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Burt Lyman, executive director of the Verizon Wireless Center, at a recent Mav’s hockey game.

Civic center bustling City hoping this year will bring expansion Also in this issue Salvage Sisters Northern Comfort All American Foods

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4 • March 2014 • MN Valley Business

F E A T U R E S March 2014 • Volume 6, Issue 6

14

Approaching its 20th anniversary the Verizon Wireless Center remains busy, with officials hoping an expansion will be approved this year.

18

In 1987 All American Foods started with only a couple of employees in a rented warehouse. Today 50 employees work on a 14 acre campus.

20

Carol Jones and Heather Fisher give good used furniture a new look and new homes at their Salvage Sisters business in Old Town.

22

Keith High started Northern Comfort in 1978, a business that now includes several family members.

MN Valley Business • March 2014 • 5

■ March 2014 • VOLUME 6, ISSUE 6 PUBLISHER James P. Santori EXECUTIVE EDITOR Joe Spear ASSOCIATE EDITOR Tim Krohn CONTRIBUTING Tim Krohn WRITERS Pete Steiner Kent Thiesse Heidi Sampson Dan Gahler Eric Plath PHOTOGRAPHERS Pat Christman John Cross COVER PHOTO John Cross PAGE DESIGNER Christina Sankey ADVERTISING Ginny Bergerson MANAGER ADVERTISING sales Danny Creel Jen Wanderscheid ADVERTISING Barb Wass ASSISTANT ADVERTISING Sue Hammar DESIGNERS Christina Sankey CIRCULATION Denise Zernechel DIRECTOR For editorial inquiries, call Tim Krohn at 507-344-6383. For advertising, call 344-6336, or e-mail mankatomag@mankatofreepress.com. MN Valley Business is published by The Free Press Media monthly at 418 South 2nd Street., Mankato MN 56001.

■ Local Business memos/ Company news................................7 ■ Business and Industry trends.........9 ■ Minnesota Business updates....... 10 ■ Business Commentary................. 11 ■ Construction, real estate trends.. 25 ■ Agriculture Outlook...................... 26 ■ Agribusiness trends..................... 27 ■ Job trends..................................... 28 ■ Retail trends................................. 29 ■ Greater Mankato Growth.............. 30 ■ Greater Mankato Growth Member Activities ....................... 31

From the editor

By Joe Spear

City center concept revived

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he concept of the city center appears to be growing once again. It wasn’t that long ago that the old “downtown” idea of urban planning was not only dying literally but also as a concept. Downtowns were deteriorating. Once historic buildings were allowed to deteriorate into disrepair by owners who wanted to make a quick buck offering low rent dives. City planners shook their heads and threw up their arms. “Downtowns are dying” was the call to arms that echoed off many a planning commission meeting room wall. Some of the planners were realistic as old building owners knew they had the upper hand. Buy their old rickety building for an outrageous price or provide “relocation” money. It was a form of highway robbery that all too many cities accepted. The dumpy looking downtowns offered no horizons for entrepreneurs. Strip malls ruled. Then developers saw a good thing and put strip malls on steroids to build “power centers.” Those took root in wide open spaces that provided free parking and the in-and-out convenience of an old downtown. Ultimately, some of the old downtown building owners died off. Their properties were bought by people who took pride in the look of their building. It’s a phenomena evident in Mankato in the last 10 years or so. One can point to renovations of the Graif Building, the Landkamer Building, some storefronts on South Front Street as well as buildings like the old Stahl House in Old Town. Now, we’re seeing that concept reaching a new height with one of the newest and largest office buildings and combination commercial concepts coming to fruition in the downtown -- the City Center. The downtown is now renamed the City Center - capital Cs - as a formal place, and not just as a location. That’s key, because people will go to a place they can envision and it’s different than a street corner.

6 • March 2014 • MN Valley Business

Capitals Cs for City Center is proper writing style for a formal place, but it’s also the proper approach to renaming and rebranding, if you will, downtown Mankato It’s a place that has a map that includes downtown North Mankato. So we review this month, the latest developments of downtown’s key, the Verizon Wireless Center. At about 20 years old, Mankato’s civic center has been an engine to drive everything from downtown pubs to the rebuilding of a downtown infrastructure and the restoration of historic buildings. Without that civic center draw, the rest of the development seems at the very least less likely and less vibrant. The development boom comes with subtle realities perhaps only developers get. People like to work in buildings located where they are part of a defined place. When I walk out of The Free Press at 5:30 on a warm summer evening, and I see the “Alive After Five” show going on in the park next to the building -- a beautiful park, by the way -- one feels good about the “place” they work. It wouldn’t be the same coming out of some office building in one of the spacious parking lots elsewhere in Mankato. And after a decade or so, the concept of downtown appears to be working in Mankato. The Verizon Center will likely undergo and expansion this year where it will be able to host trade shows of 1,200 or more people, about twice of what it can handle now. A new auditorium and trade show space will allow it to host trade shows, hockey games and weddings on the same weekend. Last year was the first year the civic center hit $1 million in concession sales, marking another milestone. Downtowns may indeed be back. MV Joe Spear is executive editor of Minnesota Valley Business. Contact him at 344-6382 or jspear@mankatofreepress.com

Local Business People/Company News

CAB marks 30th year

On Feb. 4, 1984, Clarence and Bonnie Betts (thus CAB) launched CAB Construction with a handful of employees, out of a two-stall garage in Madison Lake. Today, Bonnie Betts is sole owner and president, employing 40 people. CAB has expanded into full scale manufacturing of structural steel components and products, quadrupling in size in the process. Equipped with recently acquired AISC (American Institute of Steel Construction) quality certification, CAB is poised to grow out of its current 75,000 square foot facility at 1532 1st Avenue near downtown Mankato. ■■■

TBEI hires Elkins

Truck Bodies and Equipment International, (TBEI) hired Sandy Elkins as the new Crysteel customer service manager at its Lake Crystal facility. Elkins had worked previously at TBEI-Crysteel for 19 years. During that time, Elkins worked in various departments including sales, scheduling production & loads, marketing, and accounts receivable. ■■■

Jordan Fund creates scholarship

The Jordan Sands Community Fund has announced the creation of a new scholarship program with South Central College – North Mankato Campus Foundation. The Jordan Sands Community Fund scholarship will be an annual scholarship of $2,500 to the Mechatronics Engineering Technology program at the North Mankato campus. Scholarships will be awarded to returning, highperforming students who have a GPA of 3.0 or above and preference will be given to students with prior mineral or mining processing experience. ■■■

Two get ‘Top Shop’ honors

Elysian Auto Service in Elysian and Autotronics of Mankato are among 20 shops selected by the AAA Clubs of Minnesota and Iowa as Top Shops. The awards are given to those repair facilities that last year had the required number of online customer satisfaction surveys with an Excellent rating of 93 percent or above. The evaluations are monitored and processed by AAA. ■■■

SMC, Tolzmann honored

Kim Tolzmann, quality control manager with Southern Minnesota Construction, and SMC were honored by their parent company - Oldcastle Materials – for their community involvement. Tolzmann received the Outstanding Community Ambassador award. He is a Patriot Guard Rider and

involved in Legacy Ride. He has been involved in numerous American Legion programs and events. SMC was cited for employees’ involvement in fundraising events including for the American Cancer Society as well as buying four new bikes and repairing 150 used bikes for kids. SMC also opens it quarries to local school groups. ■■■

Knopick joins ProGrowth Bank

David T. Knopick, recently joined ProGrowth Bank as senior vice president – commercial lending. After a 44 year career in several executive positions with Mankato area banks, Knopick is reuniting with Market President Al Kiefer. In the 1990s, they led Security State Bank of Mankato during a 15-year period. Knopick has served on the board of many Mankato institutions, including David T. Knopick South Central College, Greater Mankato United Way, and the Mankato Area Chamber and Convention Bureau. He has also held many leadership positions in state and national independent banking organizations. ■■■

Kato Ballroom under new ownership

The Kato Ballroom is under new ownership and management. The new owners are Tania and James Cordes of Westport, CT. Tania will be primarily running the Ballroom. She has performed extensive charitable work throughout the Midwest and East Coast and earned her MBA from the Harvard Business School Renovations have been done to bring back some of the historical feel of the ’40s and ’50s while also giving the ballroom an updated look. ■■■

SMC earns paving award

Southern Minnesota Construction was honored by the Minnesota Asphalt Paving Association, for its paving work at the Fairmont Airport. ■■■

Snell Powersports awarded Sea-Doo and Spyder

Snell Powersports & Equipment was recently selected by Bombardier Recreational Products to carry Sea-Doo personal watercrafts and Spyder roadsters. With these two additional product categories, Snell PSE is now a full-line BRP dealer. In addition to Sea-Doo and Spyder, Snell PSE also carries Can-Am all-terrain and sideby-side vehicles, Ski-Doo snowmobiles and Evinrude outboard engines.

