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CONTENTS October • November 2017 • Vol. 16 No. 5 •


Cover story

Upsize Growth Challenge: A panel of experts assembled by Upsize magazine assist Brian Anderson, president of DataTrec, and Greg Hennes, founder of Hennes Art Co., as they untangle the hurdles they face in expanding their small businesses. BY ANDREW TELLIJOHN

Cover photograph by Jonathan Hankin


From the editor:


Editor Beth Ewen talks about the PAGE 6 importance of listening, even when pitching CYBER SECURITY your business idea to others. Protecting your business from cyber attacks

Staff list:

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

By Jake Omann, Associated Benefits and Risk Consultants

PAGE 8 Upsize Minnesota (USPS 024-029) is published bi-monthly for $20 by Upsize Minnesota, 3033 Excelsior Blvd, Suite 10, Minneapolis, MN 55416. Periodicals postage rates at Minneapolis, MN and additional mailing offices. Postmaster: Send address changes to Upsize Minnesota, 3033 Excelsior Blvd., Suite 10, Minneapolis, MN 55416

EXIT STRATEGY Start early to create more value for the company you’ll someday sell by Tom Siders, L. Harris Partners


WORKPLACE A happy workplace can help your bottom line by Elizabeth Hang, Robert Half Management Resources


WORKSHOP: A panel of experts tells entrepreneurs what they should do to maximize the price they can get for selling the business



CATCHING UP: Custom Rock Formliner

Small businesses benefit from accepting electronic payments

John Fallenstein, CEO, talks about learning from his mistakes and maintaining a good company culture.

TECHNOLOGY by Pat Moran, BlackLine Advisory Group

Planning now means peace of mind later.

What happens if… THE ECONOMY WEAKENS







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I GET PITCHED all the time with story ideas, because what’s not to like about free publicity for your company? I’m sure you do, too, since everyone in business needs to sell something, and everyone in business probably has a 30-second elevator speech down pat. Three local investors who hear pitches for a living, however, recommend listening rather than talking. “The first thing I want to see, is the person really aware and present? Are they really listening to me? Are they looking at me and connecting with what I’m doing, because if they’re not I’m just getting a spiel,” said Pamela York, founder of Capita3, a new fund in Minneapolis looking to finance womenowned and –led companies. “Awareness is a huge factor in entrepreneurs,” she added. “I want to hear — here’s this big problem and here’s the solution I have. And more or less, here’s how we can make money.” York was one of three panelists at a Network Connect event, which aims to connect entrepreneurs and investors, at the University of St. Thomas this fall. I like her idea about awareness and I know from experience many entrepreneurs have it, but a few, not so much. I also know how disarming it is when a person I’m interviewing for a story turns the tables and asks about Upsize. When that happens, it usually leaves me sputtering a bit as I’m not used to it, but it also makes that person stay in my memory more as a fellow business owner rather than as just another story. Another panelist, Marc Kermisch, is president and chief information officer at Red Wing Shoe Co., and separately an angel investor who advises early stage companies. “I want to look for a team that wants to pivot and hears my feedback,” he says. “I’ve run into a lot of entrepreneurs that are closedminded about it. They are so passionate that they’re closed off to new ways of thinking, and end up shutting down the person they’re pitching.” Rick Brimacomb, moderator of the panel and co-founder of Network Con4


nect, asked if there were “soft” mistakes that could turn the panelists away from a deal. “So for me,” he offered, “it drives me crazy when they say it’s an Xbillion-dollar industry and I only need one percent.” That’s one of my turn-offs, too. I’d rather see laser-sharp focus on the particular niche the company is targeting and how it will gain customers in that niche — the rest is just noise. Andrew Murphy, managing partner at Loup Ventures, an early-stage venture capital firm, is trying to raise his first fund, of $20 million, and so is pitching his own opportunity to investors right now. “When you’re given the opportunity to pitch a potential investor on the elevator, the temptation is to try and spit it all out and get in all your good points,” he said, and he adds he tries to follow his own advice. “I think you miss the opportunity to hear what they’re interested in. So asking more questions than making points seems to resonate, because it shows an emotional intelligence.” What about you? Is your elevator pitch so polished that you’re shouting down your connections? It may be time to re-tool. Beth Ewen Editor and co-founder Upsize Minnesota


no spiels


Wes Bergstrom


Beth Ewen

MANAGING EDITOR Andrew Tellijohn




Tom Dunn

HOW TO REACH US To subscribe email Georgene Bergstrom, or visit With story ideas email Andrew Tellijohn, To advertise email Wes Bergstrom, To order reprints email Georgene Bergstrom, To order extra or back issues email Georgene Bergstrom, To suggest Web resource links,

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How to protect yourself from a cyber attack by Jake Omann

TIPS 1. Business leaders need to be educated about the types of cyber threats they could face, such as malware, phishing or ransomware. 2. Find an insurance partner you trust. That person will help navigate options and will help ensure your plan is tailored to cover your business. 3. Make sure you have first- and third-party coverage so that you are covered for attacks that happen to you or attacks that affect your customers. 4. Educate and empower employees so they have the information they need to help you maintain security. They are often the best defense a company has against cyber threats. Get them to speak up when something looks amiss. 5. t’s easy to feel helpless about the possibility of cyber threats, but proactive steps toward protection and insurance will lay a foundation for security and ensure businesses can continue if they suffer a security breach.


AS RECENT AS 10 YEARS AGO, cybersecurity was merely a passing thought for most businesses and consumers. Today, the threat is front and center, with thousands of headlines reporting the damage of cyber incidents like the worldwide WannaCry attack in May and the more recent Equifax data breach. Protection is now a priority for all companies, and it starts with business owners knowing the top threats, empowering employees and choosing the right insurance. Small businesses, in particular, carry a higher risk of experiencing cyber threats. In a study by NetDiligence, which looked at empirical data from actual breaches, organizations generating less than $50 million in revenue were the most impacted group in comparison to their larger counterparts. With the rate, speed and anonymity of attacks, it’s easy for business leaders to feel helpless in addressing cyber threats. However, taking the correct proactive steps regarding protection and insurance will lay a solid foundation for security, and ensure businesses can continue when this security is breached. Below are recommendations for businesses that can help mitigate these exposures: 1. Know the Top Threats Business leaders need to be educated about the many faces of cyber threats. Below are some of the most common cyber threats today: • Malware (short for “malicious software”) — software intended to damage or disable computers or computer systems. A few signs that malware may be infecting your computer or network are slow speeds, pop-ups, suspicious


activity, disabled security programs and high bandwidth usage. • Phishing — the practice of sending falsified emails, seemingly from reputable companies, to entice people to provide personal information, such as credit card numbers and passwords. Common characteristics of phishing emails include poor grammar or misspelled words, requests for personal information, URLs that don’t align with the business and requests for money. • Ransomware — software that blocks access to a computer system until an amount of money, or ransom, is paid. If you’re a victim of ransomware, you’ll likely see a screen blocking you from using your computer, files that won’t open, file extensions (.exe) replaced with .crypted or instructions on how to pay the ransom. 2. Choose the Right Insurance Finding a trusted insurance partner to help navigate options and plans is an important first step. Having a trusted partner will ensure you’ll get the right coverage and your plan will be tailored to your business. • Understand what your general liability insurance does and does not cover. Is cyber liability part of your coverage? Does that cyber liability coverage include business interruption? In 2013, Amazon lost $66,000 per minute when its website was down for 13 minutes. For Amazon, $858,000 was a hiccup, but for a small business owner, the loss of revenue due to a cyberattack could be devastating.

• Make sure your coverage is enough. Even if your business has cyber liability with business interruption coverage, it may not be enough. In fact, 40 percent of policy holders with business income insurance had a limit of insurance that was deemed to be 45 percent lower than needed. It’s important to accurately quantify your potential losses before deciding on coverage. • Get a combination of first- and third-party coverage. A ransomware attack would typically be considered a first-party claim (covers the policyholder) while a phishing scam that impacts your customers resulting in litigation would be considered a third-party claim. Most cyber insurance policies are customizable, which allows you to adjust your policy based on your risks. • Know your master services plan with your technology providers. Most technology companies have master service agreements with their clients that outline the services they provide and associated fees. Understanding these agreements will help you create a cyber insurance policy that is customized to your business and the vendors with whom you work. 3. Educate and Empower Employees A business’ best defense against cyber threats is its employees. Business leaders can be well-informed on cyber threats and have the right insurance, but the reality is that they are not the only ones dealing with confidential information and the businesses’ technology and servers. All employees should be equipped with the information and training needed to maintain security. • Educate employees on com-

mon phishing and ransomware schemes. Not only should you and your leadership be educated on the top threats, your employees should be, too. Keep them informed on the latest cyber threats so they can easily and quickly spot an issue. • Educate employees on security measures that should be in place and practices that should be followed. Create clear policies regarding sensitive information sharing, computer and network access, password management, physical property and visitors. Make sure these policies are updated and reviewed regularly with employees and enforced when violated. • Empower employees to speak up when something looks amiss. It is important that employees are comfortable with alerting their manager or IT of anything suspicious so they can effectively investigate and mitigate the incident. Encouraging a culture of security will ensure all team members are engaged in upholding the proper safeguards to mitigate these risks. The need for business leaders to consider and implement cybersecurity is one that will impact the success and future of their organizations. The question is no longer if your business will be hit by a cyber attack, but rather how prepared your business will be and how you will respond to these attacks. Knowing the threats, having a plan and engaging the whole company are effective ways to address the inevitable.

