Upsize Minnesota November/December 2018

Upsize Growth Challenge

FOREVERENCE

FIGURES OUT

WHAT’S

NEXT “Death and dying is inherently sad. Every website associated with this product or service wants to take a sad event and make it even a little sadder. We feel like our role is to give people a little bit of a break from that. As weird as it is people seem to have fun with it and find some joy in it.”

— PETE SAARI, CEO and founder of Foreverence

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CONTENTS November • December 2018 • Vol. 17 No. 6 • www.upsizemag.com

PAGE 14

Cover story

Growth Challenge: More than half of Americans are now getting cremated when they die. Foreverence has created custom-made urns that act not just as a place to store their ashes, but as a tribute to their lives and interests. CEO Pete Saari talks about what led him to start the company and where it is headed next.

BY ANDREW TELLIJOHN Cover photograph by Tom Dunn

PAGE 4

Bb BUSINESS BUILDERS

Editor Beth Ewen profiles Pipeline Angels, which teaches people how to become angel investors in hopes of providing capital to women and non-binary femme social entrepreneurs.

PAGE 6

WORKSHOP:

Keep these five tips in mind when seeking successful franchisees.

A panel of experts talked about challenges assocaited with family businesses and best practices for overcoming them.

PAGE 4

PAGE 8

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

What the human body can teach us about running a business.

From the editor:

Staff list:

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

FRANCHISING

by Joe Fittante, Larkin Hoffman

MANAGEMENT

by David Stark, The David Stark Collective

PAGE 10

PLANNING Give your business a hygiene cleansing in 2018 to prevent avoidable problems in 2019.

by Tom Siders, L. Harris Partners

PAGE 20

PAGE 28

BACK PAGE: Author Dileep Rao shares snippets of the research through which he concluded that entrepreneurs might be better off avoiding venture capital, at least early on in their new business.

Planning now means peace of mind later.

What happens if…

THE ECONOMY WEAKENS

RETIREMENT LOOKS VERY TEMPTING…

A DIVORCE OCCURS IN THE FAMILY

YOU DESIRE A CHANGE IN LIFESTYLE

YOUR KID DOESN’T WANT TO RUN THE BUSINESS

THERE’S AN UNEXPECTED HEALTH ISSUE

YOUR BUSINESS PARTNER WANTS TO SELL

CK&Co. can help you proactively prepare your transition with our 4-step action plan.

Visit us at lp.ckco-cpa.com/upsize to learn more.

Download our free Succession Planning Guide Online lp.ckco-cpa.com/upsize

tax • audit • accounting business consulting (952) 345-2500 www.ckco-cpa.com

Member of

The pipeline

EDITOR

Beth Ewen bewen@upsizemag.com

MANAGING EDITOR Andrew Tellijohn atellijohn@upsizemag.com

DESIGN DIRECTOR Jonathan Hankin jhankin@upsizemag.com

CIRCULATION MANAGER Georgene Bergstrom gbergstrom@upsizemag.com

PHOTOGRAPHER

Tom Dunn tom@tomdunnphoto.com

HOW TO REACH US To subscribe email Georgene Bergstrom, gbergstrom@upsizemag.com or visit www.upsizemag.com With story ideas email Andrew Tellijohn, atellijohn@upsizemag.com To advertise email Wes Bergstrom, wbergstrom@upsizemag.com To order reprints email Georgene Bergstrom, gbergstrom@upsizemag.com To order extra or back issues email Georgene Bergstrom, gbergstrom@upsizemag.com To suggest Web resource links, links@upsizemag.com

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UPSIZE NOVEMBER • DECEMBER 2018

businesses, what brings them to life. So it was great fun to be able to immerse myself in so many entrepreneur applicants.”

She attended a Pipeline Angels boot camp last spring and was pleased to find herself in a very diverse crowd. “I am cis, a straight white woman,” she says. “Natalia had a great point in the boot camp. Cis, straight white women are the white men of general investing.”

After learning the ropes, she and Armstrong got busy looking at potential investments, eventually deciding on Pie for Providers out of Chicago. The company exceeded their goal for this early stage round, raising $550,000 in a combination of convertible notes and grants. “They help really materially and fundamentally elevate and increase providers’ bottom line revenue,” Knoke says. “There are subsidies, both local and national, as well as tax deductions available, that providers routinely leave on the table, and this can be 30 percent of their income.”

Pie for Providers automates and takes the complexities out of applying for the subsidies and gaining the available tax deductions. “This can make the difference between working for less than minimum wage and making a great living.”

Knoke, and I, invite you to check out pipelineangels.com. “This is a very welcoming education that will make you smarter, it will make you savvier. You’re going to find like-minded people,” she says. “It’s a great way to get started.”

Beth Ewen Editor and co-founder Upsize Minnesota bewen@upsizemag.com

www.upsizemag.com

PHOTO BY JONATHAN HANKIN

PUBLISHER

Wes Bergstrom wbergstrom@upsizemag.com

D

o you have a spare $50,000 or so to begin investing in early stage ventures? If so, would you know how to get started when you’re neither a powerhouse baby boomer nor a techie wunderkind, the two groups who dominate this scene?

If you answered no to both questions, I’d like to introduce Pipeline Angels, an organization founded by Natalia Oberti Noguera, that teaches people how to become angel investors in an effort to get more capital to women and non-binary femme social entrepreneurs.

Maggie Knoke is one local woman who has gotten involved. She, along with business partner Lisa Goldson Armstrong, started the Twin Cities chapter of Pipeline Angels this past spring. She explains that it helps younger, diverse investors learn the business and get into the game. And get this — people can buy in for just $5,000 (while joining the network of advisers).

“That’s incredible to me. That radically shifts the accessibility,” said Knoke in a conversation this fall, after she made her first investment. “That buy-in fee is much more accessible than the typical $25,000 or $50,000.” Pipeline reports that since its launch in 2011, more than 200 members have graduated from its angel investing boot camp and have invested nearly $5 million in more than 40 companies.

She believes the need is great. “I sure feel like there is a lot of room and a lot of need to continue to have early stage funders,” she says. “One of the things that’s important to note, because we have such an emphasis on women, non-binary femme, people of color — this is a founder population that doesn’t have that kind of generational wealth.”

Knoke, in her mid-40s, started her career with small, non-profit businesses, then got an MBA and turned to the corporate world, eventually landing at Target Corp. “I left that because I missed my people — smaller, scrappy organizations,” she says.

“I loved my time in the corporate world, but after a certain time I was making Powerpoints. I feel it was a great time to apply to Pipeline Angels,” she says. “Again, I’m insanely curious about other people’s

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

franchising

BUSINESS BUILDERS

The five characteristics of a highly successful franchisee

by Joe Fittante Jr.

TIPS 1. The cost to franchisors for attracting, recruiting and securing franchisees is rising.

2. Avoid prospects that want access to the franchisor’s brand but seek to operate their franchised business outside the systems that made the brand successful.

