubt it. The debt deniers’ argument is about as unrealistic. By Michael D. Tanner, senior fellow, Cato Institute. This article appeared in National Review (Online) on January 30, 2013.

MARCH/APRIL 2013

CONNECT Business Magazine

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