Spring 2007 IQ Magazine

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BRAINERD BAXTER

M I N N E S O TA’ S 4 T H O F J U L Y C A P I TAL June 28th LITTLE MISS AND MISTER 4TH OF JULY PAGEANT Westgate Mall, Sponsored by Riddle Jewelry and Dairy Queen

SHOW N’ SHINE

July 1st

July 4th

The Body Works, Sponsored by Street Merchants Auto Club

33RD ANNUAL ARTS IN THE PARK

THE AMERICAN CELEBRATION

Gregory Park

Don Adamson Football Field

July 2nd

Noon - Free Corn on the Cob Feed, Sponsored by Brainerd Jaycees

June 30th

June 29th

MISS BRAINERD SCHOLARSHIP PAGEANT

RIGHT FRIENDS PICNIC

Tornstrom Auditorium

Camp Confidence, Sponsored by the Jack Mehaffey Family

June 30th and July 1st

BATTLE OF THE BANDS Don Adamson Football Field, Sponsored by Youth As Resources

POHLKAMP/STRUTHERS SOFTBALL TOURNAMENT Memorial Fields

BRAINERD LAKES VETERANS CENTER GOLF TOURNAMENT with THE RED, WHITE, AND BLUE THUNDER - SUPPORT OUR TROOPS DAY

4:00 P.M. — Parade 6:30 P.M. — Entertainment 10:00 P.M. — National Anthem 10:15 P.M. — Fireworks, Sponsored by the City of Brainerd, the City of Baxter, and the Brainerd/Baxter Lodging Association

Mills Field BLUE THUNDER VS. DULUTH

July 7th

July 3rd GOSPEL NIGHT Heritage Assembly of God Church

RACE FOR THE CURE Forestview Middle School

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SUPPORTING COMMUNITY GROWTH

SEH Building, Brainerd

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Revitalizing Downtown Brainerd, Minnesota Located in the heart of Brainerd’s civic and business districts, the new SEH office building is the result of a partnership between both private and public sectors with one common goal—the revitalization of downtown Brainerd. The building has brought new life into this city block, offering modern amenities while maintaining the architectural integrity of neighboring historic buildings.

2006 State ABC Award of Excellence Winner Brainerd Lakes Area / 888-829-0707 / www.kuepers.com

MN LIC 0002599

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SPRING 2007

CONTENTS FEATURES 10

Sponsor Silhouettes

14

18

24

28

Are You Hard-Wired for Business Ownership?

The Guarded Secrets of Business Planning & Financing

What Does the Future Hold For Central Minnesota’s Growing Entrepreneurs?

How Your Hometown Can Ignite the Entrepreneurial Spirit

Entrepersonality

Inside the Vault

Profitizing

Friendly Fire

DEPARTMENTS 4 Beginnings Weavings 6 Mythology Artificial Intelligence 8 Credit Scores Where Credit is Due

10 Sponsor Silhouettes 32 Small Business Resource Guide 36 Initiatives Floating A Loan

38 Race Matters Cultures of Business

46 KeyNotes The Foundation Newsletter

42 Angel Investing Angels Among Us

52 Guest Editorial Long Live the Entrepreneur

“Our mission is to unlock the potential of the people of central Minnesota to build and sustain healthy communities.”

Cass Lake Schley Bena

Wilkinson Federal Dam Leech Lake

Boy River

Tobique

Onigum Walker

Brevik

Remer

CASS

Ah-Gwah-Ching

Whipholt

Longville Inguadona Hackensack

INITIATIVE FOUNDATION FOCUS AREAS

Pontoria Backus

Outing

Oshawa

Huntersville

Chickamaw Beach

Menahga

Fifty Lakes Emily

Swanburg

Manhattan Beach

Pine River

Crosslake Nimrod

Sebeka

Jenkins Pequot Lakes

WADENA

Breezy Point

Oylen

Blue Grass Leader

Nisswa Lake Shore

Leaf River

Trommald

Lake Hubert

Cuyuna

Crosby Ironton

Merrifield

Riverton

Wadena

Deerwood

Legionville

CROW WING

Verndale E Gull Lake

Aldrich

BAXTER Hewitt

Bay Lake Duquette Kerrick Ellson

Barrows

Philbrook

Willow River

Garrison

Bruno Rutledge

Bertha

COVER

“You, Incorporated” Illustration by Chris McAllister

Lincoln

Pine Center

Opstead

Vineland

Cushing

Clarissa

Long Prairie

Gutches Grove

Warman

M O R R I Pierz SON

Hillman

MILLE LACS KANABEC

LITTLE FALLS

Genola

Flensburg Sobieski

Round Prairie

Gregory

Elmdale

Sauk Centre

Brennyville

Opole

St. Anna

Albany

Watab St. Wendel

Farming

Gilman

Roscoe

Cold Spring St. Nicholas

Day

Pease

CAMBRIDGE

Walbo

SHERBURNE Orrock

Zimmerman

Spencer Brook

Oxlip

Rush City

Stark

Spring Lake Bodum

Isanti

Rock Creek

Rush Point

Edgewood Bradford

Clear Lake St. Augusta Luxemburg Clearwater

Blomford Weber

Harris

NORTH BRANCH

Hasty

Almelund

Center

Lindstrom City Stacy

Kimball

BIG LAKE

Enfield

Fair Haven

Silver Creek

ELK RIVER

MONTICELLO Annandale Albertville

Maple Lake

French West Lake Albion

ST. MICHAEL W R I G H TBUFFALO

Albion Center Knapp

Cokato

Albright Highland

Waverly

Lake Rice Lake

Rockford Montrose

Stockholm Howard

Oster

Delano

Sunrise

CHISAGO

Crown

Becker Marty

South Haven

INITIATIVE QUARTERLY

ISANTI

Wyanett Pine Brook

West Point

Maine Prairie Watkins

Greeley

Braham Stanchfield Springvale Grandy

Dalbo Carmody Long Siding

Palmer

Cable

Richmond

Paynesville

Foreston

Estes Brook Glendorado Santiago

ST. CLOUD

Rockville Lake Henry

Oak Park

Coin

Princeton

WAITE PARK Jacobs Prairie

West Rock

Brunswick

Milaca

Ronneby

Foley

Duelm

Grasston

Bock

St. Joseph

Spring Hill St. Martin

Jakeville

SAUK RAPIDS

Collegeville

STEARNS

Pine City

Rum River

BENTON Popple Creek

SARTELL

Avon

Greenwald

Cloverdale

Beroun

Ogilvie

Granit Ledge

Novak's Corner

Mayhew

St. Stephen

St. Anthony Freeport New Munich

Silver Corners

Rice Holdingford

St. Rosa

Melrose Meire Grove

Elrosa

Belgrade Georgeville

Ramey

Morrill

North Prairie

Padua

Brooten

Little Rock

Royalton

Bowlus

Upsala

St. Francis

Hinckley

Henriette

Mora Burtrum Grey Eagle

Ward Springs

Brook Park

Quamba

Buckman

Swanville

Little Sauk

West Union

Wyoming

Chisago City

Cloverton Duxbury

Friesland

Kroschel

Onamia

Lastrup

Freedham

PINE

Sandstone

Wahkon

Cove

Harding

Camp Ripley Junction Darling

Kingsdale

Askov

Groningen

Isle Bayview

Randall Browerville

TODD

Eden Valley

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Finlayson

Shephard Fort Ripley

Eagle Bend

Clotho

Nickerson

Sturgeon Lake Denham

BRAINERD

Pillager

Motley

Palmdale

Taylors Falls Shafer Franconia

Markville

• Strengthen Children, Youth, and Families • Promote Economic Stability • Preserve Space, Place, and Natural Resources • Build Capacity of Nonprofit Organizations • Embrace Diversity & Reduce Prejudice • Increase Utilization of Technology

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Twenty years ago, how valuable would it have been to know the trends that shape our world today? Would you have taken the same paths? Would your business and community be different or better?

In a bold effort to educate leaders, the Center for Strategic and International Studies (CSIS) in Washington, D.C., predicted seven revolutions that will drive global change through 2025. Rooted in research, each trend embodies both promise and peril.

CSIS Vice President Erik Peterson will deliver this sought-after presentation, followed by a panel discussion and brainstorming on local impacts. As a community leader, your ideas will shape how our region will take action.

Inject future-focus into your organization.

Bring your leadership team and register today.

FRIDAY, APRIL 13 9 A.M. to 2:30 P.M. I St. Cloud Civic Center I $55

w w w. i f o u n d . o r g / 7 R to register by April 1

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Brainerd Lakes Area Development Corporation

BEGINNINGS

WE HELP MAKE IT HAPPEN.

If you’re ready to: start a new business, expand an existing company, or relocate your business to the beautiful Brainerd Lakes Area, make BLADC your first call!

The Brainerd Lakes Area Development Corporation helps new and expanding businesses find the resources they need to succeed.

Weavings Dear Friends, Welcome to morning. You take an unhurried walk in the damp woods. The wind and wilderness carry your thoughts back to you. The coffee is the best you’ve ever tasted. As the sun breaks over the trees, it warms your shoulders like a soft blanket.

Aspiring entrepreneur and artist, Deb Shaffer, strummed at her loom and deftly wove that moment into a display piece that stole a half-breath away from me. Entitled “Woods in Chime” and measuring three-by-six feet in majestic blues and purples, it was one of those things you wish you could see every day.

For a brief moment, the weaving captured my curiosity as we were touring Initiative Foundation projects in the Isle area.

Isle is earning second-looks for the way it supports local entrepreneurs and develops its economy from the inside out. Depot Studios, one of our tour stops, serves as a retail laboratory for artistic entrepreneurs like Deb to test the marketplace. This makes for a stronger economy, tighter relationships, and a unique hometown identity that attracts visitors and new residents.

This issue of IQ is for Deb and all of those who have dreamed about starting a business, but wondered what it takes to do it. It’s also for community leaders who wish to better understand the unique needs of entrepreneurs and the elements needed to build a hometown culture that shares in their success.

As I discovered on Christmas, entrepreneurial cultures also have personal benefits. After a subtle hint to Neal (as he feigned husbandly disinterest), the woven piece found its way under the tree and eventually over my stairwell. With entrepreneurship, you see, everything is intertwined.

Enjoy the magazine!

Kathy Gaalswyk, President Initiative Foundation

(218) 828-0096 (888) 322-5232 www.bladc.org 4

INITIATIVE QUARTERLY

P.S. For the first time ever, IQ will showcase four sponsors who share the foundation’s commitment to strong local businesses and quality jobs. Please see pages 10–13 for silhouettes of Venture Allies/Granite Equity Partners, Great River Energy, Harold Anderson Entrepreneurial Center, and our Green Business Loan Fund.

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There’s strength in numbers.

