spring 2007 iq magazine

Cover1.IQ.Spring07 3/7/07 2:38 PM

MMIINNNNEESSOOTTAA’’SS 44TTHH OOFF JJUULLYY CCAAPPIITTAALL

June 28thLITTLE MISS AND MISTER4TH OF JULY PAGEANT

Westgate Mall,Sponsored by Riddle Jewelryand Dairy Queen

June 29thRIGHT FRIENDS PICNIC

Camp Confidence,Sponsored by the Jack Mehaffey Family

BATTLE OF THE BANDS

Don Adamson Football Field,Sponsored by Youth As Resources

SHOW N’ SHINE

The Body Works,Sponsored byStreet Merchants Auto Club

June 30thMISS BRAINERDSCHOLARSHIP PAGEANT

Tornstrom Auditorium

June 30th and July 1stPOHLKAMP/STRUTHERSSOFTBALL TOURNAMENT

Memorial Fields

July 1st33RD ANNUALARTS IN THE PARK

Gregory Park

July 2ndBRAINERD LAKESVETERANS CENTER GOLFTOURNAMENT with THERED, WHITE, AND BLUE THUNDER - SUPPORTOUR TROOPS DAY

Mills FieldBLUE THUNDER VS. DULUTH

July 3rdGOSPEL NIGHT

Heritage Assembly of God Church

July 4thTHE AMERICAN CELEBRATION

Don Adamson Football Field

Noon - Free Corn on the Cob Feed,Sponsored by Brainerd Jaycees

4:00 P.M. — Parade6:30 P.M. — Entertainment10:00 P.M. — National Anthem10:15 P.M. — Fireworks, Sponsoredby the City of Brainerd, the City ofBaxter, and the Brainerd/BaxterLodging Association

July 7thRACE FOR THE CURE

Forestview Middle School

BBRRAAIINNEERRDD BBAAXXTTEERR

Cover2.IQ.Spring07 3/5/07 4:24 PM Page 1

MN LIC 0002599

2006 State ABC Award of Excellence WinnerBrainerd Lakes Area / 888-829-0707 / www.kuepers.com

SE

H B

uild

ing,

Bra

iner

d

SUPPORTING COMMUNITY GROWTH

Revitalizing Downtown Brainerd, MinnesotaLocated in the heart of Brainerd’s civic and business districts, the new SEH office building is theresult of a partnership between both private and public sectors with one common goal—the revi-talization of downtown Brainerd. The building has brought new life into this city block, offeringmodern amenities while maintaining the architectural integrity of neighboring historic buildings.

01 IQ.Spring07_1-9 3/1/07 11:35 AM Page 1

2 INITIATIVE QUARTERLY

CONTENTSFEATURES

10Sponsor Silhouettes

14EntrepersonalityAre You Hard-Wired forBusiness Ownership?

18Inside the VaultThe Guarded Secretsof Business Planning &Financing

24ProfitizingWhat Does the FutureHold For CentralMinnesota’s GrowingEntrepreneurs?

28Friendly FireHow Your HometownCan Ignite theEntrepreneurial Spirit

DEPARTMENTS4 BeginningsWeavings

6 MythologyArtificial Intelligence

8 Credit ScoresWhere Credit is Due

10 Sponsor Silhouettes

32 Small BusinessResource Guide

36 InitiativesFloating A Loan

SPRING 2007

“You, Incorporated”Illustration by Chris McAllister

38 Race MattersCultures of Business

42 Angel InvestingAngels Among Us

46 KeyNotesThe Foundation Newsletter

52 Guest EditorialLong Live the Entrepreneur

COVER• Strengthen Children,

Youth, and Families• Promote Economic Stability

• Preserve Space, Place, and Natural Resources

• Build Capacity of Nonprofit Organizations

• Embrace Diversity & Reduce Prejudice

• Increase Utilization of Technology

“Our mission is to unlock the potential of the people of central Minnesota to build

and sustain healthy communities.”