“Not only should you and your leadership be educated on the top threats, your employees should be, too. Keep them informed on the latest cyber threats so they can easily and quickly spot an issue.” Jake Omann,

Associated Benefits and Risk Consulting

Jake Omann is management liability consultant with Associated Benefits and Risk Consulting: 952.947.9747;;



exit strategy


Growing business value — get beyond the numbers

A BUSINESS OWNER will turn 65 every 60 seconds for the next 15 years. More than 250,000 businesses with revenue between $5 million and $100 million in revenue will attempt an ownership change by 2030. So, it should not be a surprise that many business owners are starting to give serious thought to the process of selling their business. As they face the reality of needing an exit strategy, several questions emerge: • What do buyers look for in a potential acquisition? • How do I position my business to maximize value when the time comes to transition out? • In my industry, businesses sell for a multiple of X, so is that what I can expect? • Why do some businesses sell quickly, for top dollar, and others sit on the market for months or even years?

by Tom Siders

TIPS 1. Build a stable, motivated management team. This is one primary requirement sophisticated buyers look for when considering purchasing a business. 2. Creating good operating systems and consistent processes that are documented in writing enhance value by demonstrating to buyers that the business can be maintained without owner involvement after a sale. 3. Future revenues should not be concentrated with just a few customers. Ideally, no single customer should account for more than 10 percent of sales. 4. Establishing good financial controls demonstrates to a buyer that you are serious about a critical element of business management. This safeguards the business’ assets and supports claims of profitability. 5. Have a growth strategy. Buyers pay for what they will reap in the future, not what you have already recognized during your time running the business. 8

Our experience has shown that a buyer’s interest in purchasing a business, and paying a premium for it, is centered on the perception of risk and reward. If the business has characteristics that reduce risk and enhance future return, more buyers will be attracted and the likelihood that buyers will pay top dollar increases. What this means in practice What are those characteristics? Let’s look at an example. Company A and Company B share the characteristics shown in table 1. At your first glance at this quantita-

TABLE 1 Company age

25 years old


Industrial supplies

Total assets

$7 million

Total equity

$3 million

Latest annual revenue

$20 million

Owner compensation and perks


Annual net income

$1.5 million

Earnings before interest, taxes, depreciation, amortization (EBITDA)

$2 million

Market growth potential

5 percent annual

tive data, you’d likely conclude the two companies have similar risks and potential returns, and thus the same value. However, while they share identical quantitative characteristics, look deeper at each company’s qualitative characteristics, shown in table 2. Given this new information, do you still think the two companies would have the same value? Experience has shown us time and time again that buyers are willing to pay far more for Company A because the risks are lower and the potential future returns are higher. Focusing on the quantitative All too often, business owners believe the most effective way to build business value is to focus only on the quantitative: grow sales, cut costs, make acquisitions or some combination of the three. So, what does focusing on the quantitative look like and what issues does this create? If it’s growing revenue, how quickly can you accomplish that? Will you have to cut prices? Will competitors match?


Company A

Company B

Product development program

innovative, cutting edge


Market development program



Equipment age & condition

new, state-of-the-art

original & worn

Management team

deep, experienced

thin, weak

Business planning

highly developed




old, antiquated


finely tuned


Customer base

wide and diverse


Employee training

regular and formal



owner cultivated

owner dictated


Can your current infrastructure support the growth? Will you expand territory? Can you penetrate new markets without significant investments? If it’s cutting costs, where do you cut? Cheaper materials? Lower labor costs? Will this damage the company brand? Harm on-time delivery? If you cut overhead, will it mean staff cuts? Will that damage morale, cause unwanted employee turnover, or reduce the strength and depth of your management? If it’s acquisition, can you successfully complete one? Can your company absorb it? Weak systems and processes can ruin an acquisition. Can the cultures mesh? A culture clash can drive out good employees. Can efficiencies be captured? Can customers be retained? Qualitative: real value growth comes from going beyond numbers. So, what are the characteristics that reduce company-specific risk and increase quality, attract more buyers and bring greater value? We find there are seven value drivers that should be the focus of every business owner. 1. A stable, motivated management team This is a primary requirement of most sophisticated buyers. The first question we hear when working with business buyers is “who runs the business and are they willing to stay?” If a business is totally dependent on the owner, potential buyers lower the price or simply walk away. 2. Reliable business systems and processes Good operating systems and consistent processes enhance value. They need to be documented in writing to demonstrate to potential buyers that the business can be maintained profitably, without owner involvement, after the sale. 3. Diversified customer base To obtain top dollar, future revenue should not be concentrated with just a few customers. Ideally, no





single customer should account for more than 10 percent of sales. Effective financial controls This is not only good business hygiene, but proves to a buyer that you are serious about a critical element of business management. Good controls safeguard assets and help support your claim about profitability. Growth strategy Buyers don’t pay premium prices for what you’ve already reaped from the business. They pay premium prices for what they will reap in the future. The growth strategy is your “story” to potential buyers. It should align with your history and should be in written form. Scalability If you prove your point about growth potential, a reasonable buyer will not pay a premium if the business cannot absorb growth due to limitations of internal systems and process. They won’t pay a premium for growth potential if your business can’t produce it. Good and improving cash flow A record of a growing cash flow is the key to growing business value. A business growing top line revenue by 10 percent annually, but only growing cash flow by 3 percent will attract far few buyers and a lower price than the same business with top line growth of 3 percent and cash flow growth of 10 percent.

The Next Step is Yours The saying goes, “The best time to plant a tree is 10 years ago. The secondbest time is today.” As a business owner, make sure you are focusing on these qualitative, seemingly intangible characteristics now. These are the traits that buyers look for and if you strengthen them, there is a greater likelihood you will sell at a premium whether that’s next year or 20 years from now.

“As a business owner, make sure you are focusing on these qualitative, seemingly intangible characteristics now. These are the traits that buyers look for and if you strengthen them, there is a greater likelihood you will sell at a premium whether that’s next year or 20 years from now.” Tom Siders, L. Harris Partners

Tom Siders is a partner with L. Harris Partners: 952.944.3303;;





Find the right payment processing partner by Pat Moran

TIPS 1. There are many payment processor options available to small businesses. Find one with experience in your type of business and with the goods and services you offer. 2. Make sure you get a clear list of fees you’ll be assessed and understand all terms and conditions of the contract you’ll sign with your vendor. 3. Decide whether you want to purchase or lease equipment and realize that leasing is typically the most expensive choice for obtaining equipment. 4. Make sure to test the compatibility of your electronic payment system with other technology, such as your accounting software, to make money management easier and more efficient. 5. Look for a processor that offers 24-hour technical and phone support. Make sure you have a dedicated customer service team or account manager that can explain their support methods. 10

RAPID GROWTH in digital technology affects every aspect of our lives – from how many of us navigate around town, to how we consume news, to how we make purchases. The same is true for the owners of the nearly 510,000 small businesses across Minnesota. Technology changes the way they track expenses, monitor inventory and even pay their employees. But one aspect many business owners in Minnesota and across the country haven’t changed is how they accept payments from their customers. The National Federation of Independent Business found that only about half of small businesses accept electronic payments. As customers increasingly prefer to make payments electronically, it becomes even more important for small businesses to accept cards and mobile technologies to stay competitive. Not only does accepting electronic payments help level the playing field between small businesses and larger competitors, it also expands the marketplace for small businesses, creating more opportunities for them to sell their goods and services. For example, accepting online purchases allows businesses to expand their customer base. In fact, Business Insider’s BI Intelligence research and information service reports that 224 million consumers shop online, up by nearly 20 million from 2015 to 2016. Accepting payments electronically helps small businesses better compete with larger businesses, minimizes potential losses associated with handling cash and expand into online sales. In fact, a recent study led by Oxford Economics and Charney Research on the “Future of Money”


found that the fastest growing firms in terms of revenue are those that conduct e-commerce via their websites and mobile apps. However, like any other purchase decision, there are basic best practices that apply to accepting electronic payments. If you’re a small business owner interested in accepting payments using cards and mobile technologies, here are six important tips to consider: 1. Find a payment processor that fits your business. There is no shortage of options available to small businesses. However, it is important to find a payment processor with experience and expertise in your type of business and the goods or services you offer. Often, your fellow business owners can be good resources for recommendations. Technology providers you already work with can also be a good resource for you. For example, if you already have a point-of-sale solution, ask that technology provider for opinions on payment processors. Lastly, if you have a good relationship with your bank, consider starting with them – you’ll be working with a known entity and you may be able to leverage your bundle of services to your benefit. 2. Understand contract terms and how fees are calculated. When it comes to the adoption of electronic payments, navigating the fee structures from payment processors can seem overwhelming. Remember, like with any contract, it’s important to ensure that you understand all terms and conditions, including when and how you get paid, start and end

