Jon Cassens Lends CPA Guidance to “Upsize Magazine’s Growth Challenge” Business Owners

The Growth Challenge is a contest created by Upsize Magazine, and facilitated in partnership with Club Entrepreneur, to match business owners with industry experts to reach their business goals. Learn more...

Jon Cassens October 11, 2017

Upsize Minneapolis - Minneapolis CPA Firm

Jon Cassens was part of the panel of business advisors for this year’s Upsize Growth Challenge, offering his expertise and experience related to accounting, tax and business financial management.

The Growth Challenge is a contest created by Upsize Magazine, and facilitated in partnership with Club Entrepreneur, to match business owners with industry experts to reach their business goals. Also a participating in the panel were Melissa Johnston, VP Business Banking with Highland Bank; Dan Moshe, CEO with Tech Guru; and Dean Willer, attorney with Winthrop & Weinstine.

Below is an reprint of the Upsize Article, tips and advice. For the full article, click here to be redirected to Upsize Magazine. Photo credit: Jonathan Hankin

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This year’s Upsize Growth Challenge participants were DataTrec and Hennes Art Company. 

Brian Anderson, CEO of Eagan-based DataTrec, started Anderson Cargo 27 years ago. The specialty logistics provider made a career out of focusing on unique services to clients with very specific needs.

DataTrec Story and Advice from the Panel

DataTrec formed to focus specifically on moving high-value electronic gear that is not packaged from one location to another for businesses of any size or location “which changed the dynamic considerably,” he says.

“Because the valuation of the equipment went up into the millions and the value of the content, from operating systems, client lists, and credit card information to (health insurance privacy laws), made security and chain of custody issues much greater. We continued to do that and we got pretty good at it.”

So, with a website and a sales rep, DataTrec was formed. The company has built several custom containers to assist with the moves. The competitors are bubble-wrapping and boxing, he says.

“You can imagine, if it was your business, the anxiety that resides when you do that,” Anderson says. “You’re taking your whole system down. Are we going to be able to log in Monday morning? What’s the cost if we can’t log in? It’s a huge stress that reaches the CEO suite.”

Anderson declined to identify DataTrec’s clients but says that several well-known companies locally and beyond have used the service and are “amazed” at the result.

So, what’s the challenge?

Now Anderson believes the company has built the momentum and expertise it should utilize to build market share across the country before competitors — currently van line, moving and storage companies — catch on.

Nobody owns the market, which Anderson says is estimated at about $750 million. But the market is changing fast. Security concerns are causing companies to move servers to colocation facilities. We’re at the early stages. He thinks with aggressive growth DataTrec can capture $50 to $60 million in four to five years.

“We need to go to the market and find money and take it out to 20 cities,” he says.
Upsize Growth Challenge Experts love Anderson’s business, but also wondered if he might want to focus on a specific niche. Right now the company will move data centers for large or small companies anywhere in the U.S. or even the world, and it’ll do it fast.

Dean Willer, an attorney with Winthrop & Weinstine, suggested determining whether his target was large businesses, which sales people could target without necessarily expanding into other markets, or small businesses, which might take the direct contact that would come from establishing a presence elsewhere.

When asked by the experts whether the greatest opportunity was national growth or doing moves for local companies, Anderson indicated that going national after large companies has more upside and “would be your steady churn” while business for smaller firms would also likely develop along the way.

“It seems to me the strategy is dependent on the customer base,” Willer says.
Dan Moshe, founder of TechGuru says he might even want to focus on a specific industry, as his own firm did recently. “Everything is easier since we became more focused,” he says.

Jon Cassens, a director with DS+B | CPAs + Business Advisors, told Anderson he should consider partnering with potential competitors, paying them a referral fee, and having them do the physical marketing in other markets. “You can still have your physical marketing,” he says. “Your capital investment is much less. “

Regardless of the decision, there are banks, venture capitalists and angel investors out there looking to invest in companies like this, says Melissa Johnston, business banker with Highland Bank. “Work with someone internally or externally to build your financial plan and then find the right investors,” she says.

Greg Hennes is president and CEO of Hennes Art Co., which customizes art programs for corporate, hospitality and healthcare companies. It’s his second foray into the corporate art consulting business.

Hennes Art Co., Story and Advice from the Panel

Greg Hennes started Art Holdings in 1989, building it up to about 60 employees and $8 million in revenue before selling in 2009. When he got back into the business and founded Hennes Art Co., his intention was to keep the company small. “I wanted to be able to run my business on a laptop from a boat,” he quipped.

He was doing $400,000 to $500,000 in sales per year out of his house. Since moving into a showroom space three years ago, however, his sales have been growing at 60 percent per year. He hired his first employee last year and is now up to five. Revenues should approach $1.5 million this year and he’s looking to hire a business development person to flesh out potentially another $1 million in projects that he has been unable to act on so far.

The company works from an 11,000-square-foot facility near the Minneapolis Farmers Market. There they do smaller custom framing jobs. Production for the company’s more volume assignments is outsourced.

So, what’s the challenge?

While the company’s growth is strong, everything Hennes Art does is extremely manual. He can supply almost anything. Online vendors have millions of images available and local artists can customize several projects that can be made suitable for his clients and presented in different ways.

But with this company and his previous one, he’s worked with several web development firms to come up with a project management software that would automate the process for his clients in an easy to use way online.

To date he’s been unable to find a developer who could design a program that worked.
“I’m willing to spend the money to create a system that will really help us grow without adding a lot of overhead,” Hennes says. “I’ve presented this to a handful of web development firms and they all say it’s going to cost $100,000 and it might not work. That’s where I’m gun shy.

His competitors are companies like Crate and Barrel or West Elm. They have shopping carts on their websites and designers are gravitating toward that. He says if he could come up with an online tool to compete with that, he could do the art in higher quality framing for less money.

“If we can offer that kind of a service we would probably double our sales almost overnight with our existing client base,” Hennes says. “It would allow us to go after more national design firms. Right now we sell regionally and deliver nationally.”

The Growth Challenge Experts agreed Hennes he should take another look at what management programs are already on the market that could be repurposed for his needs, so he could save on cost. TechGuru’s Moshe says $100,000 is a lot of money for a small business.

“For every industry, I’ve found there is something out there,” he says.

Moshe and other experts noted, however, that while automation might be Hennes’ main goal, he might want to focus on his staffing instead. Having a tech person on staff might help find that application he needs, Moshe says.

Given the presence of a significant backlog of projects, Winthrop & Weinstine’s Willer indicated he’d focus on hiring a business development person.

“I’d be developing as much as I can now so you can broaden your customer base while it’s affordable to hire someone for $150,000 to $200,000,” he says. “It’s an expensive hire but the person is going to do a lot of work for you.”

Johnston, from Highland Bank, agreed and suggested that Hennes find a recruiter.

“If you find the right recruiting firm, someone who can specialize in the creative world, they are going to have the right filters and the right contacts to give you,” she says.

And DS+B Cassens adds that while automating some of his processes might make sense, Hennes must make sure he maintains personal relationships with clients.

“A differentiator is your hands on, one-on-one with these developers or with that design person,” he says. “That’s something you don’t want to lose.”

How DS+B Can Support Your Growing Your Business:

DS+B is a professional services firm with 60+ years of proven experience helping growing businesses manage complexity and reach the next level in their business. As a team of CPAs and business advisors, we provide a connected, proactive and accessible team to streamline your accounting, tax and business advisory needs – so you can spend more time focused on growing and strengthening your business.

For questions or to get started, contact Jon Cassens, Director of Business Services.