Two winning companies shed painful pasts to drive next round of growth

With trial by fire in past, AgVenture’s
boss says ‘let’s scale it once more’

Sandy Hansen took over AgVenture Feed  & Seed Inc. the hard way.

“I started knowing absolutely zero, and I’m not saying that to be humble,” 

she said. “The day I assumed responsibility was the day my husband of 15 months passed away of leukemia,” in January 2003.

“It was his business. I was an insurance agent at the time. The only thing I knew about the business was table talk.” 

Clutching a single sheet of paper with instructions hastily scrawled before his bone marrow transplant – she should sell the company, it said, and listed where she could locate the bank accounts – she decided to dig in instead. The news didn’t get better.

“At that point we had $1.2 million in sales and those were shrinking fast. The business was near bankruptcy.” She talked her small local banker into giving her a chance. “I suppose they really had no choice,” she mused. 

Fast forward to today – which skips over 10 years of heavy lifting to create the company’s story, just as the opening line of this article vastly understates the shock of how she came to be in charge. 

“We’ve grown from $1.2 million to $4 million and have stabilized, and now plateaued,” said Hansen, one of two winners of this year’s Upsize Growth Challenge.

She’s ready to engineer another phase of growth for the company, which sells feed and seed to customers surrounding Watkins, Minnesota, from small hobby farmers to large dairy operators. 

She plans to hit $5 million in sales by the end of this year, armed with the work of a second outside salesperson whom she is hiring, and then continue the 20 to 25 percent annual growth rate until she doubles the business in five years. “I decided let’s scale it once more,” she said, this time with the possibility of her eventual exit in mind.

The challenge is as much psychological as anything, given the trial by fire she’s been through-finding the courage to take risks, believing in herself even though she has no formal business training, clearly communicating her vision to employees so they buy in to the changes.

“It scares me,” she says, “because now we have something to protect.”

‘You’ve come a long way’

Bridget Manahan. commercial banker with Western Bank in St. Paul and the Upsize Growth Challenge finance expert, notes what she sees as Hansen’s obvious strength: leadership skills. “I’m really impressed with how you articulate how you’ve moved the business forward. You have leadership capabilities that you may not realize,” Manahan said.

Now Hansen’s task it to use those skills to get the company’s vision out of her own head and into the DNA of the organization. For that Manahan recommends a written plan, and formal discussions with management and advisers about it. “I am always an advocate of laying the plan out on paper, and based on the strategic plan you’ve outlined, ask: What does my business look like in one year, two years, five years? It forces a discussion about the assumptions you’re making.”

She recommends building a team of advisers-a kitchen cabinet, Manahan calls it-that can include outside professionals such as her banker, accountant and lawyer, and inside members of her management team. Those discussions are especially important when many changes are afoot, and when family members are involved-Hansen’s brother-in-law has been the company’s only outside salesperson until now.

Dean Willer, an attorney with Winthrop & Weinstine in Minneapolis and the Upsize Growth Challenge legal expert, is also impressed that Hansen is poised for growth. “You’ve come a long way from being forced into a position,” he said.  

Then he drills down, asking why she’s chosen the $5 million revenue goal this year.

“What is the difference between $4 million and $5 million to you?” he asks, wanting to know how much of the top-line sales increase will flow to the bottom line.

Hansen says she chose the target because it represents about 25 percent growth, a number she feels is aggressive but not so explosive as to be unmanageable. She says if the company hits $4.5 million in revenue, she can break even with the added costs of the new position-and revenue above that should translate into profit.

Willer, who works with many companies on mergers and acquisitions, counsels her to think more carefully about the scalability of her plan. For example, Hansen has created what she calls an efficient organization by outsourcing such tasks as hauling feed and seed to customers. So, as Willer puts it, she’s built her company by layering in variable costs rather than fixed costs. 

“A lot of the drivers in your business key off your variable costs, so how much leverage can you get when you scale up?”  Willer asks.  He explains for the non-MBAs in the room (he holds a J.D. and an MBA): “If you own the truck you have a fixed cost, and if you can leverage off a fixed cost by adding additional revenue you can drop more to the bottom line.”

How large she can grow the top or bottom line will matter keenly if she wants to eventually sell the business. A financial buyer, he said, will want to see a fat bottom line-to sell for $5 million, he says, “you need to be around that $1 million mark in cash flow.”

On the other hand, if she wants a strategic buyer, or one who wants to operate the company for competitive reasons rather than simply invest in it for financial ones, “you want to look at the top line.” A strategic buyer will scrutinize the quality of those customers: how varied they are, how deep the company’s relationships with them are.

The point, he says, is to do detailed planning years in advance for an eventual exit, starting with an overall vision of the goal and working backwards. “You’re going to want to model how to get there,” he said.

Wanting a legacy

Hansen said she hopes to create a legacy, so the business survives beyond her and doesn’t just close down as so many small companies do, particularly those in rural areas with a lack of potential buyers. She is asked whether she still feels in survival mode, or if she has moved on from the shock of the early years.

“Up until two years ago it was survival, and then it was a good look in the mirror. I’m unschooled, and I asked my accountant, what don’t I know about my accounting? He said, you have to believe you know more than 80 percent of the business owners who come in here because you’ve suffered. You know.”

Hansen is gaining confidence. “It takes a psychological switch. Thankfully I went from near bankruptcy to a nice life, and that’s why I think our time is right to bust through,” she said.

“Sometimes your psychology needs time to re-program and not think about what you were.” 