dates of service, and any conditions of automatic renewal. In addition, request a clear list of fees and make sure you understand how the merchant discount rate is calculated and any conditions that affect the rate — including card type or card-not-present transactions. Try to negotiate on all fee elements and be aware that any additional monthly and annual fees from the processor can add up quickly. Ask the processor trying to win your business for an example statement that includes all the fees you would be charged. If the processor cannot or will not provide this, consider exploring other options. 3. Decide whether you want to purchase or lease equipment. Many payment processors will try to gain customers with low processing fees, but charge a significant amount for leasing equipment. Generally, leasing is the most expensive choice for obtaining equipment and unless you don’t have other options, consider avoiding leasing. Leasing can mean additional monthly charges, while purchasing is usually a one-time fee. If you instead decide to work with a third-party hardware vendor to obtain your equipment, make sure their system is compatible with the payment processor you have chosen to use. 4. Make sure your equipment has the latest security technology. The U.S. market has now embraced chip card functionality. Europay, Mastercard and Visa (EMV) chip cards work directly with the terminal to generate a code that makes each transaction unique and impossible to duplicate. For the security of your business and your customers, prioritize hardware that can accept EMV chip cards. Talk to your payment processor about your

options for accepting these chip cards and make sure you also can accept mobile payments, mobile wallets and other contactless payment methods. Mobile payments represent a quickly growing market – they are expected to reach $142 billion in the United States by 2019, according to Forrester. 5. Explore options for integration. When considering electronic payment systems, it is important to find out if the service you choose will be compatible with other technology. For example, many businesses look for an electronic payment system that can be integrated with accounting software, making it easier and more efficient to manage money. 6. Get the support you need. Look for a payment processor that offers phone and technical support, 24 hours a day, seven days a week. You should have a dedicated customer service team or account manager, and they should be able to explain clearly the steps they take when handling support for customer payment-related issues. In addition, programs like “Master Your Card” offer information and resources to help small business owners understand and use electronic payments. Technology is changing the world more quickly than ever before. Shifting away from the status quo can be difficult for small businesses. Fortunately, today’s resources make it easier for them to find an electronic payment system that fits their unique business needs. By adopting the latest business and financial technology, small business owners can set themselves on a path to growth and success.

“Not only does accepting electronic payments help level the playing field between small businesses and larger competitors, it also expands the marketplace for small businesses, creating more opportunities for them to sell their goods and services. ” Pat Moran, BlackLine Advisory Group

Pat Moran is managing director of BlackLine Advisory Group and a member of the Master Your Card Small Business Advisory Panel: 877.751.5565;;





Keeping a happy workplace helps retention, boosts bottom line by Elizabeth Hang

TIPS 1. Keep your workplace culture in mind when hiring. Consider personal skills as well as technical abilities and consider having staff meet with short-listed candidates to provide input. 2. Make work challenging and satisfying. Find the sweet spot that allows people to feel they are doing something well but also learning and progressing. 3. Make sure there is a defined path for employees to learn new skills and move up the ladder. If there is not, they’ll often seek advancement elsewhere. 4. Praise and acknowledge employees when they achieve big wins or go above-and-beyond. Don’t go overboard, but be sincere and specific when offering praise. 5. Management plays a large role in fostering positive workplace friendships and collegiality. Workplace happiness is important to the culture of a thriving business. You can lead those efforts. 12

IT’S NOT EASY to put together a great team. It’s especially challenging when you’re a small business and don’t have the glitzy perks — free cafeteria, on-site gym and daycare, 24/7 massages — that tend to attract talent. But as difficult as it is to hire top candidates, retaining them may prove even harder. In a recent Robert Half survey, 42 percent of workers interviewed said they’re likely to look for a new job in the next year. Among respondents under 35, that number jumps to 68 percent. Losing employees, particularly your top performers, can be disastrous for business. And given Minnesota’s low unemployment rate, which was 3.8 percent as of August 2017, replacing them wouldn’t be easy. Retaining talent begins by asking the question: Are your people happy? The importance of happiness The office isn’t Disney World, and a business owner’s primary concern is profitability. However, workplace happiness is an integral part of the equation for a healthy company. When employees enjoy their job and feel engaged, they are more productive than those who are just working for a paycheck. The Robert Half report, “It’s Time We All Work Happy,” outlines the three elements of on-the-job satisfaction:


• Enthusiasm — a high-energy state that leads workers to create and seize opportunities. • Interest — a state of deep focus brought on by stimulating and challenging work. • Contentment — a state of calm satisfaction that arises after

doing excellent work, coupled with appreciation from peers and management. Over the long term, happy workers are less likely to look for a new job and more likely to recommend their employer to friends and family. In other words, what’s good for employees is good for your business. How to add more happiness to the workplace Does this mean you should install nap pods or stock the break room fridge with gourmet snacks? Employees might appreciate such gestures, but flashy new perks aren’t necessarily the answer. Job satisfaction is more intrinsic, and it’s not exclusive to big companies. In fact, our research found that the happiest workers are in businesses with fewer than 10 employees. Making employees happy can cost little and has a high return on investment. With smart, motivated leadership, any company can boost job satisfaction. Here are five ways to raise your workers’ happiness quotient: 1. Keep your workplace culture in mind when hiring. Do your company, current employees and future new hires a favor by bringing in people who will fit with the work environment. Someone who doesn’t mesh well with the corporate culture or their colleagues will not last long on the job, leading to wasted effort and all-around poor morale. Avoid a new hire nightmare by taking into account not only potential employees’ technical abilities, but also their personality and people skills. You might even consider having your staff meet with short-listed candidates and weigh in with their

opinions. 2. Make work challenging and satisfying. When handing out assignments, aim for that Goldilocks sweet spot: Tasks shouldn’t be so easy that an employee could do it on autopilot, nor should they be so complex that you set workers up for frustration or worse, failure. People are happy when they are able to do something well, but they also want to feel like they’re learning and progressing. If an employee is losing interest because the work has become routine, ask him to lead a business initiative or brainstorm a new product. On the flip side, if an otherwise talented employee has trouble with a task, provide professional development training. 3. Define career paths. Talented workers are constantly thinking about their long-term future. They want to gain experience, learn new skills and move up the ladder. If they believe their professional prospects are at a dead end within the company, they’ll seek advancement elsewhere. The challenge for you is to show that even though a small business doesn’t have as many layers of hierarchy as in a larger company, there is still ample room for career progression. To keep ambitious employees happy, meet with them quarterly or semi-annually to discuss how they can achieve their goals. Perhaps they should work toward a certification or another degree, or undergo management training. Such discussions are especially important for members of Generation Z, who are typically eager to rise professionally. 4. Show appreciation. Not every accomplishment needs to be praised. In fact, too many compliments can be counterproductive. But you should acknowledge the big wins and the above-and-beyond efforts. If not, employees may wonder why they’re

giving it their all when their efforts aren’t recognized or rewarded. When it comes to thanking workers, the keys are sincerity, and giving quick and specific praise — and when appropriate, making some noise. Let’s say the local newspaper covered your organization’s event because your marketing coordinator came up with an interesting story angle to pitch to a reporter, and the result was invaluable word of mouth advertising that led to additional business. When recognizing that employee, let the entire staff know immediately what she did, how she did it and why it is commendable. Lead the group in applauding her efforts, and then perhaps present her with a gift card and a handwritten note of appreciation. 5. Promote collegiality. Remember how our study found that the happiest employees work in small companies? The reason could be their office’s family-like atmosphere, where people truly care for one another’s wellbeing. Management plays a large role in fostering positive workplace friendships. Your efforts could be as simple as planning monthly potluck lunches and celebrating birthdays with cake and coffee. Don’t forget to be an active participant and to get to know your workers better. One of the greatest sources of employee unhappiness is a strained relationship with the boss. Workplace happiness isn’t a pie-inthe-sky concept, nor is it optional — not if your goal is a thriving business. When employees enjoy their work, feel respected and receive competitive salaries, they will continue to give their employer their best work for many years to come.

“Over the long term, happy workers are less likely to look for a new job and more likely to recommend their employer to friends and family. In other words, what’s good for employees is good your business.” Elizabeth Hang, Robert Half Management Resources

Elizabeth Hang is a human resources division leader in the Twin Citiesoffices of Robert Half Management Resources, a division of Robert Half Inc.: 952.831.7240;;




Growing smart DataTrec, Hennes Art Co. share their successes, challenges for expansion


ast month we introduced Minneapolis-based Hennes Art Co. and Eagan-based DataTrec as this year’s participants in the Upsize Growth Challenge. In the time since, Brian Anderson, president of DataTrec, and Greg Hennes, founder of Hennes Art, met again with the panel of experts, this time at a public event at the Minneapolis Club, where they again spelled out their growth questions and provided an update on progress since the private meeting six weeks earlier. Below is a look at where these companies came from and what they are trying to accomplish.


