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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
Oct-Nov 2017

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Catching up

It’s been just about nine years since John Fallenstein admitted in an interview with Upsize that he was buying into an industry that he knew little about and that he was a bit nervous while attorneys hashed out the terms of the deal that allowed him to acquire Custom Rock Formliner.

The St. Paul company makes the urethane and plastic formliners that mold to concrete work on highways and bridges.

He’s learned a lot over the last decade since achieving the goal of buying a business of his own. The industry was new to him then, but he quickly fell in love with it. And he’d always wanted to be in charge of his own destiny.

“I’ve always been entrepreneurial,” he says. “I’ve always enjoyed having an integral role in building something.  And I’ve always wanted something of my own. That undercurrent has always been there, even when I worked for other people. It was just a natural evolution.”

Fallenstein knew going in there would be a learning curve. And he acknowledges having made some mistakes along the way. But in the meantime, he’s also had significant success helping the company expand, as well. He won’t discuss financials, other than saying revenues have more than doubled since he purchased the company. He told Upsize in 2009 that Custom Rock had more than $5 million in annual revenue.

“I’ve learned a lot and been really lucky to come out on the other side of it with lessons and not bankruptcies,” he says.

He talked openly about a couple of the lessons. For example, the company has always focused on urethane formliners. But in 2012, he was exploring getting into plastic. He didn’t find a lot of data available for financial projections so ended up relying largely on anecdotal information. As a result, he underestimated the potential revenue and overestimated the costs of getting into the market. He chose to pass.

“I decided it didn’t make sense,” he says. “I severely undershot the amount of potential revenue from plastic. The same with the margins. … I didn’t think we were ever going to get into plastics.”

A few months later, however, he got a call from a distributor who encouraged him to meet two men in Texas who were in the plastics side of the business before being let go by a competitor that was getting out of formliner work.

“They handed me a pro forma,” he says. “I looked at this and said ‘Really? This kind of revenue? This kind of margin? Within four months we were moving forward.”

Custom Rock purchased a machine, rented space and opened a facility just north of San Antonio in 2013. Now, plastics accounts for about 75 percent of what Custom Rock’s urethane business does. He recently hired a sales person to get into another plastics channel and now he expects the plastics side will overtake the urethane side of the business within the next two years.

“My big lesson in that was that I thought I had thoroughly examined everything about the opportunity, but I really hadn’t,” he says. “Part of it was that I was still really new to the industry and didn’t realize what I didn’t know. It wasn’t so much of an ego thing. I really thought I had exhausted my sources and had solid conclusions.”

Earlier, he learned about the importance of establishing a true relationship with a banker.

Fallenstein initially worked with a larger bank. He had a great relationship with his original banker, but after she left, he had three different contact people in two years. When 2010 started looking rough, the bank started talking about changing the requirements of their deal.

In 2011, Custom Rock moved to Tradition Capital Bank, a smaller operation that he says is interested in what the company does, willing to build a relationship and more nimble and able to adapt quickly.

“They’re business people who happen to do banking,” he says. “They understand our business.”

That was important when Custom Rock struggled in 2011. The challenges were due to the economic downturn – it didn’t manifest right away because they were finishing up government contracts that had funds allocated before the economy went bad. The bank recognized, as Custom Rock did, that when the economy turned around, there would be pent up demand for work and the company likely would be fine. About a year later, that proved true and Custom Rock has grown ever since.

“I had looked at banking as just being a source of money, not really paying attention to how well they fit the business,” Fallenstein says.

“What I learned … is you need to find a bank that is willing to invest the resources and time to understand what you do and what your business cycle is like.”

While he acknowledges the growing pains, one thing Fallenstein is proud of is having maintained an employee-centric culture that was in place when he bought the firm from the Mooty family. He thinks it is vitally important to treat employees well. They are paid well, they get solid benefits, they vest immediately in the retirement plan, they get excellent medical benefits and they generally know that if they fit the culture and work hard, their jobs are safe.

Fallenstein says Custom Rock won’t hire someone unless it knows the person will be kept busy. The company has about 30 employees and a collection of temps who are tapped during heavy work times.  Temps are, in many ways, treated like employees. They are invited to holiday parties and are compensated well so they’ll return from other temp work when Custom Rock has the need.

“I’m proud I’ve been able to maintain that,” he says. “We place value on integrity. Not just with customers, but with each other.”

Existing employees are largely on an honor system. There is a paid time off system in place, but Fallenstein says if someone has used that time but still has family needs to address, they are encouraged to do what they must.

“We’ve said if you’ve exhausted your PTO, go ahead and take the time. If you have to take a sick kid to the doctor or whatever, go ahead and take the time,” he says. “We’re not going to count it against you. Take the time. Thankfully we’re small enough where we can still be that flexible. I would imagine at some point it’s hard to be that loose, but we’re able to do it so we do.”

 

Contact the expert: John Fallenstein, owner of Custom Rock Formliner: 651.699.1345;
jfallenstein@customrock.com;
www.customrock.com.