> VOLUME 4, SPRING 2007 INITIATIVE FOUNDATION Executive Editor & Director of Communications / MATT KILIAN Communications Associate / ANITA HOLLENHORST PUBLISHERS Evergreen Press / CHIP & JEAN BORKENHAGEN EDITORIAL Editorial Director / JODI SCHWEN Assistant Editor / TENLEE LUND ART Art Director / ANDREA BAUMANN Art Director / BRAD RAYMOND Senior Graphic Designer / BOB WALLENIUS Production Manager / BRYAN PETERSEN Lead Photographer / JIM ALTOBELL ADVERTISING / SUBSCRIPTIONS Business & Advertising Director / BRIAN LEHMAN Advertiser Services / MARY SAVAGE Subscriber Services / MARYANN LINDELL IQ EDITORIAL BOARD Initiative Foundation President / KATHY GAALSWYK Minnesota Business Finance Corporation / CAROL ANDERSON Rinke Noonan / JOHN BABCOCK Minnesota Department of Revenue / WARD EINESS Glenn Metalcraft / GINGER GLENN ClubMaxx / SCOTT GORDON Initiative Foundation / CURT HANSON Brainerd Lakes Area Development Corp. / SHEILA HAVERKAMP Mid Minnesota Federal Credit Union / JULIE HOFIUS Initiative Foundation / JOHN KALISZEWSKI Great River Energy / TOM LAMBRECHT Minnesota Rural Partners / JANE LEONARD Northeast Entrepreneur Fund / MARY MATHEWS St. Cloud Area Economic Development Partnership / TOM MOORE Clear Path Investment Partners / MARTY MORAN Pine Technical College / ROBERT MUSGROVE Central Lakes College / PAM THOMSEN Initiative Foundation / ASHLEY VARGO Initiative Foundation / SANDY VOIGT Initiative Foundation 405 First Street SE Little Falls, MN 56345 320.632.9255 www.ifound.org IQ is published by the Initiative Foundation in partnership with Evergreen Press of Brainerd, Minnesota. www.evergreenpress.net For advertising opportunities, contact: Lois Head 320.252.7348, lmhead@stcloudstate.edu Brian Lehman 218.828.6424 ext. 25, brian@evergreenpress.net Kristin Rothstein 320.251.5875, kristin@cpionline.com

Need a great healthcare provider? How about nearly 60 of them. The medical staff at BMC has never been stronger.

Brainerd Medical Center

And because our community is growing so rapidly, BMC's technological strengths and numbers of medical professionals are rising too. We're here for you, just as we always have been, and always will be.

Where talent and technology come together.™

218.828.2880 | 800.277.8262 2024 South Sixth Street www.brainerdclinic.com

SPRING 2007

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MYTHOLOGY

BY BRITTA REQUE-DRAGICEVIC

Artificial Intelligence Don’t Buy the Conventional Wisdom about Small Business Ownership

H

Conventional Wisdom: Great ideas lead to success and money.

Reality-Check: Not always.

“Great ideas need a team with focus, follow-through, and commitment,” says Joan Wurzer, executive vice president of RAIN Source Capital, an angel investor network. “If a founder is strong technically, finding a partner experienced on the business side can create a team that would be considered investable. We believe it is better to invest in an ‘A’ management team with a ‘B’ idea, than an ‘A’ idea with a ‘B’ team.”

Conventional Wisdom: There are “free money” government and nonprofit programs available to start small businesses.

Reality-Check: In spite of those late-night television commercials, there is no such thing as free money. Period.

“Actually, the government does provide grants to help small businesses,” says Melvin Aanerud, Supervisory Lender Relations Specialist for the U.S. Small Business Administration in Minneapolis, “but that money goes to Small Business Development Centers,” not directly to small business owners.

“If the government had enough money to provide grants to everyone who wanted to start a business,” he says, “individual taxes would be higher, we’d have significantly more small businesses than there would be markets for them, and the economy would be in disarray.”

Conventional Wisdom: Owning a small business is easy work with lots of time off.

Reality-Check: Entrepreneurs do get time off—when they’re sleeping.

“I like to tell people they will only have to work half-days— either the first twelve hours or the second,” says Pam Thomsen, con-

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ILLUSTRATION BY CHRIS MCALLISTER

ave you ever seen a circus performer spinning plates?

Whirling wildly, he scampers from one to the next. Some keep spinning; others shatter on the floor. Welcome to the life of the new entrepreneur. Most admit they had no idea how much work, money, patience, and determination it would take to start a business. Here’s a candid look at some common myths and dark truths about entrepreneurship.

sultant with the Small Business Development Center in Brainerd.

“Most people underestimate the time involved in owning and running a business. They were used to delegating in their former jobs. All of a sudden they have to wear all the hats, from washing windows to bookkeeping. It’s not uncommon for entrepreneurs to begin working when their employees go home.”

Conventional Wisdom: Many small businesses experience overnight success.

Reality-Check: Expect setbacks, especially financial ones.

When they first get into business, many entrepreneurs should expect to survive awhile without a regular paycheck. Doing so takes planning.

“Seek advice and plan for the worst,” advises Greg Hohlen, vice-president of commercial lending at Bremer Bank in St. Cloud.

“Financial success rarely comes fast or easily,” he adds. “What you need is a solid team behind you—at least an accountant, lawyer, and lender.”

Conventional Wisdom: Small business owners have unlimited

freedom and autonomy.

Reality-Check: That depends on how you define freedom.

“I have eight hundred clients. That means I have eight hundred bosses,” says Les Engel, founder of Engel Metallurgical, Ltd., an engineering consulting company in St. Cloud. There are also responsibilities to investors and lenders, employees and families.

“It’s like a rollercoaster on the ground,” he adds. “Sometimes the phones aren’t ringing and we panic. Then all of a sudden everybody calls and we panic. You’ll definitely have a lot of people to answer to.” IQ

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CREDIT SCORES

BY BRITTA REQUE-DRAGICEVIC

Where Credit is Due How Your Three-Digit Number Can Make or Break Business Financing

“

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I

have some bad news. We ran the credit check, but your score is too low. At this time, our bank must decline your business loan application.”

Your mind reels and your heart sinks. Your would-be lender continues on about improving your credit score, personally guaranteeing the loan, and saving more money for the business. What? Is this really how the system works?

The answer is yes. Many new entrepreneurs are surprised when banks don’t jump at the chance to finance their business ventures.

Many are unaware that securing a business loan is much more difficult than securing a home mortgage. Your personal credit is a major factor.

“How you’ve managed your personal credit is highly indicative to a banker of how you will manage a business,” says Catherine Jackson, president of Citizens State Bank of Waverly and a former Initiative Foundation board member. “If you have past-due accounts, tax liens, or judgments against you, it will definitely make it more difficult or expensive to get financing.”

A 2005 survey by the Consumer Federation of America and Fair Isaac Corporation suggested that about half of American consumers do not understand that credit scores measure credit risk. Lenders use credit scores as a crystal ball that reveals whether borrowers are likely to pay back the loan.

Fair Isaac created the most popular FICO credit-score formula, which churns data from the three major credit bureaus (Equifax, Experian, and TransUnion) to compute individual scores ranging from 300 to 850. The median U.S. FICO score is 723. The higher your score, the better investment you appear to be. FICO scores take five weighted factors into account: payment history (35 percent), amounts owed (30 percent), length of credit history (15 percent), new credit (10 percent), and types of credit used (10 percent).

James Brown, a veteran bank president who now runs Gateway Financial Services in Walker, says all lenders consider the five C’s of credit: character, cash flow, capital, collateral, and conditions. Personal credit is especially important for first-time entrepreneurs, because that is the one of the few pieces of information available to lenders.

“Every commercial loan has to be personally guaranteed, which means you are responsible for it even if the business fails,” says Brown.

INITIATIVE QUARTERLY

Catherine Jackson, Citizens State Bank of Waverly

Settling the Score

Credit Improvement Tips

Pay your bills on time.

Delinquent payments and collections can have a major negative impact on your score.

Pay down debt— Don’t just move it around.

Owing the same amount, but having fewer accounts may lower your score.

A closed account will still show up on your credit report.

Have credit accounts, but manage them responsibly.

In general, having credit cards and installment loans will raise your score. Someone with no credit tends to be higher risk than someone who has managed it responsibly.

Don’t open new accounts just to increase your available credit.

This approach could backfire and actually lower your score. Rapid account buildup can also look risky.

Check progress on your credit report.

Contrary to popular belief, this won’t lower your score, as long as you order your report directly from one of the three credit bureaus or a reputable monitoring organization. Visit annualcreditreport.com to get free reports from the three credit bureaus, or pay to get your actual scores.

Source: Fair Isaac Corporation, myfico.com

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“You have to remember that bankers have a primary duty to protect their depositors’ money. They are highly regulated by federal, state, and institutional policies. A banker may very well want to give you a loan based on his faith in your business plan or character, but policies may not allow him to do it.”

Even if a bank does take a chance on a borrower, a borderline credit score generally incurs a higher interest rate to compensate for the greater risk. This can add hundreds of dollars more per month and thousands over the life of the loan.

Credit scores may be improved, but it doesn’t happen overnight. Since payment history carries the heaviest score weight, it may take twelve months or more of consistent, on-time payments to notice a difference. Paying down existing debt also makes a positive impact in the “amounts owed” factor. Aspiring entrepreneurs should strive to keep their balances at no more than 30 percent of their credit limit.

For entrepreneurs with lower scores, securing business financing may still be possible if you have a sound business plan and can convey your personal integrity as well as document the circumstances behind your shaky credit history.

“In my opinion, there are two kinds of people,” says Bob Voss, loan fund manager for the Northeast Entrepreneur Fund in Virginia, Minnesota. “One is the person who can’t pay their bills for a specific reason—medical problems or loss of a job.

The second is the person who does not pay their bills because they do not think it is important or they simply do not care.

We are willing to work with entrepreneurs who fit the first scenario.”

“There is always room for assessing the entire situation,” adds Jackson. “We evaluate all the partners involved in the business, the size of the venture, and the potential economic impact it will have on the community. Sometimes if an entrepreneur doesn’t have the most ideal credit, we can work with that based on the value of the other factors. Of course, they’ll need to be able to explain why their cards are maxed out, but we definitely take that into consideration when lending to them.” IQ

Pre K-12 Education Services Parenting Education Enviromental/Occupational Health & Safety Solutions Professional Training Serving our member school districts, cities, counties, nonprofits and communities.

St. Cloud, Minnesota (320) 255-3236 www.resourcetraining.com

SPRING 2007

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Great River Energy, The Power of Community What do a shiny-red fire engine and an electric cooperative have in common?

Commitment to community. That’s what Rush City discovered when it needed to upgrade fire equipment but required some additional financing. Leaders approached East Central Energy, one of 28 member cooperatives of Great River Energy.

East Central Energy provided a $240,000 USDA no-interest loan to meet the city’s needs.

“People don’t always realize that their electrical cooperative provides more than electricity,” says Tom Lambrecht, Great River Energy’s economic development coordinator. “We are an active participant in community and economic development, and our low-interest financing is just one part of our dedication to helping communities grow.”

Since 1999, Great River Energy and its 28 rural electric cooperative members have helped to finance 40 projects totaling $14 million. The electric wholesaler supplies energy to its cooperatives, who serve more than 600,000 homes and businesses. Through exclusive federal grant programs, Great River Energy and its cooperatives are able to offer loans that truly make a difference to the communities they serve.

Residents of Albany, Eden Valley, Lindstrom, Moose Lake, Rockville, Rush City and Summit, Wisc. are among those who have benefited from the investments.

“Through our projects, we have helped to create 768 new jobs and retain another 1,147,” Lambrecht says. Great River Energy also provides loan application guidance and business development assistance in such areas as energy efficiency and conservation improvements.