3. Candidates passionate about a franchisor’s business category who are lacking in business experience may wane in enthusiasm as they discover the amount of work needed to achieve success.

4. Prospects who are worth their weight in gold are literally worth their weight in gold.

Undercapitalization is a frequent cause of underperformance in franchising.

5. Businesses are different.

Take the time to explore the characteristics that have resulted in the best franchisees for your unique business concept.

6

MUCH LIKE SANTA CLAUS, the Easter Bunny, unicorns and the perfect franchisor, there is no such thing as the perfect franchisee. However, after more than 20 years of working with franchisors, both large and small, I have identified various characteristics common to most successful franchisees. The importance of quickly identifying franchisee prospects with these characteristics is critical in the current climate, as the cost to franchisors for attracting, recruiting and securing franchisees continues to rise.

Misses in the franchisee selection process can slow the growth of the franchisor’s brand and result in litigation with unhappy, unsuccessful franchisees, tarnishing the goodwill of the brand. Accordingly, when vetting prospects, a franchisor should look for at least the following characteristics in its franchisee prospects:

THE FIVE: 1. Colors in the lines One of the main reasons investors purchase a franchise is to take advantage of the systems and operating procedures created by the franchisor.

These systems and operating procedures, which come at great cost to the franchisor, are commonly found in the franchisor’s operating manual, sometimes referred to as the “coloring book” of the franchise system. Prospects genuinely focused on “coloring within the lines” are usually the most successful franchisees in the system. Prospects that want access to the franchisor’s brand but seek to operate their franchised business outside of the systems that made the brand successful, because they “know

UPSIZE NOVEMBER • DECEMBER 2018

better than the franchisor,” should be avoided.

2. Plays well with others Prospects who are good communicators, level-headed and who understand that the franchised system is made up of more than the prospect’s own individual location, are generally successful franchisees over the long term. Prospects who are argumentative, not good listeners or who begin the relationship by making unreasonable demands should be avoided. This is not to say that every prospect that asks questions of the franchisor should be discarded. Much to the contrary.

Prospects who ask questions show an investment in the system. In fact, more questions asked on the front-end usually results in fewer disputes down the road. However, those prospects who try to negotiate every point of the franchise relationship, or who are difficult to deal with on the front side of the relationship, should be avoided, as these attributes usually signal trouble down the road.

3. Passion plus purpose Many prospects are drawn to a franchise because they are passionate about the franchised services or they regularly participate in the same activities as those offered by the franchised brand.

For example, the backyard weekend pit master who wants to open a franchised barbecue restaurant because BBQ is his or her passion. However, in many cases these individuals have no experience or interest in actually operating the franchised business that is the subject of their passion and once they understand the amount of time and effort it takes to actually operate the business, as

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opposed to performing the activity that is the subject of the business, their enthusiasm for the opportunity wanes and the franchised business ultimately suffers. Successful franchisors identify prospects whose passion matches their purpose, meaning they are not only passionate about the franchised services but they are purposeful when it comes to actually operating the franchised business that performs those services.

If a prospect only has the passion but not the purpose, then before selling a franchise to such individual, confirm that the franchised business will employ a manager with the business experience needed to successfully operate.

4. Capital is king Prospects who are worth their weight in gold are literally worth their weight in gold. Franchised businesses fail for a variety of reasons. Some of those reasons may be within the control of the franchisor, but many others are not.

One of the most prevalent reasons for early failure is the undercapitalization of the franchisee. Franchisors can avoid this potential pitfall by taking a couple of steps. First, have a rock-solid understanding of the capital needed to open and successfully operate the franchised business until break even.

Second, confirm adequate capital by performing extensive financial due diligence on the prospect and be non-negotiable in the financial requirements. This means failure to meet the financial requirements automatically disqualifies the prospect from consideration for a franchise, regardless of that person’s otherwise suitability for the system. Too many well-meaning franchisors have bent their financial requirements to allow a prospect in their system only to later have the prospect fail due to having inadequate funds to invest in their business.

5. Some grit and a little reality Franchised businesses, like nonfranchised businesses, are difficult. To be successful, they require hard work, perseverance, and grit. Prospects that have these leadership qualities are well positioned to be successful franchisees.

Franchisors can identify these characteristics through discussions with prospects regarding their prior experiences as well as industrial testing. Additionally, a franchisor should weed out the prospect that has an unrealistic view of the potential return on its investment, either in terms of time or rate of return. It is highly unlikely that this prospect, if they become a franchisee, will ever be happy. Instead, the franchisor should take steps to identify the prospect that has a realistic view of the business model and whose values are consistent with the values of the franchisor.

Each franchisor should take the time and expend the effort to identify the characteristics of the “perfect franchisee” for its system. This analysis should encompass emotional, operational and financial characteristics.

After identifying those characteristics, the franchisor should be uncompromising in granting franchises to only those prospects who exhibit those characteristics. In the short term there may be pain, as the franchisor may find itself turning away prospects. However, in the long term, the prospects to whom the franchisor grants franchises will be better positioned for success, which benefits both parties over the long-term.

“Those prospects who try to negotiate every point of the franchise relationship, or who are difficult to deal with on the front side of the relationship, should be avoided, as these attributes usually signal trouble down the road.”

Joe Fittante Jr., Larkin Hoffman

Joe Fittante Jr. is an attorney and shareholder at Larkin Hoffman: 952.896.3256; jfittante@larkinhoffman.com; www.larkinhoffman.com.

www.upsizemag.com

NOVEMBER • DECEMBER 2018 UPSIZE

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

management

BUSINESS BUILDERS

Five things the human body can teach us and our businesses

by David Stark

TIPS 1. With more people working remotely, make sure you don’t lose connectivity. Maintain the digital systems that connect you with your employees and customers.

2. It’s better to have people working together rather than separately. Collaborative space and software, openness to crowd sourcing, crowd evaluating, listening and learning all emphasize a focus on teams, rather than individuals.

3. Listen to customers and respond to their needs quickly. Services can become obsolete now in a matter of weeks, not years.

4. One significant downside of interconnectivity is the chance for cyber attacks. Take the threat seriously and prepare ahead of time for the potential that you may be victimized rather than waiting for it to happen.

5. Renew a focus on strategy. With change happening fast, make sure your strategic plan doesn’t sit on a shelf, but remains an ongoing discussion backed with new ideas and information.

8

WE’RE LIVING AND conducting business in a time of unprecedented technological revolution, with exponential change happening at breakneck speeds. So how do we as business leaders stay savvy in a changing environment, and more importantly, lead our organizations with confidence into the future?

Wouldn’t it be great if we could put on some magical glasses with lenses that allowed us to see the whole new picture of business as it is unfolding before us? I believe that in any industry — and particularly those dominated by artificial intelligence, machine learning and digital interconnection — leaders can be best equipped by drawing metaphorical insights from an age-old machine: the agile human body. The following are five ways you can mimic the human body and its many ecosystems to inform and guide your strategic business decisions.

Maintain critical systems.