When Brian Anderson got out of college in 1982, he was dating a woman in town and his car was “going to heck.” So, he took a job in import-export sales that offered a company car and international travel. “It sounded like it had some flair to it,” he says. Every 18 months to two years later, he took a new job or move up in his existing role until 1990, when he started his own company, Anderson Air Cargo. Over the years, the company evolved. It began expanding service offices into international shipping and domestic trucking. Sept. 11 attacks changed the logistics industry significantly, he says. Regulatory compliance issues became more stringent and fuel costs went through the roof, making the economics of flying cargo in inefficient planes difficult. So, air freight went from 35 percent of his Eagan-based business to about 3 percent. Around the same time, what is now Anderson Cargo Services Inc. began building a business around more challenging logistics work related to the relocation of computers and servers. “Computers started to take over everything,” Anderson says. “It began with people reselling computers.”

Minneapolis is a big market for electronics, but the companies that use them don’t necessarily buy them here. They had to pick them up — and when they did, he says, they were typically not packaged well, if at all. Over the last decade, that evolved into the movement of higher and higher value equipment, such as data centers. As companies moved them offsite, Anderson Cargo would help the company reallocate them. It became a big enough part of the business where Anderson, at the beginning of this year, established DataTrec to handle that challenging cargo activity.

Provides an exit strategy

In addition to growth in a niche market, Anderson sees DataTrec as his opportunity for an exit strategy at some point. The difference between Anderson Cargo and DataTrec, he says, is like the difference between Dairy Queen and Bob and Cheryl’s Ice Cream. “Anderson Cargo has been a very good company,” he says, “It, I think, has been defined by others in business as what they would call a lifestyle company.” DataTrec has much broader appeal. The name isn’t tied to the family. “It’s very focused, very defined and it’s not tied to an individual,” he says.

The Growth Challenge

Anderson wants to see DataTrec grow substantially into 15 to 20 markets. He was seeking feedback on raising money to do so. Presently DataTrec operates as a brand of Anderson Cargo Services. They share staff. But he believes splitting off the specialty business provides a better opportunity for marketing those services, and he definitely sees DataTrec as the growth engine going forward.

by Andrew Tellijohn photographs by Tom Dunn 14


“This is a high-risk endeavor. You’ve got an entire company at stake. You’ve got your clients, your software, your backend. The stress of the people we are dealing with, they are freaking out.” — Brian Anderson, DataTrec

In just 10 months, the company has done three campaigns and has sourced a large number of names and prospects within a pyramid of customers he and his staff have identified. He’s looking to expand with a physical presence into 15 to 20 strategic markets that would not only allow more direct marketing to targeted companies but also would create a more efficient disbursement of the equipment his company has created to safely package and transport the sensitive equipment DataTrec relocates. Between the packaging equipment, the armed security and the chain of custody guarantees, DataTrec attempts to greatly assuage the anxiety a company feels when it’s taking highly secured data and moving it from one location to another. “It’s their whole livelihood you are moving,” Anderson says. “I think we’ve really identified a service niche that is not presently being serviced well.” “About 85 percent of small businesses still have their computers in what we would call a closet,” Anderson told attendees at the public event, held at the Minneapolis Club in mid-October. “We have taken a decade of experience … to learn how to facilitate this process,” he says. “This is a high-risk endeavor. You’ve got an entire company at stake. You’ve got your clients, your software, your backend. The stress of the people we are dealing with, they are freaking out.”

ABOUT THIS PROJECT The Upsize Growth Challenge, presented by Winthrop & Weinstine, is a contest created by Upsize magazine to match two winning business owners with the expert advice they need to reach their goals. From nominations, judges select two winners based on the ambition of the growth goal and the quality of the work already completed to meet it. They participated in a workshop this spring with expert advisers supplied by the sponsoring companies, which was covered in the August/ September issue. In September, winners told their stories at a public event and experts gave advice applicable to all growing firms, covered in this article. Nominations for next year’s contest open in spring 2018.

What the experts say

A panel of experts convened by Upsize for the Growth Challenge was excited about Anderson’s prospects for success. Before approaching banks or investors, he needs to hone a business plan that outlines best- and worst-case scenarios, says Melissa Johnston, vice president of business banking for Highland Bank. But he’s established a unique niche and he’ll have plenty of options for financing, from traditional banks to ven-




“[U-Haul] partnered with many different businesses to stick their sign out. The cost of getting in would be relatively low and that’s a different revenue stream.” — Jon Cassens, DS+B | CPAs + Business Advisors. ture capitalists or angel investors. “There is a lot of money sitting on the sidelines right now and also folks looking to invest in good ideas with a track record,” she says. “Brian is positioned well for that.” Jon Cassens, a director at DS+B | CPAs + Business Advisors, says Anderson will have several options for how he wants to proceed with expansion. One option that could reduce costs might be following the U-Haul model of establishing partnerships with complementary businesses in new markets. “[U-Haul] partnered with many different businesses to stick their sign out,” he says. “The cost of getting in would be relatively low and that’s a different revenue stream. The opportunities there are big and diverse, which I think is a big opportunity.” Because he doesn’t already have a huge pot of money, it might make sense to decide whether to target small or large businesses at the outset, says Dean Willer, an attorney with presenting sponsor Winthrop & Weinstine. With large clients, a direct sales force might take away the need for having a physical presence in all the important markets, but if small businesses are the target, it might be necessary to have people on the ground in those cities to help find the right contacts. “Decide where you want to be,” Willer says. “Do you want go to the big boys first and work down or go to the little guys first and work up and end up with a situation where you can target your resources to the most advantageous way to attack the market.” Dan Moshe, founder of Tech Guru, says Anderson has tapped well into the minds of tech savvy individuals. He complimented

DataTrec’s quick turnaround time on quotes and the ability to own a process that troubles customers. “Brian really understands how us techie people think,” Moshe says. “He knows and understands that we want it right now. We want to just have it work and not have to mess around with it, especially if it’s something as analog as boxes and trucks and moving stuff.”

Hennes Art Co.

Greg Hennes graduated from St. Thomas University with a double major in business and economics, but he always loved architecture and knew he wanted to work in a creative field. After graduation, he answered an ad for a job managing an art gallery, where he worked closely with architects and designers in helping set up corporate art collections. After that, he helped an office furnishings dealer set up an art division. When the owner sold the business and retired, the buyer didn’t want anything to do with the art side. So, in 1989, Hennes took his client list and vendor relationships and struck out on his own. Through a variety of mergers and acquisitions, over the next 20 years, he built Art Holdings Corp. into a solid company with 66 employees at its peak. He sought an investor to facilitate national growth, but in a short time the relationship soured over philosophical differences. “I basically walked out the door and started this new company,”

“Decide where you want to be. Do you want go to the big boys first and work down or go to the little guys first and work up and end up with a situation where you can target your resources to the most advantageous way to attack the market.” — Dean Willer, Winthrop & Weinstine 16


“I needed to be better prepared for the growth that was coming by having a larger facility and a few more employees to make sure we actually did it right and that every step we take continues to fuel the growth.” — Greg Hennes, Hennes Art

Hennes says. When he started Hennes Art Co., his intention was to keep it small. He wanted to be able to run it from a boat with a laptop. He set up a gallery in downtown Minneapolis doing high-end art shows. But then growth started happening and, with that, returned his desire to expand. Corporate clients from his previous company started finding him and, just a few years later, the company moved into an 11,000-square-foot showroom in the Warehouse District. He’s added a handful of employees and is again doing full-service art consulting catering to corporate clients of any level. “I needed to be better prepared for the growth that was coming by having a larger facility and a few more employees to make sure we actually did it right and that every step we take continues to fuel the growth,” he says. The main difference is that Hennes Art outsources most of the mass production, which allows for lower overhead costs because facility needs are smaller. “It’s a much more streamlined, efficient model,” he says. Sales in 2016 were just under $1 million. He expects to close 2017 at around $1.5 million and push $2 million in sales in 2018.

looking for a cost effective and technologically sound way to enhance the user-friendliness of the company’s web platform, a way to automate many of the choices customers make. But he also was looking for advice on the hiring of a business development person, whose responsibilities would include reducing a significant backlog of projects on which the company hasn’t had the resources to bid. He’d been looking for that person for a while, but has been carefully balancing the desire to grow with the need to ensure that he’s keeping the company on a manageable track. After meeting with the panel of experts, however, he upped the urgency and made the hire. By mid-October, the new person had already facilitated an additional $200,000 in bids for business, Hennes says. “We, literally, with that one add, will be able to double our revenue next year,” he says. “That’s how much was sitting on the table that we weren’t getting to.”