MN Valley Business • March 2014 • 7

GMG announces marketing team

Greater Mankato Growth announced its new marketing & communications team. Amy Linde, has been promoted to marketing & communications director and Amanda Weldon has been hired as the marketing & communications assistant. Linde will be responsible for providing leadership and execution of all external marketing and communications strategies and tactics in order to provide critical information to businesses, while positively positioning GMG and the regional marketplace. She has been with GMG since 2008. Weldon will play a supportive role in the execution of all marketing & communications initiatives. Weldon recently graduated from Minnesota State University with a degree in Mass Media. ■■■

Hansen earns designation

Debra Hansen, CEO of the Realtor Association of Southern Minnesota has been honored by the National Association of Realtors with the Realtor Association Certified Executive designation, which recognizes exceptional efforts made by association executives. ■■■

I&S gets engineering excellence award

I&S Group was recognized with an Honor Award for Engineering Excellence for the Sibley Park Apartments from the Minnesota Chapter of the American Council of Engineering Companies. The Engineering Excellence awards are presented annually by ACEC/MN, to recognize achievements that demonstrate the highest degree of merit and serve to advance the profession. Sibley Park Apartments is a 60 unit apartment in the Sibley Parkway redevelopment area. ■■■

Harstad joins PresenceMaker

PresenceMaker has hired Chris Harstad as marketing advisor. He brings eight years of sales and marketing experience and will be assisting PresenceMaker with business development and customer relations. He is a graduate of Bethany Lutheran College. Following graduation, he spent three years teaching English as a Second Language in South Korean and Japan before returning to Mankato. Chris Harstad PresenceMaker is a full service interactive media, Internet and marketing firm located in City Center. ■■■

Davisco confirms shelf life on whey powders

In a study spanning over three years, Davisco Foods International detected no significant change in flavor, aroma, color or nutritional composition in sweet dairy whey and deproteinized whey. The study was conducted

8 • March 2014 • MN Valley Business

in the Davisco warehouse, matching the real-world conditions products would face prior to shipping to customers. The company said a longer shelf life with Davisco whey powders will benefit warehousing, logistics, supply chain and manufacturers all the way to retail and consumer products. ■■■

Dauk passes financial exams

James H. Dauk, CPA and shareholder at Milbrett, Dauk & Co., recently passed the Series 7 and Series 66 Exams, earning him the ability to become affiliated as a registered representative with Cetera Financial Specialists. The Series 7 Exam is a six-hour, 250 question test that is owned, maintained and administered by FINRA, which is designed to qualify candidates to solicit James H. Dauk the purchase or sale of a broad range of investments, including stocks, bonds, options, limited partnerships, and investment company products. The Series 66, Uniform Combined State Law Examination, is a 100 question exam administered by FINRA and is designed to qualify candidates as securities agents within a state. ■■■

Bluth selected to Best Lawyers in America

Joseph Bluth was selected by Best Lawyers in America to be in the 2014 edition, which previously recognized him as one of Minnesota’s Top 25 Family Lawyers. Bluth has been designated a “Super Lawyer” by the Minnesota Super Lawyers publication each year since 2003. Bluth limits his law practice to providing mediation and other alternative dispute resolution services Joseph Bluth in complex family law matters affected by physical or mental disabilities, claims of alcohol/ substance abuse, parental alienation, domestic violence or sexual abuse. His firm, High Conflict Mediation and Arbitration Services, which handles cases throughout the state, is based in Mankato. ■■■

Enventis pays dividend

Enventis (HickoryTech) announced a quarterly dividend of $0.15 per share of HickoryTech common stock. The $0.15 dividend is payable in the first quarter on March 5, 2014 to shareholders of record on Feb. 15, 2014. The company has paid a cash dividend to shareholders for more than 65 years and increased its dividend the past four consecutive years, the most recent increase being the fourth quarter 2013. ■■■

Business and Industry Trends

Economy

Mankato vehicle sales down 3%

After a few years of steady gains, the sale of cars and pickups in Mankato slipped 3 percent in 2013 compared to the year earlier. Mankato dealers sold 10,294 vehicles last year, which was 330 fewer than in 2012. August was the best month for dealers when they sold 1,075 vehicles, followed by January when 1,014 were sold. The best month of the last two years was September of 2012 when 1,183 vehicles were sold. Dealers reported very strong sales of pickup trucks in 2012, coming off a strong financial year for many farmers.

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Housing

Local housing sales soar

Housing sales in south-central Minnesota last year increased by more than double the statewide average. There were 1,850 existing homes sold in 2013, compared to 1,670 the year before. That nearly 11 percent increase was far ahead of the 4.6 percent growth seen statewide and outpaced all other regions, such as the Rochester area, which saw a 4.7 percent increase, and the Twin Cities, which had a nearly 9 percent increase. The median selling price, which is the midway point of all houses sold, rose nearly 8 percent in 2013 to $132,500. The average number of days a home was on the market before selling dropped from 156 in 2012 to 142 days in 2013. Still, the good news was offset by housing sales declines in most of the smaller communities in the 10 counties covered by the Realtors Association of Southern Minnesota — an area that stretches from Le Sueur County to Jackson County and Redwood County to Faribault County.

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Energy

Record cold push heating, propane costs

Temperatures east of the Rocky Mountains have been significantly colder this winter (October – January) compared with the same period both last winter and the previous 10-year average, putting upward pressure on consumption and prices of fuels used for space heating, according to the Energy Information Administration. U.S. average heating degree days were 12% higher than last winter (indicating colder weather) and 8 percent above the previous 10-year average. The Northeast was

11percent colder than last winter, the Midwest 17 percent colder, and the South 20 percent colder, while the West was 3 percent warmer. The cold weather has had the greatest effect on propane prices, particularly for consumers in the Midwest. Cold temperatures have tightened supplies in the East and Midwest regions that were already low heading into the winter heating season. Residential propane prices in the Midwest rose from an average of $2.08 per gallon on Dec. 2, 2013, to $4.20 on Jan. 27; prices fell back to $3.83 on Feb.3. EIA now expects that propane prices in the Midwest will average $2.41 over the winter (39 percent higher than last winter) while those in the Northeast will average $3.43 (14 percent higher than last winter).

Natural gas prices up 4 percent

Cold weather also contributed to a new record-high withdrawal of natural gas from storage and a surge in natural gas spot prices. Natural gas working inventories on Jan. 31 totaled 1.92 trillion cubic feet (Tcf), 0.78 Tcf below the level at the same time a year ago and 0.56 Tcf below the previous five-year average (2009-13). Henry Hub natural gas spot prices increased from $4.32 per million British thermal units on Jan. 2 to $5.66 on Jan. 27, before falling back to $5.04 on Jan. 31. EIA expects that the Henry Hub natural gas spot price, which averaged $3.73 in 2013, will average $4.17 in 2014. Residential natural gas prices are expected to average $10.16 per thousand cubic feet (Mcf) this winter, an increase of 4 percent from last winter.

Renewable power to grow

U.S. Electricity and Heat Generation from Renewables. EIA projects renewables used for electricity and heat generation will grow by about 0.7 percent in 2014. Hydropower is projected to decrease by 2.0 percent, while nonhydropower renewables rise by 2.2 percent. In 2015, renewables consumption for electric power and heat generation is projected to increase by a rate of 5.8 percent from 2014, as a 5 percent increase in hydropower is combined with a 6.2 percent increase in nonhydropower renewables. EIA estimates that wind capacity will increase by 8.7 percent in 2014 to about 66 gigawatts (GW) by the end of the year and will increase 15.1 percent to total more than 75 GW at the end of 2015. Electricity generation from wind is projected to remain flat in 2014 but increase by 11.8 percent in 2015, contributing 4.6 percent of total electricity generation in 2015. EIA expects continued robust growth in solar electricity generation, although the amount of utility-scale generation remains a small share of total U.S. generation at about 0.4 percent by 2015.

MN Valley Business • March 2014 • 9

Minnesota Business Updates

■ ADM net earnings down Archer Daniels Midland announced a decline in fourth-quarter 2013 net earnings attributable to the company to $374 million, or 56 cents per share, from $510 million, or 77 cents per share, a year before, reflecting the adverse impact of charges related to GrainCorp and to ADM’s Brazilian sugar mill. Excluding specified items, segment operating profit stood at $1 billion, up 33 percent. Quarterly net sales and other operating income came in at $24.14 billion, compared with $24.92 billion in the 2012 period. Nine analysts estimated revenues of $24.70 billion for the quarter. Commenting on the future, the company said: “Looking ahead, we continue to see strong global demand for our products and large crop supplies. We expect continued good utilization of our North American network until South America’s large harvest reaches global markets”

■ General growth profits surge General Growth Properties said its fourth-quarter profit surged as it reported a higher mall-leased percentage and a bigger-thanexpected increase in revenue. For the fourth quarter, General Growth reported a profit of $77 million, or 7 cents a share, compared with $32.2 million, or four cents a share, a year earlier. Prior-year results had a steep charge tied to warrant-liability adjustments. Meanwhile, total expenses rose 7.5 percent in the latest quarter. General Growth, which owns and manages retail properties in shopping malls across the U.S., has sold and spun off assets in an effort to improve its business since exiting bankruptcy in 2010. The company is also accelerating its redevelopment pipeline, which General Growth says will help generate growth in future years. It jointed the S&P 500 index recently. Late last year, Brookfield Property Partners agreed to invest an additional $1.4 billion in General Growth Properties, boosting its ownership stake in the mall owner to 32 percent.