INITIATIVE FOUNDATION FOCUS AREAS

C A S S

C R O WW I N G

M O R R I S O NT O D D

W R I G H T

BENTON

S H E R B U R N E

I S A N T I

C H I S A G O

S T E A R N S

WADENA

P I N E

K A N A B E CM I L L EL A C S

ST. CLOUD

BRAINERDBAXTER

CAMBRIDGE

LITTLE FALLS

NORTHBRANCH

SARTELL

BIGLAKE

ELKRIVER

ST. MICHAEL

BUFFALO

MONTICELLO

SAUKRAPIDS

WAITEPARK

Nisswa

Wadena

Menahga

Long Prairie

Melrose

Sauk Centre

Paynesville

Cold SpringZimmerman

Albertville

Rockford

Delano

Montrose

Maple LakeAnnandale

HowardLake

Cokato

Albany

St. Joseph

Foley

Pierz

Crosby

Sandstone

Mora

Milaca

Princeton

Braham

Isanti

Stacy

Wyoming

Chisago City

Lindstrom

Pine City

Rush City

Crosslake

Wilkinson

Leech Lake

Walker

Ah-Gwah-Ching

Onigum

Whipholt

Brevik

Hackensack

Longville

Inguadona

Boy River

Federal Dam

Bena

Schley

Tobique

Remer

Nickerson

Duquette

Kerrick

Bruno

Kingsdale

Cloverton

Duxbury

Cloverdale

Markville

Denham

Ellson Willow River

Rutledge

FinlaysonAskov

Groningen

FrieslandKroschelWarman

Quamba

Ogilvie

Bock

Foreston

Pease

Long Siding

Carmody

Dalbo

Day

Springvale

Walbo

West PointBradford

Bodum

Weber

Blomford

Edgewood

Spring Lake

Stark Harris

Sunrise

Almelund

PalmdaleCenter

CityShafer

Taylors Falls

Franconia

Rush PointGrandy

Stanchfield

Oxlip

Crown

SpencerBrook

Pine BrookWyanett

Estes Brook

Glendorado

OakPark

Ronneby

Duelm

CablePalmer

Clear Lake

Hasty

Enfield

Silver Creek

Waverly

OsterRice Lake

HighlandAlbright

Knapp

Georgeville

Belgrade

Brooten

Elrosa

Padua

Sebeka

Blue Grass

Leaf River

Verndale

West Union

Stockholm

Albion Center

WestAlbion

FrenchLake

Becker

Orrock

Santiago

Coin

Brunswick

Hinckley

Beroun

Henriette

GrasstonWest Rock

GreeleyRock Creek

Brook Park

Sturgeon Lake

Opstead

Isle

WahkonBayview

Cove

Onamia

Hillman

Harding

LastrupFreedham

Genola

Buckman

MorrillRamey Granit

LedgeBrennyville

Novak's Corner

JakevilleGilman

RumRiver

Little RockRoyalton

Gregory

Darling

Randall

Cushing

Lincoln

Browerville

Motley

Philbrook

North Prairie

BowlusElmdale

Burtrum

Round Prairie

Little Sauk

GutchesGrove

Clotho

Clarissa

Eagle Bend

Bertha

Hewitt

Grey Eagle

St. Rosa

St. Francis

St. WendelSt. Anna

AvonCollegeville

St. Anthony

Freeport

NewMunich

Greenwald

Meire Grove

Spring Hill

Lake Henry RoscoeRichmond

FarmingSt. Martin

St. Nicholas

Eden Valley WatkinsKimball

Maine Prairie

Marty

Luxemburg

St. Augusta

Clearwater

Rockville

Jacobs Prairie

Fair Haven

South Haven

St. Stephen

Rice

Watab

Mayhew

SilverCorners

PoppleCreek

OpoleHoldingford

Ward Springs

Swanville

SobieskiFlensburg

Upsala

Vineland

Huntersville

Nimrod

Oylen

Aldrich

Leader

Pillager

Oshawa

Backus

Pontoria

Pine River

Jenkins

Lake Shore Lake Hubert

Legionville

Merrifield

E Gull Lake

Fort Ripley

Camp RipleyJunction

Barrows

Shephard

Pine Center

Garrison

Bay Lake

DeerwoodIronton

Riverton

TrommaldCuyuna

Pequot Lakes

Breezy Point

ChickamawBeach Swanburg

ManhattanBeach

Fifty Lakes

Outing

Emily

Cass Lake

01 IQ.Spring07_1-9 3/7/07 2:47 PM Page 2

Twenty years ago, how valuable would it havebeen to know the trends that shape ourworld today? Would you have taken the samepaths? Would your business and communitybe different or better?

In a bold effort to educate leaders, theCenter for Strategic and International Studies(CSIS) in Washington, D.C., predicted sevenrevolutions that will drive global changethrough 2025. Rooted in research, each trendembodies both promise and peril.

CSIS Vice President Erik Peterson will deliverthis sought-after presentation, followed by apanel discussion and brainstorming on localimpacts. As a community leader, your ideaswill shape how our region will take action.

Inject future-focus into your organization.Bring your leadership team and register today.

FRIDAY, APRIL 139 A.M. to 2:30 P.M. I St. Cloud Civic Center I $55

w w w. i f o u n d . o r g / 7 Rto register by April 1

01 IQ.Spring07_1-9 3/1/07 11:35 AM Page 3


Welcome to morning. You take an unhurried walk in the damp woods. The wind andwilderness carry your thoughts back to you. The coffee is the best you’ve ever tasted. As the sunbreaks over the trees, it warms your shoulders like a soft blanket.

Aspiring entrepreneur and artist, Deb Shaffer, strummed at her loom and deftly wove thatmoment into a display piece that stole a half-breath away from me. Entitled “Woods in Chime”

and measuring three-by-six feet in majestic bluesand purples, it was one of those things you wishyou could see every day.

For a brief moment, the weaving captured mycuriosity as we were touring Initiative Foundationprojects in the Isle area.

Isle is earning second-looks for the way it sup-ports local entrepreneurs and develops its economyfrom the inside out. Depot Studios, one of our tourstops, serves as a retail laboratory for artistic entre-preneurs like Deb to test the marketplace. Thismakes for a stronger economy, tighter relationships,and a unique hometown identity that attracts visi-tors and new residents.

This issue of IQ is for Deb and all of those who have dreamed about starting a business, butwondered what it takes to do it. It’s also for community leaders who wish to better understandthe unique needs of entrepreneurs and the elements needed to build a hometown culture thatshares in their success.