What the experts say

When Hennes first met with the assembled panel of experts, they were intrigued by his desire to improve the company’s web capabilities but also suggested that he first accelerate his search for a business development colleague. Panelists were happy he The Growth Challenge made that hire before the second meeting. While he’s comfortable with the company’s trajectory, Hennes “What Greg did after starting his company in 2010 is make reentered the Growth Challenge for a couple reasons. First, he’s ally good choices in terms of when to add to his team and how to



COVER STORY “What Greg did after starting his company in 2010 is make really good choices in terms of when to add to his team and how to manage that growth appropriately. He’s built his company based on service and how he delivers to his clients. Adding people just to fill seats isn’t a great solution.” — Melissa Johnston, Highland Bank

Contact the experts: Brian Anderson, DataTrec: 651.209.0047;; Jon Cassens, DS+B CPA + Business Advisors: 612.630.5071;; Greg Hennes, Hennes Art: 612.377.2630;; Melissa Johnston, Highland Bank: 952.858.4798;; Dan Moshe, Tech Guru: 612.235.4895;; Dean Willer, Winthrop & Weinstine: 612.604.6633;;

manage that growth appropriately,” says Highland Bank’s Johnston. “He’s built his company based on service and how he delivers to his clients. Adding people just to fill those seats isn’t a great solution.” He’s put himself in a position to build a strong case for financial assistance, should he need it to help with future growth. “Yes, there are some great opportunities for Greg to add some capital,

through traditional bank financing or other sources,” she says. Willer, from Winthrop & Weinstine, says it’s great that the company has moved forward with hiring a salesman to help work down the backlog of potential orders. While finding a new business development person was Hennes Art’s low-hanging fruit, Willer and Tech Guru’s Moshe add that Hennes still has tremendous opportunities for growth through a technological enhancement. Moshe suggests Hennes should do an exhaustive search to see if the technology necessary to improve the company’s website exists elsewhere before committing substantial resourcs to building one from scratch. Scouring tradeshow lists and studying the websites of companies in adjacent industries are a couple ways he’s found answers to similar problems. “I’ve been involved with many projects where it’s obvious that a technology play is going to transform the business,” he says, “You’re not alone. Somebody else has probably come up against a similar business problem. It’s up to us entrepreneurs to see if we can apply a little creativity … That’s what entrepreneurs’ specialties are, we can see connections that aren’t obvious.” Cassens, from DS+B | CPAs + Business Advisors, agrees that there is a room for technological enhancements with Hennes Art, but cautions against going too far. “The differentiator for your business is that personal touch, the ability to sift through the weeds the client may not want to as well as the ability to have those touch points with the decision makers,” he says.

“I’ve been involved with many projects where it’s obvious that a technology play is going to transform the business. You’re not alone. That’s what makes entrepreneurs special is we can see connections that aren’t obvious.” — Dan Moshe, Tech Guru 18


UPSIZE MINNESOTA and CLUB ENTREPRENEUR Present a luncheon workshop series at the Minneapolis Club

Tuesday, November 28th

Tuesday, January 23rd

Thursday, March 22nd




Trial and error is not the most efficient teacher. A quicker, less painful way to learn is from the experience of others — which will be the path taken by those attending this workshop.

Be careful what you wish for. Rapid growth can cause major problems. This workshop will help attendees prepare for the downside of fast growth.

Who are the buyers and sellers of smaller companies? How are companies valued? What are the keys to a successful exit? Get the answers to these questions and more at our annual M&A workshop.

11 a.m. to 1 p.m.

11 a.m. to 1 p.m.

11 a.m. to 1 p.m.

For the fifth straight year, the UPSIZE and CLUB E workshop series is dedicated to helping attendees with all facets of the growth challenge, and introducing local experts who can serve as trusted resources. Who should attend: The workshops will be geared towards entrepreneurs, CEOs, presidents, smallbusiness owners and executive managers. Questions from the audience will be encouraged.

Cost: $34.00 per workshop, which includes the program, lunch and parking during the event.

Location: All workshop will be held at the Minneapolis Club: 729 Second Ave. So. — in downtown Minneapolis — at the corner of 8th Street (one way headed east) and 2nd Ave. Enter the parking ramp from the 8th Street side, on the south side of the building.

SPACE IS LIMITED! REGISTER NOW, go to For questions, please contact the Front Desk team of The Minneapolis Club 612.332.2292 or

SCHEDULE: 11:00 – 11:30 — Registration & Networking | 11:30 – 1:00 — Introductions, Lunch & Workshop | After 1:00 — Networking


WORKSHOP: Take control of your successful exit

Moving on

Panel discusses maximizing value when selling a business By Andrew Tellijohn Photographs by Tom Dunn


n overworked small business owner in the trades, burned out and desperate to sell, gets calls from two potential buyers. He doesn’t seek assistance from any mergers and acquisition experts and he allows the potential buyers to ride along with his employees to learn more about the business. In the end, both options fall through and, within a month, his two best workers, knowing the business is for sale, leave for other opportunities. That was among the worst-case scenarios described by panelists during a workshop at the Minneapolis Club hosted by Rick Brimacomb’s Club E and Upsize magazine. About 4.5 million businesses, representing $10 trillion in business value, will transition in the next decade, Brimacomb says, but only 20 percent to 30 percent will end up being sold. “Every business owner leaves their business someday,” he says. “The question is how are you going to leave your business? Are you going to take control and exit or is that

going to just happen to you?” The panelists shared their thoughts on what business owners can do to take control of their own business transitions and how they can maximize the value of their return in the process.

Have a plan

Most importantly, be proactive, says Dan Moshe, founder of Tech Guru. When people approach him about the availability of his own company, he generally takes the call. He’s not intending to sell right now, but while talking, he’ll ask the potential buyer what would improve the company’s valuation. “I just grill them,” he says. What he’s been told is that for his tech company, buyers want good systems in place and high-quality people, who are loyal and well-trained. “The way I’m thinking about this at Tech Guru is we’ve been intentional about every other thing we’ve set out to do with Tech Guru — our marketing, our operations, our customer service — why not be intentional about the end, the exit,” he says. “When I get to the point, I’m going to go pitch the type of companies that I want to sell Tech Guru to when the time

“You need two to five years in advance of the exit to get everything pulled together. I tell clients ‘If you can predict, with absolute certainty two years before you die, become disabled, get divorced or have a dispute with your business partner, then start then.’ Otherwise maybe you better just start now, just in case.” — Tom Siders, L. Harris Partners



WORKSHOP: Take control of your successful exit

“It’s really important that we do a deep dive early on and that the seller really understands the triggers of the business as well as what might be required when it gets to due diligence. It’s a very strict process.” — Peggy DeMuse, Sunbelt Business Advisors is right, when I’m ready to do it. That’s how I’m looking at it.” That fits well with the advice of other panelists, who suggest business owners get started with at least a rough idea of a plan at least two years before they intend to sell — ideally earlier. “It’s really important that we do a deep dive early on and that the seller really understand the triggers of the business as well as what might be required when it gets to due diligence. It’s a very strict process,” says Peggy DeMuse, a broker with Sunbelt Business Advisors. During that time, Sunbelt works with them on the more intangible aspects that will impact the price an owner gets, such as making sure a quality management team is in place “so you can go on vacation for two months and hopefully they won’t miss you too much,” she says. “That’s a good thing.” “We’ll work with sellers to help understand how to get their business structured to help maximize the value and increase the multiple they are going to get,” she adds. Tom Siders, a partner with L. Harris Partners, says it takes that long to truly pull everything together — from cleaning up financial statements to finding the right buyer. “I tell clients ‘If you can predict, with absolute certainty, two years before you die, become disabled, get divorced or have a dispute with your business partner, then start then. Otherwise maybe you better just start now, just in case,’” he

says. Then revisit that plan, Siders adds, at least every two years. Sellers should start by having a sense well in advance of how much they need to sell for in order to maintain the lifestyle they want, says Sean Boland, managing principal at DS+B CPAs and Business Advisors.

Building the team

If that number is $5 million, he says, taxes dictate that a sale must actually be closer to $8 million. If engaged early enough, he says, business advisers — accountants, bankers, attorneys and others — can help owners make sure they take the steps to get there. Part of creating a plan that will maximize a business’ value includes finding the right partners to work with. Potential sellers are, rightfully, spending their time trying to build the company. “Being tied down to chase after an attorney to do your estate plan is not necessarily a priority for them,” Boland says. “That’s why you have to mentor them. You have to have people around them. … That’s part of that proactive planning. Figure out what you are going to do, how much you need, do you want it to transition to your kids and what kind of a payday do you need at the very end.”

“Being tied down to chase after an attorney to do your estate plan is not necessarily a priority for them. That’s why you have to mentor them. You have to have people around them.” — Sean Boland, DS+B | CPAs + Business Advisors.