Like the human body where connections between our brain, our nerves and organs are paramount to survival, businesses today need to prioritize fluid connection points in their business. Before the connected, digital revolution, the physical office space was one of the most important aspects of the design of an organization. It was the conduit for how and where information was shared, stored and collaborated on. Today, the most important buildout in your organization is the digital systems that will be connecting all projects and people. Like a central nervous system, digital systems inform critical aspect of our business, and from it flow communication, collaboration, innovation, performance, operations, product design and much more. Employees will continue to

UPSIZE NOVEMBER • DECEMBER 2018

work in much more flexible ways, and from mobile devices everywhere.

Additionally, the scope of people that organizations need, are listening to or communicating with will continue to become larger and more global.

Beyond hardware and software for the basic running of the organization, the spinal cord of our day includes everything from customer-relationship management systems to social media, cloud-based platforms and mobile accessibility. The design (or redesign) of these connected systems is one of the most important considerations for leaders today.

Understand how many parts make up one body.

When everything is connected like it is today, research and practice have proven how much better it is to have people working together rather than separately. The implications of this insight can rearrange your physical office space or the organizational design beyond silos. Innovation, performance, speed of response to customers and more depend upon the idea of a series of organ systems working together to keep the whole body — your organization — functioning properly. Collaborative space and software, openness to crowdsourcing and evaluating, listening and learning are all elements of this focus on teams, rather than individual employees.

Use all your senses.

The speed at which products or services can become obsolete can now be measured in weeks, not years. The companies that are listening intently to customers and responding quickly and strategically are leaving in the dust organizations that do not have eyes and ears tuned in. This applies to sales,

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marketing, reputation management, customer experience, product design and much more. It’s no longer unusual for a company to crowdsource newproduct ideas.

As an example, take the fashion industry. At a forward-thinking clothing company, designers can post a number of ideas for a new dress, and their online fans pick out the ones they like best. Then the company narrows down the choices and the online audience votes on which ones they like the most. The organization makes the final dress choices available for purchase, with different fabric choices. Once customers order, the company takes a digital scan of their body remotely and custom-makes the dress to fit exact specifications. In this case, two-way communication with the fan base is implemented every step of the way.

Stay immune to outside attack.

Interconnectivity has a few downsides, one of the most dangerous of which is cybersecurity. This means that you need to have an immune system in place that is as effective as the human body is at fighting off so many intruders.

I recently heard about a local company that was compromised. While the CEO was on vacation, the receptionist unknowingly responded to a phishing e-mail, sharing her passcode with intruders. When this executive received the phone call about what happened, all he could picture were client tax I.D. numbers, financial statements, personal information and credit cards leaking out beyond their company. Fortunately, he had a cybersecurity firm in place to mitigate the damage and negotiate the return of information. Cybersecurity is a top of the house issue today, so take it extremely seriously.

tween machines and living human beings is the unbelievable capacities of the human brain, which allows the body to improvise and adapt to the world around it. Ten or 20 years ago, businesses had the luxury of developing their strategies every year or so, then standardizing business practices and workflows that would carry them through until the strategy was revisited. I worked with one client whose strategic plan notebook weighed eight pounds after its completion. More to the point, it was never looked at again.

With the speed of change today, interconnectivity and competition of new proportions, brain function-like innovation, adaptability, experimentation with new products and services, is mission critical. Competitive advantage is often temporary at best and businesses today need to be dynamically evaluating their strategy to stay ahead of the curve. This requires a new role for strategy in your business. Rather than relegating strategy to a document or binder on the shelf, it needs to be an ongoing discussion backed by perpetual new information, ideas, feedback and outcomes.

The human body and its various systems offer a useful lens into so many aspects of our businesses today that can offer actionable insights for organizations to stay relevant and successful.

“One of the great differences between machines and living human beings is the unbelievable capacities of the human brain, which allows the body to improvise and adapt to the world around it.”

David Stark, The David Stark Collective

Grow, adapt, repeat.

One of the great differences beDavid Stark is the founder and owner of The David Stark Collective, a business consulting firm: 952.484.7270; david@davidstarkcollective.com; www.davidstarkcollective.com. www.upsizemag.com

NOVEMBER • DECEMBER 2018 UPSIZE

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

planning

BUSINESS BUILDERS

“Aha!” or “Uh-Oh”?

Your choice

by Tom Siders

TIPS 1. Make time to work on strategies for increasing business value, finding new revenue streams, and plotting your future direction.

2. Make sure you follow a checklist of must-do items so you get them taken care of before they become avoidable problems.

3. Renew your trade name with the Secretary of State costs just $25 unless you forget to do it. Then it can lead to expensive litigation or even an unexpected need to rebrand.

4. Keep good records and update or amend them often to ensure they comply with changes in regulations. Neglecting to do so can void programs and result in financial hits for employers and employees.

5. Meet with your team of advisers — accountants, bankers, insurance agents, and others — to make sure all of your basic business hygiene items are handled in a timely fashion.

10

THIS IS THE FINAL 2018 ISSUE of Upsize Magazine. Soon, we turn the page on a new calendar year. We’ve been reminiscing about client situations we were drawn into the past 12 months. Many of them remind us of the wisdom of the very first recommendation we deliver to every new client — make time to work on the business, not just in it.

Working on your business is time spent creating strategies to increase business value, adding new revenue streams, and plotting the future direction of your company and is what we call “Aha!” time.

Dealing with avoidable problems while working in the business are often what we call “Uh-Oh” time. Many of these “UH-OH” moments are truly avoidable.

Examples of 2018 “UH-OH” moments: • A client registered a trade name (doing business as) and built a strong business brand under that name, but failed to file the $25 annual renewal of the trade name with the Secretary of State. Another business, even a competitor, can find the name available in Minnesota, and file for the use. The result? Significant expenditures to litigate or even greater costs to “re-brand” using a new name.

• The IRS, upon audit, ruled that the rent paid to a shareholder for use of his building, based on a 20-year-old lease agreement, was valid, and the annual increases in rent paid to him by the company, not documented in the original lease, nor in corporate minutes, were deemed by the IRS to be dividends, taxable on his personal return, and not deductible on his company’s return. The result is a significant additional tax liability.

• A company, owned two thirds by one spouse, one third by the other, nearly implodes when the minority ownership spouse files for divorce, and demands a full value buy-out, in cash, for shares owned. The result is massive legal fees and considerable time taken away from the majority owner to manage the business. The

UPSIZE NOVEMBER • DECEMBER 2018

devastating effects on the value of business could have been avoided with a solid buy-sell agreement, even between husband and wife, to spell out how shareholders are bought out and avoid damaging business value during the process.

• A company deferred compensation plan was adopted years ago. Sloppy record keeping and failure to amend the plan to comply with current regulations results in IRS disqualification of the plan and current taxation of each employee participant’s entire balance. The results of employer neglect results in a hit to employee morale, litigation against the sponsoring employer, and diminished business financial results.

So, what gives? You! You either get too busy or too lazy and ignore basic business hygiene. The situations described above were avoidable and so this is a sermon about business hygiene.