As I discovered on Christmas, entrepreneurial cultures also have personal benefits. Aftera subtle hint to Neal (as he feigned husbandly disinterest), the woven piece found its wayunder the tree and eventually over my stairwell. With entrepreneurship, you see, everythingis intertwined.

Enjoy the magazine!

Kathy Gaalswyk, PresidentInitiative Foundation

P.S. For the first time ever, IQ will showcase four sponsors who share the foundation’s commitmentto strong local businesses and quality jobs. Please see pages 10–13 for silhouettes of VentureAllies/Granite Equity Partners, Great River Energy, Harold Anderson Entrepreneurial Center, and ourGreen Business Loan Fund.

WeavingsDear Friends,

BEGINNINGSBrainerd Lakes Area

Development Corporation

WE HELP

MAKE IT

HAPPEN.

(218) 828-0096

(888) 322-5232

www.bladc.org

If you’re ready to:� start a new business, � expand an existing company, or� relocate your business to the

beautiful Brainerd Lakes Area,

make BLADC your first call!

The Brainerd Lakes AreaDevelopment Corporation helps new and expanding

businesses find the resourcesthey need to succeed.

01 IQ.Spring07_1-9 3/7/07 2:47 PM Page 4

SPRING 2007 5

INITIATIVE FOUNDATIONExecutive Editor & Director of Communications / MATT KILIAN

Communications Associate / ANITA HOLLENHORST

PUBLISHERSEvergreen Press / CHIP & JEAN BORKENHAGEN

EDITORIALEditorial Director / JODI SCHWEN

Assistant Editor / TENLEE LUND

ARTArt Director / ANDREA BAUMANN

Art Director / BRAD RAYMOND

Senior Graphic Designer / BOB WALLENIUS

Production Manager / BRYAN PETERSEN

Lead Photographer / JIM ALTOBELL

ADVERTISING / SUBSCRIPTIONSBusiness & Advertising Director / BRIAN LEHMAN

Advertiser Services / MARY SAVAGE

Subscriber Services / MARYANN LINDELL

IQ EDITORIAL BOARDInitiative Foundation President / KATHY GAALSWYK

Minnesota Business Finance Corporation / CAROL ANDERSON

Rinke Noonan / JOHN BABCOCK

Minnesota Department of Revenue / WARD EINESS

Glenn Metalcraft / GINGER GLENN

ClubMaxx / SCOTT GORDON

Initiative Foundation / CURT HANSON

Brainerd Lakes Area Development Corp. / SHEILA HAVERKAMP

Mid Minnesota Federal Credit Union / JULIE HOFIUS

Initiative Foundation / JOHN KALISZEWSKI

Great River Energy / TOM LAMBRECHT

Minnesota Rural Partners / JANE LEONARD

Northeast Entrepreneur Fund / MARY MATHEWS

St. Cloud Area Economic Development Partnership / TOM MOORE

Clear Path Investment Partners / MARTY MORAN

Pine Technical College / ROBERT MUSGROVE

Central Lakes College / PAM THOMSEN

Initiative Foundation / ASHLEY VARGO

Initiative Foundation / SANDY VOIGT

Initiative Foundation405 First Street SELittle Falls, MN 56345320.632.9255www.ifound.org

IQ is published by the Initiative Foundation in partnership with

Evergreen Press of Brainerd, Minnesota. www.evergreenpress.net

For advertising opportunities, contact:Lois Head 320.252.7348, [email protected] Lehman 218.828.6424 ext. 25, [email protected] Rothstein 320.251.5875, [email protected]

> VOLUME 4, SPRING 2007

Need a great healthcare provider? How about nearly 60 of

them. The medical staff at BMC has never been stronger.

And because our community is growing so rapidly,

BMC's technological strengths and numbers of medical

professionals are rising too. We're here for you, just as we

always have been, and always will be.

BrainerdMedical Center

Where talent and technology come together.™

218.828.2880 | 800.277.82622024 South Sixth Streetwww.brainerdclinic.com

There’s strength in numbers.

01 IQ.Spring07_1-9 3/7/07 2:49 PM Page 5


BY BRITTA REQUE-DRAGICEVIC

sultant with the Small Business Development Center in Brainerd.“Most people underestimate the time involved in owning and

running a business. They were used to delegating in their formerjobs. All of a sudden they have to wear all the hats, from washingwindows to bookkeeping. It’s not uncommon for entrepreneurs tobegin working when their employees go home.”

Conventional Wisdom: Many small businesses experienceovernight success.

Reality-Check: Expect setbacks, especially financial ones.

When they first get into business, many entrepreneurs shouldexpect to survive awhile without a regular paycheck. Doing sotakes planning.

“Seek advice and plan for the worst,” advises Greg Hohlen,vice-president of commercial lending at Bremer Bank in St. Cloud.

“Financial success rarely comes fast or easily,” he adds. “Whatyou need is a solid team behind you—at least an accountant,lawyer, and lender.”

Conventional Wisdom: Small business owners have unlimitedfreedom and autonomy.

Reality-Check: That depends on how you define freedom.

“I have eight hundred clients. That means I have eight hundredbosses,” says Les Engel, founder of Engel Metallurgical, Ltd., anengineering consulting company in St. Cloud. There are alsoresponsibilities to investors and lenders, employees and families.

