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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?

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by Andrew Tellijohn
December 2006

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Best Practices: Finance & Operations

Money Matters is Among Finalists’ Tactics

by Andrew Tellijohn

ADDING TO THE bottom line isn’t all about numbers. Each of the best practices by the finalists in the Finance and Operations category involves people.

Whether it’s training them to engage customers or getting them to work with partner companies for the satisfaction of a client, these companies prove that there is more to making money than cutting expenses and keeping good books.

Collaboration is key

On projects in its core areas such as aviation and retail, Architectural Alliance is generally the lead partner. But — as pointed out by its name — the company is perfectly capable and willing to work as part of a team if that’s what it takes to make a client happy.

The Minneapolis-based Architectural Alliance has worked as the local architect on the Guthrie Theater and the Minneapolis Central Library, and was recently recommended by the University of Minnesota and selected by the lead architect to serve in that role as the school plans its new football stadium project — despite having little background in building athletic venues.

“That gives us the perspective of knowing what it’s like to work with other entities,” says Eric Peterson, a principal with the company. “You check that ego and assume whatever role is necessary for the satisfaction of the client.”

On the first two of those projects, the $125-million Guthrie and $138- million library, the company met with Paris-based Jean Nouvel and New Haven, Connecticut-based Cesar Pelli, respectively, to define each firm’s roles and set up communications systems to bridge communications gaps.

The company was founded almost four decades ago on the idea of working together both internally and externally. Even the name represents teamwork.

“That was very purposeful,” Peterson says.

The strategy appears to be working for the 80-employee, $15 million firm.

Collaboration and innovation, both inside and outside the company, are principles that have become the key to growth. And they allow the company to add projects with a minimum investment of dollars in marketing.

“We have a core philosophical value of collaboration that really cuts across our organization,” Peterson says. “People are seeking us out.”

Focus on earnings

When Jim Masterson joined LightEdge Solutions three years ago, many employees were spending their time playing golf and waiting for the other shoe to drop. It was a tired company that “on the surface didn’t seem to have much of a future,” says Masterson, CEO.

But he took his own energy and began using it to focus and inspire existing staff. He peeled back the layers and found a niche for the firm, offering voice and data services for small- and medium-sized companies.

Today 95 percent of the company’s revenue comes from those businesses. Three years ago, he says, “the first thing I needed to do was give them something to do.”

Many people didn’t have the stomach for the changes. They left, allowing Masterson to bring on some hungry workers. The first goal was to become EBIDTA positive, he says, referring to the approximate measure of operating cash flow: earnings before interest, depreciation, taxes and amortization. “They accepted the challenge,” he says. “Two years later, we had an EBIDTA party.”

The next goal is to get to positive cash flow. That should happen early next year.

While the rebuilding was going on, the company launched a next-generation technology product and began better negotiating processes with vendors.

“We had to rebuild this thing while we were fully steaming ahead in the ocean,” Masterson says. “The best practice we’ve found is pumping passion and attitude back into” the company.

LightEdge is headquartered in Des Moines, Iowa, and has a regional office in Minneapolis. The company’s current financial position is strong enough that when executives set out to raise $5 million to $10 million for acquisitions, they ended up with $12 million.

One of the secrets is empowering employees, Masterson says. Despite aggressive growth through acquisition, LightEdge Solutions has maintained a corporate infrastructure with just two C-level and two vice president-level executives. The flat structure has encouraged an ego-free environment that is conducive to growth, he says.

No excuses, please

No matter what happens in a given day at Permac Industries, customers will never hear a word of complaint or the hint of an excuse. Work can get stressful at times, but Burnsville-based Permac’s employees are trained not to pass the buck. Instead, they are instructed to ask enough questions to discern a client’s absolute needs and find ways to get the job done.

“We don’t waste our time explaining to a customer why something didn’t happen,” says Darlene Miller, president and CEO. “Nobody wants to hear the negativity. Nobody has time and nobody cares.”

Miller believes that explaining when, what or how Permac can help a customer shows strength, resilience and determination — and shows the customer that the given employee is a problem solver who can handle difficult situations.

“We all have these daily dilemmas,” she says. “It’s all in the presentation of what you can do.”

The machining industry, the company says, is generally cyclical. But Permac isn’t. The company has grown so consistently and steadily that while competitors were shutting down during the aftermath of the September 11, 2001, terrorist attacks, Permac expanded its customer base and became more flexible by offering just-in-time delivery to even smaller customers.

The positivity has contributed, Miller says, to gaining more business, and to keeping employees happy.