WORKSHOP: Take control of your successful exit

“The way I’m thinking about this at Tech Guru is we’ve been intentional about every other thing we’ve set out to do with Tech Guru — our marketing our operations, our customer service — why not be intentional about the end, the exit.” — Dan Moshe, Tech Guru Melissa Johnston, vice president of business banking with Highland Bank, says she was approached recently by the owner and the controller of a private company that had been approached by a competitor about selling. They were not customers. They had seen her name and they approached her because they work with a large bank. Their personal representative changes on a regular basis and they don’t feel a strong relationship there. The company had performed well for a few years following the recession, but slowed in 2015 and broken even in 2016. Johnston indicated to them that that selling following two subpar years would not be ideal. “You’re not going to get the value you have built up over the last 20 years,” she says. “Having those conversations with a business banker and not showing your hand too soon to a potential buyer is really important.” Johnston adds that if business owners don’t feel they have a close relationship with their banker, it might be time for a change. “There are a lot of amazing ones out there and you should find one,” she adds.

People are important

One of the thing the panel of experts frequently hears from potential sellers is concern for the future of their management team and employees. Buyers, panelists say, typically want to acquire companies with strong, welltrained, loyal people. Sellers, they add, should remember that spending money training staff can pay off, not just for loyalty and retention, but also for increasing the value of their business in the long-term. “You want to have good quality people,” DeMuse says. “Investing in your people is one of the most important things you can do that is going to drive the business going forward. That is what is going to help grow it and make it a more valuable company.” Siders and Johnston agree, though they caution against letting potential buyers meet with employees before a deal 22


is completed. Siders cited cases in which employees met with potential buyers, then left for other opportunities upon learning the business was for sale. Adds Johnston: “A lot of the buyers will want to meet the people and have conversations ahead of time — if I am working with the seller I say no way.”

What else can increase a company’s value for sale?

Besides people, Johnston adds, buyers are looking at what industry the business is in, what the potential is for future growth and the prospects for sustainable cash flow. “The other thing is the management structure,” she adds. “Who is doing what? Do you have processes, handbooks, is it transferable? It’s amazing how, in small companies, roles are loose between people. … As a seller, when you are preparing to sell, it’s important to document all the roles and be really clear with the buyers on that management structure.” The experts say another important part of planning ahead is the opportunity to clean up financial statements with a focus toward improving cash flow and away from reducing taxes. Business owners, Boland says, are often surprised to find out that running expenses through the company in order to minimize taxes isn’t the best practice, at least when the end goal is selling the business. Buyers are looking at cash flow, not asset values, when determining a purchase price, DeMuse says. Thus, a transaction that might save $100 in taxes might end up costing $300 or more during a sale, she adds. Johnston says the practice contributes to making it difficult to get bank financing. And those expenses are unlikely to be added back in to the sale price, at least without documentation, she adds. Adds Siders: “Most business owners try to run their business using tax minimization accounting policies. Then when it comes time to sell they have to come clean. I don’t know about you, but I don’t want to go to confession with the IRS.” At least two years ahead of a sale, Siders adds, companies

WORKSHOP: Take control of your successful exit

“Remember to check your emotions at the door and use a process, use a plan and lean on that board of advisers or the group that you surround yourself with to help with any acquisition.” — Melissa Johnston, Highland Bank

should up those practices and start focusing more on maximizing cash flow. “Think of your financial statements as your brochure for someone to buy your business,” he says. There also are some relatively inexpensive tech-related enhancements a company can make that could increase the business’ value. The business is usually one of the owner’s largest assets, but often times it’s not always well maintained from a technology perspective, Moshe says. Many times, companies spend way too much money patching old, inefficient software instead of spending just a bit more on new programs that might work better. Or they continue old internal communications practices like picking up the phone when a free or inexpensive software, such as Slack, could facilitate those internal discussions electronically while keeping phone lines free for clients to call, he says. Moshe also indicates that hardware technologies have

CONTACT THE EXPERTS SEAN BOLAND, managing principal with DS+B | CPAs + Business Advisors: 612.630.5076;; PEGGY DEMUSE, business broker with Sunbelt Business Advisors: 651.288.1627;; MELISSA JOHNSTON, vice president of business banking at Highland Bank: 952.858.4798;; DAN MOSHE, founder and CEO at Tech Guru: 612.235.4895;; TOM SIDERS, partner with L. Harris Partners: 952.944.3303;;

changed to the point where some offices are purchasing single 43-inch monitors for employees who previously had two or four screens on their desks. That frees up space to be more productively used. They’ll also purchase laptops so employees can take them home. “You can help them work when and where they want to,” Moshe says. “Before you know it, you’re capturing productive time you otherwise wouldn’t have been able to capture.” Businesses should use caution, he adds, when purchasing security software. It’s important, but it’s equally important to have a plan so it doesn’t “like many things in business, become a money pit, as well.”

Other advice

The good news is, if you started early, created a plan and worked with the right experts, now is a great time to sell. “The market is super-hot,” DeMuse says. “Most good businesses that are coming in are selling fairly quickly and generally with multiple offers. It’s been a sellers’ market for a while but it’s interesting how over the last quarter it has really jumped.” But it takes some time. Sellers need to prepare for some turmoil. There will be a lot of ups and downs. Experts advise patience. “Remember to check your emotions at the door and use a process, use a plan and lean on that board of advisers or the group that you surround yourself with to help with any acquisition,” Johnston says. L. Harris Partners also takes some time to work with entrepreneurs to ensure they have a plan for when the sale closes. Siders says, from personal experience, that being aimless is not good. “When you don’t have that business to go to anymore you get a little antsy,” he says. “You’ve got to have a plan for what you are going to do with your time.”



catching up by Andrew Tellijohn

Fallenstein still learning lessons, building business after nearly a decade on his own

TIPS 1. Have really good people. Treat them well. That is the ultimate key at the end of the day. 2. Know what you don’t know. Make sure you exhaust every avenue for learning about a potential business move or you might make an uninformed decision. 3. Make sure you have relationships with your banker and other professional associates. When they know your business, they can help you grow and they can help you weather difficult times, as well. 4. Be open to advice outside your typical circle. Taking meetings with competitors or different markets may open doors you haven’t considered. 24


t’s been just about nine years since John Fallenstein admitted in an interview with Upsize that he was buying into an industry that he knew little about and that he was a bit nervous while attorneys hashed out the terms of the deal that allowed him to acquire Custom Rock Formliner. The St. Paul company makes the urethane and plastic formliners that mold to concrete work on highways and bridges. He’s learned a lot over the last decade since achieving the goal of buying a business of his own. The industry was new to him then, but he quickly fell in love with it. And he’d always wanted to be in charge of his own destiny. “I’ve always been entrepreneurial,” he says. “I’ve always enjoyed having an integral role in building something. And I’ve always wanted something of my own. That undercurrent has always been there, even when I worked for other people. It was just a natural evolution.” Fallenstein knew going in there would be a learning curve. And he acknowledges having made some mistakes along the way. But in the meantime, he’s also had significant success helping the company expand, as well. He won’t discuss financials, other than saying revenues have more than doubled since he purchased the company. He told Upsize in 2009 that Custom Rock had more than $5 million in annual revenue. “I’ve learned a lot and been really lucky to come out on the other side of it with lessons and not bankruptcies,” he says. He talked openly about a couple of the lessons. For example, the company has always focused on urethane formliners. But in 2012, he was exploring getting into plastic. He didn’t find a lot of data available for financial projections so ended up relying largely on anecdotal information. As a result, he underestimated the potential revenue and overestimated the costs of getting into the market. He


chose to pass. “I decided it didn’t make sense,” he says. “I severely undershot the amount of potential revenue from plastic. The same with the margins. … I didn’t think we were ever going to get into plastics.” A few months later, however, he got a call from a distributor who encouraged him to meet two men in Texas who were in the plastics side of the business before being let go by a competitor that was getting out of formliner work. “They handed me a pro forma,” he says. “I looked at this and said ‘Really? This kind of revenue? This kind of margin? Within four months we were moving forward.” Custom Rock purchased a machine, rented space and opened a facility just north of San Antonio in 2013. Now, plastics accounts for about 75 percent of what Custom Rock’s urethane business does. He recently hired a sales person to get into another plastics channel and now he expects the plastics side will overtake the urethane side of the business within the next two years. “My big lesson in that was that I thought I had thoroughly examined everything about the opportunity, but I really hadn’t,” he says. “Part of it was that I was still really new to the industry