“Our employees live in the communities they serve and are active in community leadership roles,” Lambrecht adds, “so we have a vast array of information available to help new businesses choose the right location and business climate for their enterprise.”

It’s a role Great River Energy takes on with pride.

“We’re here to help our communities continue to be vital, thriving places for those of us who call Minnesota home.”

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INITIATIVE QUARTERLY

Emergency Service: Dave Gruenes (left), Stearns Electric Association, helped Rockville secure USDA financing for essential fire-fighting equipment.

www.GreatRiverEnergy.com

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SPECIAL ENTREPRENEURSHIP ISSUE

Anderson Entrepreneurial Center, Forum and Substance “After 12 years of business ownership, I found myself at a crossroads.”

TOM GRONES, GEOCOMM

Tom Grones is the president and CEO of St. Cloud-based GeoComm,

Inc., a national industry leader in high-tech public safety systems.

Founded in 1995, GeoComm is a high-growth company that develops emergency mapping systems and communications solutions for hundreds of clients nationwide.

Starting with seven employees in 1995, GeoComm now employs 107 and anticipates increasing staff by another 24 percent. In 2006, its annual revenue was $8.5 million. In 2007, its projected revenue is $10.3 million.

The Anderson Entrepreneurial Center provided a growth opportunity for Grones by helping him analyze GeoComm’s strategy through the Owner-President Forum. Designed to maximize learning in shorter time installments, the curriculum covers various business topics such as accounting, leadership, management reporting and competitive strategy.

The forum also provides ongoing opportunities for business leaders to connect with their peers.

“Tom was an excellent candidate for the forum,” says Marc Sanderson, the Owner-President Forum’s program manager and facilitator.

“He altered and renewed his approach to the strategic direction of GeoComm.” With an MBA from Harvard Business School, Sanderson is also the owner-president of Wilkie Sanderson, a Sauk Rapids-based manufacturer of architectural woodworking.

Today, Grones believes that the company’s new direction promises to

pay long-term dividends—not just to the company, but to the larger economic community in St. Cloud. “I was sufficiently impressed with the results of my involvement that I enrolled two Tom Grones members of my executive staff in the current Managers’ Forum,” he adds, “and I plan to send two more to the next session.”

By accessing a wide spectrum of forums and services delivered by the Anderson Entrepreneurial Center, hundreds of entrepreneurs and managers have increased their overall effectiveness as business leaders. The Anderson Entrepreneurial Center aims to make an ongoing impact on the central Minnesota business community by promoting entrepreneurial excellence.

616 Roosevelt Road, Suite 100 St. Cloud, MN 56301 (320) 251-5420 www.haec.org

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Venture Allies, No Stone Unturned

Granite Equity Partners, Seeing the Bigger Picture Alyssa & Gene Schreder

When Gene and Alyssa Schreder purchased Media Pro in 1997, the The Granite-Tops & Venture Allies Team

In 1996, Kip Cameron founded Granite-Tops. With his first plant in Cold

Spring, he worked hard to forge new ground in high-end, custom stone crafting. Today, Granite-Tops is a $15 million company.

As the company grew, it acquired a new plant in Albertville, added a warehouse and opened a Twin Cities sales office. Granite-Tops currently employs 87 people and uses many local vendors and suppliers. It also tapped into the power of local professional services like Venture Allies, central Minnesota’s leading management consulting firm.

Venture Allies created a business plan defining strategies for marketing, production, and finance. The firm also helped develop a strong management team and implement business systems to facilitate rapid growth and operational excellence.

“It's been thrilling and challenging to spearhead a team that has grown over the last decade,” says Cameron, “not only in size and profit, but also in business maturity and know-how.” Granite-Tops is a success story about a local entrepreneur and the region that formed its bedrock.

Venture Allies management consulting firm serves Central Minnesota, offering custom consulting services in strategy, structure and systems.

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3051 2nd St. S, Ste. 103 St. Cloud, MN 56301 (320) 203-7600 www.ventureallies.com INITIATIVE QUARTERLY

company produced pre-show advertisements for ten theaters and eighty cinema screens. In 2006, the company’s ads were viewed by 100 million patrons in 350 theaters nationwide.

Now known as UniqueScreen Media, its employment grew from 15 people in 1997 to over 175 in 2006. Their many local partners include Cinema Entertainment Corporation, United Entertainment Corporation, Leonard Street, Marco, LarsonAllen, Apollo Insurance, Netgain Technology and the Anderson Entrepreneurial Center.

Granite Equity Partners provided funding for the company's rapid growth between 2004 and 2006, along with governance services to guide its strategy. When the company combined with Access Integrated Technologies, Inc. (NASDAQ: AIXD), stockholders benefited from a significant return on their investments. Today, part of that capital is being reinvested in central Minnesota companies.

“Being an entrepreneur is exciting and rewarding while, at the same time, frightening,” Gene says. “Granite Equity provided us with the funding and strategic guidance needed to meet all our goals.”

“Owning a business is very demanding,” Alyssa adds. “Granite Equity had the means to provide help and support when we needed it.”

Granite Equity Partners is a Minnesota-based private equity firm focused on buyouts, recapitalizations, and growth equity investments in Minnesota and adjoining markets.

3051 2nd St. S, Ste. 105 St. Cloud, MN 56301 (320) 251-1800 www.graniteequity.com

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SPECIAL ENTREPRENEURSHIP ISSUE

Initiative Foundation, In Search of Greener Ventures Introducing our Green Business Loan Fund...

Thanks to a cutting-edge investment from the Northwest Area

Foundation, we are now seeking 13 surefire business ventures that will change the world by changing the ways in which we impact our natural environment.

To qualify for special loans up to $250,000, businesses must have a primary lender and tackle one or more of the following:

· Deliver a product or service associated with environmental preservation, protection, mitigation or clean-up · Reduce current energy demands for residences or businesses · Transform waste materials into a marketable product · Create “green-collar” jobs that pay at least $15 per hour in a lower-income community (required) Jay Idzorek once collected Ironton area restaurant grease to make biodiesel fuel in his garage. In 2006, he joined forces with the Initiative Foundation to launch Green Range Renewable Energy, the only biodiesel plant in northern Minnesota. How green is it? Even the retail gas pumps are powered by wind turbines.

Green Range purchases local soybean oil and waste grease, and then refines it to remove pollutants and water. Add a catalyst and it becomes very eco-friendly fuel that gives petroleum diesel a run for its money .Biodiesel costs about 10 to 25 cents less per gallon, it’s safe for any diesel-fueled engine, and it produces 50 to 80 percent fewer toxic emissions.

That’s just the type of business we’re looking for. If you are a serious entrepreneur and believe you can make some green by going green, we’d love to hear from you. Contact Ashley Vargo, business finance officer, at (877) 632-9255 toll-free or avargo@ifound.org.

405 First Street SE Little Falls, MN 56345 (320) 632-9255 www.ifound.org SPRING 2007

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Are you hard-wired for business ownership?

Honeybees swarm

TRE

around their hive in apparent pandemonium. Dare to examine them closer, however, and you may notice that some bees only gather nectar or fertilize eggs. Others care for the young or stand guard. Very few ever ascend to the queen’s throne. Each type of bee is predisposed toward a unique and valuable role in the colony—much like the personality differences between brazen entrepreneurs and those of us who play it safe.

In his 2006 book titled The Entrepreneur Next Door, author Bill Wagner asserts that there are not just one, but four personality profiles that lend themselves to entrepreneurial success. Based on a study of more than 1,500 accomplished entrepreneurs, Wagner linked business success with the common traits of those he described as Go-Getters, Trailblazers, Motivators, and Managers. In contrast, his Authority, Collaborator, and Diplomat personalities did not lend themselves as naturally to the leadership demands of start-up success.

According to Wagner, that’s not to say that a worker bee could never be a queen, metaphorically speaking.

“After defining key personality traits, we found that 70 percent (of those we studied) had personalities that were very well-suited to their businesses,” says Wagner, “but it was the 30 percent that didn’t have the ideal personality that intrigued me. They had a high level of self-awareness that allowed them to accommodate who they were and who they needed to be to become successful.”

He points out that being aware of your entrepreneurial personality can help you make beneficial business decisions such as hiring complementary employees, maximizing strengths, and minimizing weaknesses.

How do Minnesota entrepreneurs apply their hard-wired traits to launch and run winning businesses? We asked four of them to peg their own personality profiles and reveal their secrets of success.

personality

By Britta Reque-Dragicevic SPRING 2007

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The

G o-Getter

Paul Streitz

31 Percent of All Entrepreneurs

years and it gave me the motivation to press forward, not knowing if I would have a chance to do something like this again.

Traits Extremely independent, competitive, ambitious Seeks out challenges and tough problems to tackle Takes great risks to achieve great rewards

Entrepersonality I take calculated risks—I don’t jump in without weighing the consequences. I tend to stay ahead of my competition, coming out with new products before they do. I never do anything halfway.

Achilles’ Heel Team-building

Arch-Enemy Growing at a pace the lighting market wants to grow without having the investment dollars to follow.

Industry LED and Fiber-Optic Lighting Systems (www.advancedlighting.com)

Advanced Lighting Systems, Sauk Centre

Beginnings I was working as a flight attendant. On a layover, I saw a guy installing fiber-optic lights in a casino. I asked if I could sell his products on commission only. He said, “Why not?” I hit up every airline passenger and landed a big one— Chuck E. Cheese’s. After three years, I started Advanced Lighting. I fought cancer for two

Moment of Truth When we lit up the Declaration of Independence, Bill of Rights, and the U.S. Constitution at the National Archives in Washington, D.C. Words of Wisdom Value each customer, vendor, and employee as if they are part of you. It always comes back to you in repeat business, good service, and loyalty.

The

T railblazer

29 Percent of All Entrepreneurs

Traits Extremely goal-oriented, strategic thinker Relishes having autonomy, authority, and influence Highly energetic, with sense of urgency

J ack and Betty Thomas

Mann Lake, Ltd., Hackensack

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Achilles’ Heel Collaborating Industry Beekeeping equipment and supplies (www.mannlakeltd.com) Beginnings We got started in 1984 when we attended a beekeeping tradeshow and found that there was room for growth and improvement in the industry. We entered our business when the main competitor had the market tied up for one hundred years. With aggressive marketing, new products and an emphasis on service, we pulled the rug out from under them in just four years.

Entrepersonality We match the Trailblazer type well. We didn’t want to be tied to someone else’s clock.

Arch-Enemy At first, it was finding the right people to help our company grow. Employees were disciplined or dismissed if they did not follow our rigid standards of excellence. Now we employ fortyfive to fifty-five people and many have been with us for ten-plus years.

Moment of Truth When the industry started looking at us for developments, products, and expert opinions.

Words of Wisdom Have a live person answer your phones all the time. Be extremely visible at conventions, trade shows, etc. You won’t learn anything by staying home. Listen to your customers, find their problems, and solve them.

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The

M otivator

13 Percent of All Entrepreneurs

Traits Extremely energetic, self-starter, driver of change Urgency to get things done quickly Emotional communicator, team-player, and salesperson Achilles’ Heel Staying focused

K rystal Quade

Industry Wholesale rock, aggregate, and materials trucking (www.rockontrucks.com)

Rock On Enterprises, Waite Park

Beginnings I wanted to earn a little extra money, because I had just taken a drastic pay cut moving from the Twin Cities to St. Cloud. I got started when I was twenty-five with one truck and one trailer. Now at age thirty, I have grown to own five semis and

thirty trailers and broker work for fifty owner-operators.

