Advancing a business beyond the start-up stage – Lessons and anecdotes from ripening area business owners
Story by Sean Fitzgerald
EVERY LONG-TIME BUSINESS OWNER KNOWS that getting a new company up and running is one behemoth challenge. But keeping a business going for five years, seven years and more – and taking that business to new heights of product and service delivery – is an entirely different challenge in and of itself.
In many respects, those failed businesses that do well in their first two years but aren’t around for their 5-year or 10-year anniversaries fall flat due to a lack of preparation to advance to levels of service beyond the start-up stage. In the same light, a number of other business owners fall prey to complacency, resting on their laurels to keep the business running “as it always has.”
But advancing a business beyond the start-up stage often isn’t cheap, easy or free of stress and risk. What follows are the stories of a handful of northeast Wisconsin entrepreneurs who risked their start-up success and made the leap to the next stage of growth in recent years.
Growing by acquisition
TOWARD THE END OF 2009, nearly four years after launching Menasha-based Stellar Blue Web Design, the team of three partners who operated every aspect of the business since its launch in January 2006 were at a crossroads. The firm continued adding new clients – at an average rate of two to three a month at that point – and found themselves working nearly around the clock to keep up with client demand.
“We were working 80-hour weeks, and we were wondering ‘Now what’s the next step – we can’t keep working like this,’” said Jim Dobinski, managing partner for Stellar Blue.
At that point, he and partners Dustin White and Cathy Wunrow agreed they would take the next big step in entrepreneurial development – adding their first non-owner employee at the beginning of 2010.
Adding a fulltime marketing specialist this past January, Dobinski’s time was freed to better manage the growth and administration of the company. Tasks like bookkeeping, taking care of insurance, and meeting with financiers had been divvied up among the three partners since before Stellar Blue even got off the ground. Now Dobinski could spend more time keeping the management of the business together. And White could focus more specifically on programming. And Wunrow on design.
“Our roles are defined more than they were before,” Dobinski said. “I think there’s more of a process for everything we do as a business now.”
Then this past February, Dobinski took a call from the owner of Com Resources looking to sell her company. Stellar Blue wasn’t looking to acquire any business at the time, but with a new employee on board, Dobinski and his partners couldn’t resist the opportunity. Admittedly moving forward with less due diligence than they should have conducted, they closed the deal on their first acquisition in March.
“That was one phone call, and six weeks later, we had 70 new clients,” Dobinski said.
With a new fulltime graphic professional on board in late August and two interns who work on programming functions for Stellar Blue’s clients, the company is poised for even further growth. So far in 2010, Stellar Blue’s receipts are up 30 percent over the same period in 2009, Dobinski said, and the firm is looking at a handful of other acquisition possibilities later this coming year. It’s also looking to take a more aggressive approach into the Green Bay market in upcoming months.
“We feel we can take on anything that comes our way now,” Dobinski said.
All of this growth and change has meant the business has had to upgrade its own professional resume as well. This past year has been somewhat of a crash course in human resource management for Dobinski. He’s written the company’s first ever employee handbook, designed an employee benefits package, and learned the delicate art of conducting payroll.
Stellar Blue doesn’t have a common office. Rather, it’s created a workplace culture in which staff work from their individual homes. Staff communicates with one another throughout the day with messaging, email and phone calls, and holds virtual meetings at least twice each week through phone and video conferencing. It’s a culture Dobinski hopes to keep intact as the company grows further.
Dobinski credits business advisor and longtime mentor Gary Vaughan of Guident Business Solutions with the direction and encouragement to work through each stage of the company’s growth. Vaughan has also helped pull in the reins when Dobinski became a bit too eager and aggressive, providing some sobering reflection to help ensure Stellar Blue had all of its ducks in a row.
Now that advice is paying dividends as Stellar Blue looks to capture larger markets.
ALLOWING A BUSINESS TO GROW, shift and change shape as the needs of the market dictate can be tough if it means deviating off course of a strategic plan, but sometimes it can lead to unimagined possibilities with better-than-expected results.
That’s been the case for 44 Degrees North Advertising and Design, an Oshkosh-based creative firm that started out in 1988 as a business management and marketing consulting agency. Owner Diane Penzenstadler had been there since the beginning, and bought the business outright from the founder on Jan. 1, 2000.
“This has evolved and changed so many times, it doesn’t even feel like the same business anymore,” said Penzenstadler, who changed the name of the firm back in 2007 from Creative Management and Marketing Resources, the moniker it had held from the launch of the business 19 years earlier.
At the time, there were very few resources available for small to mid-sized businesses to help improve their operations management and visibility in the market without breaking the bank. Penzenstadler worked part-time on the marketing side of the consultancy, working only as needed as the business grew, taking on more clients while some of its longstanding clients needed even more time and services from the firm.