[A note to our friends in other professions — these are sample to-do lists, and are not intended to be all-inclusive; we do encourage all of you to proactively initiate annual meetings with your significant clients with specific agendas.]

Attorneys: • Review your Inc., LLC, LLP documents, and business trade name registrations to ensure they are current and amended, if necessary, to comply with current law and business circumstances • Create or update owner buy-sell documents to ensure they are current and relevant to current business conditions; a solid buy-sell agreement is essential • Review and update employment contracts, including non-compete/ non-solicit provisions • Ensure that leases and contracts with vendors and customers are current and relevant

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• Ensure patents, trademarks and all intellectual property are protected • Engage lawyer, accountant and wealth adviser in a collaborative update of your estate plan Accountant: • Request a projection of current tax liabilities and recommendations to mitigate the amount • Explore possible changes in current accounting methods (LIFO) and potential credits and incentives (R&D, energy, ICDISC, etc.), to reduce or defer future income taxes • Obtain an estimate of the business’ value to help craft a relevant buy-sell agreement and to assist with creating or updating your personal financial plan and estate plan • Ask for recommendations on internal controls • Request assistance with cash flow projections, to assure current financing is adequate and avoid surprising your banker when you run out of liquidity • Help determine if waivers of bank covenants are likely, also to avoid surprising your bank at the last minute Wealth adviser: • Create or update personal financial plan • Reset risk tolerance profile and rebalance portfolio • Seek advice regarding adequacy and ownership of disability and life insurance Bank: • Inquire about the bank’s credit evaluation of your business and recommendations to improve it • Discuss your business plan and any changes that may impact the bank • Explore options to improve cash flow through restructuring long-term debt

or terming out short-term debt • Learn about the bank’s capabilities for helping your business with cash management and treasury functions Group plan administrator: • Ensure all plans meet current regulatory requirements, pertinent participant elections are on file and all required filings have been made with IRS and the Department of Labor • Discuss how plans can be modified to reduce cost, enhance benefits, and/or increase employee participation Property and Casualty Adviser • Request a risk assessment, to determine if all exposures (i.e., umbrella liability, employee business use of personal vehicles, employee theft, cyber, etc.) are adequately considered and covered with appropriate limits • Review workers’ compensation claims history and classifications and seek recommendations to reduce cost of coverage • Ask for recommendations from the insurer’s underwriter to reduce risk and thus reduce premiums Technology consultant • Request a security/intrusion review and recommendations to close gaps • Determine that all user software licenses are current With the holidays approaching, make a resolution to improve your business hygiene. It will help avoid time spent on the “Uh-Oh!” and create more time for the “Aha!”

“Make time to work on the business, not just in it. Working on your business is time spent creating strategies to increase business value, adding new revenue streams, and plotting the future direction of your company and is what we call “Aha!” time.”

Tom Siders, L. Harris Partners

Tom Siders is a partner with L. Harris Partners: 952.944.3303; tom.siders@lharrispartners.com; www.lharrispartners.com.

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NOVEMBER • DECEMBER 2018 UPSIZE

11

SOLUTIONS for Growing Companies 6. Educate and Hold Employees Accountable

The Small Business Cyber Security Plan

Clear expectations go a long way. Your employees should know your security policies and why they exist. Store policies in a central repository accessible to all employees. Hold meetings to review new policies and consider requiring signatures when employees have read the policies.

7. Backup Data These last two suggestions are a little more advanced, but important. Data backup is your safety net. Have a system in place for your IT infrastructure backups and test them. Ensure a scalable backup solution. Cloud-based or on-premise, you can handle backups yourself or have them managed for you.

A

ll organizations — large or small — use technology and connect to the internet. Unless you have the right security in place, this can leave you vulnerable to cyber-attacks.

Don’t panic: Protecting your information is possible and you can do so in a reasonable and economical way that fits your budget.

Below are eight safeguards to consider when developing your small business cyber security plan. Many of these suggestions may seem like they’re above your level of IT expertise, but keep in mind, you can always outsource to a managed IT services provider:

1. Limit Access Keep networking equipment behind locked doors made accessible to authorized individuals only. All computers should be password protected.

8. Cover the Basics: Anti-Virus, Firewall, Anti-Spyware, Encryption and AntiMalware Proper network equipment and components are important to keep you secure. You want appropriate, consistent ways to secure Email can be hacked to send spam that endpoints (computers, printers) and keep an spoofs email from within your organization. Spam filtering, quarantines and locking eye on them. Options exist to manage, check down your email server can all help secure and patch end-point software all from one your email. Lock your email so only authen- console. ticated users (your employees and trusted partners) can send email from your orgaMany small businesses can’t afford to nization. Remember, managed IT service employ cyber security experts. If you don’t providers are available to help you configure have the expertise in-house, you can partner any of the items on this list. with a managed IT service provider and have it all done for you.

3. Email Security

4. Secure Wi-Fi Unsecured Wi-Fi keeps your network open to hackers, so rotate Wi-Fi passwords.

Segment guest and corporate wireless networks to ensure network security and consider limiting guest network session lengths.

Loffler Companies 1101 E 78th St Ste 200 Bloomington, MN 55420

5. Create Security Policies 2. Password Integrity Require passwords that include letters, numbers, symbols, case sensitivity and length. Passwords should be changed often and not allowed to repeat.

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NOVEMBER • DECEMBER 2018 UPSIZE

Security policies are useless unless documented. Document security requirements (like those listed above) needed to keep your information and employees safe, then test and implement.

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James Loffler Vice President — IT Solutions Group 952-925-6800 info@loffler.com www.loffler.com

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SOLUTIONS for Growing Companies

Business exit in your future?

Shorten the learning curve.

by Julie Keyes

W

hen it comes to your business transition, there are many things to consider and decide upon, like who will advise you in order to reach the best possible outcome? As a business owner, you also want to maximize your business value well before the exit, to ensure having as many options as possible when it comes time to live out your ‘next act’.

KEYESTRATEGIES, LLC is an

Here are some things you need to know, along with a few action items to get started:

• Get your personal and business finances in order; your Wealth Manager and CPA are key players.

In my work with business owners, one advisory relationship that’s often sorely lacking is the one with the wealth manager or financial adviser. Since most small business owners have most of their wealth tied up in their business, they don’t see a need to have a relationship until after they have ‘real money’ to invest. The truth is, the time to plan for your liquidity event comes well before the sale. Having a solid tax plan is also essential. How will you maintain your lifestyle? What about your current business value? Your CPA will normalize your financials so accurate value calculations can be made. Knowing a current range of value is important regardless of whether the sale is internal or external, so you’re not as surprised when a full Valuation report is required.

• Meet regularly with your trusted advisers; create a transition plan of action and stick to it.

In addition to your Wealth Manager and CPA, you need a strong relationship

with a good business attorney who can help put your legal house in order before an acquisition. Attorneys are vital to the process; from Buy Sell Agreements, contracts and employment agreements, to legal governance and estate planning.