“It’s like a rollercoaster on the ground,” he adds. “Sometimesthe phones aren’t ringing and we panic. Then all of a sudden every-body calls and we panic. You’ll definitely have a lot of people toanswer to.” IQ

ave you ever seen a circus performer spinning plates?Whirling wildly, he scampers from one to the next. Somekeep spinning; others shatter on the floor. Welcome to

the life of the new entrepreneur. Most admit they had no idea howmuch work, money, patience, and determination it would take tostart a business. Here’s a candid look at some common myths anddark truths about entrepreneurship.

Conventional Wisdom: Great ideas lead to success and money.

Reality-Check: Not always.

“Great ideas need a team with focus, follow-through, and com-mitment,” says Joan Wurzer, executive vice president of RAINSource Capital, an angel investor network. “If a founder is strongtechnically, finding a partner experienced on the business side cancreate a team that would be considered investable. We believe it isbetter to invest in an ‘A’ management team with a ‘B’ idea, than an‘A’ idea with a ‘B’ team.”

Conventional Wisdom: There are “free money” governmentand nonprofit programs available to start small businesses.

Reality-Check: In spite of those late-night television commer-cials, there is no such thing as free money. Period.

“Actually, the government does provide grants to help smallbusinesses,” says Melvin Aanerud, Supervisory Lender RelationsSpecialist for the U.S. Small Business Administration inMinneapolis, “but that money goes to Small BusinessDevelopment Centers,” not directly to small business owners.

“If the government had enough money to provide grants to every-one who wanted to start a business,” he says, “individual taxes wouldbe higher, we’d have significantly more small businesses than therewould be markets for them, and the economy would be in disarray.”

Conventional Wisdom: Owning a small business is easy workwith lots of time off.

Reality-Check: Entrepreneurs do get time off—when they’resleeping.

“I like to tell people they will only have to work half-days—either the first twelve hours or the second,” says Pam Thomsen, con-

HH

ArtificialIntelligenceDon’t Buy the Conventional Wisdomabout Small Business Ownership

MYTHOLOGY

ILLU

STRA

TIO

N B

Y C

HR

IS M

CALL

ISTE

R

01 IQ.Spring07_1-9 3/7/07 2:47 PM Page 6

SPRING 2007 7

01 IQ.Spring07_1-9 3/1/07 11:35 AM Page 7


have some bad news. We ran the credit check, but your scoreis too low. At this time, our bank must decline your businessloan application.”

Your mind reels and your heart sinks. Your would-be lender con-tinues on about improving your credit score, personally guaranteeingthe loan, and saving more money for the business. What? Is this real-ly how the system works?

The answer is yes. Many new entrepreneurs are surprised whenbanks don’t jump at the chance to finance their business ventures.Many are unaware that securing a business loan is much more difficultthan securing a home mortgage. Your personal credit is a major factor.

“How you’ve managed your personal credit is highly indicative toa banker of how you will manage a business,” says Catherine Jackson,president of Citizens State Bank of Waverly and a former InitiativeFoundation board member. “If you have past-due accounts, tax liens,or judgments against you, it will definitely make it more difficult orexpensive to get financing.”

A 2005 survey by the Consumer Federation of America and FairIsaac Corporation suggested that about half of American consumers donot understand that credit scores measure credit risk. Lenders usecredit scores as a crystal ball that reveals whether borrowers are likelyto pay back the loan.

Fair Isaac created the most popular FICO credit-score formula,which churns data from the three major credit bureaus (Equifax,Experian, and TransUnion) to compute individual scores ranging from300 to 850. The median U.S. FICO score is 723. The higher yourscore, the better investment you appear to be. FICO scores take fiveweighted factors into account: payment history (35 percent), amountsowed (30 percent), length of credit history (15 percent), new credit(10 percent), and types of credit used (10 percent).

James Brown, a veteran bank president who now runs GatewayFinancial Services in Walker, says all lenders consider the five C’s ofcredit: character, cash flow, capital, collateral, and conditions. Personalcredit is especially important for first-time entrepreneurs, because thatis the one of the few pieces of information available to lenders.

“Every commercial loan has to be personally guaranteed, whichmeans you are responsible for it even if the business fails,” says Brown.

Catherine Jackson,Citizens State Bank

of Waverly

BY BRITTA REQUE-DRAGICEVIC

Where Credit is DueHow Your Three-Digit Number Can Make or Break Business Financing

II

CREDIT SCORES

Pay your bills on time.

Delinquent payments and collectionscan have a major negative impact onyour score.

Pay down debt—Don’t just move it around.

Owing the same amount, but havingfewer accounts may lower your score.A closed account will still show up onyour credit report.

Have credit accounts,but manage them responsibly.

In general, having credit cards andinstallment loans will raise yourscore. Someone with no credit tendsto be higher risk than someone whohas managed it responsibly.

Don’t open new accountsjust to increase youravailable credit.

This approach could backfire andactually lower your score. Rapidaccount buildup can also look risky.

Check progresson your credit report.

Contrary to popular belief, this won’tlower your score, as long as you orderyour report directly from one of thethree credit bureaus or a reputablemonitoring organization. Visit annu-alcreditreport.com to get free reportsfrom the three credit bureaus, or payto get your actual scores.