Entrepersonality Personality helps, but knowledge is still most important. I motivate a mostly male-oriented business by encouraging my workers to focus on meeting their own goals and by offering rewards for them to strive for. I also choose employees who are driven, so to speak.

Arch-Enemy Earning respect in a male-dominated construction industry.

Moment of Truth When I felt secure enough to finally quit my full-time banking job in 2003.

Words of Wisdom Taking risk is okay, but never put all your eggs in one basket. Try not to burn bridges, because you never know when you might work with that person or business again.

The

M anager

6 Percent of All Entrepreneurs

Traits Extremely assertive, confident in own ideas Takes time to think things through, process-driven Persistent enough to stay the course and get results

J ohn Herou E-Ride Industries, Princeton

W

Achilles’ Heel Listening to others Industry Electric vehicles (www.e-ride.com) Beginnings I began the original company in 1989 after designing a golf “car” for my four kids.

Someone saw my kids driving it around and asked if they could buy one. I started making luxury golf carts that sold around the world to many dignitaries and celebrities. When the market dropped off in 2001, I reformed the

company around a new prototype for a lowspeed, electric neighborhood vehicle. We now make the largest electric vehicles in the United States, which are used on college campuses, golf courses, airports, military bases, in neighborhoods, and industrial settings.

Entrepersonality I like to think of myself as a positive person who simply will not give up. I believe things can work if you put your mind to it. That’s how I’ve always been.

Arch-Enemy Financing. That’s the biggest obstacle for many entrepreneurs.

Moment of Truth When oil prices rose and people became more aware of global warming, all things combined for the right market for this.

Words of Wisdom Be persistent and don’t ever quit. We laid everything on the line for this business. IQ

ondering about your own personalit y type?

Take the free entrepreneur personalit y test online at www.theentrepreneurnextdoor.com.

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CEO Chuck Albrecht cracks open the vault at Mid-Minnesota Federal Credit Union in Baxter.

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H O L L E N H O R S T

&

M A T T

K I L I A N

Bank vaults, or strongrooms, have seen able evolution. Keys and combination

remarklocks have

been replaced by detectors that sense motion, h e a t , s o u n d , a n d v i b r a t i o n s . To d a y ' s h i g h - t e c h Federal Reserve vaults are guarded by doors that can weigh more than 47 tons. Still, their contents have always remained the same—money , valuables, and a few secrets. The tricky thing is, they are only revealed to the right person at the right time. For those entrepreneurs who want to know how the pros truly evaluate business plans and loan applications, welcome to the inner sanctum.

I N S I D E

T H E

THE GUARDED SECRETS OF BUSINESS PLANNING AND FINANCING

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The 5

C

’s of Credit

Numbers aside, most lenders consider a handful of subjective guidelines when considering a loan application. Although the weight of each one may vary from bank to bank, the elements are the same: a profitable idea, financial stability, and the borrower ’s unwavering commitment to business success.

CASH FLOW Don’t confuse cash with profit. Lenders must be convinced that your business will have enough cash to pay its debts at any given time. This includes payroll, suppliers, utilities, and, of course, your business loan.

Pam Thomsen, Small Business Development Center consultant, advises new entrepreneurs to refuse to take shortcuts in business planning. “People who don’t plan at the beginning suffer later.”

Capital How will you make it through the proverbial “tough times?” Will there be enough money to sustain and grow your venture?

Character

P

roperly planning and finding financing for new business ventures may seem like daunting tasks. Some may feel like they need to rob a virtual safe of guarded secrets in order to achieve business success. In reality, the tricksof-the-trade aren’t all that tricky. Here is your first set of combination numbers.

HOW A PLAN COMES TOGETHER There are many reasons for a new entrepreneur to put forth his or her best efforts on a business plan. The most compelling reason is obtaining financing from a lender. You simply can’t get a loan without one. Business plans, however, are far more than just a résumé or a slick brochure to impress your banker. The average business plan is twentyfive to fifty-five pages long and may take weeks to put together.

According to Pam Thomsen, Small

Are you honest, competent, determined, savvy, and adaptable? Prove it to your lender, and bring along a good credit score.

Collateral Business Development Center (SBDC) consultant at Brainerd’s Central Lakes College, the planning process forces entrepreneurs to evaluate the true potential of their business.

It helps them set realistic goals, identify competitors, anticipate road bumps, and reveal financial realities they may never have considered before.

“The biggest thing we see is that entrepreneurs aren’t realistic,” says Thomsen. “A business plan will help determine if you have a viable business opportunity. Start there and then go looking for financing.”

A good plan prevents hardship, if not bankruptcy, down the road. It answers the “what ifs.” What if I don’t reach this sales mark for that quarter? What if gas prices go up?

What if a distributor goes out of business?

What if the market changes and people don’t want our product or service anymore?

Thomsen recommends that aspiring business owners begin their journey at a Small Business Development Center. There are nine CONTINUED ON PAGE 22

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Lenders are trained to protect their investments. By securing valuable assets, they can sell (or liquidate) them if you can’t repay the loan. Such assets include real estate, equipment, inventory, and yes, even your personal property. In fact, a personal guarantee of repayment is non-negotiable. No collateral?

No loan. It’s that simple.

Conditions How healthy is the overall economy and the market for your product or service? Is your industry booming or sagging? Who are your competitors? In the razor-sharp minds of lenders, external conditions are equally as important as your business idea.

(OPPOSITE) Entrepreneurs Ginger and Joe Glenn of Glenn Metalcraft, Princeton: “It’s critically important that you trust your bank and that they trust you.”

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CONTINUED FROM PAGE 20

in Minnesota (mnsbdc.com) and services are available free of charge. As a consultant to hundreds of entrepreneurs herself, Thomsen focuses on three simple concepts: MARKETING: “Somebody has to want or need the product and be willing to pay for it.”

FINANCING: “This includes accounting, record keeping, taxation, and cash flow.”

MANAGEMENT: “The entrepreneur will be wearing all the hats.

Can they manage all the aspects of the business?”

Identifying personal strengths and weaknesses reveal where more training or professional consulting is required to achieve success.

“People who don’t plan at the beginning suffer later,” adds Thomsen. “Had they sat down and fleshed it out with a consultant, we might have identified some of those weak areas right away. If they’re in their second or third year of business, there’s no quick fix now.”

is hard for both you and for the bank,” says Ginger Glenn of Glenn Metalcraft. “They don’t have the history and knowledge of the industry nor do they share your vision.”

The Initiative Foundation partnered with a local bank to finance Glenn Metalcraft in 2001 based on the enthusiasm of her late husband, Dennis, and the vision of their son, Joe. “He’s more driven by creative thinking and thought-out plans,” says Glenn. “Joe had the vision to create a new market for us and it was vital that we did. With the type of work we were doing, we would have struggled.”

For Cathie Mayr, owner of Nordic Living, a Scandinavian home store in Nisswa, paying attention to her plan helped chart a future course for her business. “I spent about three months putting it together and two months of that was close to full-time,” says Mayr. “With help from the SBDC, I went to the bank with everything I needed. Now every January before any trade shows, we ask ourselves, ‘Is this the direction the business needs to take? Do we need to make any major course changes?’”

Answering those questions opened doors for three thriving and complementary business

savings on the line, maxing out credit cards, and risking the security of themselves and their families.

With corporate mergers and acquisitions, banks are changing like never before. Although FDIC-insured lenders in Minnesota decreased by 7 percent or thirty-five institutions since 2003, they remain one of the top sources of business financing. According to a 2004 report by the U.S. Small Business Administration, commercial banks supplied $522 billion in small business loans. Paling in comparison, angel investors, venture capitalists, and other companies contributed just $46.3 million combined.

Just like shopping for an office computer, entrepreneurs should shop for bankers.

According to Ginger Glenn, however, banks shouldn’t be compared solely on interest rates.

“When we grew and had to move to a different bank, we checked and double-checked that it felt right,” she says, “that they cared, that we could communicate, and we weren’t lost in the big corporate heap. Definitely interview banks. It’s critically important that you trust your bank and that they trust you.”

Contrary to the stereotype of the portly banker in a threepiece suit who lights cigars with $100 bills, most lending professionals have the entrepreneur’s best interests in mind.

For lenders—an aspiring entrepreneur’s primary target audience—business plans serve as concrete evidence that the business owner is able to pay back what he or she borrows.

Contrary to the stereotype of the portly banker in a three-piece suit who lights cigars with $100 bills, most lending professionals have the entrepreneur’s best interests in mind.

According to John Kaliszewski, the Initiative Foundation’s vice president for economic development who runs its business financing programs, the worse part of his job is foreclosing on a loan.

“My top priority is creating quality jobs and local business ownership in central Minnesota,” says Kaliszewski. “A close second is protecting our assets. If we agreed to finance projects written on cocktail napkins or talked about in a first meeting, essentially we would be agreeing to ruin a lot of good people’s lives and personal credit. No lender takes any pleasure in doing that.”

“Going raw to a bank with just a concept

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ventures—a heritage arts school, interior design service, and yarn sales.

When an entrepreneur is ready to take on the business plan, Thomsen advises to resist the temptations. Paying for slick, colorful brochures won’t cover up a lack of critical information. Fill-in-the-blank templates and websites don’t force entrepreneurs to be brutally honest with themselves and their business idea. Planning is a personal journey filled with risks and consequences, and there are no shortcuts.

THE ART OF THE DEAL A common saying in the commercial financing profession is: If you don’t come prepared, your three investment options are friends, family, and fools. Whether starting a business or expanding one, getting the money to fulfill entrepreneurial dreams is seldom an easy task. Many entrepreneurs put their life

Since all banks are regulated by government agencies and internal policies, entrepreneurs should also be sure to collect essential documents before approaching a lender or investor. Some of these items include a detailed business plan, employer or tax ID numbers, personal tax returns, personal financial statements, and cash flow projections.

Ashley Vargo, the Initiative Foundation’s business finance officer who bridges gaps between banks and borrowers, suggests that the most critical items to bring along are proof of owner equity and commitment. That extends far beyond a new entrepreneur’s confidence and enthusiasm. It translates to about 20 percent of the total project budget and a crystal-clear understanding that a personal guarantee is non-negotiable. If the business fails and assets are sold off, the borrower must agree to personally pay back the remainder of the loan.

“Those are very common myths we have to dispel every week,” says Vargo, “that you don’t need any money down, or that by incor-

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porating, it somehow separates a person from their loan obligations. Lenders must be thoroughly convinced that you are 100 percent committed to the success of the business because you understand what’s at stake and share in the risk.”

After the meetings are over and the lender has all of the documents to evaluate a potential business investment, he or she often refers to an informal checklist called the Five Cs of Credit: Cash flow, Capital, Character, Collateral, and Conditions. In a nutshell, lenders try to gauge credit risk, personal integrity, and market conditions as well as whether an entrepreneur will have regular cash to pay debts, “savings” to get through the hard times, and valuable assets to liquidate if the loan defaults.

“You may see fancy jargon, but it still boils down to those five Cs,” says Mo Durheim, commercial lender at Farmers and Merchants State Bank in Sauk Rapids. “If you pick apart the five Cs, that’s still the basis for most entrepreneurs.”

