“Be careful what you wish for. Rapid growth can cause major problems,” said Rick Brimacomb, founder of Brimacomb + Associates and Club E, to introduce a workshop co-sponsored by Upsize Minnesota on managing rapid growth, at the Minneapolis Club in late January. Four experts and one entrepreneur—Kevin Ortner of Renters Warehouse, also the Upsize Business Builder of the Year featured on the December/January cover of Upsize—shared common pain points and how to get around them.
Rick Brimacomb, Brimacomb + Associates, moderator: Introduce yourselves, and tell us your area of expertise, through which you view this topic of managing rapid growth.
Scott Emery, Geck Duea & Olson: Our law firm is in White Bear Lake, and I work with entrepreneurial businesses from startup to $10 million in revenue.
Todd Lee, Bell State Bank & Trust: We’re headquartered in Fargo, North Dakota, and we’ve been actively growing in the last two to three years in the Twin Cities. We’ve wound up banking a lot of rapidly growing businesses. We started at zero in assets three years ago in the Twin Cities, and now we have $350 million in assets. I share your joy but I also share your pain.
Dan Moshe, TechGuru: As a student at the University of Minnesota, I’d drive my Honda Accord all over the metro, and I’ve grown my company from humble beginnings at Territorial Hall, now in cool offices in Minneapolis. Every day, 1,300 people go to work, and my dedicated people are there to support those clients.
Kevin Ortner, Renters Warehouse: We have 15 offices, revenue north of $15 million, a new and successful franchise operation. We are the 2015 Upsize Business Builder of the Year, as well.
Tom Siders, L. Harris Partners: We have offices in Minneapolis and Chicago. We’ve surveyed 6,000 businesses, and almost all of them said they were struggling with these strategic issues: organic revenue growth; profitability and cash flow; finding good people. We can help with all of those things.
Brimacomb: Share the common characteristics that you see in businesses that manage growth well.
Emery: Successful businesses
No. 1, engage in purposeful planning. They’re specific in the results they’re trying to achieve, and they have a plan.
No. 2, they recognize the importance of devoting resources to creating future value.
No. 3, they work at creating the right culture and helping it sustain. If it’s rapid growth, there’s a tendency to hire someone to fill the bill; but successful firms resist that temptation.
No. 4, they understand the metrics behind the growth. What products and services are profitable for you?
Lee: Successful companies tend to have never forgotten what it is that made them great. There’s something they’re the best at. There’s a tendency during times of growth that make you distracted, but you cannot lose sight of what your competitive advantage was and still is.
Moshe: The single most important thing to fuel my growth is to get the right people on the bus. People who share my core values and first I had to figure out what those values were. I look back to when I was riding my bike around Eau Claire, going to people’s houses to help them with their computers. And they’d want me to go home and do my homework. I realized my core value was caring.
Ortner: It starts with the people. The reason we’ve been able to sustain the growth is the people, but also having the vision about where you want to go. It starts with the team, and then having that shared vision and communicating it all the way through the organization.
Siders: Owners need professional management processes. Entrepreneurs typically manage their business emotionally. The owner needs to make himself or herself disposable, so the business can operate without the owner.
Brimacomb: OK, now the flip side: What obstacles stand in the way, to keep owners from growing their companies successfully?
Siders: The biggest obstacle is not scaling your infrastructure. If you only rely on the owner your business is fragile.
Ortner: The biggest obstacle to growth is confusing and over-burdensome government regulations. My apologies to any government regulators in the room.
Moshe: The shift in my mind from thinking of TechGuru as a tech company to thinking of it as a marketing company that happens to be great at technology. Making our company act that way had a significant effect on our growth. Reframing what we are and what we do, and learning how to do marketing—that helped a lot.
Lee: It’s emotional. The emotions of the business owner who had worn all these hats. It was a point of pride for the owner, and a point of comfort for the staff, but it evolves to where it’s scary, and then it’s the emotion of letting go.
Emery: Not recognizing that owners have limits on their skill sets. Realizing you need to manage teams and processes. Also, access to capital is an obstacle. It’s important to develop banking relationships before you need capital, because when you need it, you won’t be able to get it.
From the audience: The thing I’m hearing is systems. What would you say to that entrepreneur that gets it, but can’t seem to get there?
Lee: I had a conversation with a business owner the other day, who got it, but he was paralyzed with how to do it. Are you going to have a short-term consultant or hire a long-term employee to solve this? That’s a good question to ask. I’d say call your banker because they don’t charge by the hour.
Siders: Most entrepreneurs are control freaks. I tell them, let’s put a list together of everything you do, and start with everything you love to do and then list everything you hate. At the bottom of the list, with everything you hate, that’s where you start with your next hire.
From the audience: In this day and age of technology, what are tricks of the trade so everyone in your company can be on the same page?
Moshe: The new generation of workers likes to work on their own terms. Googledocs and Dropbox are two examples of things that allow everyone to do this. I advise people to dump their servers and focus on apps and tools that are based in the cloud. Chances are if there’s a mobile app for that the new generation will like it.
From the audience: What’s your recommendation for CRM or customer relationship management software?
Moshe: There are a lot of great tools, such as Nutshell, which is easy to use and helps provide insights. Here’s the great thing about a lot of tools. A lot of these tools have free trials, so play with it and try it out. See what works for your workplace.