Hire those with the expertise you need and know that incomplete or incompetent advice can cost you more than a Multiple of EBITDA. You also need a Certified Exit Planner.

Someone at your side, who knows you, your goals, your staff, your advisory team; who can keep the train on the tracks

•Understand what drives value in your business and implement improvements in those areas Most owners who say they’re ‘ready’ for exit, are not ready at all and they don’t understand the difference between owner readiness and business readiness,

K www.upsizemag.com

JULIE KEYES is the founder and owner of KeyeStrategies, LLC. As a Certified Exit Planning Adviser (CEPA) and Value Growth Adviser, she works with business owners looking to understand their future transition options and would like help navigating the process. She is the President of the Exit Planning Institute Twin Cities Metro Area Chapter and the EPI “Leader of Year” for 2017.

Ke y e S t r a t e g i e s

advisory firm for entrepreneurs looking to grow and improve their business, while also providing Transition and Exit Planning services for companies between $3-30MM in annual revenue. The firm’s mission is to help business owners increase revenue, improve cash flow, and foster successful leadership and team engagement, while they are still running their companies, so they can enjoy the benefits before a critical transition.

“Critical Transition” is a term that includes business exit as well as various types of buy-out, merger, roll-up and recapitalization scenarios. but they are equally important. Exit Planning is a lot more time-consuming and complicated than you think. Often, the ‘time consuming’ part lies in closing the value gap.

• Begin thinking about your life after business; how will you spend your time?

Do some soul searching and gain some self-awareness, so you can imagine life without your business, and still be fulfilled. Frankly, you’ve got one shot at a successful transition, so hire competent, reputable advisers. You deserve it and your family and employees are counting on it.

LLC

J U L I E K E Y E S CEPA

Julie@KeyeStrategies.com www.KeyeStrategies.com (763) 350-5563 advertisement

NOVEMBER • DECEMBER 2018 UPSIZE

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2018

Lasting legacy Custom urn company Foreverence capitalizes on fast-growing cremation industry

A

s their father was aging, the children of a design engineer for NASA approached Foreverence with the idea of creating a custom urn in the shape of a space shuttle.

Once their father was on board, the kids presented him with the urn. They sent CEO Pete Saari a video showing the man laughing and expressing excitement about sharing it with his friends in the senior home.

“When was the last time someone said that about an urn?

Probably never,” Saari said during the Growth Challenge public event, held at the Minneapolis Club in October “Death and dying is inherently sad. Every website associated with this product or service wants to take a sad event and make it even a little sadder. We feel like our role is to give people a little bit of a break from that. As weird as it is people seem to have fun with it and find some joy in it.”

Saari got the idea for Foreverence a few years ago while reading an article in Time magazine that indicated half the country’s dying are now opting for cremation over burial, with further increases projected in the years ahead. Foreverence uses 3D printing to create the custom urns, which are designed in consultation with family members to represent the deceased person’s interests. “Every family has a story to tell,” he says.

Maple Grove-based Foreverence has had some significant

successes since opening, among them being chosen to build the Paisley Park urn used to house the remains of Prince. Several other celebrities, including Scott Weiland, Bob Casale and Lemmy Kilmister, have been memorialized via the company’s urns, which has been a public relations coup, Saari says.

There also have been some challenges. Incorporated in 2014, Foreverence started out trying to sell to funeral homes -- an industry that claimed to really like the product but that moved slowly enough in adopting it that the company grew frustrated.

“I half-jokingly say they did us a great disservice by liking the product as much as they did,” Saari says.

While growth through that channel languished, the 3D printing industry got excited about having a consumer product to market. Growth in the business-to-consumer segment started increasing almost by accident, he adds. So, in 2017, Foreverence officials stopped attending funeral home trade shows and started focusing on marketing to affinity group events with passionate attendees such as the Barrett-Jackson Auto Auction, the Miami Yacht Show and the Westminster Kennel Club Dog Show.

“We finally decided we’re going to make a full pivot here and leave the industry and become a straight up direct-to-consumer brand,” Saari says.

by Andrew Tellijohn

PHOTOGRAPHS BY TOM DUNN AND JONATHAN HANKIN

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UPSIZE NOVEMBER • DECEMBER 2018

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PETE SAARI, CEO and founder of Foreverence, started the company after learning that more than half of Americans are now choosing cremation over burial.

www.upsizemag.com

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COVER STORY 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. The other participant, NoSweat Co., was featured in the September/October issue. At a public event in October, participants again told their stories and the panel of experts reiterated their advice so that an audience of small business owners and other observers could benefit.

So, what’s next?

As the Growth Challenge was taking place, Foreverence was preparing to create a sister website aimed at the pet market. The company already sells some product to those buyers, but intends to up its efforts soon. People spend a ton of money on pets and it tends to be an easier sales process, Saari says, because the loss of a human loved one typically means a consensus decisionmaking process. For pets, “it’s that one person making that call right then and there.”

Saari says there also are internal discussions taking place on the best strategies for upping a conversion rate that right now hovers around 10 percent. That likely involves some “downstream options,” such as an e-commerce platform that provides some options at lower price points than the completely unique ones presented in person, Saari says.

Upstream options under consideration, he says, include commissioning an artist that could design something special solely

for a customer or commissioning a series of 100 or 200 items at a higher price point.

“You’re always looking at up and down and how to churn margin,” Saari says.

And what’s the challenge?

The challenges Foreverence faces in taking its next steps are similar to other small businesses. What to focus on doing next?

How to expand its offerings while maintaining the high-end niche? How to raise the necessary capital for doing so?

The company also would like to diversify away from operating as just a “time of need” company. About 20 percent of its current business come from the pre-planning segment of its business for those who want to take control themselves over how they are remembered. That’s a side Saari would like to see grow. Post-planners, who feel whatever product was purchased years ago for their loved ones was inadequate and want something new also present an opportunity, he says.

“There is never a shortage of good ideas, but there always is a shortage of capital and a shortage of human resources to execute on those ideas,” Saari says.

The company has conducted some smaller offerings. While Saari doesn’t consider that a mistake, he told Upsize in a separate interview that balancing between the amount of financing to seek versus maintaining control of the company matters.

“You end up becoming a professional fundraiser instead of running and operating your business,” Saari says, of raising smaller amounts. “It elongates the process. You always find yourself holding off on some of the things you think you should be executing.”

The company’s urns usually cost consumers on average around $2,500 — well above the cost of a traditional urn, but below the cost of a casket from a funeral home. “We definitely play on the high-end,” Saari acknowledges, comparing a Foreverence urn to a Rolex. “Nobody has ever bought a Rolex watch because it tells time. You’re not buying it for its primary utility, you’re buying it

“If you go complete customization you could move up-market quite a bit. If someone is going to want a pure custom urn those people are probably a lot less price sensitive.”

— Dean Willer, Winthrop & Weinstine

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UPSIZE NOVEMBER • DECEMBER 2018

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THE FAMILY BUSINESS: PASSING IT ALONG OR SELLING IT OFF? As you do your estate planning, are you making plans for passing along the family business? Do all of your children want to be involved? Should it be sold instead? What if some want to be involved and others don’t?