After lenders perform their due diligence, one or more “Cs” may raise red flags that require further investigation, documentation, or another face-to-face meeting with the borrower. Sometimes, the answer is no.

“You have to take a look at the reasons why it was denied,” provides Chuck Albrecht, president and CEO of MidMinnesota Federal Credit Union. “Research alternatives, look at those issues, and decide if it’s worth going forward. If we have to provide a denial we like to provide them with resources to help solve the problem.”

Lenders will often provide helpful advice on how to improve a credit score, tweak a business plan, or alleviate other risk factors.

Borrowers can always explore other lending options, but they shouldn’t expect different results if their venture isn’t financially sound.

“Most entrepreneurs tend to underestimate their expenses and horribly overestimate their sales, because they have a dream,” says the SBDC’s Thomsen. “Bankers are trained to see that very quickly.”

Still, if a business is meant to be, the entrepreneurial spirit prevails.

Challenges often bring out competitive drive, and true entrepreneurs possess the talent of adaptation.

“Hopefully, they’ll do something to cure their risk and come back to me,” says Durheim. “Those are always the ones I like to work with.” IQ

PERCENTAGE POINTS UNLOCKING THE FACTS ABOUT SMALL BUSINESS OWNERSHIP

10% U.S. workers who report that they own a business.

—Kaufmann Foundation

34% U.S. businesses that don’t survive at least two years.

—U.S. Small Business Administration

49% U.S. businesses that are operated from home settings.

—U.S. Census Bureau

>70% U.S. entrepreneurs who are already employed by other firms when they start up.

—Global Entrepreneurship Monitor

77% U.S. entrepreneurs who invested their own money or family assets to start businesses.

—U.S. Census Bureau, September 2006

86% Minnesota businesses that employ five or fewer workers.

—U.S. Department of Commerce

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Tom Moore, St. Cloud Area Economic Development Partnership, models the wardrobe evolution of growing entrepreneurs.

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Deep within Netgain Technology’s granite-clad fortress in downtown St. Cloud, thunderbolts of critical information WHIRR through the high-tech servers. Scott Warzecha’s office is perched three floors above the flashing LEDs and Star Trek-looking vault, where business data and software are beamed back and forth to nationwide clients on demand. From this enviable vantage point, he can catch an occasional glimpse of the future and it looks pretty darned good.

Profitizing What does the future hold for central Minnesota’s growing entrepreneurs?

By Matt Kilian Warzecha, one of St. Cloud’s newly celebrated entrepreneurs and technology innovators, is finding himself on the verge of surging growth. With an expanding team of twentyone and a monthly influx of new and bigger clients, all stars seem to be aligned for his eight-year-old firm.

“Every business owner has a nightmare story about technology failures and the expense of owning and maintaining IT equipment,” says Warzecha. “We help businesses get back to doing what they do best. We manage their data and software from here and the only difference they notice is that it finally works right.”

Netgain’s optimistic future is driven by Warzecha’s innovation, steady growth philosophy, and evangelistic selling when the service was so new that many thought it was too good to be true. The company also received timely financing from the Initiative Foundation and Bremer. But even if he can save some clients 30 to 50 percent on annual IT expenses, why is Netgain booming as other promising ventures fail? Are there specific industries that hold powder-keg potential for aspiring entrepreneurs?

In a fourteen-county analysis for the Initiative Foundation, the Minnesota Department of Employment and Economic Development (DEED) charted the net change in business births and deaths from 2000 to

2005. Construction and healthcare enterprises dominated the top-ten list of highest growth industries.

According to Cameron Macht, DEED regional analyst for central and southwest Minnesota, these trends are not likely to change. Despite recent housing and real estate slowdowns, central Minnesota’s population is projected to swell by 40 percent in the next twenty years, which means construction and contractor businesses haven’t nearly peaked.

The St. Cloud area, Brainerd lakes area, and metro-fringe counties are statewide hot spots for current and future growth. An aging population will also impact entrepreneurial opportunities in healthcare.

“Right now, about 12 to 15 percent of central Minnesota residents are sixty-five or older,” says Macht. “2011 is the front end for baby-boomer retirement, so the demand for healthcare services will be tremendous.”

Although Macht is quick to point out that entrepreneurial growth is almost never limited to one sector and that opportunities can be found wherever there are good ideas, he believes that firms such as Netgain may benefit from growth in major industries that form the economic backbone of a community. “If you can identify an area’s core industries that are growing,” he says, “it’s a good bet that some of the best opportunities will be in the industries that support them.”

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Both the St. Cloud and Brainerd areas have taken considerable effort and expense to understand their core industries and plan around them.

St. Cloud’s 2002 Community Assessment churned ten attributes such as business size, employment, productivity, and profitability to crank out its list of strategic industries that power the area’s economy. The list included

chasing smokestacks, Moore focuses on local entrepreneurs such as Warzecha—helping navigate his upstart firm through financing options, JOBZ tax incentives, and purchasing the abandoned St. Cloud Federal Building through an online auction.

“Netgain was in a high-priority industry with high-quality jobs that helped anchor our downtown,” says Moore. “Because we know that local business owners are likely to grow and stay here, we give them the extra attention because it improves the lives of people in our community.”

While Moore acknowledges that most entrepreneurs simply can’t break into some of St. Cloud’s massive industries, he adds that opportunities exist for new ventures to ride their coattails.

“Take granite, for example, which is a big part of St. Cloud’s economy and identity,” he says. “An entrepreneur may not be able to own a granite quarry, but the emergence of granite countertops and home accents makes for a growing support industry because of the local supply. The granite companies also need their own suppliers and many Scott Warzecha, Netgain Technology, is wired to the St. Cloud area’s would rather do core industries. If they prosper as predicted, so will Netgain. business locally.”

To weekend refugees Netgain’s “business service” industry and oth- who share a love affair with the lake country, ers that represented its top clients: health serv- Brainerd’s core businesses appear to be resorts, ices, engineering/management, manufacturing, log cabins, and specialty shops. Although tourism is a potent economic engine and valuable printing/publishing, and wholesale trade.

Tom Moore, executive director of the St. brand, it surprisingly didn’t make the list of Cloud Area Economic Development Brainerd’s core industries. Similar to their St. Partnership, says that communities are better Cloud counterparts, Brainerd leaders prioritized off supporting their entrepreneur “minor healthcare, finance and insurance, professional leagues,” rather than trying to attract big-name and technical services, as well as metal, plastic, corporations. Instead of spending his time and wood-related manufacturing.

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“We looked at six quantitative factors and then we asked seventy leaders, ‘What do you want to be as a community?’” says Sheila Haverkamp, executive director of the Brainerd Lakes Area Development Corporation (BLADC). “Most people are shocked at the number of successful manufacturing companies in Brainerd. They made the list because they generate wealth and living-wage jobs.”

The BLADC is one of the headliners in a team of organizations that supports local entrepreneurs and established businesses. For its size, the community is blessed with a twelve hundred-member chamber of commerce, Small Business Development Center, technical college, and financing network, all working in tandem to help strengthen the local economy from the inside out.

“When a community can identify multiple businesses in the same sector that feed off each other,” adds Haverkamp, “that’s what turns the lightbulb on for entrepreneurs. There are opportunities for employees to either spin off and fill a niche or provide a local service that these industries need.”

Shawn Hunstad spun off in a core industry. After three years as a manufacturing sales rep for Stern Rubber in Staples, he also saw an opportunity to meet customer needs for plastic and polymer parts. He and business partner, Terry Stern, started the Baxter-based firm, Stern Industries, with Initiative Foundation gap-financing and a broker’s mentality. If they couldn’t manufacture a particular part, they would find a quality supplier, negotiate a low price, and pass along the savings.

Nimble responses to new markets and a staunch commitment to customer service led Stern Industries from modest sales of $200,000 in 1995 to more than $44 million in 2006. Today, the company supplies plastic fuel tanks and other parts to Polaris’ line of snowmobiles and ATVs. “In manufacturing, lots of people are nervous about China and India, but the business opportunities are still here,” says Hunstad. “I agree that the growth will come from Brainerd’s key industries, because companies like ours need things that we would rather get locally. It all comes down to quality service and finding the guy in my backyard that can do this for me.”

To help central Minnesota towns such as Brainerd uncover local opportunities for clustered manufacturing, the Initiative Foundation launched the Enterprise Network Systems Analysis (ENSA) project. It’s a fancy name with

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Arnie Johnson, Brainerd’s entrepreneur extraordinaire, shares the old-stove recipe of American success: hard work, sound planning, enthusiasm, creativity, and tenacity.

a simple concept. Find out what everyone within a region buys and sells, and then try to make local business connections or identify new niches for entrepreneurs.

“This keeps the dollars circulating within central Minnesota,” says Warren Williams, Initiative Foundation board of trustees chair and thirty-nine-year banking executive. “Local opportunities are not always met by big businesses—they get more conservative because they have more to lose. We look to the entrepreneurs who are willing to take risks in order to make their mark in the world.”

For those seeking to know the future, one of Brainerd’s legendary entrepreneurs offers this advice: Search within yourself. Arnie Johnson recalls his Iron Range upbringing when the entrepreneurial cards were seemingly stacked against him. Johnson’s blue-collar beginnings included growing up in near-poverty, graduating in the bottom half of his highschool class, and starting his career ascent from the seat of a mining truck.

In 1975, he founded Universal Pensions, providing pension and IRA services to financial clients across the United States. He sold the five hundred-employee company in 2001 for $85 million. Today, his business interests include everything from commercial real estate to supper clubs to a new venture called Minnesota Thermal Sciences, which manufactures life-saving containers that keep human blood at a constant temperature for seventytwo hours.

In what Johnson calls today’s “microwave society,” where many new entrepreneurs seek the fast track to fortune, he often finds himself sharing the old-stove recipe of American success: hard work, sound planning, enthusiasm, creativity, and tenacity.

“I started with nothing, sacrificed almost everything but my family, and today I have a 116-foot yacht named Tenacity,” says Johnson.

“There is no such thing as a magic pill. If you want to become an entrepreneur, you must learn how to make your own circumstances.” IQ

Birth & Death in Central Minnesota Net Change in Birth/Death of Firms 2000–2005 Industry Trends

Emerging Specialty Trade Contractors 613 Construction 210 Real Estate 190 Food & Drinking Establishments 105 Nursing & Residential Care Facilities 93 Administrative & Support Services 88 Social Assistance 70 Outpatient Healthcare Services 65 Repair & Maintenance 60

Fading?

Gas Stations -25 Hotels, Motels & Campgrounds -19 Truck Transportation -17 Wholesale Electronic Markets -15 Membership Organizations -15 Store Retailers -13 Rental & Leasing Services -13 Source: Minnesota Department of Employment & Economic Development (DEED).

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friendly How Your Hometown Can Ignite the Entrepreneurial Spirit

As darkness falls on Pequot Lakes, the future of Kendall Candles looks bright— thanks, in part, to an entrepreneurial community.

From left: Carol Kottschade, Del Ria Kerger, and Tassy Singer.

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By Christine Hierlmaier Nelson

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a

t its beginning, a small business can be as delicate as candlelight in the darkness.

Flickering with others, it holds the power to illuminate a community’s future, sharing warmth in the form of jobs, tax-base, hometown character, and personal connections.