Custom Rock Formliner Description: Manufacturer of decorative urethane or plastic formliners for bridge and highway work Founded: 1971 Headquarters: St. Paul Owner: John Fallenstein Web:

and didn’t realize what I didn’t know. It wasn’t so much of an ego thing. I really thought I had exhausted my sources and had solid conclusions.” Earlier, he learned about the importance of establishing a true relationship with a banker. Fallenstein initially worked with a larger bank. He had a great relationship with his original banker, but after she left, he had three different contact people in two years. When 2010 started looking rough, the bank started talking about changing the requirements of their deal. In 2011, Custom Rock moved to Tradition Capital Bank, a smaller operation that he says is interested in what the company does, willing to build a relationship and more nimble and able to adapt quickly. “They’re business people who happen to do banking,” he says. “They understand our business.” That was important when Custom Rock struggled in 2011. The challenges were due to the economic downturn – it didn’t manifest right away because they were finishing up government contracts that had funds allocated before the economy went bad. The bank recognized, as Custom Rock did, that when the economy turned around, there would be pent up demand for work and the company likely would be fine. About a year later, that proved true and Custom Rock has grown ever since. “I had looked at banking as just being a source of money, not really paying attention to how well they fit the business,” Fallenstein says. “What I learned … is you need to find a bank that is

willing to invest the resources and time to understand what you do and what your business cycle is like.” While he acknowledges the growing pains, one thing Fallenstein is proud of is having maintained an employeecentric culture that was in place when he bought the firm from the Mooty family. He thinks it is vitally important to treat employees well. They are paid well, they get solid benefits, they vest immediately in the retirement plan, they get excellent medical benefits and they generally know that if they fit the culture and work hard, their jobs are safe. Fallenstein says Custom Rock won’t hire someone unless it knows the person will be kept busy. The company has about 30 employees and a collection of temps who are tapped during heavy work times. Temps are, in many ways, treated like employees. They are invited to holiday parties and are compensated well so they’ll return from other temp work when Custom Rock has the need. “I’m proud I’ve been able to maintain that,” he says. “We place value on integrity. Not just with customers, but with each other.” Existing employees are largely on an honor system. There is a paid time off system in place, but Fallenstein says if someone has used that time but still has family needs to address, they are encouraged to do what they must. “We’ve said if you’ve exhausted your PTO, go ahead and take the time. If you have to take a sick kid to the doctor or whatever, go ahead and take the time,” he says. “We’re not going to count it against you. Take the time. Thankfully we’re small enough where we can still be that flexible. I would imagine at some point it’s hard to be that loose, but we’re able to do it so we do.” Contact the expert: John Fallenstein, owner of Custom Rock Formliner: 651.699.1345;;

“I’ve always been entrepreneurial. I’ve always enjoyed have an integral role in building something. And I’ve always wanted something of my own. That undercurrent has always been there, even when I worked for other people. It was just a natural evolution.” — John Fallenstein owner of Custom Rock Formliner



UPSIZE RESOURCE DIRECTORY accounting Cummings, Keegan & Co., p.l.l.p St. Louis Park, MN • Apple Valley, MN 952-345-2500 • Kathy J. Klang, CPA/ABV Business owners in all phases – new and emerging, established, and those planning a succession or exit strategy – rely on Cummings, Keegan & Co., P.L.L.P. for a complete range of tax, accounting and auditing, and business management needs. Clients receive a tailored client experience – driven by client preferences, needs, and goals.

BUSINESS BROKERS Sunbelt Business Advisors

BANK Crown Bank

1300 Godward St. NE, Suite 6000 Mpls MN 55413 Contact: Peggy DeMuse, 651-288-1627

Kevin Howk, President 6600 France Avenue South, Suite 125 Edina, Minnesota 55435 Ph: (952) 285-5800 Imagine a bank that actually helps you get what you want. Instead of red tape, loan committees and canned lending formulas. Work with a decision-maker who can back you up from start to finish.

Member FDIC

Thinking about buying or selling a business? Sunbelt is the world’s largest seller of private companies. We work with business owners to help them understand the current value of their business and how to maximize their net proceeds at the time of sale. Sunbelt will provide business owners with a completely confidential, no-obligation value range.

ACCOUNTING DS+B | CPAs + Business Advisors

BANK Highland Bank

business machines Coordinated Business Systems, Ltd.

222 South Ninth Street #3000 Minneapolis MN 55402 Phone: 612-359-9630 Contact: Sean Boland | Managing Principal

Rick Wall, CEO | 952.858.4753 Jay Hammond, President | 952.858.4810 952-858-4888 |

851 W. 128th Street• Burnsville, MN 55337 (952)894-9460 (p) (952)894-9238 • Jim Oricchio – President

Founded in 1943, Highland Bank is focused on small business lending and is an SBA “Preferred” Lender, making us uniquely qualified to help your business obtain the financing it needs expeditiously. Work directly with the decision-makers who will treat you like a business partner. Member FDIC.

Coordinated Business Systems is Minnesota’s premier independently owned and managed provider of document imaging technology and managed IT and network services. In addition to providing the latest hardware and software, our mission is to offer custom designed managed print services, document management and managed I.T. and Network services programs to help business of all sizes improve profitability, increase productivity, lower costs and maintain their competitive edge.

DS+B is a connected, proactive and accessible® team of accounting and tax experts, offering personal attention and services tailored exactly to what you need, when you need it. Our CPAs are ideally-suited to working with privately-held businesses and entrepreneurs — providing you financial guidance and accounting solutions that keep your business dream headed in the right direction.

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Bank North American Banking Company

Roseville, 651-483-4521, Michael Bromelkamp Eden Prairie, 952-941-9242, Thomas Pesch

Offices located in: Roseville, Minneapolis, Woodbury, Hastings Brad Huckle, President and Chief Lending Officer

We strive to provide an exquisite client experience that is dedicated to building strong relationships while providing a hands-on approach to business consulting. In addition to the traditional CPA services, we provide valuations, employee benefits, HR, and back-office accounting. We also have extensive experience working with start-up companies, mergers, recapitalizations and financing.

Our goal at North American Banking Company is to give business owners all of the banking services they need and make it a great experience. Our bankers are seasoned professionals in all areas of business banking. You will find it’s easy to do business with bankers who are focused on you. We’re not your average bank.

Depend on Our People. Count on Our Advice. SM Member FDIC

advertising • marketing Risdall tel: 651.631.1098; fax: 651.631.2561 John Risdall, Ted Risdall, Tom Wilson, Josh Dahmes Founded in 1972, Risdall Marketing Group is the sixth largest and seventh oldest ad agency in Minnesota. With more Web Marketing Awards than any other agency on the planet in the last four years (not to mention the two Clios we just won), we are the world’s leading interactive agency, as well as the Minnesota leader in industrial, high technology, medical technology and business-tobusiness advertising.



bank Venture Bank 4470 W. 79th St. Circle, Suite 100 Bloomington, MN 55435 763-398-3333 Christine Young, VP & SBA Program Officer Venture Bank is a Business Bank that specializes in finding creative solutions for the loan and deposit needs of business customers. Venture Bank is a Preferred Lender with the Small Business Administration and is one of the most active SBA lenders in Minnesota.


business machines Loffler Companies, Inc.

Innovate. Deliver. 1101 East 78th Street, Suite 200 • Bloomington, MN 55420 952-925-6800 phone 952-925-6801 fax • Jim Loffler — President Loffler is your one call for office technology and services. Our integrated solutions from digital printers & copiers (Canon, Konica Minolta, HP, Lexmark, OCE & Toshiba) to telephones, IT services, dictation, document management software and on-site managed services improve your productivity and bottom line. Our fast, reliable and professional customer service makes Loffler your first choice.

COMMERCIAL PHOTOGRAPHER Tom Dunn Photography 308 Prince Street Studio 242 Saint Paul, MN 55101 651-368-2047 Tom Dunn Tom is a commercial photographer who has been helping businesses tell their unique story with photographs for websites and marketing materials since 2006. Tom works closely with his clients to understand their business and branding strategy and creates images that support their mission and success.

UPSIZE RESOURCE DIRECTORY commercial real estate The Ackerberg Group

internet marketing Risdall

LENDER Connect2Capital

Lake Calhoun Center, Suite 10 3033 Excelsior Boulevard • Mpls, MN 55416 612/824-2100 • Stuart Ackerberg •

tel: 651.631.1098 fax: 651.631.2561 John Risdall, Ted Risdall, Tom Wilson, Josh Dahmes

801 Nicollet Mall, Suite 1700W Minneapolis 55402 Contact: Maddie Larson,

The Ackerberg Group creates vibrant neighborhoods in Minneapolis’ urban core by combining astute development, renovation, investment, management and brokerage services with passion for social and ecological sustainability and the arts. Since 1964, Ackerberg has created office, industrial, retail, residential and mixed-use projects that have transformed neighborhoods through the development of long-standing relationships with neighbors and tenants alike.

As the world’s leading interactive agency, we offer our clients the most extensive assortment of web tools including Search Engine and Social Media optimization. And when it comes to winning awards, nobody does it better. Since 2007, we’ve won more Web Marketing Awards than any other agency on the planet. And last year, we also won two Clios.

Connect2Capital is a non-profit lender with people right here in your community who will work with you to find the best loan for your small business. We offer small business loans from $50,000-$4 million for permanent working capital, owner-occupied commercial real estate and leasehold improvements, business equipment, and refinancing existing debt.

computer consulting Intertech

it managed services Tech Guru — The Caring Technology Company

mailing services Braemar Mailing Service Inc.