■ General Mills launches 50 products General Mills is launching 50 new products, including Nature Valley breakfast biscuits and Fiber One nutrition bars. The company typically launches products in two waves, one at the beginning of its fiscal year, the second at the midpoint. Earlier in its 2014 fiscal year, General Mills trotted out 100 new products, according to the Star Tribune. Many of the items are snacks, which is one of the hottest categories in packaged food. The shelf-stable breakfast biscuits are a first for the

10 • March 2014 • MN Valley Business

Nature Valley brand. Fiber One, a brand that crosses cereal and snack bars, will come out with its first nutrition bar, the Fiber One Meal Bar.

■ Analyst bullish on Enventis (HickoryTech)

An analyst on the finance and stock analysis website Seeking Alpha wrote a bullish review about Enventis stock recently. Here is a condensed version: HickoryTech (to become Enventis in May) is a regional telecom story that is little followed and undergoing a nice transformation that is likely to end in a takeout premium or a significant jump in price rewarding shareholders handsomely. The company has become a significant fiber and data player in the upper Midwest states they serve, yet are being valued as if they are a highly levered, declining voice/telecom company without future prospects. As financial data showing the successful conversion is released over the subsequent quarters- the Fiber and Data segment showing strong growth and margin expansioninvestors are likely to more fully appreciate the new profile of the firm and bid up the shares. The company is using its telecom business as a cash machine to invest in and enhance its broadband services. While I’m sure at least some of HickoryTech’s investors know this as it’s a long duration transformation period, I don’t think many appreciate the type of company that it will become once the transformation is complete nor the value of such a firm. HickoryTech has proven to be prudent capital allocators with a successful transformation plan moving the company from a secular-declining telecom company into a growth story with strong organic expansion. Investors have unjustly focused on the telecom business while ignoring the transformation that has occurred within the underlying business.

■ Cold saps Johnson Outdoors An early-arriving and brutally cold winter across much of the United States hurt new orders and shipments at Johnson Outdoors Inc., the company said in reporting a fiscal first quarter loss. The Racine-based company said revenue and profit fell for the three months ended Dec. 27, 2013, compared with record high sales and earnings a year earlier. “The outdoor recreational industry is highly seasonal and heavily influenced by weather conditions,” Helen JohnsonLeipold, chairman and chief executive, said in a statement. “Last year, the first quarter benefited from unusually early new product shipments, particularly in marine electronics. “The early onset of harsh winter conditions during this year’s first quarter has shifted the timing of new product orders and shipments.” Johnson Outdoors reported a first-quarter loss of $2.2 million, or 22 cents a share, compared to net income of $247,000, or 2 cents, in year-ago quarter. Sales fell to $79.1 million from $87.3 million.

Business Commentary

By Dan Gahler and Eric Plath

Farm transition planning takes time, thought

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any factors need to be considered when planning for the transition of any business, including a farming operation. Land ownership, expensive equipment and short-term cash flow needs make farming a highly capital-intensive business, which makes proper planning even more critical considering the large dollar amounts at stake. Transition planning is most effective when considered over a long period of time. There are four main transitional planning areas that farmers should address: financial issues, psychological issues, income tax issues, and gift & estate tax issues.

Financial Issues 1. For the Retiree a) Investment of proceeds – Where should the proceeds from a sale of land and/or equipment be invested? b) Loss of annual revenue from operations or rental income – If the land and/or equipment are sold or gifted, the retiree needs to have some type of income replacement. c) Loss of security from ownership – The retiree needs to feel assured of their future financial security. 2. For the New Farmer a) Obtaining financing for the purchase – Can the new farmer obtain financing or a contract for deed from the seller? b) Using non-farm investments or income to help with the purchase c) Maintaining adequate cash flow – Careful planning is critical and it is prudent to compile a cash flow analysis to understand income and expenses of the farm operation.

Psychological Issues to Consider 1. For the Retiree a) Loss of control of the farming operation and sole responsibility of the farm’s success

b) Loss of pride in a land sale outside the family c) Reception of the transition by family members – Open communication will help the entire family better understand and accept the transition plan. 2. For the New Farmer a) I ncreased Pressure from Potentially Large Debt b) Fear of asking for guidance – The new farmer should identify strengths and weaknesses and not be afraid to seek advice.

Income Tax Issues to Consider 1. Sale of Land a) Cash sale - With a cash sale, the land is simply sold for cash with all the related income tax consequences realized at that date. The gain on the sale will need to be split between capital gain (more favorable) and ordinary gain. b) Installment sale - The retiree could also decide to sell the land on a contract for deed. This allows the capital gain portion of the sale to be realized over multiple years in proportion to the proceeds collected from the sale. With an installment sale of land, any gain allocated to tile and some farm buildings will be picked up in the year of the sale even if no proceeds are received. Planning is very critical - the retiree needs to have enough cash on hand to pay the tax on this type of a gain. 2. Sale of Equipment a) Cash sale - Generally, all gain from the sale of equipment will be ordinary income subject to regular income tax rates. The only time equipment is eligible for capital gain rates is if the sale price of the equipment exceeds the original cost of the equipment. In this scenario, the excess portion would be eligible for capital gain treatment. A piece-meal approach is often used to sell one or two

pieces of equipment at a time without recognizing the gain all at once. b) Installment sale - Essentially, an installment sale of equipment does not give you any more favorable treatment than a cash sale. The gain on an installment sale of equipment is entirely taxable in the year in which the installment sale is consummated. This is true even if the retiree receives zero dollars in the year of the sale. Be very careful. c) Other installment sale tax considerations 1. Interest income - On installment sales, there is an interest component that the retiree will receive each year. This interest is picked up as ordinary income by the retiree just as if it was interest from a bank account. 2. Tax consequences of reacquiring property d) Sale of final year crop 1. Year of retiring – When winding down a previous active farm operation, typically there will be carryover grain to be sold with no expenses to offset against this income. Various options are available to help minimize the tax impact due to this including: a. Income averaging for farmers b. Use of a retirement plan to help level off the income c. Use of any charitable desires d. Use of an oil and gas investment Gifting and Estate Tax Issues to Consider 1. Estate exemption for federal & state – Federal estate exemption is currently $5,340,000 for 2014, Minnesota estate exemption is $1,000,000 plus an additional $4,000,000 exclusion for qualified farmland or qualified small business property. 2. Annual gifting exclusion – The annual gift exclusion for 2014 is $14,000. Amounts in excess of the annual gift exclusion chip away at

MN Valley Business • March 2014 • 11

your lifetime limit. 3. Charitable intent as part of the transition plan – Consider making a current gift of long-term capital gain property. Such a contribution is unique because it allows the donor to take a current income tax deduction for the fair market value of the property donated, while not being required to realize the gain on the appreciation of the donated property. Because this only applies to long-term capital gain property, farm equipment and tile generally would not be eligible. 4. Informing the family of the transition plan – Open

communication will help prevent sibling squabbles later and will greatly help the surviving spouse feel more confident in the plan. There are many different facets to plan for in the transition planning process. Most retirees have been considering some of these issues for years before they actually retire, but it is critical to make sure the new farmer is also involved in the discussion. Unfortunately, sometimes the transition process must be accelerated due to medical conditions of the retiree. However, the implications can be minimized with

prior discussions and earlier planning. Remember that all this planning is centered on very large dollars and that it is important to surround yourself with competent experts. MV Dan Gahler is a CPA and partner at5 Eide Bailly in Mankato. He has more than 30 years accounting experience. 507-386-6257; dgahler@eidebailly. com. Eric Plath is a CPA at Eide Bailly with more than six years accounting experience. 507-386-6288; eplath@ eidebailly.com

Q&A: How small businesses can land government contracts By McClatchey News Service

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ourdes Martin-Rosa, founder and president of Government Business Solutions, splits her time between offices in Miami and Washington, D.C. She spends her days meeting with government employees who award contracts, coaching small-business owners, holding workshops and advocating for the federal government’s Women’s Procurement Set-Aside Program. For the past six years, Martin-Rosa has also served as the American Express OPEN Advisor on government contracting, helping small businesses get their accounting systems and marketing materials ready to win government contracts. To learn more about how Martin-Rosa helps businesses gain access to government contracts, we emailed her these questions. Q: How did SBA certification help you to expand your business? A: As a small business, narrowing your competition is key. If you can find a way to maximize your capabilities towards helping you land a government contract, definitely get certified. As a small disadvantaged woman-owned small business, my firm qualified for the SBA’s 8(a) and Economically Disadvantaged Woman-owned Small Business programs. These programs have allowed me to propel my firm’s sales

by 120 percent. (According to the SBA, a “disadvantaged” business must be 51 percent or more owned and controlled by one or more “disadvantaged” people. The disadvantaged person or persons must be a minority and meet certain financial requirements, and the business must be small.) While certifications can certainly give you a competitive edge, you still have to develop a strong marketing plan and present your firm’s capabilities to government agencies. Q: Please tell me about the opportunities that exist today for small businesses in government contracting. What is the overall volume of government contracting? A: The federal government is the world’s largest procurer of products and services. Each year, the government spends approximately $500 billion, and the Small Business Act mandates (that) government agencies set aside 23 percent of all government expenditures with small businesses. In 2012, the government awarded about $100 billion to small businesses. According to Set Aside Alert, which pulled data from the White House’s Small Business Dashboard, fiscal year 2013 could be the year that the federal government hits the 23 percent goal for the first time in eight years. It’s important to know that this 23 percent piece of the