Some leaders stand aside and watch the dim lightshow. Others take steps to lure and fan the flames.

Five years ago, Sally Baumgartner took the leap into business ownership with an existing candle manufacturing facility near her lake home.

Kendall Candles, named after her daughter, has experienced average annual growth of 10–15 percent since then. Baumgartner attributes it to skilled employees, a solid business plan, and a focus on customer needs.

But there are also things about the company’s location that helped her along. When she was just starting out, small business specialists from the technical college provided her with area resources. She discovered a retail niche thanks to heavy summer tourism and other area business owners that were very supportive.

Like many entrepreneurs in the Brainerd Lakes Area, Baumgartner originally came to enjoy the quality of life. But the positive culture for new businesses was a surprising bonus. “One source of help leads to other sources,” she says.

“Rural communities are beginning to rethink the premises upon which their economic development strategies are based,” begins the preface for the book, Energizing Entrepreneurs: Charting a Course for Rural Communities, by Deborah Markley, Don Macke, and Vicki B. Luther. The most successful communities in this effort seem to be focused on entrepreneurs and have a regional mindset for infrastructure and resources, according to the authors.

They also identify three key components of an entrepreneurial environment and how rural communities can develop them: Community Climate, Community Infrastructure, and Community Support. Several communities in central Minnesota are already demonstrating the benefits of this culture to foster—and sustain— creative ideas and individuals.

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Brainerd’s lake life attracted entrepreneur Dan Schulist, but it was Sheila Haverkamp (left) and services delivered by the Brainerd Lakes Area Development Corporation that made the area feel like home for Lakeland Mold and its president, John Newhouse (right).

Community Climate Entrepreneurs can seem odd in a small town where people are used to working for someone else or earning their living on the farm. Local economic development experts and resources are critical to encourage a new way of life. In Brainerd, the vision of lake life provides the incentive to relocate while Central Lakes College, Brainerd Lakes Area Chambers of Commerce, and Brainerd Lakes Area Development Corporation (BLADC) strive to sweeten the deal.

“We have a seasonal homeowners marketing program,” notes Sheila Haverkamp, BLADC’s executive director. “We target people who know and appreciate the quality of life.”

Haverkamp also believes that entrepreneurs enjoy relative anonymity to develop their ideas while having access to other business experts and owners who understand their challenges and can provide a sounding board. She believes that those resources should be tapped at the local and regional levels.

“They can meet one-on-one and have coffee with business planners or private realtors and lenders or go to a networking event at the chamber,” adds Haverkamp. “And if you have a business component that requires site planning or approvals, we have connections to many township and county officials.”

Haverkamp worked with Dan and Pat Schulist when they dreamed of owning a business near their lakehome. Dan was a pattern maker for a Twin Cities rotomolding tool manufacturer, making the tools used to construct such

things as plastic playhouses, kayaks, and fuel tanks. Starting with one employee in a former Burlington Northern warehouse, Lakeland Mold Co. now employs eighty people and just acquired a similar company in Ohio this year.

When John Newhouse took over for the Schulists as general manager and soon president in 1996, he immediately focused on networking with other business owners and training opportunities to achieve the company’s next level of growth—and he found them.

“Today we work with many departments within the college for hiring students,” says Carol Anderson, Community Development of Morrison County.

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Newhouse. “They often want to stay because of close connections to family and the lifestyle. The college has also provided customized training and helped us acquire funding from the state.”

Connections to other manufacturers have also proven critical, he says. “Our HR managers are very close in manufacturing here. Our safety committees visit each other to get new ideas and we’ve shared technology for such processes as lean manufacturing. Many have become close friends.”

Chief Hole-in-the-Day Industrial Park, named after a famous Ojibwe chief. The city also developed a revolving loan fund that offers more flexibility to entrepreneurs than traditional financing.

To attract and retain working parents, the largest industrial park includes a daycare center.

“You have to be creative and be in it for the long haul,” says Anderson. “For every ten companies I meet, I get one to come. But we are now applying for our third loan fund and other cities are taking notice of our success.”

The diversity of industry in Little Falls is

Kenny Nelson’s Barrel-O-Fun is one of the larger firms curiously located in rural Perham due to its grow-your-own culture of business support. “We have more jobs than people,” says economic development pro, Chuck Johnson (middle).

Community Infrastructure Your community may send out friendly signals to entrepreneurs, but some won’t even wave back if you don’t have access to major highways or offer an industrial park. They also need basic business services such as banking, insurance, and accounting. They need high-speed telecommunications as well as experts who can help them decipher tax and regulatory issues.

When Carol Anderson came to Little Falls as its economic development director eighteen years ago, the town had one industrial park and she was instructed to fill it. When she filled it, she told city officials that if they wanted more industry, they should buy more land.

Through a $500,000 federal grant that the city had to match, Little Falls developed the North Bluffs Business Park. Then they raised another $500,000 to gain a state match to build

striking: injection molding, precious metals plating, precision tooling for the optical industry, woodworking, mailing, robotics, sewing, and printing are just some of them.

Anderson explains business development this way: When companies are ready to grow, they can’t always wait for the land or financing to become available. In conjunction with the local Small Business Development Center and other resources, she also keeps tabs on problems entrepreneurs may encounter and responds quickly to turn things around.

“If the owner is willing to listen, we can help,” says Anderson. “We’ve only lost two companies in all the time I’ve been here.”

Community Support When a community has pride in its industry and quality of life, the feeling is palpable. There are stories passed down to the next generation that

fuel creativity and a sense that “life is better here.” Every citizen takes part in sustaining the story. Mentors offer their guidance to newcomers and the tradition continues.

Such is the case in Perham, a small community east of Detroit Lakes. Industry there is an eclectic mix of pet food, potato chips, and licorice, all stemming from a homegrown entrepreneur named Tuffy.

In the 1960s, Tuffy Nelson owned a feed company for livestock and saw an opportunity to move into pet food. When he sold Tuffy’s to Heinz, Inc., he and his son, Kenny, started a potato chip factory called Barrel-O-Fun, which was later sold to G. Heileman Brewing Co. Five years ago, the Tuffy’s plant in Perham had dwindled from two hundred employees at its peak to about thirty-five and was about to be closed. Kenny Nelson pooled together investors to buy it back ten minutes before the final bell—so the story goes. Today, the plant employs one hundred.

“When G. Heileman was going to sell Barrel-O-Fun, Kenny bought that back, too,” shares Chuck Johnson, economic development director with the City of Perham. He has lived in Perham for thirty years and says that pride in the city’s entrepreneurial history fuels more of the same.

The local telephone company, Arvig Communications, was among the first in the state to offer high-speed Internet services. From local banks to private investors, the city has also coordinated attractive packages to bring in promising business, says Johnson.

At a time when many towns are experiencing a “brain drain” of college graduates who migrate elsewhere, Johnson notes a local woman who set up her dental practice back in Perham after receiving financing that included a ten-year, zero interest loan from another local business.

“We have more jobs than people in Perham,” says Johnson. “And it’s because people are willing to get in front of the parade and make things happen.”

Investing in a local economic development official or a micro-lending program begins to establish the culture, according to area economic development experts. Taking stock of current assets—legal, financial, educational, real estate—and supplementing them with regional and state opportunities will add to the entrepreneurial focus. And finally, by making residents and community leaders aware of the important role entrepreneurs can play in rural economic development, it adds fuel to the fire. IQ SPRING 2007

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Small Business

Resource

Guide

SOURCES OF ASSISTANCE FOR YOUR BUSINESS

Central Minnesota entrepreneurs have access to a broad spectrum of high-quality consulting services and financing options. Most services are available at no charge. Compiled by the Initiative Foundation’s economic development team, the following is a non-comprehensive listing of our region’s most trusted allies of small business. For more, visit www.ifound.org.

Business Consulting Anderson Entrepreneurial Center, St. Cloud www.haec.org (320) 251-5420 Promotes excellence in entrepreneurial performance for the central Minnesota business community by educating, connecting, and recognizing entrepreneurs.

AURI Ag Innovations www.auri.org 1-800-279-5010 Provides staffing, research, outreach, and funding for businesses that offer new, valueadded agricultural products.

Latino Economic Development Center www.ledc-mn.org 1-877-724-5332 Provides business development services to Latino entrepreneurs, including help with understanding financing and regulatory processes.

Metropolitan Economic Development Association www.meda.net (612) 332-6332 Provides business consulting services to minority-owned businesses, including planning, technical assistance, sales development, and procurement.

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Minnesota Technology, Inc. www.minnesotatechnology.org (612) 373-2900 Provides business/technology consulting and training services for manufacturing and hightech companies in Minnesota (fee-based).

SCORE “Counselors to America's Small Business” www.score.org www.stcloudscore.org (320) 240-1332 Volunteer business professionals provide online resources and counseling at no charge.

Small Business Development Centers www.mnsbdc.com Provide business counseling services for prospective and current business owners at no charge. Services include business planning, loan application preparation, sales and marketing assistance, accounting, and financial analysis. >Central Lakes College, Brainerd www.clcmn.edu/smallbusiness (218) 855-8142 Counties served: Aitkin, Cass, Chisago, Crow Wing, Isanti, Kanabec, Mille Lacs, Morrison (northern), Pine, Todd, Wadena.

>St. Cloud State University (320) 308-4842 Counties served: Benton, Morrison (southern), Sherburne, Stearns, Wright, Swift, and parts of Mille Lacs.

Financing & Technical Assistance African Development Center www.adcminnesota.org (612)333-4772 Provides business consulting services and financing to African entrepreneurs.

American Indian Economic Development Fund www.aiedfloans.org (651) 917-0819 Provides gap financing, technical assistance, and culturally relevant business education to enrolled Band members who wish to start or expand businesses.

Initiative Foundation www.ifound.org 1-877-632-9255 Provides supplementary financing for locally owned new and expanding businesses that create quality jobs in central Minnesota communities.

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Local Resources Contact your local city or county administrator/clerk, economic development office, utility provider, Housing and Redevelopment Authority (HRA), or chamber of commerce.

Visit www.ifound.org/business_resources.php for a comprehensive listing of central Minnesota resources. Also see: >Association of Minnesota Counties www.mncounties.org >Minnesota Association of Professional County Economic Developers www.mapced.org >League of Minnesota Cities www.lmnc.org >Minnesota Public Utilities Commission www.puc.state.mn.us >Minnesota Rural Electric Association www.mrea.org Mille Lacs Band of Ojibwe Corporate Commission www.corporatecommission.com 1-800-746-9805 Provides technical assistance, training, and low-interest loans to tribal businesses.

Services include business plan development, accounting, management, marketing, and financing.

Minnesota Business Finance Corporation www.mbfc.org 1-800-593-0123 Provides financing for new and expanding businesses using the SBA 504 program.

Minnesota Chippewa Tribe, Native American Business Development Center (218) 335-8583 Provides technical assistance, training, and business loans to tribal businesses.

Minnesota Community Capital Fund www.mncommunitycapitalfund.org 1-800-860-6223 Provides financing for business expansions using the revolving loan fund resources of member organizations.

Minnesota Department of Employment & Economic Development (DEED) www.positivelymn.com 1-800-657-3858 www.mnwfc.org 1-888-438-5627 Provides business development services to help companies start up, expand, or relocate in Minnesota; find and train employees; promote international trade, and finance business expansions. Publishes A Guide to Starting a Business in Minnesota.