Settling the ScoreCredit Improvement Tips

Source:Fair Isaac Corporation, myfico.com

“

01 IQ.Spring07_1-9 3/1/07 11:32 AM Page 8

SPRING 2007 9

“You have to remember that bankers havea primary duty to protect their depositors’money. They are highly regulated by feder-al, state, and institutional policies. Abanker may very well want to give you aloan based on his faith in your businessplan or character, but policies may notallow him to do it.”

Even if a bank does take a chance ona borrower, a borderline credit score gen-erally incurs a higher interest rate to com-pensate for the greater risk. This can addhundreds of dollars more per month andthousands over the life of the loan.

Credit scores may be improved, but itdoesn’t happen overnight. Since paymenthistory carries the heaviest score weight, itmay take twelve months or more of con-sistent, on-time payments to notice a dif-ference. Paying down existing debt alsomakes a positive impact in the “amountsowed” factor. Aspiring entrepreneursshould strive to keep their balances at nomore than 30 percent of their credit limit.

For entrepreneurs with lower scores,securing business financing may still bepossible if you have a sound business planand can convey your personal integrity aswell as document the circumstancesbehind your shaky credit history.

“In my opinion, there are two kindsof people,” says Bob Voss, loan fund man-ager for the Northeast Entrepreneur Fundin Virginia, Minnesota. “One is the personwho can’t pay their bills for a specific rea-son—medical problems or loss of a job.The second is the person who does notpay their bills because they do not think itis important or they simply do not care.We are willing to work with entrepreneurswho fit the first scenario.”

“There is always room for assessingthe entire situation,” adds Jackson. “Weevaluate all the partners involved in thebusiness, the size of the venture, and thepotential economic impact it will have onthe community. Sometimes if an entrepre-neur doesn’t have the most ideal credit, wecan work with that based on the value ofthe other factors. Of course, they’ll need tobe able to explain why their cards aremaxed out, but we definitely take that intoconsideration when lending to them.” IQ

St. Cloud, Minnesota(320) 255-3236

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01 IQ.Spring07_1-9 3/7/07 2:49 PM Page 9

ommitment to community. That’s what Rush City discov-ered when it needed to upgrade fire equipment but requiredsome additional financing. Leaders approached East CentralEnergy, one of 28 member cooperatives of Great River Energy.East Central Energy provided a $240,000 USDA no-interestloan to meet the city’s needs.

“People don’t always realize that their electrical coopera-tive provides more than electricity,” says Tom Lambrecht,Great River Energy’s economic development coordinator. “Weare an active participant in community and economic devel-opment, and our low-interest financing is just one part of ourdedication to helping communities grow.”

Since 1999, Great River Energy and its 28 rural electriccooperative members have helped to finance 40 projects total-ing $14 million. The electric wholesaler supplies energy to itscooperatives, who serve more than 600,000 homes and busi-nesses. Through exclusive federal grant programs, Great RiverEnergy and its cooperatives are able to offer loans that trulymake a difference to the communities they serve.

Residents of Albany, Eden Valley, Lindstrom, Moose Lake,Rockville, Rush City and Summit, Wisc. are among those whohave benefited from the investments.

“Through our projects, we have helped to create 768 newjobs and retain another 1,147,” Lambrecht says. Great RiverEnergy also provides loan application guidance and businessdevelopment assistance in such areas as energy efficiency andconservation improvements.

“Our employees live in the communities they serve andare active in community leadership roles,” Lambrecht adds,“so we have a vast array of information available to help newbusinesses choose the right location and business climate fortheir enterprise.”

It’s a role Great River Energy takes on with pride.“We’re here to help our communities continue to be vital,

thriving places for those of us who call Minnesota home.”

Great River Energy,The Power of CommunityWhat do a shiny-red fire engineand an electric cooperative have in common?

C

www.GreatRiverEnergy.com

Emergency Service: Dave Gruenes (left), Stearns Electric Association, helped Rockvillesecure USDA financing for essential fire-fighting equipment.


02 IQ.Spring07_10-13 3/5/07 2:21 PM Page 10

om Grones is the president and CEO of St. Cloud-based GeoComm,Inc., a national industry leader in high-tech public safety systems.Founded in 1995, GeoComm is a high-growth company that developsemergency mapping systems and communications solutions for hundredsof clients nationwide.

Starting with seven employees in 1995, GeoComm now employs 107and anticipates increasing staff by another 24 percent. In 2006, its annualrevenue was $8.5 million. In 2007, its projected revenue is $10.3 million.

The Anderson Entrepreneurial Center provided a growth opportuni-ty for Grones by helping him analyze GeoComm’s strategy through theOwner-President Forum. Designed to maximize learning in shorter timeinstallments, the curriculum covers various business topics such asaccounting, leadership, management reporting and competitive strategy.The forum also provides ongoing opportunities for business leaders toconnect with their peers.

“Tom was an excellent candidate for the forum,” says MarcSanderson, the Owner-President Forum’s program manager and facilitator.“He altered and renewed his approach to the strategic direction ofGeoComm.” With an MBA from Harvard Business School, Sanderson isalso the owner-president of Wilkie Sanderson, a Sauk Rapids-based man-ufacturer of architectural woodworking.