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pie is sliced even thinner by offering certification and verification programs for socioeconomic categories, allowing these small businesses a greater competitive edge. Business owners should do some research to see if they are eligible for the following programs: _8(a): SBA program designated for small disadvantaged businesses _Women-owned small business program _Service-disabled-veteran-owned small-business program _”Hubzone” (historically underutilized business zone) smallbusiness program There are many organizations and programs, many of which are free, that offer assistance to small businesses pursuing government contracting. For example, I serve as a mentor for American Express OPEN’s government contracting program for small businesses, which offers free workshops, one-on-one access to government buyers, online curriculum and mentoring. As a small-business government contractor, this national program allows me the opportunity to share the wealth of knowledge I’ve learned throughout my 18 years in government contracting. It’s very

gratifying to hear from small businesses I’ve worked with when they finally land that first government contract. Q: What is your forecast for small businesses for 2014? A: The federal government contracting future for small businesses looks brighter than ever. Congress finally passed a budget and approved a $1.1 trillion in spending through 2015. The Department of Defense was allocated approximately $570 billion, where other civilian agencies will receive $480 billion in contract spending. Congress hasn’t passed a budget in four years, which held up contracts, but now there will be an opportunity to award these agency requirements. Although local and state government contracting may be lucrative, federal government contracting offers transparency, and each agency has a procurement forecast posted on each of their websites educating the public on what they need to procure for the fiscal year. This is a wonderful way for small businesses to create a strategic marketing plan towards landing some of these posted contracts.

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Pauline Kruger Vice President St. Peter Location

Andy Fischer Loan Officer Mankato Location

1601 Adams Street, Mankato, MN • 1618 S. Minnesota Ave., St. Peter, MN 507-345-4558 507-931-6100 www.wellsfederal.com MN Valley Business • March 2014 • 13

The Verizon Wireless Center arena is home to Minnesota State University hockey.

Civic center growth Conventions, park concerts fueling civic center By Tim Krohn | Photos by John Cross and Pat Christman

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s the Verizon Wireless Center approaches its 20th anniversary next year, local officials are hopeful this will be the year the state finally approves funding to allow for a major expansion of the facility. The civic center was built in 1995 for $23 million, funded through a half-percent local sales tax. Although there have been upgrades since – including a new ice sheet for the Minnesota State University Maverick hockey team – the expansion is seen as a major step toward attracting much larger conventions and booking multiple events at the civic center. “It would give us a whole new level of business we can go after. We’re losing the statewide conventions simply because we don’t have the space,” said Burt Lyman, executive director of the city-owned and operated facility. But even as they hope expansion will move forward, city officials say the facility and Riverfront Park, which is also operated by Lyman and the civic center – have been growing in use and popularity and bringing economic growth to the downtown.

Riverfront Park venue a hit When Riverfront Park opened in 2010, few could predict how quickly it would grow in popularity and use. Situated along the Minnesota River, near Old Town, the park’s stage, amphitheater and large grass area has made it ideal for events such as RibFest, art shows and concerts. The park is operated by the city-run civic center. “Last year was very good for us at the park. The park seems to have taken hold. We’re building on that,” Lyman said. He said the addition of the park has fit nicely with the civic center because summers are slower for the arena and convention center, while the park is busy. He said successful concerts at the park have means agents are now eager to book shows there. “The artists really enjoy the setting. We’re getting calls from agents rather than us having to call them.” He said the park was already booked for the summer of 2014 early this year, something that didn’t happen until June in past years. “It allows for more planning and ways we can package more events with it. I can’t name the acts coming yet, but they will be bigger and better than 2013.”

Cover Story

14 • March 2014 • MN Valley Business

The cooling system and floor of the ice arena were replaced last year. | Below: Florida Georgia Line recently played at the civic center. For events such as RibFest, the park can accommodate more than 5,000 people, but concerts have been more limited with last summer’s Willie Nelson concert able to accommodate about 3,000 fans. Lyman said the city’s doing improvements to allow for larger concerts. “We’re grading the back grass area higher up in the back to improve the sight lines to the stage. We should be able to get maybe 5,000 (fans) now.” Lyman said the grading, along with other steps, should also help deal with noise complaints by residents, including across the river in North Mankato, who say the concerts’ sounds carry far and clear. “We put in new bass speakers that we can control better so it doesn’t reverberate all across the valley, and we’ve planted a lot of arborvitae behind the stage to dampen the sound – and it’s very attractive.” The city is also planning to put in a concrete slab, covered by a roof, behind the Mankato Piece sculpture for use as a site for concession stands. Eventually Lyman wants to convert it to a building, with refrigeration, where city concession stands and supplies can be stored all summer. “It’s expensive to bring all those concessions out there and stock it, so this would get those costs down. Our primary revenue is from food and concessions, so if we can be more efficient, it will help financially.”

Country dominates concert scene While several big rock shows were featured during the early years of the civic center, country has steadily dominated. “We had some good success with larger country shows. We’ve had four sell-outs the last couple of years. Eric Church was big. Florida Georgia Line sold out more quickly than any, even quicker than Elton John,” Lyman said. Lyman said the success of country isn’t a Midwest phenomenon. “Country is a big thing nationwide, period.” He noted, for example, that a big annual n a t i o n a l convention for agents and venue managers such as Lyman previously was held in Los Angeles but is now in Nashville. “It shows how strong country is. Whether it will stay that way, I don’t know.” Lyman said Mankato’s ability to sell out large concerts, be it Elton John or country acts, has given the city credibility and attention with agents. “We never had a string with so many sell-outs. That gets attention of acts and agents. And with the Elton John concert, they had flex pricing with their tickets and they were able to sell thousands of tickets at higher prices. That showed the industry that Mankato could sell higher ticket prices so long as it’s a higher quality act.” The city gets the lion’s share of its revenues, not from any ticket sales but from concession sales. Venues used to

MN Valley Business • March 2014 • 15

Conventions and meetings remain a big part of civic center business. get some cut of ticket sales, but changes in the industry has all but ended that. “These groups need to make their money touring. With the (music) downloads, they’re not selling albums anymore so they tour hard and the ticket sales go to the promoter and the band.” Meetings, conventions stay strong While big star concerts draw the most attention, it’s the meetings and conventions that are the bread and butter of the civic center. “The meetings and convention center side has been extremely high. There are peaks and valleys, but the banquets and events and those kinds of things have grown consistently,” Lyman said. The biggest problem, he said, is that they are routinely forced to turn away business because of a lack of space. That is the impetus behind now long-standing attempt by the city to get included in a state bonding bill for a civic center expansion. The $32.5 million expansion would include $15.5 million from Mankato and the remainder from state bonding. Mankato has repeatedly lost out in recent years. The money was included in bonding bills but excised by then Gov. Tim Pawlenty. More recently, Gov. Mark Dayton supported the plan, but it failed to pass the Legislature. Funding for Mankato – and other civic center projects in the state – are in the governor’s bonding request this year. “It seems like we’ve been trying for as long as I can remember,” Lyman said. “A lot of people have worked so hard at it.” City Manager Pat Hentges is cautiously optimistic about the city’s chances of getting bonding money this session. “I think (our chances) are probably as good as they’ve been. We have the support of all three bodies, including

16 • March 2014 • MN Valley Business

the governor, leaders in the House and Senate. It’s whether or not they can get some additional votes, particularly from the House,” Hentges said. Hentges recently told the City Council that if state funding fails to come through again, they may have to consider a change in plans. “If we don’t get it this year, we going to have to rethink it and obviously go with a substantially scaled-back project that may not be able to accommodate MSU on a full-time basis down there,” he said. If the state bonding is approved, the expansion will move to the area of the former U.S. Bank building and parking lot, which the city already owns. An auditorium building on what is now the parking lot would become a large, flat show space while the former bank building would be renovated for convention and meeting breakout rooms and other uses. The show space could be used for things like trade shows and also concerts and other events. Lyman said telescoping riser seats around the edges would create an auditorium for musicians to play. It would have 2,500 to 3,000 seats. “Instead of building a big stage, it would be a plug-andplay venue. So if you have someone like Jackson Browne, they don’t have to bring in four or five semis of stuff. They can just plug in some gear and they’re ready.” He said the auditorium also would provide good acoustics for orchestras. Smaller music events are done in the banquet room area of the civic center, which can handle only 400 to 800 fans, depending on the setup. “With the new space we could preserve the banquet room for banquets and push events into the new auditorium. Currently, the civic center can handle conventions for about 600 people, but Lyman said the expansion would