PCS Residential founders
search for goals that
mean more than money

The childhood buddies who co-founded PCS Residential appear to have it all.

They built a booming company set to hit $16 million in sales this year from 0 six years ago, snared the No. 12 spot on a local list of fastest-growing companies, and posted an eye-popping $75 million revenue goal in five years-unrealistic perhaps, but a target audacious enough, and backed with enough detailed plans, to gain their selection as one of two Upsize Growth Challenge winners this year.

So why do the victories seem empty? 

Nathan Smith, general manager, and Chad Nyberg , VP of sales and marketing, are both 31 now and know what it’s like to chase revenue targets, to grow so fast that plenty of people get burned along the way-including themselves.

“It’s been a long journey. This business has cost us a lot of relationships,” said Nyberg. “We’ve had people steal from us. We have friends and family who won’t talk to us. All of these sacrifices have made us ask ourselves-what is this about?

“There’s got to be something more here than the money. We’re looking for a deeper meaning,” he said.

To that end, the pair are spending considerable time on several detailed management objectives to try to mimic much larger companies they admire-and they’re reaching out to local advisers and studying management gurus like Jim Collins and the new CEO of 3M to draw inspiration. 

Among their efforts is creating a list of five core values, for example, which Smith details, from integrity to empathy to advancement and so on. And there are many more-so many, in fact, that at the Upsize Growth Challenge workshop they quickly stop talking like brash entrepreneurs and start sounding like two people who’ve read too many management tomes.

The problem with that, say the Upsize Growth Challenge experts: growing a company at a blistering pace can’t be done by the book, and the co-founders illustrate this truth when they switch from detailing their theories to explaining their reality. 

PCS Residential, in Eagan, is in the insurance restoration business, restoring residential properties when the owners suffer a loss from a storm or another reason. Smith says they’ve identified a number of cities where they could expand, based on criteria including how many storms have hit that city-but only recent storms count, because insurance companies usually demand claims be filed within two years. 

“How do you plan around such inconsistency?” Smith asks. “How can you get quality people, if in six months you have to ask them to go somewhere else? We have a true vision of building a company, but we’re in a market where so many companies are fly by night.”

Pajamas vs. suits

Deb Cochran, marketing director at Winthrop & Weinstine in Minneapolis and the Upsize Growth Challenge marketing expert, believes it’s all about branding-and the internal brand you’re building with employees has to be consistent with the external brand you’re building with customers and the public.

“You don’t want to be wearing your pajamas around the office and then you go out in the world and wear a suit,” she says.

“Branding is about the experience of your clients, the experience of your employees,” she said. And to find out what their experiences are, ask them. Create a simple survey to ask customers why they chose your service over others, and then look for common themes that you can use to write key messages. Do interviews with employees who leave, with those who are newly hired, and with those who’ve been on the job for a while and ask them what it’s like to work for you. 

You will learn “what are those key differentiators,” Cochran said, “and if you have engaged employees then they can be ambassadors of your brand.”

She said the co-founders are on the right track because they’ve in recent months changed how they talk about their goals: Instead of touting the $75 million revenue goal, they’ve begun emphasizing instead the number of homeowners-1,500-they’d like to serve each year. 

But Cochran urges them to go further. “It’s about picking that key tag line. Like life insurance: it’s not about buying a new fur coat or a new car. It’s about sending your kids to college if something happens to you,” she said. 

“You’re in the restoration business. You’re giving families new hope,” Cochran said. A simple message built around that idea should be at the heart of their brand.

Once the key messages are in place, she encourages them to develop a highly detailed, turnkey plan about how they’re going to enter each new city, essential for them because speed is key-they need to go where storms are happening. “Going into these new cities-how much time does it take to ramp up? Do you have the model ready to go? Spend the time perfecting those plans, so you can go in and sweep those cities.”

Dean Willer, too, an attorney at Winthrop & Weinstine and the Upsize Growth Challenge legal expert, urges them to simply choose their first city for expansion, develop a plan and then execute it-as quickly as they can. Once the first expansion is successful, others will become easier.

He advises them to embrace the chaos that comes with growing a company-rather than become paralyzed by it, because it will never go away. “You’re going to be dealing with it for a while,” he says, referring to their fast growth track so far and their plans to keep that going. 

Bridget Manahan, the Upsize Growth Challenge finance expert and a commercial lender with Western Bank in St. Paul, advises the pair to fill in the blanks between now and their ultimate revenue goal.  “We’ve got this $75 million out there-but what does it look like when it’s not $15 million any more but it’s $25 million? What does it look like when it’s $40 million? What does that mean to my management team, to my financial needs, and so on?”

$300 in the till

Both Willer and Manahan warn against burning through cash-the death knell of many fast-growing companies. They say a top-notch on-staff financial person, and a top outside accounting firm that can recommend a detailed accounting system, are musts.

“When you grow quickly you start to chew up cash. You need a really good financial person, so you don’t wake up one day and find there’s $300 in the bank account,” Willer said. “It’s surprising-you run into companies all the time that run out of cash.”

Smith and Nyberg say they feel confident about their financial management, but agree they’d like to find a software system so they know where costly mistakes can happen in their pipeline and find ways to stop them earlier. 

Mostly, they say they want to continue to grow their company, but with a goal different from what drove them when they started at age 25.

“We know what it means to chase money, because when you’re entrepreneurs the world tells us to grow. But it leaves a little bit of emptiness,” said Smith. “Our true passion is to grow a company that makes values-based decisions, that affects the lives of many, many homeowners. That $75 million is just going to be a byproduct of those things.”

Beth Ewen