Northeast Entrepreneur Fund www.entrepreneurfund.org 1-800-422-0374 Provides no-charge as well as fee-based consulting, training, and financing for prospective and current business owners.

Counties served: Aitkin, Carlton, Cass, Cook, Crow Wing, Itasca, Koochiching, Lake, Pine, St. Louis.

Regional Development Commissions Provide gap financing as well as planning, consulting, and technical assistance to central Minnesota businesses. >Region Five Development Commission Counties served: Cass, Crow Wing, Morrison, Todd, Wadena. www.regionfive.org (218) 894-3233 >East Central Regional Development Commission Counties served: Chisago, Isanti, Kanabec, Mille Lacs, Pine. www.region7erdc.org (320) 679-4065 Small Business Administration www.sba.gov Provides financing resources for business start-ups and expansions including 7(a), 504,

and disaster assistance loans. Website offers online tutorial for business planning, including sample business plans and templates.

USDA Rural & Community Development www.rurdev.usda.gov/mn (651) 602-7800 Works with private-sector and community organizations to provide financial assistance and business planning in rural areas to create quality jobs and promote a clean, rural environment in under-served areas.

WomenVenture www.womenventure.org (651) 646-3808 Provides consulting, coaching, training, and financing to both women and men who want to start or grow a business.

Counties served: Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, Washington, Wright.

Online Resources Bizpathways.org www.bizpathways.org Business planning guide and template that can be saved and edited online. Site also features a searchable database of financial resources. Membership fee required.

James J. Hill Reference Library www.mnpower.biztoolkit.org Comprehensive resources for business planning, market research, management, and growth. Expanded website access sponsored

by Minnesota Power.

Kauffman Foundation e-Venturing™ www.eventuring.org Provides articles written by entrepreneurs and compiles “best of the bestâ€? web content for starting and running high-impact companies.

Official Business Link to U.S. Government www.business.gov A partnership of twenty-one federal agencies that provides a single access point for government resources for starting, growing, and financing small businesses.

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INITIATIVES

BY CHRISTINE HIERLMAIER NELSON

Floating a Loan Lake-Mapping Firm Buoyed by Initiative Foundation Financing

A

rmed with high-tech GPS and sonar systems in a retrofitted fishing boat, Mike Wood planned to float every navigable square-foot of the Midwest’s most popular lakes. By braving the thickest weed beds and shin-deep sandbars that would strike fear into the heart of any well-invested fisherman, he would transform a goldmine of lunker-lair intelligence into some of the finest digital fishing maps in the United States.

At least, that’s what he told any lender who would listen to him in the early 1990s. All he and his wife, Connie, had to show for their idea was “a lot of smoke and mirrors and things to come,” says Wood.

“It was difficult to justify the product and market we envisioned.”

In spite of its futuristic concept, the Initiative Foundation saw the company’s potential in Little Falls, given the town’s boat manufacturing industry and proximity to the Brainerd Lakes area.

When other lenders said, “No, thanks,” the Initiative Foundation partnered with Pine Country State Bank to take on the unsecured part of the loan. The calculated risk paid off.

Today, Waypoint Technologies and its LakeMaster brand are among the leading digital and paper lake-mapping providers to anglers in the country.

“It was not feasible to make the move without them,” says Wood.

When the six Minnesota Initiative Foundations were formed in 1986, they received special IRS permission to provide business loans, a rarity for foundations. Working in partnership with private lenders, the Initiative Foundation has assisted in starting and expanding more than seven hundred locally owned businesses through $23.8 million of its own lending resources.

“The days of ‘smoke-stack chasing’ as an economic development strategy are gone,” says Kathy Gaalswyk, Initiative Foundation president. “When a community loses its local businesses, it loses its identity. Helping people who already live in and care about their community will provide the greatest long-term impact on our local economies.”

The major goal is to create quality jobs in the central Minnesota hometowns that need them most. In the past twenty years, the foundation has helped businesses secure more than 8,000 quality jobs with a current target wage of $15.60 per hour including benefits.

“When you talk about economic development, it all starts with living-wage jobs,” says John Kaliszewski, Initiative Foundation vicepresident for economic development. “If you don’t have a good job,

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Mike Wood shows off LakeMaster’s digital maps to the Initiative Foundation’s John Kaliszewski.

Foundation Financing Programs Direct Business Loan Fund

Green Business Loan Fund

$50,000 to $250,000 for targeted industries such as manufacturers, technology-based business sectors, and value-added agriculture.

$50,000 to $250,000 for firms that protect and preserve the environment through products and services related to recycling, renewable energy, waste transformation, and emerging technology.

Technology Capital Fund $50,000 to $500,000 for emerging technology ventures and established companies adding productivity improvements through the use of technology.

Seed Capital Fund Up to $50,000 equity investments for emerging ventures, financing product concept, development, and market research.

Microenterprise Loan Guaranty Fund $50,000 guarantee against bank default for very small businesses that meet community needs or advance entrepreneurship opportunities for racial minorities, women, young adults, and low-income individuals.

nothing else we do as a foundation will matter very much to you.”

Initiative Foundation lending programs fill the gap when a proposed business appears too risky for a traditional lender. Banks and other private lenders are often restricted by federal laws, credit, and collateral policies even when the entrepreneur presents a solid business plan or has an existing business.

“Ideal applicants have a strong business plan, a solid relationship with a local banker, the willingness to work hard, and creativity,” says Gaalswyk.

Working closely with central Minnesota economic development professionals, the Initiative Foundation helps to coordinate the right public/private financing package. “[The foundation was] able to make adjustments as we grew and ran into some challenges,” says Wood. “They’ve always been there with words of encouragement.” IQ

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RACE MATTERS

BY BRITTA REQUE-DRAGICEVIC

Cultures of Business Diverse Entrepreneurs Face Unique Barriers to Success

A

fter serving as a police officer in the military, Robert Dorr dreamed of a career in the Minnesota Highway Patrol. It never happened. Not having 20/20 vision meant no job.

Dejected, the young and often struggling Native American worked himself through electrician’s school and settled for launching an international security firm that generates more than $60 million each year.

Meet the new face of American entrepreneurship.

According to the Kauffman Foundation, which studies entrepreneurial activity nationwide, minority entrepreneurs outpaced nonminorities by 7 percent in 2005. While they are starting more businesses at a faster pace, they also face unique challenges such as poverty and racial stereotypes.

“I came from a dirt-poor Native American family,” says Dorr, president and CEO of Deco-Inc. in Baxter. “Many of my business friends had companies to inherit or parents who had enough to help them get started. I didn’t have anything and that made getting operating capital very difficult.

“After a while, I just gave up and focused on finding work on the reservations,” he says. “That proved invaluable, because when the gaming industry started in the early 1990s, enormous opportunities opened up.”

Like most entrepreneurs, he glimpsed an open window of opportunity and leapt through it. After developing skills in installing security systems in 1998, he believed the market was ripe to provide independent security for government facilities and tribes across the country and worldwide. After securing government contracts, his company grew from three employees to more than twelve hundred in less than five years.

“You have to have a plan, put a lot of thought into the business, and make the absolute most of every opportunity available to you,” he says.

The U.S. Small Business Administration offers special programs to assist minority-owned businesses. The agency offers assistance in business development and specially designated firms may be eligible for priority preference in government contracts.

“There are good programs out there,” says Dorr. “You just have to

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Native American Robert Dorr’s advice to minority entrepreneurs: “You have to have a plan, put a lot of thought into the business, and make the absolute most of every opportunity available to you.”

be ambitious enough to go after them.”

Many immigrant groups are developing their own resources to meet unique start-up needs. The Latino Economic Development Center in Minneapolis works to build economic opportunity, leadership, civic involvement, and political influence by nurturing Latinoowned businesses.

“Our community faces the same challenges as any other ethnic community when starting a business,” says Ramon Leon, executive director of the Latino Economic Development Center in Minneapolis.

“It’s the lack of understanding how the system works, technical assistance in our own language, collateral to acquire financing, and sometimes legal barriers.”

Hussein Samatar, a Somali native and founder of the African Development Center in Minneapolis, cites the complexities of the American financial system as a major barrier.

By launching economic development centers, Leon and Samatar have been able to help educate, guide, and provide assistance to their ethnic groups in ways that culturally meet their clients’ needs.

In 2006, the African Development Center trained fifty-five entrepreneurs. It also leveraged $4.8 million in business loans including its own fund, which now exceeds $1 million.

The Latino Center focuses on organizing the Latino community around economic development issues and helping small business owners plan and run their businesses effectively and legally.

While immigrants arrive in the United States with millions collectively invested in college education and training in foreign systems, Leon says that few get opportunities to apply their education in the United States. He also cites additional pressures to, “not end up worse off than when they left.”

According to Samatar, immigrants often have more pressures on them to succeed. Those pressures often include the need to support family members in their home country. “Newcomers take risks that others don’t,” he says. “Their most common characteristic is a strong determination to succeed.” IQ

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ANGEL INVESTING

BY CHRISTINE HIERLMAIER NELSON

Angels Among Us Regional Investment Networks Take Flight

T

hey appear out of nowhere during a would-be entrepreneur’s darkest hour, answering desperate pleas, renewing hope and confidence, and delivering that which seemed to be impossible to obtain alone. That’s why they call them angels.

Although their motives are more economic than angelic, angel investors offer opportunities for Minnesota entrepreneurs to present their ideas to affluent people and community organizations who want to invest locally and diversify their portfolios at the same time. Many angels are joining forces for greater investment power and levels of business start-up funding that aren’t easy to find.

According to the Kauffman Foundation, less than 3 percent of venture capital funds are now invested in start-ups. Instead, many funds favor established companies that are on the verge of going public or will soon be sold to a competitor. Angel investment, however, is on a high growth curve and is estimated to have pumped $20 billion into new ventures in 2004 alone.

For entrepreneurs, there are prices to pay to get an angel investment—increased pressure to grow quickly and giving up an ownership stake in the company. With venture capital, a similar investment option, owners also must be willing to sell or go public after a few successful years.

Finding angels and tracking their growth has been difficult because they have traditionally operated as “silent partners.”

Entrepreneurs can find potential investors through a regional angel investment network (RAIN) or local economic development resources. Networks like Twin Cities-based RAIN Source Capital are springing up around the country to make investments more efficient and profitable for individual angel investors.

“We are forming one new fund a month within an eight-state region,” says Joan Wurzer of RAIN Source Capital, which helps set up angel funds and screen investment opportunities. “Our investors are looking for high-growth potential, typically $10 million in sales within five years.”

The level of financing within RAIN funds is $5 million or less per venture, Wurzer says. The advantage of angel funds for startups is that they can present to fifteen to twenty angel investors at once. At last count, RAIN Source Capital has invested $60 million in forty companies.

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Winging it: Gary Marsden is one of the St. Cloud RAIN Fund’s twenty-seven angel investors.

Complex screenings and administration headaches make networking a welcome option for angels, says Gary Marsden, chair and investor in the St. Cloud RAIN Fund. Including the Initiative Foundation, the St. Cloud RAIN Fund has twenty-seven members who have contributed $1.2 million ($25,000 or $50,000 apiece) and have so far invested in three Minnesota ventures. Their goal is ten.