The city plans to upgrade food and beverage concessions, such as those at right, to better support events at the civic center. allow them to bring conventions twice that size. “It gives us a whole new level of business we can go after. We’re losing the statewide conventions simply because we don’t have the space.” And, he said, they can double their space for conventions without adding much more staff. “We can add maybe two or three or four people, but our revenue goes up a lot more.” He said the expansion would not only allow for bigger conventions but would allow the civic center to book multiple smaller events, maybe a dart tournament in the auditorium, a wedding or business banquet in the banquet room and a Maverick hockey game in the arena. The city also wants to upgrade all the concession stands in the arena. “Quite frankly, we don’t have the greatest food options right now. We need to offer higher quality foods and more menu options,” Lyman said. “If people feel we have good food, they may come a little earlier. We don’t want to interfere with the bars and restaurants in the area, but if I can get them here 15 minutes earlier, it helps us (financially).” Last year was the first year the civic center hit the $1 million mark in food and beverage sales and Lyman said that needs to be the focus to be successful financially. “When we started, it was the rent and ticket sales share that was a big thing. That has changed incredibly.” And while the city-owned civic center may be competing for food and beverage sales, Lyman said the facility and its various events – from hockey games to conventions and business meetings – offers a major benefit for the hotels, bars and restaurants in the downtown. MV

Rod Mitchell, president of All American Foods

Value added

All American Foods’ ingredients in countless foods

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By Heidi Sampson | Photos by John Cross

ack in 1987, Jeff Thom, CEO of All American Foods, started out with only a couple of employees in a rented warehouse that had formerly been the old Kayot pontoon building. Over the next 10 years, Thom’s company went from renting one plant to constructing and operating three manufacturing facilities across their 14 acre Mankato campus. In 2000, the company acquired its fourth production facility in Waseca. Today, the company consists of a combined 250,000 square feet between both their Mankato and Waseca sites, as well as an increase in employment to approximately 50. Even with 27 years of growth, President Rod Mitchell believes the challenge of All American Foods lies in describing to the general public, what it is they do. “Nobody really knows what it is we do here because you can’t go to a store and pull a product off of the shelf with our name on it,” Mitchell said. “We are a food ingredient

manufacture. So if you go and look at the ingredients within different foods, I’d be willing to bet you’ve probably eaten one of our products every single day without even knowing it.”

Profile

18 • March 2014 • MN Valley Business

Customized Products All American Foods has been in the business of customized development, processing and packaging of dried, co-dried, and dry blended ingredients. The company can mix, chop, liquid spray, plate colors, flavors, oils and pastes into an application specifically designed to their client’s dairy needs. “We build food ingredients including milk products strictly for the application in which they are used,” said Chad Anderson, director of sales for All American Foods. “For instance, standard dairy commodity ingredients offer a one size fits all approach. Our Pro Mix ingredient line only consists of components that offer functional and nutritional value to our customers. Often when food

manufacturers purchase standard commodities, they are typically buying and paying for components that offer no value. Our customers simply buy what brings them value and that is how our Pro Mix ingredient line has become so beneficial to our customers.” The leading areas All American Food’s specializes in is, confectionary, bakery, salad dressings, dips, beverages, soups, sauces, processed potatoes, cheese powders, flavor enhanced cream powders, such as sour cream and yogurt powders, high fat powders, dairy powders, and dried nonfat buttermilk and whole milk substitutes. All American’s Pro Mix line offers those markets ingredients that are not over-engineered which maximizes the users functionality and nutritional goals while also lowering their cost per pound. “Let’s say your company is using milk,” Mitchell said, “we will give you exactly the amount of protein you need, the exact amount of fat you may want in your finished product and so forth. We can even reduce fats. Our mixtures are very specific to the application of the client.” Production Line to Lab Testing All American Foods production line used to have nine people assist with the creation or mixing and bagging of an ingredient or application. At that time, they could produce between 60,000 and 80,000 pounds of shippable material in one shift. Since their entire system went to automation, today their production runs on four people and produces 200,000 pounds in a single shift, more than doubling their daily output. All America Foods also offers a broad range of packaging sizes from 50 pound bags up to 2,000 pound super totes. Once an application is created and bagged, a sample is taken to the lab where Todd Block and other lab technicians perform product testing duties. They make composite samples which is essentially a small sample of each sample drawn from a specific production lot size. The composite sample is then tested for standard plate counts such as, yeast, mold and other microbes. They also check for other items such as moisture and fat so they ensure the product meets the specification required. All salmonella testing is conducted off site, by an independent laboratory. “Once the retained sample is tested,” Mitchell said, “the sample is kept for three years so we can do further future testing if needed.” Research and Development All American Foods offers its clients the ability to take an ingredient from concept, through production trial runs to final application where a product is tested in their onsite kitchen facilities. “We can do trial runs for people,” Mitchell said. “This basically means we can make a smaller batch of a proposed application. We then take that to our talented research and development team, led by Kathy Jacobson, to see how it fairs in the test kitchen before creating the entire application for shipment.” The pilot plant and test kitchen areas are designed to bring applications from start to finish. They can even make different versions of a particular food item to see how it works with a particular application. “We can test it, develop it, and tweak it right here and get immediate feedback,” Mitchell said. “Maybe they’ll say they want the sauce or the cream to be a bit thicker, we

Todd Block mixes products to be tested for bacteria and other impurities. will work on making it thicker. If they want a different taste profile then we will work on that. If our research and development team is working on four different versions of a particular project, they will bring in between 10 and 12 people to taste test it.” The All American Foods facilities are also Kosher Certified, Halal Certified and organically certified, on top of being independently audited and approved by GMASAFE. They also work with other regulatory agencies such as USDA, FDA, Grade A and the Minnesota Department of Agriculture, to ensure their products are delivered with superior quality. “There is more gluten free products coming to the market all of the time,” Mitchell said. “It’s what the people are asking for and that’s what we do. We will test the product to see what’s going to happen to the product when it changes to meet the needs of the market.” Employee and Clientele Relations All American Foods average length of employment is substantial as 31percent of their employees have been working for them for over 15 years. Sixty five percent have been employed more than 10 years. They are employee owned with all shareholders regularly involved in day to day operations. “We have a real aggressive benefit package,” Mitchell said. “We want to retain people and the best way to do that is to train them and keep them trained. We really encourage continued education also.” During Christmas and New Year’s, All American Foods was able to shut down their facilities in Mankato and Waseca, giving all of their employees a chance to stay home with their families. As an added bonus, their employees received the break paid without the time counting against their accrued vacation or personal days. “We are as worried about our employees as we are our customers and I don’t know which one is more important,” Mitchell said. “Without customers you don’t need good employees and without good employees you won’t have customers. Those are our two most important assets.”

MV

MN Valley Business • March 2014 • 19

Carol Jones (left) and Heather Fisher of Salvage Sisters in Old Town.

Turning ugly to cool Salvage Sisters recycles furniture By Heidi Sampson Photos by John Cross

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he possibility of starting a business had been tossed around many different times as Carol Jones, founder and coowner of the Salvage Sisters, regularly discussed potential business ideas with close-knit friends. However, the turning point from general discussion to actualization began with a dumpster full of good quality used furniture pieces in Madison, WI. As luck would have it, Carol and her husband had rented a U-Haul to move their two children to a college dorm in Madison. After unpacking the U-Haul, Carol was struck by the massive amounts of furniture lying unclaimed and unwanted by the curb. “They have what’s known as a homeless

night out there,” Carol said. “It’s where all the college kids have to be out of their dorms and yet, they can’t move into their new apartments till the next day. The students have no method available to them for storage of their stuff. Since parents can’t come and students don’t have any place to go, the end result is that a lot of really good furniture gets tossed to the curb. It was a great starter supply for Salvage Sisters. Since we’d taken a U-Haul there and were essentially bringing it back empty, we decided to fill it up with the furniture nobody wanted.”

Spotlight

20 • March 2014 • MN Valley Business

••••••

Carol’s storage facility for her newly acquired furniture pieces was located on a relative’s farm site, in Carol’s garage and in her basement, when Salvage Sisters began in August of 2012. At that time, the furniture she obtained was prepped and painted in the garage and then moved into the house while the paint cured. “It takes 30 days to fully cure paint so I’d move the items into the house,” Carol said. “We’d have all of this extra furniture scattered about. My husband and I would to have wiggle around to get in-between the furniture pieces placed throughout our home.” While Carol struggled with proper storage, she also wasn’t an expert painter when she began her business. Although she did realize she was going to have to put some major time in to figure out how to paint efficiently while achieving superior quality with her finished product. “I figured I would need about a 100 hours of internship in my garage,” Carol said. “I would need to learn how to prep it, paint it and trouble shoot. When a person is dealing with old, discarded furniture, we never know what’s on it or how it has been used or even what’s going to happen once a new finish is applied. I’ve been very fortunate as Diamond Vogel and ABS (Auto Body Specialties) have generously provided pointers on paint and paint sprayers. If I have a problem with my sprayer, I can take it to ABS and they’ll help me.” During the summer of 2013, Carol put out a couple of feelers looking for possible business partners. Heather Fisher, an interior designer, was one of those inquires when the two met through a mutual acquaintance. Carol had only met Heather twice, before they decided to become business partners that July. “It’s nice because we have similar energy levels with complementary skills,” Carol said. “It really is a good partnership. Neither of us is afraid to take a chance or make a decision.” In November of 2013, Salvage Sisters added a much needed 1,000 square foot warehouse and professional painting booth located just down the road from their Riverfront store. •••••• Carol and Heather believe their show room reflects an eclectic client base as Salvage Sisters specializes in painted furniture from a wide variety of styles. Furniture pieces can range from modern, to retro mid-century modern, to old fashioned or even ornate in wood work design. If a client has a particular request with a specific style in mind, Salvage Sisters will add the request to an existing list of furniture they are looking for. They also participate in custom painting of furniture pieces already owned by customers. Within Salvage Sisters, Carol scouts out, fixes and paints the furniture. The majority of her furniture pieces are found at estate sales, garage sales, on Craigslist and at the side of the road. Once the furniture piece is taken in, Carol checks the item over for any repair work that might need to be done. The item is then cleaned and sanded down so that any finish that is bubbling or chipped is smoothed over ready for primer and paint. “We typically take the ugly stuff,” Carol said. “Sometimes people come in and say, ‘hey, I’m on the way to the dump, do you want to look over the furniture?’ I don’t really have

