Take four finalists, 13 key executives and even an improvisational hand-clapping exercise, and what do you get? Best practices for building a business, useful for any entrepreneur.
ABOUT THIS PROJECT
The Upsize Business Builder Awards, presented by Winthrop & Weinstine, is an annual contest designed to recognize Minnesota entrepreneurs for driving smart, sustainable growth. From nominations, Upsize selected four finalists: John Sturgess, Adogo Pet Hotels; John Long, Avionte; Loren O’Brien, B&F Fastener Supply; and John Sweeney, Brave New Workshop. They presented their stories in a private session in December, after which judges named B&F Fastener Supply the Upsize Business Builder of the Year. Upsize is proud to present all four impressive entrepreneurs in these pages, in hopes that every business owner will draw wisdom and inspiration from their tales.
ABOUT THE JUDGES
Judges for the Upsize Business Builder Awards considered three criteria: three-year certified revenue growth, impact of the best practice on company performance, and sustainability of the growth model. They are Dean Willer, Winthrop & Weinstine, dwiller@winthrop.com; Micah Thor, Tech Guru, micah@techguruit.com; Bill Mills, Executive Group, bill@mnexecutive-group.com; Rick Brimacomb, Brimacomb + Associates, rick@brimacomb.com; and Beth Ewen, Upsize, bewen@upsizemag.com.
Growth rates in pocket, B&F preps for tricky hand-off
Five years ago, Loren O’Brien of B&F Fastener Supply wrote his goals on paper and presented them to the Upsize Growth Challenge experts assembled to advise him.
Item E was prescient: “Focus from 2010 going forward will be to maintain double-digit growth to get us to $25- to $30 million in revenue over the next three to five years and in the $30- to $40 million range in the next five to seven years.”
After the nuts and bolts distributor was named the Upsize Business Builder of the Year for 2016, he was proud to note the company’s management team nailed it. “Ha,” he emailed. “Pulled out my notes from 2010. Thought you would get a kick out of the written goals.”
Indeed, B&F Fastener Supply has been on a steady march, adding distribution centers—they’re now at 14—including a new headquarters in Ramsey, and hitting $30.5 million in revenue last year, up from $24.2 million in 2012.
O’Brien is the embodiment of the business adage: if you write it, it will come. There’s nothing like clear goals to empower a team toward steady progress.
Now the company has a new challenge, which is to transition leadership to O’Brien’s children even while maintaining relationships with the top executives who have pushed the company to today’s heights.
True to form, O’Brien has developed a written plan for the several-year process, using continuing input from outside advisers, such as enrolling in a family succession seminar series at the University of St. Thomas.
His first move was to retain a 10 percent share in the business, and divide the remaining parts equally among his four children.
Nicole Baltes, one of O’Brien’s three daughters, is partway through a process to learn all parts of the business before becoming president in time.
Only one-third of family-owned businesses succeed to the next generation, Baltes declares, and she believes her father’s insistence on transparency is the key. “You will not find many privately held companies” that share every financial number with all staff.
“This openness led to stability” during the transition, Baltes said about her colleagues. “The management team was incredible,” and remains supportive as she grows into her role.
Todd Boone, executive vice president, has been with the company for 24 years, and accepts the fact that O’Brien’s children will take over the firm—especially since the alternative could be private equity or a competitor swooping in, not a positive prospect for him.
“I thank Loren for giving me the opportunity” over the years, and he’s happy to support helping the next generation succeed.
If Baltes takes a page from her father’s book, that’s a likely bet.
Loren O’Brien is CEO of B&F Fastener Supply in Ramsey: 763.252.2300; loreno@bffastenersupply.com; bffastenersupply.com
Adogo Pet Hotels has model, aims to replicate it
™I believe Adogo will be a game changer like Marriott is a game changer,” declares John Sturgess about his young chain of pet hotels.
Sturgess was in the human hotel business, opening more than 800 hotels all over the world for Carlson Cos. among others, and he’s applying principles learned there to pets—which as he points out are often held in equal esteem as children, if not higher.
The pet business in the United States was $17 billion in 2004, he says, and has ballooned to $60 billion last year, and 36 percent of U.S. families own a dog. Further, he claims, of the top five services used by all those dog owners, Adogo Pet Hotels offers three.
Add his carefully designed systems—such as centralized cleaning; webcams, security cameras and alarm systems; and marketing focused on community involvement—and he believes his three current hotels in the west metro could one day dot the country.
“I built a sustainable service model for dogs that can be replicated across the U.S.,” Sturgess says.
His three pet hotels, which he likes to locate in the center of communities, not in the outskirts like some competitors, topped $1.63 million in revenue in 2014, just four years after start-up with the Minnetonka hotel.