Address these issues upfront with your estate and business succession planning. Contact attorneys Cameron Kelly and Jesse Beier to assist you with the estate planning issues a business owner faces.

Cameron Kelly

Cameron Kelly

Jesse Beier

ckelly@lommen.com / Minnesota & Wisconsin

jbeier@lommen.com / Minnesota & Wisconsin

612.336.9309 / 715.381.7112

612.336.9339 Jesse Beier

800.752.4297 lommen.com www.upsizemag.com

NOVEMBER • DECEMBER 2018 UPSIZE

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COVER STORY “Every pet person I see, they are just off the charts about their pets … If $350 million a year are spent on pet Halloween products, you should be able to sell a healthy amount of the pet product.”

— Rick Brimacomb, Brimacomb Capital

because it’s an expression of style, an expression of elegance. If couple years.’ It is a unique and cool idea.” you’re looking for an ash container you’re not going to buy one He suggested tailoring at least some promotions toward asof our products.” sisted living facilities or other end-of-life centers with the idea of reaching caregivers. “They will be your direct contact at some What the experts say point,” he says.

The panel of experts commended Foreverence for targeting Rick Brimacomb, CEO of Brimacomb Capital, told Foreverpets and wondered if the company may be able to increase sales ence officials that he heard a news report around Halloween inand margin by incorporating some prototype urns into its mix. dicating that people spend around $350 million on costumes and Dan Moshe, co-founder and CEO of Tech Guru, says he’d like other items for their pets. to see the company supplement its core, customized urns with a “Every pet person I see, they are just off the charts about their collection of pre-made products “if it can be done without hurt- pets,” he says. “If $350 million a year are spent on pet Halloween ing the brand,” he says. products, you should be able to sell a healthy amount of the pet Those might still include a nameplate that identifies the per- product.” son, but otherwise would be a standard product. “I’m thinking, in Regarding financing, Brimacomb says the company should fothe transactional world we live, in I’d love to see 1,000 concepts cus on creating a one-to-two-year plan aimed at an amount that — it doesn’t matter if they’ve ever been made — where I can pick would move past the “raise a little, spend a little” pattern. something out and include that in my estate planning.”

“If you are break even, give or take, you have the luxury of Those mass-produced products could step into the company’s time,” he says. “If you take a step back and say we did a lot of current price points, allowing Foreverence to charge a higher work to get here, we’re breaking even, we’re trying some things, rate for its fully-customized urns, adds Dean Willer, a sharehold- we’re learning, this works, this doesn’t, then you can go raise, say, er with Winthrop & Weinstine. “If you go complete customiza- $2 million. You have time to do that.” tion you could move up-market quite a bit,” he says. “If someone is going to want a pure custom urn those people are probably a CONTACT THE EXPERTS: lot less price sensitive.”

RICK BRIMACOMB, Brimacomb Capital: 612.803.3169; Saari replied that on the pet side, Foreverence intends to have rick@brimacomb.com; www.brimacombcapital.com. available the six most common breeds of American dogs as sculptures. That product could then be customized with some JON CASSENS, DS+B |CPA + Business Advisors: ancillary attribute special to the dog, such as a blanket, chew toy 612.630.5071; jcassens@dsb-cpa.com; www.dsb-cpa.com. or their house. On the human side, Foreverence may dabble a bit DAN MOSHE, Tech Guru: 612.235.4895; in less customized products, but not to the point of losing the dan@techguruit.com; www.techguruit.com. company’s identity, he says.

Jon Cassens, a director with DS+B | CPAs + Business Advisors, PETE SAARI, Foreverence: 888.730.6111; pete.saari@foreverence.com; www.foreverence.com. says the custom urn market is a significantly unique niche.

“Kudos to you guys for really having a unique product,” he DEAN WILLER, Winthrop & Weinstine: 612.604.6633 says. “I’d never have thought I’d go to a wedding and sit next to dwiller@winthrop.com; www.winthrop.com. my grandma and say ‘look at this cool urn you could be in, in a 18

UPSIZE NOVEMBER • DECEMBER 2018

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WE MOVE IN ONE DIRECTION

FORWARD. C O R P O R AT E D E PA R T M E N T C H A I R

DEAN D. WILLER P / 612.604.6633 E / dwiller@winthrop.com

Our Corporate & Transactions attorneys use the law to help you reach your goals for your business. We work with clients at all stages of growth, from business formation to succession planning and everything in between, focusing on creative solutions and practical advice that helps you move your business forward.

WORKSHOP: Family business

Navigating the family business Communication and fair play improve chances for multi-generational success

By Andrew Tellijohn Photographs by Tom Dunn

W

But becoming less enamored with the East coast, he took the opportunity to move back home. And together, he, his brother and father grew the business from a $2 million entity to $10 million and sold it to a public company eight years later.

“I grew up talking business at the family kitchen table,” he says. “My father was an accomplished entrepreneur.

I never gave it much thought that I would go into the business with my brother and father until my brother called.”

Family businesses come in all shapes and sizes with all the same issues traditional businesses face – along with the added layer of family dynamics. Several business experts discussed those challenges and some best practices for ensuring their longterm success during a September workshop at the Minneapolis Club co-sponsored by Upsize Magazine and Rick Brimacomb’s Club Entrepreneur.

hen Rick Wall and his siblings started showing early on that they might be interested in becoming secondgeneration business owners in the future, Wall’s father immediately began planning. After college, their preparation was finished after each kid went off to work in different companies across the country, both to gain experience and make sure coming home to the family business was what they truly desired.

Now Wall is CEO of Highland Bank and his siblings run the real estate businesses started by their father. They communicate regularly and help each other make sure they’re on the right track for long-term success.

“I have to hand it to my dad for having some good counsel and foresight,” Wall says.

“Because he started the process of setting us up to work together early on, when we Lessons learned Rick Brimacomb started showing some indication that we Gustafson says his experience left him would be interested in working with him.” with a wealth of knowledge on what to do The path into working with family was a bit more and not do. The family did have a partnership agreement circuitous for Eric Gustafson, now managing partner in place and a good buy-sell agreement that they regularly for the The Gustafson Group, a family business advisory updated. That helped when it was time to sell. firm. He was in Washington, D.C. attending graduate “We were approached by a buyer unexpectedly,” he school after having worked with Sen. Dave Durenberger, says. “And the sale went quickly. If we’d had to monkey expecting to pursue a career in public policy when his around with buy-sell and formulas and all that stuff, I brother called asking if he’d like to go into digital printing. think it would have been a lot more complicated.”

“I said ‘what is digital printing,’” Gustafson quipped.

There are a few things he’d do differently, however. He

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WORKSHOP: Family business “There is a lot of conflict avoidance and lack of planning just because you don’t think your adult children are ready to start the process. You would be surprised how ready they are before you think they are.”