“Even when we have bad news to deliver we stay positive,” she says. “Customers soon realize you are a problem solver.”

Smart financing

St. Paul-based Restoration Professionals has doubled its revenue each year since its inception in 2003 and has gone from 15 employees to 55. Last year the company realized it needed to find a new facility to accommodate the growth.

The general contractor, which specializes in water and fire damage restoration, mold remediation, and industrial and carpet cleaning, considered leasing or buying an existing building before deciding that the company’s needs would best be met by building a new facility.

Co-founders Patty and Timothy Labey realized that owning rather than leasing would provide equity and give them a sure sense of what their building-related expenses would be for the next two decades.

“Owning real estate would be a good investment for us because having real estate would be more tangible and add to the value of our business,” Patty Labey says.

So Restoration Professionals sought assistance from the St. Paul Port Authority and for $1 purchased a 3.5-acre lot with $350,000 value.

Using the equity in the parcel, and with the assistance of the Small Business Administration and Community National Bank, the company was able to finance the construction of what has become a state-of-the-art building in the Great Northern Business Center – South.

The Labeys were even able to finish the second floor of the building when their contractor agreed to share a budget overage with them.

Labey suggests to attendees that they form strong partnership with entities such as banks and accountants, and not to be afraid to ask questions if they don’t understand something.

“Don’t be afraid to ask for what you want,” she says. “These people want to help you.”

While the new building has been a boon to business, Labey says it’s been just as rewarding building and expanding in a growing area of St. Paul.

“For us, it’s been very exciting to be a part of the redevelopment of the area we are in,” she says.

Reaching out to experts

Just because the Sisters of St. Joseph of Carondelet Ministries is a foundation doesn’t mean it can ignore the bottom line.

In fact, its executive director, Sister Irene O’Neill, pays close attention to business-like management of resources.

St. Paul-based Sisters of St. Joseph now has six well-established programs. The foundation operates 11 free St. Mary’s Health Clinics for the poor and more than 360,000 uninsured in the Twin Cities alone.

The organization also operates Sister Care, which delivers service to 200 or more elderly people every week; Learning in Style, an educational program that teaches basic reading, writing and speaking skills to immigrants; and Sarah’s, a transitional place for tortured, abused and homeless women.

Under O’Neill’s direction, the Sisters foundation has grown from a zero balance to an endowment of more than $11 million and its impact on the community has grown.

The strategies that have led to this growth include reaching out for help and responding to the needs of the community.

“We go to you for help,” she says. “We surround ourselves with experts. We go to you and say ‘teach us.’ We form very strong bonds. We want to bring in new individuals to help come in and look at things with new eyes.”

O’Neill has also tried to publicly spread the word about the Sisters of St. Joseph, perhaps more so than past leaders have done. She started a blog called the “Blogging Nun” and has been involved in technology and public relations campaigns. She says she has learned  that “just because people know your name doesn’t mean they know what you do.”

Eventually, O’Neill says, it would  be nice if there were no need for a Sisters of St. Joseph. But until everyone has housing and food and hospitalization and countless other needs met, the Sisters will continue adapting and finding new ways to help people.

“I think of our business as one we’d like to put out of business,” O’Neill says. “There are a lot of needs out there.”

FINALIST RUNDOWN

» Architectural Alliance, architecture firm: collaborated with two high-profile architecture firms to complete the new Guthrie Theater and Minneapolis Central Library projects.

Eric Peterson is general principal: 612.874.4102;  epeterson@archalliance.comwww.archalliance.com.

» LightEdge Solutions, Internet, voice and data services provider: pushes for opportunistic product development and aggressive “time-to-market” strategies.

Jim Masterson is chairman and CEO: 612.252.2301;  jmasterson@lightedge.com; www.lightedge.com.

» Permac Industries, precision machined parts manufacturer: combats cyclical industry through technology purchases and by forming partnerships.

Darlene Miller is president and CEO: 952.894.7231;  dmiller@permacindustries.com; www.permacindustries.com.

» Restoration Professionals, general contractor: secured financing through economic development programs to build new facility, without straining cash flow.

Patty Labey is co-founder: 651.379.1990; patty@restpro.com; www.restpro.com.

» Sisters of St. Joseph of Carondelet Ministries Foundation, health care and social services provider: not-for-profit grew balance from 0 in 1994 to $11 million.
Sister Irene O’Neill is executive director: 651.690.7025; ioneill@csjstpaul.orgwww.csjstpaul.org.