time for auctions but I do have people who are interested in doing that kind of stuff. They are routinely buying and selling furniture. So I do have some people in the field. They know our price point and they know kind of what I am looking for.” While Carol handles the furniture side, Heather runs the store. She takes care of their bookkeeping, media networking and the interior design layout. Heather also consults on colors and fabrics as she assists Carol in establishing how a piece will be reconstructed. “We see Salvage Sisters as a lifestyle business,” Heather said. “Some of the ugliest pieces make the best pieces once they are repainted. Our colors are thoughtfully selected. I keep on top of the design world to stay current with the latest trends. Since our turnover in furniture is fairly fast, we are able to keep up on the latest colors and designs. We also have consignment artist pieces available within the store as well, so we really can offer a wide variety of gift items.” •••••• Salvage Sisters has especially enjoyed the response they have received from the community, from businesses voluntarily assisting them with answers to questions to community members who actively see the value in supporting a business that recycles ugly furniture into something beautiful. For Heather, Salvage Sisters has been a great fit. She enjoys using her interior design background in a way that helps clients to accessorize their homes with the latest trends. “When people come into the store, it’s usually likeminded women who are also interested in how we created a particular piece,” Heather said. “I enjoy having my own stamp on items. I also enjoy hearing our client’s discuss their own projects and the creative things they are trying to accomplish in their own home.” For Carol, the best part about Salvage Sisters has been the freedom and flexibility of the business to be creative. “I think because people’s homes are so very different,” Carol said, “it allows for more creativity with a piece. I am able to appreciate the cool and interesting designs without worrying about putting the item into my own home because I know it’ll go to someone who will absolutely love the piece.” MV

MN Valley Business • March 2014 • 21

From left to right: Chris, Brooke, Greg, Peggy and Keith High operate Northern Comfort.

Comfort zone High family keeps people cozy By Heidi Sampson Photos by John Cross

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eith High was looking for an employment opportunity that would allow him to be closer to his family when Schneider Heating of Mankato became available for purchase in 1978. Changing the company’s name to Northern Comfort, Keith’s focus consisted of heating, cooling and plumbing. At that time, Northern Comfort was located on Dewey Street. “It was kind of a nice incubator area,” Keith said. “There were a lot of nice warehouses over there. When they would become available, we’d rent them. You could always keep getting more space.” Keith’s wife, Peggy, joined Northern Comfort as a business manager in 1985. Their two boys, Chris and Greg, began working at the family business part-time as teenagers. Chris

recalls spending many Saturdays insulating, painting or sweeping floors, as way of helping out. Chris and Greg went full-time in 1991 and 1994. Northern Comfort moved to its current location on South Bend Avenue in 1996. Today, Keith and Peggy have semi-retired from the business. Chris has moved into the role of General Manager and Greg takes care of installation and service. A little over a year ago, Chris’ wife, Brooke, joined the mix as the new business manager. “I kind of help with the detail work,” Keith said. “I also focus on sales. Peggy still looks over the end results in the bookkeeping area.” “We use the term “semi-retired” loosely,” Chris said.

All In The Family

22 • March 2014 • MN Valley Business

MVB: How has technology advanced the

heating and cooling business? Chris: I think the efficiency and the safety built into the systems are incredible. Today, we have remote access, so it’s possible to change your thermostat from your phone. It’ll even email you if it senses trouble or if there is a problem with the furnace. The average furnace is also 33 inches tall compared to some of those big monsters we had to take out in pieces. Those things were like five foot tall by five foot long and three foot wide. Brooke: There’s also been a change from two-way radios to cell phones too. Chris: I look back to when I first started, if you got to a job and you had a question, there was nobody to talk too. You just did your best till you got back at the end of the day. When we got the two-way radios, I thought how did we ever do this without them? Now, there are cell phones. Keith: Our trucks have GPS too, which is great. It’s so much better than trolling around town trying to find a place. MVB: What’s the best part about owning and running your own business? Chris: I look at it as the freedom to choose your own path. There is a good deal of responsibility, not only to your customers but also to your employees as well. We need to keep things running. Keith: That was kind of my driving reason to get into this business. I had other options and I didn’t really like them. A lot of those options were out of town but this business pretty much enabled me to plot my own course. The harder I worked the more I got from it. MVB: How do you handle the competition of this market? Chris: We don’t look at our competitors’ business models or what it is they are doing. We simply offer our services and try to show the value in our company. Greg: I think a lot of our success is that we spend a lot of time training our employees. We want to make sure we do things the right way, the first time. We want our customers to be happy. We have excellent service. I think that’s what sets us apart from our competitors. Chris: I agree, I think a lot of it comes down to service. We have enough people in our office to ensure we can take

care of our customers promptly. When you call, there isn’t an answering machine. You don’t have to wait. Our customers are able to get assistance in solving their problems immediately. MVB: What is your busiest time of the year? Chris: Summer through fall has historically been the busiest time for us. Rolling into winter, new construction isn’t as strong and we have more time to do furnace replacements. Weather extremes really tend to drive business also. MVB: What are the biggest challenges to owning your own business? Chris: I would think it would be the stresses of trying to retain good employees and then keeping enough work to keep them busy. I think that is the hardest thing. We are providing employment for these people so they can provide for their families. When the work tapers off it’s not just a ‘well, go home’ attitude. We work harder to find more work. It’s about trying to keep enough jobs coming through the door to keep everybody busy. MVB: How does Northern Comfort give back to the community? Chris: We’ve participated in Heat Up Minnesota for the past two years, which is a program through Lennox. Anybody can go to the Heat Up Minnesota website and nominate somebody they feel is deserving of a new furnace. Whether that is a single mom with a bunch of kids who can’t afford to fix the relic she has to the service veteran who came home and is having a hard time getting back on their feet. They rely on people to nominate those most in need of a new furnace. The nominations are then sent to us for the people in our area. We will then go out to look at each situation and make sure that they don’t already have a new furnace and that it actually does need replacing. After that it’s basically a drawing to see who gets the furnace. So Lennox provides the furnace and we donate the time and materials to install it. The whole event takes place in one day, the first Saturday of October.

MV

MN Valley Business • March 2014 • 23

24 • March 2014 • MN Valley Business

Construction/Real Estate Residential building permits Mankato 8000

(in thousands)

- 2013 - 2014

- 2013 - 2014 (in thousands)

3000

$220

6000

Residential building permits North Mankato

$918

2000

$496

4000

1000

2000 0

J

F

M

A

M

J

J

A

S

O

N

D

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

- 2013 - 2014

M

J

J

A

S

O

N

D

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

- 2013 - 2014

0

10

50 J

F

M

A

M

J

J

A

S

O

N

D

Source: Realtors Association of Southern Minnesota

0

J

F

M

A

M

J

J

A

S

O

N

D

Source: Cities of Mankato/North Mankato

Commercial building permits Mankato

(in thousands)

- 2013 - 2014

Commercial building permits North Mankato

- 2013 - 2014 (in thousands)

2000

$6

1500

$760

1000

$891

J

F

500 M

A

M

J

J

A

S

O

N

D

Source: City of Mankato

— 2013 — 2014

5.5 5.0

4.3%

4.5 4.0

3.4%

3.5 J

F

M

Source: Freddie Mac

0

J

F

M

A

M

J

J

A

S

O

N

D

Source: City of North Mankato

Interest Rates: 30-year fixed-rate mortgage

3.0

A

20

100

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

M

Housing starts: Mankato/North Mankato

30

77

150

0

F

40

112

200

J

Source: City of North Mankato

Existing home sales: Mankato region 250

0

A

M

J

J

A

S

O

N

D

Foreclosures: Third Quarter of 2013 County Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan

2012

2013

Percent change

24 11 14 23 12 13 13 11 6

19 6 7 22 6 18 8 7 4

-21% -45% -50% -4% -50% +38% -38% -36% -33%

Source: Minnesota Foreclosure Partners Council C. Sankey

MN Valley Business • March 2014 • 25

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Agricultural Outlook

By Kent Thiesse

Finally, a new Farm Bill is in place

T

he long-awaited new Farm Bill was signed into law by President Obama in February after passing the U.S. House by a vote of 251-166, and the U.S. Senate by a vote of 68-32. Through 2018, the new Farm Bill will reduce overall Federal spending, will reduce total CRP acreage, and will make some significant changes to farm commodity programs. The legislation will cost the federal government approximately $956 billion over the next 10 years, which is an overall reduction of about $16.5 billion from the baseline spending in the previous Farm Bill. The specific reductions are approximately $14 billion from the farm commodity programs, $4 billion from conservation programs, and a little over $8 billion from the supplemental nutrition assistance program (SNAP), with a projected increase in expenditures of about $6 billion for crop insurance programs. The overall spending under the new Farm Bill will be approximately $756 billion (79.1 percent) for SNAP programs, $90 billion (9.4 percent) on crop insurance programs, $57.6 billion (6 percent) on conservation programs, $44.4 billion (4.6 percent) on farm commodity programs, and $8.4 billion (0.9 percent) on all other programs. The new Farm Bill will eliminate the guaranteed direct payments, which have existed since the 1996 Farm Bill, as well as eliminating potential counter-cyclical payments, the average crop revenue (ACRE) program, and the permanent disaster program for crops (SURE), which were all part of the last Farm Bill. The new legislation will give crop producers a one-time choice between the revenue-based Ag Risk Coverage (ARC) program, and the Price Loss Coverage (PLC) program, based on revised reference prices for the eligible crops. Both the ARC and PLC programs will be calculated on crop base acres, rather than on yearto-year planted crop acres. Crop producers will have several other choices to make with the new

Farm Bill. Producers will be given a one-time opportunity to update crop base acres, based on average planted acres from 2009-2012, or can choose to continue with the crop base acres that existed under the last Farm Bill. Producers that choose the ARC program will have a choice of basing potential payments on county data, or on individual farm data. If they choose the county level, potential ARC payments will made on 85 percent of crop base acres, as compared to a payment level of 65 percent of crop base acres with farmlevel data calculations. County ARC payments will be made when the actual crop revenue falls to 86 percent or lower, compared to the county benchmark ARC revenue guarantee. Payments will be made on actual revenue levels between 76 and 86 percent of the benchmark revenue, up to a maximum of 10 percent. For example, if the corn benchmark revenue for a given year was $750 per acre, the maximum ARC payment that could be earned would be $75 per acre. The ARC guarantees will be updated each year, and will be based on the average county benchmark revenue. This is calculated by taking the average county yield times the national average price for each year, for the preceding five years. The PLC program option will be based on set reference (target) prices. Reference price levels for major crops were raised to the following levels for the next five years (2014-2018): corn - $3.70 per bushel; soybeans - $8.40 per bushel; and wheat - $5.50 per bushel, which is a substantial increase from current target price levels. If the 12-month national average price for a commodity falls below those levels, payments will be made on 85 percent of eligible crop base acres. Dairy programs under the new Farm Bill were quite controversial right up until completion of the legislation. Dairy producers will have a new Dairy Margin Protection program that will replace the

26 • March 2014 • MN Valley Business

previous Milk Income Loss (MILC) program. The new program will be based on the margin between the milk price and the average feed cost, and will provide a payment up to $4 per cwt., based on an established production level. Most crop insurance provisions under the new Farm Bill remained largely the same as current provisions. The biggest change for producers will be that compliance with federal conservation provisions will be required for the purchase of subsidized crop insurance, similar to the conservation compliance for participation in other farm programs. The new Farm Bill lowers the maximum amount of acres in the Conservation Reserve Program (CRP) to 24 million acres by 2018, as compared to a maximum of 32 million acres in the last Farm Bill. The maximum CRP acreage is gradually reduced, starting with a cap of 27.5 million acres by October 1, 2014. As of October 31, 2013, there were a total of 25.6 million acres in the CRP program, so total CRP acreage will likely decline at fairly small levels over the next few years. The new Farm Bill will combine some twenty-three existing conservation programs into a more manageable program mix in the future. The basic commodity farm programs in the new Farm Bill will be implemented by USDA for the 2014 crop year. Farm program signup will likely not begin until April of this year at local Farm Service Agency (FSA) offices, and will probably continue into the summer months. MV Kent Thiesse is farm management analyst and vice president, MinnStar Bank, Lake Crystal. 507- 381-7960; kent.thiesse@minnstarbank.com

Agriculture/Agribusiness Corn prices — southern Minnesota

(dollars per bushel)

— 2013 — 2014 8 6

16 12

4

0

$12.19

8

$4.20

4

J

F

Source: USDA

M

A

M

J

J

A

Iowa-Minnesota hog prices

100

S

O

N

D

0

90

20

80

18

70

16

$82.48 F

M

A

M

J

J

A

S

O

N

F

M

A

M

J

D

Source: USDA

14

J

A

S

O

N

D

Minimum prices, class 1 milk Dollars per hundredweight

— 2013 — 2014 24 $23.28 22

$88.63

J

J

Source: USDA

Milk prices

185 pound carcass, negotiated price, weighted average

— 2013 — 2014 110

60

(dollars per bushel)

— 2013 — 2014 20 $14.00

$6.94

2

Soybean prices — southern Minnesota

$20.77

J

F

M

A

M

J

J

A

S

O

N

D

Source: USDA. Based on federal milk orders.

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

C. Sankey

there for

you

W W W. U M M C . C O

Tom Evensvold

Steve Olson

Mark David Thompson Monson

Many have trusted MinnStar Bank’s personal service to help them build and grow their businesses—and we can do the same for you.

Downtown Mankato 507-625-6816 Lake Crystal 507-726-2137

BUSINESS BANKING www.minnstarbank.com Member FDIC

MN Valley Business • March 2014 • 27

Employment/Unemployment Initial unemployment claims

Minnesota initial unemployment claims

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

455 369 85 301 1,210

Percent change ‘13-’14

386 235 85 330 1,036

-15.2% -36.3% 0% +10% -14.4%

Major Industry

January

Construction Manufacturing Retail Services Total*

‘12

‘13

Percent change ‘13-’14

7,854 4,030 2,280 7,901 22,065

7,709 3,191 1,750 6,777 19,427

-1.8% -20.8% -23.2% -14.2% -12%

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

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

Local non-farm jobs

Minnesota Local non-farm jobs

- 2012 - 2013

Nine-county Mankato region

125,494 125,509

30000

2000

10000

1000

J

F

M

A

M

J

J

A

S

Local number of unemployed

O

N

D

- 2012 - 2013

Nine-county Mankato region

5,862 6,826

0000

0

J

F

M

A

M

J

J

A

S

Minnesota number of unemployed

O

N

D

- 2012 - 2013 137,950

200000

8000

161,003

150000

6000

100000

4000

50000

2000 0

2,825.4 2,803.2

3000

20000

00000

- 2012 - 2013

(in thousands)

J

F

M

A

M

J

J

A

S

O

N

D

Mankato/North Mankato Metropolitan statistical area

Unemployment rate Number of non-farm jobs Number of unemployed

2012

2013

4.4% 55,456 2,547

3.6% 55,523 2,055

Source: Minnesota Department of Employment and Economic Development

28 • March 2014 • MN Valley Business

J

F

M

A

M

J

J

A

S

O

N

D

Unemployment rates Counties, state, nation

(includes all of Blue Earth and Nicollet Counties) December

0

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

December 2012 4.5% 5.1% 5.9% 7.6% 5.1% 4.2% 5.0% 5.8% 5.5% 5.1% 5.4% 7.6%

December 2013 3.6% 4.6% 5.3% 7.1% 4.4% 3.4% 4.2% 5.0% 5.2% 4.3% 4.7% 6.5% C. Sankey

Retail/Consumer Spending Vehicle Sales Mankato — Number of vehicles sold - 2012 - 2013 702

1200 1000

(In thousands)

- 2012 - 2013

500

$430.8 $395.3

400

671

800

300

600

200

400

100

200 0

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

Sales tax collections Mankato

J

F

M

A

M

J

Source: Sales tax figures, City of Mankato

J

A

S

O

N

D

Lodging tax collections Mankato/North Mankato $41,556

60000

0

J

F

M

A

M

J

J

A

S

O

D

Mankato food and beverage tax

- 2012 - 2013

- 2012 - 2013

75000

$52,702

$47,073

50000

N

Source: Sales tax figures, City of Mankato

$55,169 50000

40000 30000

25000

20000 10000 0

J

F

M

A

M

J

J

A

S

O

N

Source: City of Mankato

J

F

M

A

M

J

J

A

S

O

N

D

Source: City of Mankato

Gas prices-Mankato — 2013 — 2014

5

0

D

Stocks of local interest

Jan. 13

Feb. 14

Percent change

Archer Daniels

$42.08

$40.78

-3.1

4

Ameriprise

$113.46

$107.99

-4.8

3

Best Buy

$36.26

$24.78

-31.6

Crown Cork & Seal

$42.72

$44.25

+3.6

Fastenal

$48.28

$44.98

-6.8

General Growth

$20.50

21.92

+7

General Mills

$48.87

$49.89

+2.1

HickoryTech

$11.63

$14.22

+22.3

Hutchinson Technology

$3.93

$3.64

-7.4

Itron

$41.43

$36.12

-12.8

Johnson Outdoors

$27.26

$23.04

-15.5

3M

$135.96

$132.12

-2.8

Target

$61.57

56.06

-9

U.S. Bancorp

$40.71

$40.79

+0.2

Wells Financial

$22.50

$22.90

+1.8

$.49

$.55

+12.2

$28.21

$29.65

+5.1

$3.25

2

$2.95

1 0

J

F

M

A

M

J

J

A

S

O

N

D

Gas prices-Minnesota — 2013 — 2014

5

$3.25

4 3 2

$2.95

1 0

J

F

M

A

M

J

J

A

S

O

N

D

Winland Xcel

Source: GasBuddy.com C. Sankey

MN Valley Business • March 2014 • 29

Advancing Business for a Stronger Community

Business Experts to Speak at Upcoming Southern Minnesota Economic Summit The idea of holding an economic summit in Greater Mankato has been a goal for many stakeholders across Southern Minnesota for many years. This year we are proud to make this concept a reality; the first Southern Minnesota Economic Summit will be held over two days, April 29 ��� 30 at the Verizon Wireless Center in Mankato. The summit will bring together a diverse audience including participants from the private and public sectors, economists, business professionals and entrepreneurs. Attendees can choose which of four breakout session track(s) to follow: 1) Entrepreneurial Bridge (brought to you by Southern Minnesota Initiative Foundation (SMIF)), 2) Growing Your Business, 3) Business Leadership and 4) Alignment of Talent & Workforce.