By the late 1990s, the firm had steered its focus almost exclusively toward marketing and had hired its first employee – a part-time designer – to allow then-CMMR to enhance and expand its design capabilities for clients. At the same time, business had grown to a point where she was working fulltime, and made the leap to buy the business outright.
Five years later, Penzenstadler had expanded to two fulltime graphic designers and was looking into the prospect of dabbling in the events business, building off of existing client requests to help put together open houses, corporate parties and other important engagements.
Though Penzenstadler considers herself a “tortoise” and “a slow grower” when it comes to her approach to managing a business, she took a few giant steps forward in 2007, moving the firm’s longtime offices, changing its name, and hiring a fulltime account representative to go out and build clients for 44 Degrees North.
“Some of it is risk, and some of it is a leap of faith,” Penzenstadler said. “That’s what entrepreneurs do. If you play it safe, you’re never going to grow.”
At this point, 44 Degrees North has grown to a staff of six employees. It’s event planning entity – Encore Event Planning – has taken on a life of its own, and the firm is currently planning a wedding show later in the year. Penzenstadler attributes her growth not only to the efforts of her own staff, but to the team of resources she surrounded herself with more than 10 years ago: a lawyer, accountant, banker and insurer.
“Wise is the person who recognizes their own strengths and weaknesses,” Penzenstadler said. “I’m smart enough to know what I don’t know, and know that I need outside help from a professional.”
A staple of Penzenstadler’s business management philosophy is to keep a diverse mix of business and industry in her client portfolio. During the past 22 years, she’s already endured a handful of economic downturns, and learned the lesson that when business is down with one client, it might be a perfect opportunity for another client to increase its marketing presence.
“I’ve worked really hard not to have all of our eggs in one basket,” she said. Upon acquiring the business of a large manufacturer in the region a few years back, Penzenstadler “worried about getting sucked into the machine,” using a disproportionate amount of her firm’s resources to make that client happy at all costs. To her credit, she’s maintained a balance of staff time and other resources to meet all of her clients’ demands as each of those businesses have grown. And she’s been ready to respond to those clients’ needs, however unconventional they might sometimes appear.
“You have to be adaptable, flexible and willing to change up. It’s the way the world is going,” Penzenstadler said.
Growing out of state
APPLETON-BASED APPETIZE INC. has been quite the hit with its customers since opening its first Hu Hot Mongolian Grill restaurant on College Avenue in Appleton in February 2006.
But owner and president David Lindenstruth didn’t open the first restaurant with thoughts of resting on his laurels and banking on the income from just the one restaurant. With ownership of the franchising rights to most of Wisconsin, he set out to open a second restaurant in Green Bay in 2008.
It was about that time Sara Kranpitz joined Lindenstruth as an assistant in the company’s head office, which was roughly a 12-foot by 12-foot room in an office building off of College Avenue. The company had about 100 employees between the two restaurants, and Lindenstruth had his sights set on further growth.
As the company looked to open Madison and Kenosha locations later in 2008 and into 2009, Kranpitz would help out with the project management of building, staffing and opening the new restaurants. Now the corporate controller for Appetize Inc., Kranpitz is running much of the operations for the company which has four Hu Hot restaurants open, one in Eau Claire opening this fall, and another in Lafayette, Ind. scheduled to open before the end of the year.
While Kranpitz was thrown into the fire for the Kenosha project to learn the finer points of acquiring a health permit or a sign permit from the city, as examples, Appetize’s move outside of Wisconsin seems almost like setting up shop in a foreign country. Appetize earned the franchising rights to most of Indiana, and had to learn the ropes mostly through trial and error.
“It’s been quite a learning experience,” Kranpitz said. “I had no idea that states could be so different in their regulation.”
For example, the company is required to have a registered agent in the state. Getting a liquor license isn’t as easy as applying to the local municipality. Liquor licenses are awarded through state government, Kranpitz said, “and they highly recommend getting an attorney for that process.”
In addition, Appetize will have to register for a separate employer identification number in Indiana. It’ll have to learn and implement the local sales and use taxes into its automated point-of-sale systems. Indiana has different human resource and employment laws than in Wisconsin. Tax structures and reporting requirements are different for employee income taxes and unemployment insurance. Kranpitz and Lindenstruth needed to learn it all from scratch.
Fortunately, the state restaurant associations in both Wisconsin and Indiana have been useful allies along the way. Kranpitz said they’ve provided helpful information payroll and employment law compliance.
Additionally, hiring management and watching over the operations of a location two states away isn’t as easy as jumping in the car to drive down to Madison for the day, then drive back that same night. Kranpitz said Appetize is already preparing to boost its corporate travel budget in 2011 so that her, Lindenstruth, or others from the now multi-office headquarters of Appetize can spend some time to get to know the Indiana market better.
After all, the company is eyeing up additional opportunities in other mid-sized markets in Indiana for late 2011.
Sean Fitzgerald is the publisher of New North B2B.