That location has a 30 percent profit margin, he says, and his other two hotels, although younger, are well on their way.
The numbers impressed the Upsize Business Builder Awards judges, as did Sturgess’s background in the human side of the business. They figure if Sturgess can raise the money to race to new markets, he could have a hit on his hands.
John Sturgess is founder of Adogo Pet Hotels in Hopkins: 952.333.5200; jsturgess@adogopethotels.com;
www.adogopethotels.com.
Avionte’s `worst year ever’ stands well above most
John Long, CEO of Avionte, starts his presentation by handing out an unusual document—unusual, that is, for a finalist in the Upsize Business Builder Awards project. It is titled “Worst Year Ever,” and goes on to cite some statistics.
Top line revenue grew by ONLY 17 percent, it says, the lowest ever. EBITDA, also known as cash flow, was 11.9 percent, the lowest in three years.
But then he turns the page to say “….and we’re thrilled.”
That’s because recurring revenue is up 53 percent over three years. Spending is up in research and development, sales and marketing and management, Long says, better positioning the company for continued growth.
Revenue in 2014 was $11.3 million, up from $6.5 million in 2012.
In short, since Serent Capital, a private equity firm, invested in the company in 2014, Long has begun using metrics to measure Avionte’s progress, and ramp up the growth rate. He is also relying on a star-studded board of directors to push progress.
“Going from founder-run to staffing up was a challenge,” he admits, but he also knows making such a change is the only way to scale. His board urges him to “always look at tomorrow. Many businesses get trapped on today, rather than let’s look out and plan for it.”
Questioned by the judges about the challenge of taking on investors, Long replies: “It is good and bad.” On the good side, there’s this: “They challenge the thinking all the time. These guys have seen thousands and thousands of businesses,” he says, and they can help him apply what’s worked for others. On the bad, well, he doesn’t specify, but implies it’s tough for any founder to be under intense scrutiny.
On the other hand, the accountability demanded by outside investors has led to his devotion to metrics, and the numbers are looking very good, indeed. The ultimate metric for any company, he says, is EBITDA percent, also known as cash flow, also known as Long’s No. 1 imperative. “Fix the percentage,” he declares. “Make freakin’ money.”
John Long is CEO of Avionte in Eagan, a supplier of software to the staffing industry: 651.556.2121; jlong@avionte.com;
www.avionte.com
Bid to survive leads to Brave New Workshop’s growth
It was do-or-die time for John Sweeney and Jenni Lilledahl, the husband-and-wife pair of corporate refugees who bought Brave New Workshop theater in 1997 from its founder, former circus performer Dudley Riggs.
They had four employees, $260,000 in revenue, a continuous stream of shows—and they were out of cash. So they took what they knew how to do—improvisation—and applied it to their business to look for new revenue streams.
When the theater troupe develops shows, like their current topical hit “The Trump who Stole Christmas,” they quickly brainstorm 400 ideas and then riff around them until great ideas arise.
Their first new idea was to add to their school, which served children, and expand the concept to get clients in the 24- to 35-year-old range, and today 80 percent of its students are non-performers.
Lilledahl runs the school, and her motto is “improv for everyone, improv for life, improv for good.”
Then they added creative outreach into corporations, under the direction of Elena Imaretska. “We have found innovation is key to business,” she says, “but it’s easy to focus on process and systems and forget about the human beings. We know a lot about how human beings innovate.”
Today, Brave New Workshop generates $3.3 million in annual revenue from a diversified portfolio of offerings. And even though Sweeney presents himself as a non-traditional businessman—“I don’t even know what EBITDA is,” he declares, after hearing his fellow Upsize Business Builder finalists throw around the term for cash flow—they’ve built a solid company.
To start his presentation, Sweeney gets the crowd of finalists and judges going in the only way he knows: through improvisation exercises. First, he urges us to our feet, and then “invites” another person, through eye contact and gestures, to clap at the same time as him.
That person does the same to another, then another, and pretty soon the whole room is clapping in tempo, albeit clunkily.
Then Sweeney introduces another classic improv technique. He offers one sentence about what’s important in building a business, and then the next person answers “yes, and…” and adds another, all around the room. It’s a lively and engaging way to get across the power of Brave New Workshop’s work.
Unlike B&F Fastener Supply, Sweeney insists that he and Lilledahl have no wish for their children, now 12 and 10, to follow them into a tough business.
“There’s no succession plan,” he declares. “We’re hoping they’re going to be lawyers.”
But just as with everything else Sweeney says, you don’t know whether he’s being truthful or just entertaining—something he, Lilledahl and the entire company have mastered.
John Sweeney is CEO of Brave New Workshop in Minneapolis: 612.332.6620; sweeney@bravenewworkshop.com;
www.bravenewworkshop.com