1575 Thomas Center Drive • Eagan, MN 55122 • Ryan McCabe at or 651.288.7001

612.235.4895 -

7379 Washington Ave S • Edina, MN 55439-2417 tel: 952-767-0300 fax: 952-767-0345

Intertech consultants are leading software developers who focus on more than simply “heads down” programming. We provide comprehensive software services – consulting, project delivery and mentoring – for all leading technologies, most notably Java, .NET and mobile. Intertech consultants are highly experienced and among the IT industry’s top contributors at conferences, technology journals and user groups.

Tech Guru’s Caring Technology Services offering is built for businesses and non-profits with 25-250 employees that want consistent uptime. By being responsive, collaborative, and security-minded, Tech Guru helps organizations maximize returns on IT investments, minimize technology risk, and achieve their strategic visions.

EXPORT MANAGEMENT Hollingsworth International

LAW FIRM Lommen Abdo

6190 Olson Memorial Hwy, Golden Valley, MN 763-231-1444 • Dick Bottorff, Principal • Jim Thomas, Sales

1000 International Centre, 920 Second Avenue South Minneapolis, MN 55402 612-339-8131 | 800-752-4297 | Contact: Jesse Beier

Hollingsworth is an Export Management and Distribution company. We specialize in increasing export sales by developing international markets for US based manufacturers. We offer export management, logistics and overseas distribution. We have bilingual staff on site. Contact

Looking for a business lawyer who speaks plain English and not legalese? Contact Lommen Abdo where we focus on small, medium-sized, family and closely held businesses. Our attorneys operate like your outside general counsel – providing you effective legal advice and sound business strategies. We are upfront about our costs and will work with you to budget legal expenses.

insurance O’Rourke Agency, Inc.

law firm Winthrop & Weinstine, P.A.

41 North 10th Avenue Hopkins, MN 55343 952-932-7219 (phone) 952-932-2820 (fax) Tim O’Rourke

Capella Tower, Suite 3500 225 S. Sixth St. • Minneapolis, MN 55402 Tel: 612.604.6400 •

Our agency has provided personal and business insurance services for the past 30 years. We proudly represent a number of outstanding insurance carriers, including Chubb, Metropolitan, Progressive, Travelers and Kemper. Call us for all your insurance needs!

Since 1985 business mailers who value personal service and meticulous attention to detail have found one company rich in both. We are postal experts and list brokers who offer a full service lettershop and data management services. Your mailing, unique or ordinary, in large quantities or small, receives Braemar-style attention to detail. We are proud of the work we do and the customer service we provide.

Winthrop & Weinstine has a long tradition of representing entrepreneurs and rapidly growing private and public companies across the Upper Midwest and the United States. Our mission is to help fuel the growth of great companies. We are committed to providing outstanding service, sound advice and strong execution. We offer flexible fee arrangements including fixed fees, “success” fees, hourly fees, blended fee arrangements and performance-based agreements. ADVERTISING SECTION



UPSIZE RESOURCE DIRECTORY mergers & acquisitions Franklin Partners

SECURITY Floyd Total Security

222 South Ninth Street, Suite 3050 Minneapolis, Minnesota 55402 612-436-0891 Chip Myers

9036 Grand Ave S. Bloomington, MN 55420 952-881-5625

Founded in 1994, Franklin Partners achieves exceptional results for established and growth-oriented private companies in mergers and acquisitions.



networking resources The Network Connect


13643 Duluth Circle Apple Valley, MN 55124 612-865-9933 • Contact: Dick Sommerstad

6900 Shady Oak Road, Suite 210 Eden Prairie, MN 55344 952-944-3303

The Network Connect is a business referral and resource network that serves as a catalytic gateway to new opportunities for businesses, investors, talent, and service providers. We bring technology, talent, and capital together. Contact us today to get connected.

We help business owners develop and implement strategies that improve financial results. Our holistic approach to consulting involves strengthening value drivers; this leads to enhanced enterprise value, minimized taxes, and maximized net proceeds upon transition out of the business.

GROW OR DIE Move your business forward with investment capital generation, deep-level network connections and strategic refinement consultation from Brimacomb and Associates. We partner with emerging companies and professional services firms to offer unparalleled access to professional resources, executive suites and financing sources. 612.803.3169 •

SBA LENDER Highland Bank


Rick Wall, CEO | 952.858.4753 Jay Hammond, President | 952.858.4810 952-858-4888 |

1000 International Centre, 920 Second Avenue South Minneapolis, MN 55402 612-339-8131 | 800-752-4297 | Contact: Cameron Kelly

Founded in 1943, Highland Bank is focused on small business lending and is an SBA “Preferred” Lender, making us uniquely qualified to help your business obtain the financing it needs expeditiously. Work directly with the decision-makers who will treat you like a business partner. Member FDIC.

You owe it to yourself, your family, your co–owners and your employees to have a business succession plan in place in the event of incapacity or death. Every business and every family is unique and your succession plan needs to fit your goals for your business and your family. Contact us to design a plan that meets your goals.

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SBA lender Venture Bank

venture capital Brimacomb + Associates

4470 W. 79th St. Circle, Suite 100 Bloomington, MN 55435 763-398-3333 Christine Young, VP & SBA Program Officer

TCF Tower, Suite #1600, 121 South Eighth St., Minneapolis, MN 55402 612-803-3169 * Rick Brimacomb, Chief Strategy and Relationship Officer

Venture Bank is a Business Bank that specializes in finding creative solutions for the loan and deposit needs of business customers. Venture Bank is a Preferred Lender with the Small Business Administration and is one of the most active SBA lenders in Minnesota.

Results-oriented advisory firm with unparalleled access to executive suites and financing sources. Emerging companies and established professional services firms rely on our depth of knowledge and deep-network connections to grow client lists, assemble project resources and secure new sources of funding.




SOLUTIONS for Growing Companies

Optimizing Your Website and Landing Pages for Success By Mahmood Khan



or many business owners, knowing the best way to leverage your online presence is an uphill battle. However, the opportunity is significant and digital marketing presents great opportunity to enhance your brand and generate new or better leads. There are several variables to be aware of that, when used together as a best practice, can help your company get great results such as number of sign ups or e-commerce sales on your website or landing page. •

Make sure content is relevant º The relevancy of targeting, communication and messaging is an important touchpoint in your users’ journey. º If a user has engaged with your digital marketing assets such as a banner ad or a text ad that appears anywhere on the web, the user expects to see the same product or service highlighted on the landing page that was associated with your messaging. Provide a smooth user experience from ad copy to a landing page. º A landing page designed for paid marketing efforts typically should be simple and without too many distractions as that can lower your conversion rates. If a user has too many options they may not select the one you hoped they would. º Analyze if you need to remove navigation features from the page,

Risdall is a full-service integrated digital marketing agency. For 45 years, Risdall’s marketing, communications and digital capabilities have constantly evolved, driven by an independent culture and a commitment to achieving our client’s business goals. For more information visit www.

MAHMOOD KHAN Mahmood Khan maybe your page is not responsive; perhaps it is too slow to load; or maybe the contact us form is too low on the page? •

Monitor results from your different marketing channels whether display (banner ads or other paid visual ads), social media, and paid search (such as Google AdWords) to measure impact on conversion rates on your landing page. º When you have sufficient data, introduce a slightly modified version of the page for A/B testing. Testing should always be ongoing to gain insights and continuously find ways to improve your conversion rates of users taking the action you desire.

With some basic steps, digital marketing tied to high-quality landing pages can help you generate new leads that can increase bottom line results.


Mahmood Khan is Senior Vice President of Digital Media and Analytics at Risdall. Khan joined Risdall from Periscope where he served as the Director of Media and Analytics and led a team of digital media, paid search and SEO professionals. Prior to Periscope, he led international ecommerce campaigns for clients at Digital River. Khan currently serves as a Member of IAB Digital Media Buyer and Planner Certification Program Exam Committee which sets the standard for global certification. Khan leads digital initiatives with a passionate data-driven perspective and his extensive expertise builds on Risdall’s integrated model of digital platform development, digital content marketing and communications, paid engagement and analytics. Risdall 2685 Long Lake Road, Suite 100 Roseville, MN 55113 tel: 651.286.6700;

PROTECT what’s important to your organization.

A data breach can put an organization in the dog house. It’s not a matter of if an attack will happen, but when. The proper security measures can make all the difference. Choose a partner whose bark is bigger than any hacker’s bite.


Learn more at • 952.925.6800

Upsize Minnesota October/November 2017  

Upsize is a magazine and online resource center with a single mission: to help Minnesota’s small-business owners build bigger and more profi...

Upsize Minnesota October/November 2017  

Upsize is a magazine and online resource center with a single mission: to help Minnesota’s small-business owners build bigger and more profi...