— Sharon Bloodsworth, White Oaks Wealth Advisors wishes there had been a more formal onboarding process because he found the learning curve steep and stressful.

He wishes the company had hired a conflict resolution facilitator to check in periodically.

“In hindsight I think just a little planning and training would have gone a long way,” he says.

Not forming a subcommittee of the family’s advisory board to deal with compensation, bonuses and reinvestment strategies was also something he’d do differently if another such opportunity arose. Gustafson and his brother set their compensation via a handshake.

“My brother and I shook hands and said ‘we’ll make the same amount of money forever,’” Gustafson says.

“Of course, things change, people change. It was a good handshake on my part, maybe not for my brother. It shouldn’t have been done that way. It was informal. It should have been done more professionally.”

Compensation and fair play

Compensation between family member employees and those who don’t share the birthright along with making sure that those family members pull their own weight and fulfill their responsibilities can be a major challenge for family businesses, says Lisa Holter Ankel, attorney and shareholder at Avisen Legal.

It’s important, she says, to make sure you’re not creating two classes of employees, she says.

“You’ll disincentivize your good employees who aren’t part of the family who may think ‘I’m never going to be eligible for the same bonuses and pay,’ she says. “That’s not a good thing to do. You want to keep your good employees just as happy as your family employees.”

Holter Ankel also often sees family businesses where there is someone not pulling their weight but they cannot be fired or moved to a different role because of family relationships. The resulting workload shifts onto other employees are unfair and ultimately a source of dissension.

www.upsizemag.com

Family members, she says, should be subject to the same reviews, coaching and practices as non-family employees.

“Someone else has to do their work,” she says. “It leads to resentment and dysfunction within the business, so it’s not a great relationship, and it’s also bad for the business.”

It’s important to communicate upfront and prove with actions that family employees will be treated the same as non-family workers. They’ll have job descriptions, comparable market play, and they’ll get coaching and training if they have difficult personalities or shortcomings in their skillsets.

“If you set mechanisms up in your business for that in advance, when there is a problem it’s much easier to implement,” Holter Ankel says.

Outside advisers

One method for dealing with such challenges is bringing on outside advisers who can help mediate issues in an unbiased way. The advisory board utilized by Gustafson’s family met three times annually. It had two non-family representatives who focused on financial performance, sales, balance sheet items and performance evaluations.

Sharon Bloodsworth, CEO of White Oaks Wealth Advisors, says she belongs to a peer-to-peer group for CEOs and family business members and she notes that those discussions often highlight advisory board dysfunction. That said, they can prove useful as long as organizations are filling them with smart people with a variety of viewpoints rather than just those who agree with management.

“I always think if they are not smarter than you, you’ll have nothing to learn,” she says. “Fill your boards with people who are different from you.”

Those advisers can come from any number of places.

Some recommended starting with a personal network.

Others suggested looking at facilitated peer groups, such as the Women Presidents’ Organization.

And do it early.

NOVEMBER • DECEMBER 2018 UPSIZE

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WORKSHOP: Family business “My brother and I shook hands and said ‘we’ll make the same amount of money forever. Of course, things change, people change. It was a good handshake on my part, maybe not for my brother. It shouldn’t have been done that way. It was informal.

It should have been done more professionally.”

— Eric Gustafson, Gustafson Group “If that isn’t put in place when things are going well, it can be really difficult to add it when things are going poorly,” Wall says. “Because by then people have entrenched positions and they don’t hear the outside voice as reasonable as they might if it was always there.”

One other word of caution from the experts: Be clear upfront, Bloodsworth says, whether you are looking for people to advise you or truly people who are going to have oversight over the company and have the ability to, for example, remove the CEO if needed.

Holter Ankel agrees. Statutory board members have legal and fiduciary duties and there are a lot of responsibilities and liabilities associated with the role.

“An advisory board,” she says, “you can take or leave what they say. You have to think about them in different ways. Organizations can have both.”

Succession planning in advance

Experts were united in their belief that creating a

succession plan and actually communicating with members of the potentially incoming generation about their roles and what it takes to succeed is vital for the future of the entity.

“Your succession plan has to start today. Otherwise you’ll reduce the value of your business, unintentionally,” Bloodsworth says, adding that as part of the discussions, families should update buy-sell agreements and make sure other legal documents are in place, just like in any other business.

“Go back to your documents and really live them,” she says. “Quite often you put a buy-sell together pretty quickly and you put in place a valuation metric that you think is reasonable, but it may have been 20 years ago. So, really refreshing and really planning for your worst-case scenario is the smartest thing to do for a family.”

Figuring out what the current owners want out of a sale and what their long-term goals are also is a big step.

“If maximizing cash flow is the goal versus having a legacy left to the family, those two goals may not be fully

“I have to hand it to my dad for having some good counsel and foresight. Because he started the process of setting us up to work together early on, when we started showing some indication that we would be interested in working with him.”

— Rick Wall, Highland Bank

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Tuesday, January 29th

A Luncheon Workshop at the Minneapolis Club

GROWING REVENUE/INCREASING PROFIT A delicate balance

Growing revenue is the #1 concern of small-business owners, and involves keeping an eye on the prize. Increasing profit requires an understanding of the relationship between revenue and expenses.

What parts of the business are profitable? When do expense cuts prove costly? This workshop will address these important questions and much more, while introducing local experts who can serve as trusted advisors.

Panel of experts: UPSIZE and CLUB E will assemble a panel of experts — people who make their living serving and advising growing companies — to present helpful information and answer questions from the audience.

Who should attend: Entrepreneurs, CEOs, presidents, small-business owners and executive managers. Questions from the audience will be encouraged.

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

Location: The 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 https://clubegrowingrevenue.brownpapertickets.com For questions, please contact the Front Desk team of The Minneapolis Club 612.332.2292 or concierge@mplsclub.org

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

NOVEMBER • DECEMBER 2018 UPSIZE

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WORKSHOP: Family business “You’ll disincentivize your good employees who aren’t part of the family who may think ‘I’m never going to be eligible for the same bonuses and pay.’ That’s not a good thing to do. You want to keep your good employees just as happy as your family employees.”

— Lisa Holter Ankel, Avisen Legal

compatible,” Holter Ankel says. “If legacy is the priority, the business owner should start thinking about funding their retirement early. They’re not going to be able to cash in or extrapolate all the value of the business.”

Consider getting valuations of the company, she adds.

“Sometimes knowing your company has a high value and a high marketability is going to give you insight that the best choice would be to sell to an outsider.”

The earlier the better, adds Gustafson. He works with one company whose CEO is likely to stay another decade.

He notes that it’s better to be safe than sorry.

“My experience is every family is different, every business is different,” he says.

The family council established by the Wall siblings decided, for example, the age at which children can start working with in the business.

“We did that when our oldest was about 4-years-old,” Wall says.

CONTACT THE EXPERTS CONTACT: LISA HOLTER ANKEL, attorney shareholder at Avisen Legal: 612.584.3401; lholterankel@avisenlegal.com; www.avisenlegal.com.