Look at the tools you’re already using, and find tools that are made for that. Also, aim for consistency in how your team sets up things like signatures, to make sure every experience your customers have is branded.
Brimacomb: How can a business owner know if the company has outgrown its technology?
Moshe: There are ways to listen for it. Listen to your employees, what they’re saying about their work. For example, duplicate data entry, re-working things. There are ways to automate, streamline and simplify that don’t require you to be a programmer.
Ask your technology expert if there’s a better way to do it, and chances are there is. Value your time and the time of your employees at their true cost, and you can better see the value of technology.
Brimacomb: We’ve heard from Dan Moshe about technology, now let’s hear from each of you about your vertical area of expertise. Scott Emery?
Emery: It’s important to consider the type of business for tax and liability issues. If you plan to finance a business with outside investors, you should have a pass-through entity like an S corp or partnership. Also, moving from single to multiple owners is a big change.
But the most important document is a buy-sell agreement.
It provides a road map upon the occurrence of certain events, like death, disability or divorce. It provides a protective mechanism when something happens. But be sure to fund the mechanism as well, with life insurance.
Brimacomb: What are other legal questions for rapidly growing companies?
Emery: How are you going to fund the expansion? Will you look at accredited or non-accredited investors? If you’re expanding in other states or countries, what are the regulations? If you’re bringing on new employees, do you have the proper agreements in place, such as confidentiality agreements and non-solicitation.
Brimacomb: For our banker, if you’ve met a borrower, and the borrower goes away, what do you and your team do afterward? Pull back the curtain for us.
Lee: That’s highly classified information. I can’t talk about it. (laughter) It is almost always a good story, when you hear from a business owner, a prospective borrower. They’re good at telling that story. We try to step back and say, is there more than a good story? Is there information backing that up?
I read in Upsize magazine, someone said the best managed companies have the best information, and that’s true. One common mistake is the hockey stick projection and that’s it. You have to have the up and down scenarios. What will you do if something goes wrong?
Be prepared for questions, and don’t be offended.
Another theme is, what kind of growth are we talking about? Is it limited to the top line, or is there bottom line growth, too? We pay attention to profit margins.
Another question we ask is, what kind of customers are you gathering? What do your existing customers think of your rapid growth? Are you losing two customers for every new one you acquire?
Does the rapid growth make you more or less credit-worthy during the term of the loan? Maybe you need a different type of capital—some senior debt and some equity, for example.
Brimacomb: How does an owner measure items in a way that helps their growth?
Siders: The best analogy I have, say it’s a sunny afternoon and you’re going to drive from your office to your home. You don’t need much information; you could do that in your sleep almost. Now, you’re going to rapidly grow your business, so it’s like flying your airplane. You need to know the information and how to measure and monitor all the dials.
Brimacomb: What attributes are buyers looking for, when they look to buy your business?
Siders: Let’s look at two identical businesses. One, the owner spends 12 weeks in Arizona every year, the other works 70 hours a week and can’t even go to the bathroom without their laptop. The former is going to be far more desirable to a buyer.
No. 1 is a stable, motivated management team so the business runs without you.
No. 2 is documented processes. 3 is a diverse customer base. 4 is effective financial statements and controls. 5 is a good and improving cash flow.
Brimacomb: What surprised you about growth, when running your companies?
Ortner: The opportunities that come along. We think it’s important to be flexible and agile, or you’ll miss out on opportunities.
From the audience: How do you select from those opportunities, to be sure you’re investing in the right things?
Ortner: We have a management team of eight people, and when those opportunities come up, they’re vetted throughout the organization. If we’re merging with others, we look at the culture fit and is it complementary to what we do. We try not to jump at bright and shiny objects.
We’ve also learned to sell more of our best-selling product. We learned to really play in our own sandbox. For example, we’re really good at managing single-family homes, and not multi-family, so we focus on single-family properties.
Brimacomb: What’s one takeaway you can share with the audience, about managing a rapidly growing company?
Emery: Develop and work with your management team.
Lee: Look for ways to avoid unnecessary complexity. If there are ways to simplify your business, that’s a good thing. Ask your rank and file employees for ideas on how to do this.
Moshe: Delegating and elevating. I made a promise in January, to not do anything I suck at anymore. I hired a CFO and an assistant. This is a great idea.
Ortner: Figure out what you’re good at, and have a plan for yourself so you’re working on your business, not in your business.
Siders: Plan your work and work your plan.
[contact]
Rick Brimacomb,
Brimacomb + Associates and Club E: 612.803.3169;
rick@brimacomb.com;
www.brimacomb.com
Scott Emery,
Geck Duea & Olson:
651.762.7797;
scottemery@gdolaw.com;
www.gdolaw.com
Todd Lee,
Bell State Bank & Trust: 952.905.5001;
tlee@bellbanks.com
www.bellbanks.com
Dan Moshe, TechGuru:
612.235.4895;
dan@techguruit.com
www.techguruit.com
Kevin Ortner,
Renters Warehouse:
952.224.9597;
kevin@renterswarehouse.com;
www.renterswarehouse.com
Tom Siders, L. Harris Partners: 952.944.3303;
tom.siders@lharrispartners.com;
www.lharrispartners.com