Today, Grones believes that the company’s new direction promises to

pay long-termdividends—notjust to the com-pany, but to thelarger econom-ic communityin St. Cloud. “Iwas sufficientlyimpressed withthe results ofmy involve-ment that Ienrolled twomembers of myexecutive staff in the current Managers’ Forum,” he adds, “and I plan tosend two more to the next session.”

By accessing a wide spectrum of forums and services delivered by theAnderson Entrepreneurial Center, hundreds of entrepreneurs and managershave increased their overall effectiveness as business leaders. The AndersonEntrepreneurial Center aims to make an ongoing impact on the centralMinnesota business community by promoting entrepreneurial excellence.

SPECIAL ENTREPRENEURSHIP ISSUE

616 Roosevelt Road, Suite 100 St. Cloud, MN 56301

(320) 251-5420 www.haec.org

Anderson Entrepreneurial Center,Forum and Substance“After 12 years of business ownership, I found myself at a crossroads.”

T

Tom Grones

TOM GRONES, GEOCOMM

SPRING 2007 11

02 IQ.Spring07_10-13 3/5/07 2:32 PM Page 11

Venture Allies,No Stone Unturned

GraniteEquityPartners,SeeingtheBiggerPicture

I

W

3051 2nd St. S, Ste. 103 St. Cloud, MN 56301(320) 203-7600 www.ventureallies.com

3051 2nd St. S, Ste. 105 St. Cloud, MN 56301(320) 251-1800 www.graniteequity.com

n 1996, Kip Cameron founded Granite-Tops. With his first plant in ColdSpring, he worked hard to forge new ground in high-end, custom stonecrafting. Today, Granite-Tops is a $15 million company.

As the company grew, it acquired a new plant in Albertville, added awarehouse and opened a Twin Cities sales office. Granite-Tops currentlyemploys 87 people and uses many local vendors and suppliers. It alsotapped into the power of local professional services like Venture Allies,central Minnesota’s leading management consulting firm.

Venture Allies created a business plan defining strategies for market-ing, production, and finance. The firm also helped develop a strong man-agement team and implement business systems to facilitate rapid growthand operational excellence.

“It's been thrilling and challenging to spearhead a team that hasgrown over the last decade,” says Cameron, “not only in size and profit,but also in business maturity and know-how.” Granite-Tops is a successstory about a local entrepreneur and the region that formed its bedrock.

Venture Allies management consulting firm serves Central Minnesota,offering custom consulting services in strategy, structure and systems.

hen Gene and Alyssa Schreder purchased Media Pro in 1997, thecompany produced pre-show advertisements for ten theaters and eightycinema screens. In 2006, the company’s ads were viewed by 100 millionpatrons in 350 theaters nationwide.

Now known as UniqueScreen Media, its employment grew from 15people in 1997 to over 175 in 2006. Their many local partners includeCinema Entertainment Corporation, United Entertainment Corporation,Leonard Street, Marco, LarsonAllen, Apollo Insurance, NetgainTechnology and the Anderson Entrepreneurial Center.

Granite Equity Partners provided funding for the company's rapidgrowth between 2004 and 2006, along with governance services to guideits strategy. When the company combined with Access IntegratedTechnologies, Inc. (NASDAQ: AIXD), stockholders benefited from a sig-nificant return on their investments. Today, part of that capital is beingreinvested in central Minnesota companies.

“Being an entrepreneur is exciting and rewarding while, at the sametime, frightening,” Gene says. “Granite Equity provided us with thefunding and strategic guidance needed to meet all our goals.”

“Owning a business is very demanding,” Alyssa adds. “GraniteEquity had the means to provide help and support when we needed it.”

Granite Equity Partners is a Minnesota-based private equity firmfocused on buyouts, recapitalizations, and growth equity investments inMinnesota and adjoining markets.

The Granite-Tops & Venture Allies Team

Alyssa & Gene Schreder


02 IQ.Spring07_10-13 3/5/07 2:21 PM Page 12

SPECIAL ENTREPRENEURSHIP ISSUE

405 First Street SE Little Falls, MN 56345

(320) 632-9255 www.ifound.org

T

Initiative Foundation,In Search of Greener VenturesIntroducing our Green Business Loan Fund...

hanks to a cutting-edge investment from the Northwest AreaFoundation, we are now seeking 13 surefire business venturesthat will change the world by changing the ways in which weimpact our natural environment.

To qualify for special loans up to $250,000, businesses musthave a primary lender and tackle one or more of the following:

Jay Idzorek once collected Ironton area restaurant grease tomake biodiesel fuel in his garage. In 2006, he joined forces with theInitiative Foundation to launch Green Range Renewable Energy, theonly biodiesel plant in northern Minnesota. How green is it? Eventhe retail gas pumps are powered by wind turbines.

Green Range purchases local soybean oil and waste grease,and then refines it to remove pollutants and water. Add a cata-lyst and it becomes very eco-friendly fuel that gives petroleumdiesel a run for its money .Biodiesel costs about 10 to 25 centsless per gallon, it’s safe for any diesel-fueled engine, and it pro-duces 50 to 80 percent fewer toxic emissions.

That’s just the type of business we’re looking for. If you area serious entrepreneur and believe you can make some green bygoing green, we’d love to hear from you. Contact Ashley Vargo,business finance officer, at (877) 632-9255 toll-free [email protected].