RICK WALL, CEO at Highland Bank: 952.858.4753; rick. wall@highlandbanks.com; www.highlandbanks.com.

ERIC GUSTAFSON, managing partner at Gustafson Group: 612.239.7833; eric@thegustafsongroup.com; www.thegustafsongroup.com.

Communication

And make sure to communicate, he adds. The family council established by the Walls was in place for a couple years.

“It was a good opportunity for us to join, especially, the spouses into the process,” he says.

We also had a retreat where we would go away and talk about business. Spouses eventually rebelled against traveling to sunny places and sitting in boardrooms rather than on beaches, so that soon turned into a vacation instead. But the Wall siblings still have weekly calls to discuss immediate issues. As a banker today, one of the biggest challenges Wall sees is the older generation’s unwillingness to be clear to the next generation about their succession plans.

“If you find yourself in that situation, you can certainly find someone to help you with that,” he says. “It can be really bad for the business.”

Gustafson suggests having an outside facilitator help with some of those discussions. He works with a few companies in such capacity, creating agendas for meetings and helping keep talks professional.

“In my experience, that helps a lot,” he says.

Bloodsworth put it bluntly. Share information with your heirs about how quickly wealth dissipates and talk with them about what must happen for the family to stay financially healthy into future generations.

“There is a lot of conflict avoidance and lack of planning just because you don’t think your adult children are ready to start the process,” she says. “You would be surprised how ready they are before you think they are.”

SHARON BLOODSWORTH, CEO of White Oaks Wealth Advisors: 612.455.6900; sharon@whiteoakswealth.com; www.whiteoakswealth.com.

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UPSIZE RESOURCE DIRECTORY accounting Cummings, Keegan & Co., p.l.l.p

BANK Highland Bank

COMMERCIAL PHOTOGRAPHER Tom Dunn Photography

St. Louis Park, MN • Apple Valley, MN 952-345-2500 • www.ckco-cpa.com Kathy J. Klang, CPA/ABV

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

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.

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.

308 Prince Street Studio 242 Saint Paul, MN 55101 651-368-2047 www.tomdunnphoto.com Tom Dunn tom@tomdunnphoto.com 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.

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ACCOUNTING Olsen Thielen CPAs

Bank North American Banking Company

commercial real estate The Ackerberg Group

Roseville, 651-483-4521, Michael Bromelkamp Eden Prairie, 952-941-9242, Thomas Pesch www.otcpas.com

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

Lake Calhoun Center, Suite 10 3033 Excelsior Boulevard • Mpls, MN 55416 612/824-2100 • www.ackerberg.com Stuart Ackerberg • stuart@ackerberg.com

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.

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.

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.

Depend on Our People. Count on Our Advice. SM

Member FDIC

ADVERTISING • MARKETING Risdall

business machines Coordinated Business Systems, Ltd.

computer consulting Intertech

Contact us: 651.631.1098 and www.risdall.com Ted Risdall, Owner Dave Schad, General Manager

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

1575 Thomas Center Drive • Eagan, MN 55122 www.intertech.com • Ryan McCabe at rmccabe@intertech.com or 651.288.7001

With over 40 years of success, Risdall is one of the longest-standing marketing agencies in Minnesota. We harness creativity, technology, and data to help brands live fully and effectively online- creating vital digital visibility that drives engagement and business growth.

Our experienced team can provide your organization with the strategy required to create integrated programs that drive bottom line success.

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.

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.

business machines Loffler Companies, Inc.

insurance O’Rourke Agency, Inc.

BANK Crown Bank

Innovate. Deliver.

1101 East 78th Street, Suite 200 • Bloomington, MN 55420 952-925-6800 phone 952-925-6801 fax www.loffler.com • Jim Loffler — President

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ADVERTISING SECTION

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venture capital Brimacomb + Associates

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ADVERTISING SECTION

NOVEMBER • DECEMBER 2018 UPSIZE

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BACK PAGE Professor says think twice before pursuing venture capital

B

usiness owners might want to think twice before chasing financing from venture capital firms, according to one local

venture capital.

There are three kinds of $1 billion-entrepreneurs. One kind sought venture capital early. The second group sought author. venture capital late. They needed it Dileep Rao is a Twin Cities-based because they had a capital-intensive author, speaker and professor of strategy. The third group never got entrepreneurship who has taught at venture capital.

Stanford, Harvard and the University Only 6 percent of the $1 billionof Minnesota previous to his current entrepreneurs got venture capital early. gig at Florida International University.

By getting it early they were basically He says the thought of raising venture shunted aside and somebody else ran capital to build your business might be the company. The group that got venbetter than the reality. ture capital late was about 18 percent.

He researched About 76 percent business owners never got venture who built their capital. The ones who ventures to $1 bilgot venture capital lion in both sales late were people like and valuation and Mark Zuckerberg, Bill discovered the Gates and Jeff Bezos. ones who took They had taken off home the greatwithout venture capiest value for their tal, so … you didn’t work most often have to guess whether waited on seeking they have the skills. outside investors.

So, V.C.s invested Rao shares the and let them run the entirety of his company. findings in the new The third group, book, “Nothing locally, includes Ventured, Everypeople like RichDILEEP RAO thing Gained,” but ard Burke, who built offers a preview in UnitedHealth Group; this interview with Upsize’s Managing Robert Kierlin, who built Fastenal and Editor Andrew Tellijohn.

Dick Schulze, who built Best Buy. They The conversation is edited for length. used special strategies to grow without Tellijohn: Are you suggesting venture capital and they had skills. entrepreneurs should stay away from Tellijohn: Do skills and strategy beat venture capital? venture capital?

Rao: Yes and no. Basically, what I Rao: Most of the time. In some cases, found in my research and present in you may need V.C. I only found one the book is that if the goal is to build entrepreneur who beat V.C.-funded a big business and to keep control of ventures without venture capital and the venture and the wealth created you that’s Michael Dell. He built Dell even may want to look at how you fit with though he had competitors who had 28

UPSIZE NOVEMBER • DECEMBER 2018

some venture capital.

The brilliance of his strategy was that he got money from his customers before he had to pay his vendors. The more he grew the more capital he had. He consolidated that advantage by buying his inventory after someone ordered it, which meant he was customizing the computers so people would pay more. It was truly a brilliant strategy.

Tellijohn: Why is there a belief that entrepreneurs can’t do this without venture capital?

Rao: V.C.s have inundated the airways with the fact that they have invested. So, the moment a company goes public with a V.C., the moment it’s sold at a good valuation, who do you see on CNBC? The V.C. behind it saying ‘hey, I was the genius behind this.’ It’s in their best interest to boast about their exploits because they need to raise money for the next fund. There is nothing in it for the entrepreneur. If somebody has made $1 billion or $2 billion from their venture, many of them really don’t want to publicize themselves. Why open yourself up to all kinds of scams and lose your privacy? contact: DILEEP RAO, author and professor of entrepreneurship at Florida International University: drao@umn.edu, www.dileeprao.com

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