“You have to be a qualified investor, meaning you have to be able to afford to lose your investment,” Marsden explains.

“Conversely, there are rewards if you are lucky enough to find a Medtronic before it becomes Medtronic.”

Doug Hennum, CEO of ChamberMaster in Brainerd, located angel investors through the Brainerd Lakes Area Development Corporation. ChamberMaster develops management software for small- to medium-sized chambers of commerce. Hennum knew that financing such nebulous assets as software would be a hard sell to a banker.

With the Initiative Foundation and several angel investors in the Brainerd area, Hennum was able to tailor a package that has allowed he and his partner, Rob Neumann, to maintain control and have the financing to move his company to the next level of growth. Currently, ChamberMaster has seventeen employees and is adding an average of twenty new clients each month.

“In our case it’s been nothing but positive,” says Hennum. “They have provided us with excellent guidance and gotten us through periods that we probably couldn’t have handled on our own.” IQ To learn more about Minnesota RAIN Funds or venture capital, visit these websites: www.rainsourcecapital.com, www.granitequity.com, www.collaborative.net.

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www.LifesABirch.com SPRING 2007

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> KEY STORY

FANTASTIC FOUR Foundation Adds More Talent to Board, Staff Team

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ee Hanson, Karen Ihnen, Geri Pohlkamp, and Tina Yorek are the foundation’s newest assets in its mission to strengthen central Minnesota communities.

foundations, including the St. Cloud State University Foundation, the Minnesota State Colleges and Universities Foundation, and the Bishop’s Task Force on Economic Reform. He also helped establish the Harold Anderson Entrepreneur Center.

Board of Trustees

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“The foundation’s success is determined by committed and passionate leaders and we added four outstanding ones,” says Kathy Gaalswyk, Initiative Foundation president.

Tina Yorek

Lee Hanson A new member of the foundation’s board of trustees and a veteran attorney at Gray Plant Mooty, Hanson concentrates his practice in closely held business law, including acquisitions, mergers, estate planning, commercial real estate, and tax planning.

He has a B.A. from Concordia College and a J.D. degree from the University of Minnesota. In 1970, he joined Gray Plant Mooty as a shareholder.

His community leadership positions include St. Cloud Area United Way, the Boys and Girls Club of Central Minnesota, the Central Minnesota Council of the Boy Scouts, The Salvation Army, and Bethlehem Lutheran Church.

Hanson has a wealth of leadership experience with Minnesota

member of the Minnesota Education Association, United For Kids Initiative, and Community Engaged Parent Education Coalition.

Karin Ihnen Early Childhood Specialist

As a home economics teacher, preschool owner, University of Minnesota Extension Service educator, and parent, Karin Ihnen has been involved in family related activities for decades.

As the Initiative Foundation’s early childhood specialist, a newly created position, Ihnen provides training and support to early childhood coalitions and volunteers. She helps to increase public awareness and strengthen community efforts to support young children and their families.

Ihnen is active on several church boards/committees and as a 4-H adult leader. She is a

Program Assistant for Grants & Training A recent graduate of St. Cloud Technical College with an administrative assistant degree, Tina Yorek is excited to be putting her education to use.

“I feel very privileged to be in a position where I’m able to utilize my training,” says Yorek. “I’m continually challenged and encouraged to grow and I can work for a worthwhile organization with people I respect and admire.”

In her new position, she provides support to the foundation’s Healthy Organizations Partnership and VISTA programs as well as community and donor funds.

Yorek is active in her church, enjoys reading, gardening, and quilting, and volunteers with Project ASTRIDE, a local therapeutic horseback riding program.

Geri Pohlkamp Methamphetamine & Youth Development Specialist

A recent empty-nester, Geri Pohlkamp and her husband are getting reacquainted, and the cattle they raise are getting a little more attention. A lifelong Pierz resident, Pohlkamp loves the central Minnesota area.

As the methamphetamine and youth development specialist, Pohlkamp travels across the region, helping communities engage youth in leadership and service as well as battle the meth epidemic.

Pohlkamp joins the foundation with seventeen years of work experience in college settings and ten years on the Pierz Public School Board. She is also active in her church and serves as an officer in the women’s group. IQ

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> E A R LY C H I L D H O O D

HARD FEELINGS Preschool Emotional Concerns Drive St. Cloud Initiative

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ver since his father was deployed to Iraq, a preschooler has shown signs of depression.

An infant returns home after a lengthy hospital stay.

She is agitated and unable to calm down even though she is physically well.

Children under age five in St. Cloud are experiencing these emotional and mental health problems, but most go untreated.

Parents and caregivers are often unsure where to turn.

The Initiative Foundation and area leaders are hoping to

strengthen early childhood mental health services for children and families in the St. Cloud, Sartell, and Sauk Rapids/Rice school districts. With $1.5 million from the Bush Foundation, the Initiative Foundation selected the St. Cloud area as one of six pilot sites to participate in the statewide Early Childhood Mental Health Initiative, the first of its kind in Minnesota.

The goals of the program are to raise awareness of children’s mental health needs, determine existing services and gaps, and

train parents and caregivers how to recognize the signs and get help.

“Although there are many excellent services for children in the community, there is a lack of mental health professionals trained to work Jane Ellison, Greater St. Cloud Early Childhood with very young chil- Mental Health Coalition. dren and their families,” says Jane Ellison, project man- participate in coalition activities, ager for the new Greater St. contact Project Manager Jane Cloud Early Childhood Mental Ellison at (320) 258-1103 or SCSU Professor Glen Palm at (320) 308Health Coalition.

For more information or to 2129, ext. 5635. IQ

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> M E T H A M P H E TA M I N E

SHATTERED

Meth Performance Shakes Up Students

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eware, parents. Its content includes illegal activities, graphic violence, and inappropriate language, but it could save your child’s life.

The Initiative Foundation awarded a $10,000 grant to bring CLIMB Theatre’s Shattered to twenty junior and senior high schools in central Minnesota.

More than five thousand students have experienced the live performance that depicts how methamphetamine takes a stranglehold on the life of an average high school girl.

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“Youth are absolutely impacted after they experience this,” says Geri Pohlkamp, Initiative Foundation methamphetamine and youth development specialist. “It gives them a glimpse into the addictive power and consequences of meth. They usually sit in stunned silence and then give the actors a standing ovation. We don’t often get that kind of reaction.”

Students also get a unique chance to discuss the performance and the dangerous realities of methamphetamine use in their

school. Unlike other lyceumtype programs, CLIMB Theatre actors conduct classroom activities The foundation brought CLIMB Theatre’s Shattered to twenty t h r o u g h o u t schools and more than 5,000 students. the day.

According to surveys, more they learned how to discourage than 94 percent of students indi- others from using the drug. cated that they thought the play “The presenters were so conwas realistic and believed that it vincing,” says a teacher from Isle reinforced their decision to steer High School. “They were young, clear of methamphetamine. spoke at the student’s level, and Another 89 percent reported never spoke down to them.” IQ

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> ECONOMIC DEVELOPMENT

HOLIDAY BONUS

Business Financing Programs Get Year-End Support

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hanks to three organizations, the Initiative Foundation received a year-end boost to its economic development efforts that support locally owned businesses and quality jobs in central Minnesota.

With a $100,000 contribution to the Seed Capital Fund, Paul and Lynn Hunt of Hunt Utilities Group (HUG) wanted to help lifechanging entrepreneurial ideas get off the ground. Focused on ecolog-

ical living, HUG’s own projects include straw-bale construction, self-heating buildings, and alternative energy. Their gift will target green business ventures.

The Calvert Foundation’s simple goal, to end poverty, drove its $500,000 investment in the foundation’s Direct Business Loan Fund. Businesses that receive foundation financing create livingwage jobs that pay more than $15 per hour including benefits. Since

David Wiese, Wells Fargo Minneapolis.

1995, the Calvert Foundation has helped disadvantaged communities—and the people in them— work their way out of poverty.

High-tech companies will have more financing options in 2007 thanks to Wells Fargo’s $650,000 investment in the foun-

dation’s Technology Capital Fund.

“We’re certain this investment in the Technology Capital Fund will help strengthen the region’s technology sector,” says David Wiese, community development and specialized lending for Wells Fargo Minneapolis. IQ

www.stcloudstate.edu • 877.654.SCSU

St. Cloud State—a smart investment in a global education.

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EDITORIAL

BY DON MACKE

Long Live the Entrepreneur America’s economic future depends on our homegrown ability to foster innovation

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ntrepreneurship is an American legacy. Benjamin Franklin argued that widespread business ownership was essential to a strong democracy and society. Minnesota clearly shares this legacy with remarkable homegrown ventures dotting large and small communities. For community leaders, the opportunity for economic and social renewal is waiting, if you are willing to explore it and invest in it.

Building an entrepreneurial culture is the most important development opportunity central to your community’s future. It represents more than just business development.

Entrepreneurial behavior also builds great schools, governments, recreation systems, nonprofits, and the very institutions that enable our quality of life. Becoming an entrepreneurial community opens many doors.

The fact that the United States has dominated the world’s economic stage for decades no longer assures us of world dominance in the twentyfirst century. We simply can’t compete globally on price or even technology.

America’s key to a bright economic future rests in our ability to innovate.

Entrepreneurs play a central role in finding innovation and putting it to work to create economic vitality.

Decades of research now provide a compelling case that nations and regions with strong entrepreneurship levels are doing better economically and socially. Studies by the London School of Economics (GEM), the Lowe Foundation, and others document the entrepreneurship and economic performance connection.

Entrepreneurial ventures generate two-thirds of job creation, twothirds of business growth, and 50 percent of innovation.

From very rural Valley County in Nebraska, where personal income is now growing at twice the state’s average, to suburban Littleton, Colorado, which has doubled job creation in a decade, there are now concrete examples of how entrepreneurship-based development makes a real difference.

Other examples include the Entrepreneurial Friendly Communities initiative in Georgia, the Papajohn Entrepreneurship Center in Iowa, new centers for entrepreneurship in Texas and

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western North Dakota, and a brand-new thirty-eight-county entrepreneurship initiative in western Alabama and eastern Mississippi.

In an era of declining state and federal engagement, communities must take responsibility for their own futures. With entrepreneurship, there is no “right course” to take, but allow me to offer some suggestions from our field experience: Form a small working group.

Charge them with exploring entrepreneurship as a development strategy for your community. Be sure to include entrepreneurs.

Do your research. Tap local resources such as the Initiative Foundation, explore community models, and, most importantly, take field trips to places such as Fairfield, Iowa, or Tupelo, Mississippi.

Survey local entrepreneurs..

Ask them to identify barriers that stand in the way of growth, as well as the community resources that have been most helpful.

Start small. Ramp up successful efforts or bridge a small, but critical, gap in services. In time, you can help renew your community economically and socially by harnessing the power of local entrepreneurs.

ILLUSTRATION BY CHRIS MCALLISTER

Engraved into the stone of my home state’s capitol building are the words “A Community Has a Work to Do.” Chances are good that your community was founded on and has prospered historically because of civic and business entrepreneurs. I challenge you to seriously explore what entrepreneurship has meant to your community and how it is a key to your future. IQ Don Macke is with the RUPRI Center for Rural Entrepreneurship. Macke has more than thirty years of rural development experience. He is co-author of “Energizing Entrepreneurs—Charting a Course for Rural Communities.”

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