ABOUT THIS CONTEST
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 participate in two workshops with expert advisers supplied by the sponsoring companies: Dean Willer of Winthrop & Weinstine and Bridget Manahan of Western Bank. Upsize reports their progress in this issue, covering workshop 2 that convened in September, since the first workshop in May. Nominations for next year’s contest open in spring 2013.
Feeling ‘validated,’ AgVenture’s boss gets her groove back
A confident Sandy Hansen, president of AgVenture Feed & Seed and an Upsize Growth Challenge winner, refers to a crisp set of statistics to report her company’s progress during the past four months.
Armed with budgets she’s put together for the first time, Hansen reports year-to-date sales are up 10 to 15 percent, and she believes she’s on track to hit her 20 percent sales growth goal by the end of the year. Even better, thanks to a relentless focus on profit margins, net income is up a gratifying 118 percent, and gross profit is up 39 percent.
“I think we have a lot of good mojo going,” says Hansen, whose company supplies feed and seed to farm and ranch customers near Cold Spring.
It’s a distinct change from Hansen’s first discussion with the contest experts in May, when she worried aloud about finding the courage to grow her company again. Hansen never planned to be a business owner, and she thought she’d left behind the farm where she grew up.
But her husband’s death 10 years ago handed her AgVenture in a monumental mess, and the fear seemed fresh when she talked this spring about her desire to expand conflicting with her vow never to feel so desperate again.
Now it’s late September, and Hansen sounds like a CEO transformed. “The mojo has changed from let’s get through this, to let’s rock and roll with this great thing we’ve created.”
Bridget Manahan is delighted with the change. She’s a commercial banker with Western Bank in St. Paul and the Upsize Growth Challenge finance expert. “You come across with a greater level of confidence,” says Manahan, who encouraged Hansen in the first workshop to let her natural leadership ability and strategic thinking skills shine.
What’s changed for Hansen? Most of all, she says, is the confidence-boosting feedback she received from experts during the first workshop. “The first thing that our meeting did was validate I was on the right track,” Hansen says. Then she details three specific actions she has taken to turn that positive feeling into better results.
No. 1, she has turned an intense focus onto profit margins, digging into her products to find which bring the most to the bottom line. “I’m managing them very tight,” she says about margins. “If there are areas where we can get 1 percent more or even a half percent more, we need to do that.”
A perfect example is heat stress products for cattle, “just like we have Gatorade” for people. This year those were a big seller as hot, dry weather stressed her customers’ herds. They’re very profitable, too, but the larger point is they filled a major need. “To us it goes back to not so much the sale but taking care of our customers. They are now seeing the results of the heat stress in their herds,” Hansen said, and she was glad her company could help mitigate the damage.
Dean Willer, an attorney with Winthrop & Weinstine in Minneapolis and the Upsize Growth Challenge legal expert, likes that she increased net income and gross profits by so much so fast, and quizzes her to make sure she really understands the main drivers. Making current customers better customers, by solving more of their problems, is an excellent strategy for every growing company.
Hansen says she’s been visiting customers herself more this summer, the second major activity she undertook once she had staff in place back at the office. “I go to their farms and say, is there anything we can do more for you? That one-to-one communication is still so important.”
Her third effort centered on creating or fine-tuning policies and procedures, so everyone knows the AgVenture way of doing things. “Once it’s behind you it frees you up even more,” she says.
Manahan urges her to keep the measurement going. “I applaud what you’ve done with respect to developing and documenting a plan. The financial performance benchmarks will continue to serve you well. It’s critical to ensure that now it becomes part of your discipline,” Manahan says.
But now Willer starts pushing back, pointing out her stressed-out demeanor in the first workshop and wondering if she’s really done enough to get to a calmer permanent state. At the first workshop, “I got this mental image of a spider web with you in the middle, and everything going out from you,” Willer says. “There is a lot of pressure on you to perform. Have you given any more thought on how to ameliorate that? Is there anyone that can take the stressors off you?”
Hansen mentions two key people on her management team, whom she believes could run the business if she wasn’t there. She mentions that she’s written everything down for others to follow, stemming again from her introduction by fire to the business. “Everything is spelled out, because my goal is to never leave someone with missing information.”
But as she talks about different scenarios for the future—will she sell the company one day? To what type of a buyer? What about the impact on the community and employees—it becomes clear that a larger vision for the future is not well defined. “Because of how I began—we had nothing—letting someone hold my baby would be difficult,” Hansen finally admits.