· Deliver a product or service associated with environmentalpreservation, protection, mitigation or clean-up

· Reduce current energy demands for residences or businesses

· Transform waste materials into a marketable product

· Create “green-collar” jobs that pay at least $15 per hour in alower-income community (required)

SPRING 2007 13

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ENT14 INITIATIVE QUARTERLY

03 IQ.Spring07_14-17 3/5/07 2:12 PM Page 14

SPRING 2007 15

Honeybees swarm around their hive in apparent pandemonium. Dareto examine them closer, however, and you may notice that some bees only gathernectar or fertilize eggs. Others care for the young or stand guard. Very few everascend to the queen’s throne. Each type of bee is predisposed toward a unique andvaluable role in the colony—much like the personality differences between brazenentrepreneurs and those of us who play it safe.

In his 2006 book titled The Entrepreneur Next Door, author Bill Wagnerasserts that there are not just one, but four personality profiles that lend themselvesto entrepreneurial success. Based on a study of more than 1,500 accomplished entre-preneurs, Wagner linked business success with the common traits of those hedescribed as Go-Getters, Trailblazers, Motivators, and Managers. In contrast, hisAuthority, Collaborator, and Diplomat personalities did not lend themselves as nat-urally to the leadership demands of start-up success.

According to Wagner, that’s not to say that a worker bee could never be aqueen, metaphorically speaking.

“After defining key personality traits, we found that 70 percent (of those westudied) had personalities that were very well-suited to their businesses,” saysWagner, “but it was the 30 percent that didn’t have the ideal personality thatintrigued me. They had a high level of self-awareness that allowed them to accom-modate who they were and who they needed to be to become successful.”

He points out that being aware of your entrepreneurial personality can helpyou make beneficial business decisions such as hiring complementary employees,maximizing strengths, and minimizing weaknesses.

How do Minnesota entrepreneurs apply their hard-wired traits to launchand run winning businesses? We asked four of them to peg their own personalityprofiles and reveal their secrets of success.

Are youhard-wiredforbusinessownership?

By Britta Reque-Dragicevic

TREpersonality

03 IQ.Spring07_14-17 3/5/07 2:12 PM Page 15


o-Getter31 Percent of All Entrepreneurs

TraitsExtremely independent, competitive, ambitiousSeeks out challenges and tough problems to tackleTakes great risks to achieve great rewards

Achilles’ HeelTeam-building

IndustryLED and Fiber-Optic Lighting Systems(www.advancedlighting.com)

BeginningsI was working as a flight attendant. On a lay-over, I saw a guy installing fiber-optic lights in acasino. I asked if I could sell his products oncommission only. He said, “Why not?” I hit upevery airline passenger and landed a big one—Chuck E. Cheese’s. After three years, I startedAdvanced Lighting. I fought cancer for two

years and it gave me the motivation to press for-ward, not knowing if I would have a chance todo something like this again.

EntrepersonalityI take calculated risks—I don’t jump in withoutweighing the consequences. I tend to stay aheadof my competition, coming out with new prod-ucts before they do. I never do anything halfway.

Arch-EnemyGrowing at a pace the lighting market wantsto grow without having the investment dollarsto follow.

Moment of TruthWhen we lit up the Declaration ofIndependence, Bill of Rights, and the U.S.Constitution at the National Archives inWashington, D.C.

Words of WisdomValue each customer, vendor, and employee as ifthey are part of you. It always comes back to youin repeat business, good service, and loyalty.

GThe

railblazer29 Percent of All Entrepreneurs

TraitsExtremely goal-oriented, strategic thinkerRelishes having autonomy, authority, and influenceHighly energetic, with sense of urgency

Achilles’ HeelCollaborating

IndustryBeekeeping equipment and supplies (www.mannlakeltd.com)

BeginningsWe got started in 1984 when we attended a bee-keeping tradeshow and found that there wasroom for growth and improvement in the indus-try. We entered our business when the maincompetitor had the market tied up for one hun-dred years. With aggressive marketing, newproducts and an emphasis on service, we pulledthe rug out from under them in just four years.

EntrepersonalityWe match the Trailblazer type well. We didn’twant to be tied to someone else’s clock.

Arch-EnemyAt first, it was finding the right people to helpour company grow. Employees were disciplinedor dismissed if they did not follow our rigidstandards of excellence. Now we employ forty-five to fifty-five people and many have beenwith us for ten-plus years.

Moment of TruthWhen the industry started looking at us fordevelopments, products, and expert opinions.

Words of WisdomHave a live person answer your phones all thetime. Be extremely visible at conventions, tradeshows, etc. You won’t learn anything by stayinghome. Listen to your customers, find their prob-lems, and solve them.

TThe

Advanced Lighting Systems,Sauk Centre

Paul Streitz

Mann Lake, Ltd.,Hackensack

J ack and BettyThomas

03 IQ.Spring07_14-17 3/5/07 2:12 PM Page 16

SPRING 2007 17

otivator13 Percent of All Entrepreneurs

TraitsExtremely energetic, self-starter, driverof changeUrgency to get things done quicklyEmotional communicator, team-player,and salesperson

Achilles’ HeelStaying focused

IndustryWholesale rock, aggregate, and materials truck-ing (www.rockontrucks.com)

BeginningsI wanted to earn a little extra money, because Ihad just taken a drastic pay cut moving from theTwin Cities to St. Cloud. I got started when I wastwenty-five with one truck and one trailer. Nowat age thirty, I have grown to own five semis and

thirty trailers and broker work for fiftyowner-operators.

