Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?
Adjustment to economic reality has come in three stages for Jeff Sweet, president and CEO of Identifix in St. Paul.
“When the economy first turned down, we said, We’re optimists. We should be focused on taking advantage of the opportunities,” says Sweet, who sold the automotive information service to a publicly held parent corporation in 1999.
Then came the second phase. “It doesn’t look like the turnaround’s coming. We had to cut expenses and cut staff,” Sweet continues.
When his company was to the bone, like most others he’s studied, it was time for phase three: Focus on improving employee performance. “We’re saying everybody has to be productive,” Sweet says.
He’s also chairman of the board of CEO Roundtable, a local peer-led group of growth-oriented CEOs who meet to discuss and overcome business problems. Upsize was invited to interview the board earlier this year, and gleaned their advice for surviving the many months of bad economic news.
These seven CEOs, all of whom run their companies, serve on the board of CEO Roundtable, and meet with fellow CEOs in their regular roundtable discussions, echo remarkably similar themes as they prepare their companies for a better future, despite the diversity of their industries.
They have already cut expenses as much as they can, in a two-year process they all called painful. They’re turning to maximizing performance of existing staff, and hiring just a few key employees in an economy that has dumped many stars onto the street. And they’re zeroing in on one word — sales — with a variety of approaches but with a single-minded intensity.
“Sell, sell, sell” is the mantra of Daniel Robbins, president of TranCentral Inc. “Don’t experiment with selling forms that don’t necessarily work. You have to focus.” TranCentral is a 60-employee transportation company based in Burnsville.
“Everyone’s selling now. Everyone’s got a line in the water,” Robbins says. No more is one group taking orders, another group following up, a third group closing.
Ruth Lane, chief energizing officer of AllOut Marketing Inc. in Wayzata, has restructured compensation so that everyone gets something if sales are good, including the front-desk person. She also started a lead generation program, in which a targeted group of people are called, specifically and systematically, to try to get appointments.
“Sales is totally my focus,” Lane says. “Once you cut extra expenses, where else can you focus but sales?”
Lane’s seven-employee company develops marketing programs for medical technology firms. She believes that prices cannot be raised in this economy, so she has created a medical advisory board as one significant way to add value for her customers.
Specialists in various medical fields are on the board, and will give their opinions on new products, technologies and markets that AllOut Marketing’s customers are developing.
“It’s an overview look that I provide to my customers, so it’s not just me telling them. There might be a cardiologist on the board giving an evaluation. It gives them a reason to come to me,” Lane says. “This is a market where you can’t raise prices, so you have to add value.”
The A list Karen Oman is president of Certes Financial Pros in Minneapolis, which trains and deploys financial personnel temporarily to clients. She likes to tout the quality of her people. “Our salespeople have CPA backgrounds with personalities,” she says, and adds her company is doing well while competitors are losing money.
“In this environment you have to have A connections. The B players won’t make it,” Oman says.
To that end, she pulled one person from another firm, and had to wait out a non-compete agreement before the new star could begin. Another star was pulled from corporate America, Oman says. “I hired two of the best, well-connected people in town. They’re making noise all over town.”
Several CEOs around the table noted that employees are willing to take pay cuts and accept different compensation arrangements. Jeffrey Chanen, president and CEO of The Maintenance Team in Eden Prairie, notes that he brought on one top salesperson on pure commission this spring, something he hadn’t done before. (The person is “doing great,” Chanen says.) Another person was switched to all commission, and Chanen predicted that person would leave.
But they also sweeten the pot for those who stay. Chanen’s company provides maintenance and repair service for heating and cooling systems. He’s started a new bonus pool for technicians. “The better their productivity is, they get part of that,” Chanen says.
For example, 3 percent of The Maintenance Team’s calls wind up being a recall, say a furnace is repaired but there’s still something wrong. “We want to get that even lower.” The recall rate is one item that’s measured, with the bonus pool tied to those measurements.
Chanen started another new feature in February, a newsletter for employees that he’ll write every other month. It’s his way of “enforcing the culture,” he says. “We have 15 to 16 new initiatives that we’re working on, but they have to hear it from me.”
The newsletter will also give notice of bad news. For example, the company has been able to absorb increases in health care insurance costs over the past two years, but can do so no longer. “I said, save your overtime, because the insurance is going up,” Chanen says. “There’s no surprises.”