Willer offers a solution, one that’s helped many of his privately held company clients, for Hansen’s inability to clearly describe her future, and her place at the center of the spider web of her small company, are common issues for entrepreneurs. “What’s the number you would like to exit on,” Willer says to ask. “Then think of it backwards. If you want to get to a $10 million sales price, what do you have to do to get there?”
“You don’t even have to sell,” Willer says, or at least not for years and years. “But it helps you basically model it out. Even if the timeline changes, it will give you the ability to work toward a tangible goal.”
It’s clear Hansen has just gotten another spark, which she’ll use to fuel the next stage in her growth plans. When Willer first asks if she ever thinks about her “target number” at which she’d like to sell the company, she shoots back, “Yeah, every day in my dream mind. The joke is, in two years I’m retired.”
But she grows more thoughtful throughout the discussion. “I feel a strong obligation to our small community. I see the finances we give back as a large part of community events.” In short, she’s beginning to think about her company’s legacy, and for the first time spins a long-term scenario.
“If I had the luxury of having an 85th birthday party, I’d like to look back and say the business went on,” Hansen says.
Sandy Hansen is owner and president of AgVenture Feed & Seed Inc.: 320.764.9910. sandy@agventurefeeds.com;
www.agventurefeeds.com
WHAT THE EXPERTS SAY…
… ABOUT MANAGEMENT TEAMS
You mention one of your core values is ownership, says Dean Willer, attorney with Winthrop & Weinstine, meaning getting employees to act like owners. If you can get into people’s livelihoods, it speaks louder and clearer.
He notes that once co-founders get their top teams in place, they will become sought after by other companies. He recommends profit-sharing or even equity stakes. Whatever it is, have it be so if the company does well they do well.
… ABOUT LEADING GROWING
COMPANIES
A lot of entrepreneurs make bad CEOs. You’ll have to make that internal shift to commit to processes you’ve put in place, Willer says.
When companies go from small to the next stage, there’s going to be some pain, he says, because you’ll have to go from entrepreneurial to the bureaucracy–that you’ll want to resist.
[contact]
Dean Willer, Winthrop & Weinstine: 612.604.6633; dwiller@winthrop.com;
www.winthrop.com
PCS chiefs take first steps to tap their team’s power
Nathan Smith, general manager of PCS Residential, admits he’s at a loss at the second Upsize Growth Challenge workshop in late September. His company has a goal to quadruple revenue from $16 million in five years, and after just four months since the first workshop he says he’s got nothing to share.
But then he plunges in anyway, and it turns out he and his business partner, Chad Nyberg, have executed what can only be called a breakthrough: two all-staff meetings, significant because the co-founders haven’t employed that typical team-building tool in the past.
“We had two good company gatherings to talk about the values piece, and talk about where we’re headed. That was a huge thing to gain alignment,” says Smith. What he’s trying to convey: “Does everybody see this crazy picture?”
They were even surprised to get some great ideas from their 40-person staff, which includes five top managers, plus production, support and sales people. “What we’re learning now is we have to get buy-in,” says Nyberg, and they heard an idea that caused them to tweak their expansion strategy.
PCS Residential, which repairs people’s homes after a flood, fire or storm, is set by spring 2013 to do its first expansion outside of the Twin Cities, in Illinois, Wisconsin or Indiana. They had planned to send two people to open two cities at once, but upon staff’s suggestion decided instead to send both managers to one city, open an office, then send one to the next city to use what was learned in the first.
“I like that idea a lot,” says Dean Willer, an attorney at Winthrop & Weinstine in Minneapolis and the Upsize Growth Challenge legal expert.
Bridget Manahan, commercial banker at Western Bank in St. Paul and the Upsize Growth Challenge finance expert, asks whether this all-company meeting was new. “We have had them before, but not as regular and focused, and I think that’s 100 percent the right way,” Smith says.
Manahan is pleased. “You’ve mentioned the importance of culture. Building some consistency in bringing people together and talking strategically—that’s a big deal and that’s an important piece.”
Nyberg and Smith are childhood friends, now both 31 years old, and they’ve built their company at a blistering pace, from start-up in 2007 to a projected $18 million this year. “He’s the gunslinger,” Smith says about Nyberg. Says Nyberg about Smith: “He’s the one who holds the cornerstone down.”
Their challenge is moving from start-up mode to a more mature state, and Nyberg says the meetings are an important step. “That’s the biggest difference. In the past the two owners made the decisions. I think it’s exciting to see we are engaging our staff,” he says. “People have a larger capacity than what they currently are doing.”