Greater Mankato Growth

The event also features four keynote speakers: • Ashley Zuelke, National Director of Rural Export Partnerships, SOUTHERN MINNESOTA U.S. Department of Commerce • Dr. Laura Kalambokidis, State of Minnesota Economist, University of Minnesota • Toby Madden, Federal Reserve Bank of Minneapolis • Liz Nead, Nead Inspiration The summit will have a unique business-to-business environment with the seasoned and experienced businessperson sharing their knowledge with those in a similar industry or with an entrepreneur just starting out. Several aspects of the Southern Minnesota economy resonate across industry lines: workforce & training, ties to the global market, profit margins and customer relations to name a few. As a result of the summit, attendees will achieve new business connections, insights gleaned from sharing and highlighting of best practices and a shared desire to grow the regional economy. Attendees can make the most of the summit by attending the integrated Business Showcase on the evening of the first day of the event. The Southern Minnesot Economic Summit will appeal to a broad audience.

To make this event available to as many businesses as possible, GMG has invited more than 60 Chambers of Commerce from across Southern Minnesota to participate. These Chambers of Commerce can offer the opportunity to attend the summit to their membership with a discounted registration rate. Establishing these partnerships has made it possible to hold the event for all Southern Minnesota businesses and professionals to learn about resources, share knowledge and build strong business relationships. Greater Mankato Growth would like to thank our event sponsors for helping to make the summit possible: Southern Minnesota Initiative Foundation (SMIF), Regional Center for Entrepreneurial Facilitation (RCEF) and AgStar Financial Services. Other sponsors include: Xcel Energy, Calpine Energy Center and Minnesota Department of Employment and Economic Development (DEED). Learn more and register to attend the summit on our website: economic-summit.com.

30 March 2014 1 •• JANUARY 2013 •• MN MNValley Valley Business Business

Leadercast Comes to Greater Mankato Join Greater Mankato Growth as we host Leadercast Greater Mankato on Friday, May 9 at South Central College. This day-long event will be simulcast to over 600 communities in 40 countries and will feature nationally-recognized speakers including Archbishop Desmond Tutu and Laura Bush. This is a fantastic opportunity for area businesses and their employees to become energized and motivated as they hear the unique leadership stories of each speaker.

Sponsored by:

Here’s what some attendees from last year had to say: “The nationally recognized speakers helped reinforce key leadership ideas that can easily be forgotten in our fast-paced and sometimes complex routines.” Nathan Hanel, Customer Service Supervior at Capstone. “This seminar changed my business outlook and I returned to my office with a positive attitude and excited to share the information with my co-workers” Beth Fasnacht, Interior Designer at Brunton Architects & Engineers

A Springtime Tradition Everyone from the Southern Minnesota business community is invited to attend the Business Showcase on April 29 from 4 – 7 p.m. at the Verizon Wireless Center during the Southern Minnesota Economic Summit. This popular annual event gives you an opportunity to get together with more than 500 individuals from businesses throughout Greater Mankato and learn about the products and services they provide. Plus you’ll have the opportunity to sample food from a variety of Greater Mankato restaurants and register for fabulous prizes from area businesses. It’s the once a year event no one wants to miss! For more information visit greatermankato.com/business-showcase.

MN MNValley Valley Business Business •• March March 2014 • 31

Greater Mankato Growth

Cost to attend is $109 per person and includes lunch. If your business is a member of Greater Mankato Growth, register by April 15 to receive a $20 discount. Register online at greatermankato.com/leadercast.

Greater Mankato Growth

2013 Year in Review

32 March 2014 1 •• JANUARY 2013 •• MN MNValley Valley Business Business

201

w

2014 Business After & Before Hours

5:00 - 7:00 p.m. March 4 April 1 May 6

Snell Motors The Loose Moose Saloon & Conference Center MRCI WorkSource

2014 Business After Hours Sponsored by:

January Business After Hours hosted by Brunton Architects & Engineers

7:30 - 9:00 a.m. March 19 April 16 May 21

Sam’s Club Enventis Mayo Clinic Health System

2014 Business Before Hours Sponsored by:

January Business Before Hours hosted by Lifeworks Services

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

MN MNValley Valley Business Business •• March March 2014 • 33

Cavalier Calls on the

Advancing Business for a Stronger Community

Growth in Greater Mankato NEW BUSINESS

Newest Members

NEW BUSINESS

NEW LOCATION

Greater Mankato Growth

Allure Salon 412 Park Lane, Mankato

Hardees 1405 Madison Avenue, Mankato

NEW BUSINESS

NEW LOCATION

Howe-to Fitness 110 West Duke Street, Suite 3, Mankato

Pawn America 1565 Tullamore Street, Mankato

Theuninck Construction LLP 1424 Shoreway Drive, Kasota

Spring Touch 1420 Lookout Drive, North Mankato springtouchlawn.com

Visit Mankato is an affiliate of Greater Mankato Growth (GMG), operated as an LLC under GMG.Visit Mankato is dedicated to the important work of attracting and servicing visitors, conventions, events and tournaments in Greater Mankato.

Planet Fitness 1859 Adams Street, Mankato planetfitness.com

Peoples State Bank of Madison Lake 500 Main Street, Madison Lake psbmadlake.com

34 december March 2014 2013 •• MN • MN Valley Valley Business Business 1 •• JANUARY 2013 MN Valley Business

Citizens Community Federal 1901 East Madison Avenue Suite, 410, Mankato. ccf.us

Calls

st ers

Agriculture Business: Growing Success It’s no secret agricultural businesses are essential to the economic growth of greater Mankato and also to the entire Midwestern region of the United States. But agritourism has played a roll in helping Mankato weather the recent economic downturn as well through various attractions and conventions. Agritourism is very prevalent in greater Mankato.The most obvious example is our local wineries. Chankaska Creek Ranch and Winery is located in rural Kasota, Indian Island Winery is in rural Janesville, and Morgan Creek Vineyards is located in rural New Ulm. Each offers a unique experience and entertainment options from grape stomps to murder mystery parties, but all provide the escape and relaxation a person associates with a nice glass of wine. You can also see examples of agritourism at Mankato’s most popular park. Sibley Park’s farmed-themed petting zoo and playground area are always busy with little ones and families. The Children’s Museum of Southern Minnesota is working on building a new site to be open as soon as spring 2015. They plan to incorporate agriculture in their Grow it Gallery, an indoor agriculture exhibit as well as 10,000 square feet of outdoor agricultural areas called the Farm Yard and the Back 40.There will be lots of exciting ways to learn and play. Kids will be able to see live animals including chickens and get hands on experience growing food. Last year, the Verizon Wireless Center hosted over 15 agriculture-related events, a number they hope to grow.

Children’s Museum of Southern Minnesota’s vision for their new location and ag-related exhibits.

The MN Ag Expo is a great example of the growth of Mankato as an agricultural epicenter.The MN Soybean Growers Association, along with the MN Corn Growers Association, recently joined forces to create a joint tradeshow and educational event. With the Corn Growers Association based in Shakopee and the Soybean Growers based here in Mankato, the Verizon Wireless Center was a natural fit to host the integrated event. Tricia Stenberg, Convention Sales and Marketing Specialist at the Verizon Wireless Center has noticed that trend in the past few years. “We are fortunate to have the MN Soybean Growers Association located here in Mankato and we have a great partnership with them,” said Stenberg. Agricultural business, including agritourism is imperative for Mankato to remain an economically healthy community. It enhances our local economy and offers tremendous growth potential for the future. Visit Mankato is an affiliate of Greater Mankato Growth (GMG), operated as an LLC under GMG.Visit Mankato is dedicated to the important work of attracting and servicing visitors, conventions, events and tournaments in Greater Mankato.

MN Valley Business • March 2014 • 35

Greater Mankato Growth

“The Agriculture meeting segment is an important part of our business plan,” explains Larissa Mrozek, Senior Sales Director at Visit Mankato. “We try to target meeting planners that are planning meetings for these groups as our amenities and facilities align well with their needs.”

36 • March 2014 • MN Valley Business

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