Robbins of TranCentral still offers 1990s-style perks to his employees. The company recently relocated to south of the river because 70 percent of his employees live there. “I put a workout room in, but they didn’t necessarily want that,” Robbins says. “They wanted access to the Internet so their kids can come in after hours and they can do projects.”
Robbins put in a tanning bed and a shower room, a grill and park benches. “They eat free in the summer as long as they cook together,” he says. He even gives free electric toothbrushes to employees.
Oman is another CEO who stresses education. She shares market information about what clients are paying, and what kinds of projects and expertise they’re seeking. “We’re just educating them. They make their own decisions about which jobs to accept,” she says about her accounting professionals.
Oman believes business owners must be careful about squeezing employees, even in an economy where jobs are scarce and employees may be willing to accept bare-bones deals. “I said, I’ll pay my people well and squeeze my margins,” Oman says. “We make a commitment to ride it out and pay them fairly.”
The reason: “People say they’ll work for nothing, but they’ll leave you as soon as something better comes,” Oman says. Turnover is more expensive than stability, she says, even if the latter comes with higher pay.
Oman’s pricing strategy is noteworthy for its long-term orientation. “I’m pricing for the recession. I’ve been saying that since 1994,” Oman says. “I don’t change prices in good times and bad, because if the prices are right and the pay is right then the model works.”
She recently heard a presentation from a former 3M economist, who said the “stars were in alignment” for 2004. She refuses to get too excited about turnaround news, however, nor does she get stymied over the recent years of poor times. “We have decided that this is the economy for the rest of our lives. We’ll just go for it,” Oman says.
‘No one hurt more’ Dennis Anderson is marking his 34th year in business this year, and has the battle-weary yet resilient attitude to show for it. He’s the founder and principal of Andcor in Wayzata, which he calls a venture catalyst for Minnesota’s emerging growth companies. His company arranges financing and invests money in promising young companies.
“People have predicted my death at least 50 times,” Anderson says. He’s reinvented his company over the years, most recently about a dozen years ago. “We gave away 85 percent of our business,” he says. “We decided we’re going to do only Minnesota businesses where we take equity in the companies.”
For a time the move paid off, but the turn of the century was brutal, he says, noting a 90 percent drop in sales from 2001 to 2002 in the companies Andcor supports. Andcor has invested in more than 140 companies, and has written off 50 in the last two years. “No one could have been hurt more than us,” Anderson says.
He’s philosophical. “I’ve been through four downturns. In every one of them X number of people out there say, We’ll never recover.
“Where the opportunities come in, it is survival of the fittest. We had a huge number of competitors. They all left. Maybe they’re smarter than I am,” Anderson says.
Anderson notes that morale suffers when business is bad. To give staff and sales a boost, he recruited a lead expert who has “a huge name in town,” Anderson says. “He’s phenomenal. When he joined us every VC in town asked him why.”
He’s now working to recruit a prominent player in the life sciences field. The idea is to add technical expertise so that companies receive advice along with funding from Andcor. “We had a model that we were experts in growing companies. Now we have to be experts in the field,” Anderson says.
A second key to Andcor’s survival is a strategic partnership, with Cargill Ventures. That’s the investing arm of the local agricultural commodities giant Cargill. “It’s a handshake deal. We do deals together,” Anderson says. “More and more those relationships are important.”
He thinks it’s important to get closer to customers. “If you show you’re there to help them grow, I think it’s invaluable.” They’ll remember the help when times get better.
Roger Paulson, who runs Master Coating Technologies in Minneapolis, believes in “sharpening the message” when talking to customers and prospects. He’s already got a succinct phrase down pat: “We sell the coolest paints in the world,” he says when introducing his company.
But in the spring he sat down with his team and said, “these are the three things that we’re going to talk about,” Paulson says. The company is going to focus on two sectors that are growing: education buildings, and health care buildings. “Before it was more, we do general corporate offices.”
He doesn’t believe a recession is in the future, but rather forecasts slow growth “until the next big thing, whatever that is.”
Chanen of The Maintenance Team chimes in: “Mold. Mold is the next big thing,” he says, getting a big laugh from everyone around the table. Mold in buildings around the country is fueling big business and big costs for anyone related to real estate.
Adds Sweet of Identifix: “Most of us have people at the max, so if the economy does pick up we’re going to have to hire people.”
Anderson sums up the optimism held by a group that figures they’ve made it through the worst. “I’m bullish on the economy, not for ’03, but we’ll start seeing it,” Anderson says. “Something new is coming out, there’s huge innovation. But the whole way to market will be different because there was so much fluff.”