Nyberg acknowledges they’ve heard advice about building a management team from mentors and read about it in business books, but actually living it is different. “The way we learn is, we learn the hard way. We have to experience the pain. Until you experience things firsthand it doesn’t stick,” he says. “The team concept that it’s not just him and I—we’ve got to learn to trust.”
Those comments lend insight into some of the pair’s actions throughout the Upsize Growth Challenge. After the first workshop, they were worried that the article about workshop one would be a hack job, even though they said they admired years’ worth of the magazine, especially a cover story on their mentor, Floyd Adelman of Inner Circle.
They stalled on the photo shoot, then fretted whether photographs of certain parts of the operation would give away too much information to competitors. Before workshop two, they questioned the format, saying their goal was long-term and there was nothing to share after just four months.
These are two business owners who’ve fought their way to success, and they’ve got the battle scars and defensive posture to prove it.
Willer wants them to push harder to build a team, and asks the roles of the five top managers. “Do they feel like they’re really part of the decisions? Is there a way you can empower them to take decisions off your plate?” he says, adding that tying key managers’ compensation to company goals is a great way to go.
“It sounds like you’re focused on values, and disseminating that through the ranks is a challenge. The way to do it is to bring your executive ranks up a level,” he says. “The more you get those people involved the better. You do that by asking them.”
Manahan suggests they consider sharing financials as a way to build the team. “It helps team members understand how interconnected what they do is with the rest, and with the overall success of the organization.”
That prompts Nyberg to bring up a classic problem at many organizations: clashes between departments. “We’ve always had the sales vs. production thing going, sales over-promising, production under-delivering. There were always fingers pointing,” he says.
Yet another first for the company is helping the issue. At the most recent quarterly meeting, Smith introduced a new metric that everyone in the company can help reach. It’s called first-time completions, meaning the number of jobs they do that are finished the first time, with no need to go back and fix something. “Every person in the company has a role in that,” Nyberg says. “If we hit first-time completes, in 2014 we have a trip planned for the whole company.”
Nyberg says another change was to fire a top salesperson who was divisive, something they were too scared to do in the past because they didn’t want to lose revenue. “The whole organization is relieved. Everyone is elated,” he says.
Manahan says follow-through will be noticed by the team. “That experience you just described, that goes along with clear expectations,” she says. “ A lot of what we’re talking about is the communication piece. Managers feeling like owners is important. The way they feel like owners is to bring them into the inner circle.”
Nyberg says “it was so cool” to see people reporting results at their fourth quarter meeting, from their third quarter. “I’m starting to think, this is what normal, healthy organizations are doing,” he says, sounding pleased and a little surprised.
Willer says the actions show a new level of maturity, but warns there’s more work ahead. “You’re right at the inflection point, where you’re a small company and you’re about to start expanding,” he says. “There’s going to be pain though, because to go from entrepreneurial to the bureaucracy—that you’ll want to resist.”
“That’s me,” Nyberg says with a laugh.
But they can see the importance of his point. Smith brings up the uproar over replacement refs in the NFL this fall. “Everyone was outraged because there was no integrity,” he says. “We’re just starting to realize this. We’re anti-authority, and in our industry and as entrepreneurs we promoted that mentality. To grow to a real size we have to change.”
Willer works with many closely held companies, taking them from start-up to sale. “A lot of entrepreneurs make bad CEOs,” he says. “You’ll have to make that internal shift to commit to the processes you’ve put in place. It’s tough.”
“I think you’ve made some real progress,” he adds.
Manahan encourages the co-owners to see the steps they’ve taken as important along the journey, even though the ultimate goal is far away. “The progress happens in the smaller wins in the short term. The smaller wins affirm what you are doing, and it builds momentum toward the next big goal,” she says.
Chad Nyberg, cnyberg@pcsrenew.com, and Nathan Smith, nsmith@pcsrenew.com, are co-founders of PCS Residential: 651.994.2028; www.pcsrenew.com
WHAT THE EXPERTS SAY…
….ABOUT CELEBRATING THE JOURNEY
The progress happens in the smaller wins in the short term, says Bridget Manahan, Western Bank. The smaller wins affirm what you’re doing, and it builds momentum toward the next big goal.
…ABOUT CONSISTENCY
The financial performance benchmarks will continue to serve you well. It’s critical to ensure that now it becomes part of your discipline, she says.
…ABOUT TEAMS
You’ve mentioned the importance of culture. Building some consistency in bringing people together and talking strategically–that’s a big deal and that’s an important piece.
[contact]
Bridget Manahan, Western Bank: 651.290.8140;
bmanahan@western-bank.com;
www.western-bank.com