EntrepersonalityPersonality helps, but knowledge is still mostimportant. I motivate a mostly male-orientedbusiness by encouraging my workers to focus onmeeting their own goals and by offering rewardsfor them to strive for. I also choose employeeswho are driven, so to speak.

Arch-EnemyEarning respect in a male-dominated construc-tion industry.

Moment of TruthWhen I felt secure enough to finally quit myfull-time banking job in 2003.

Words of WisdomTaking risk is okay, but never put all your eggsin one basket. Try not to burn bridges, becauseyou never know when you might work with thatperson or business again.

MThe

anager6 Percent of All Entrepreneurs

TraitsExtremely assertive, confident in own ideasTakes time to think things through,process-drivenPersistent enough to stay the course andget results

Achilles’ HeelListening to others

IndustryElectric vehicles (www.e-ride.com)

BeginningsI began the original company in 1989 afterdesigning a golf “car” for my four kids.Someone saw my kids driving it around andasked if they could buy one. I started makingluxury golf carts that sold around the world tomany dignitaries and celebrities. When themarket dropped off in 2001, I reformed the

company around a new prototype for a low-speed, electric neighborhood vehicle. We nowmake the largest electric vehicles in the UnitedStates, which are used on college campuses,golf courses, airports, military bases, in neigh-borhoods, and industrial settings.

EntrepersonalityI like to think of myself as a positive person whosimply will not give up. I believe things canwork if you put your mind to it. That’s how I’vealways been.

Arch-EnemyFinancing. That’s the biggest obstacle formany entrepreneurs.

Moment of TruthWhen oil prices rose and people became moreaware of global warming, all things combinedfor the right market for this.

Words of WisdomBe persistent and don’t ever quit. We laid every-thing on the line for this business. IQ

MThe

Rock On Enterprises,Waite Park

K rystal Quade

E-Ride Industries,Princeton

J ohn Herou

ondering about your own personalit y t ype?Take the free entrepreneur personalit y test online at www.theentrepreneurnextdoor.com.W

03 IQ.Spring07_14-17 3/7/07 2:54 PM Page 17


CEO Chuck Albrecht cracks open thevault at Mid-Minnesota FederalCredit Union in Baxter.

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SPRING 2007 19

Bank vau l ts , o r s t rongrooms, have seen remark-ab le evolut ion. Keys and combinat ion locks haveb e e n r e p l a c e d b y d e t e c t o r s t h a t s e n s e m o t i o n ,h e a t , s o u n d , a n d v i b r a t i o n s . To d a y ' s h i g h - t e c hFedera l Reserve vaul ts are guarded by doors thatcan weigh more than 47 tons. St i l l , the i r contentsh a v e a l w a y s r e m a i n e d t h e s a m e — m o n e y , v a l u -ab les, and a few secrets . The t r icky th ing is , theyare on ly revealed to the r ight person at the r ightt ime. For those ent repreneurs who want to knowhow the pros t ru ly eva luate bus iness p lans and loanappl icat ions, welcome to the inner sanctum.

THE GUARDED SECRETS OFBUSINESS PLANNING AND FINANCING

I N S I D E T H E

B Y A N I T A H O L L E N H O R S T & M A T T K I L I A N

04 IQ.Spring07_18-23 3/7/07 2:59 PM Page 19

roperly planning and finding financing fornew business ventures may seem like daunt-ing tasks. Some may feel like they need to roba virtual safe of guarded secrets in order toachieve business success. In reality, the tricks-of-the-trade aren’t all that tricky. Here is yourfirst set of combination numbers.

HOW A PLANCOMES TOGETHER

There are many reasons for a new entre-preneur to put forth his or her best efforts ona business plan. The most compelling reasonis obtaining financing from a lender. You sim-ply can’t get a loan without one. Businessplans, however, are far more than just arésumé or a slick brochure to impress yourbanker. The average business plan is twenty-five to fifty-five pages long and may takeweeks to put together.

According to Pam Thomsen, Small

Business Development Center (SBDC) con-sultant at Brainerd’s Central Lakes College,the planning process forces entrepreneurs toevaluate the true potential of their business.It helps them set realistic goals, identifycompetitors, anticipate road bumps, andreveal financial realities they may never haveconsidered before.

“The biggest thing we see is that entrepre-neurs aren’t realistic,” says Thomsen. “A busi-ness plan will help determine if you have aviable business opportunity. Start there andthen go looking for financing.”

A good plan prevents hardship, if notbankruptcy, down the road. It answers the“what ifs.” What if I don’t reach this sales markfor that quarter? What if gas prices go up?What if a distributor goes out of business?What if the market changes and people don’twant our product or service anymore?

Thomsen recommends that aspiring busi-ness owners begin their journey at a SmallBusiness Development Center. There are nine

INITIATIVE QUARTERLY20

Numbers aside, most lenders consider ahandful of subjective guidelines when consid-ering a loan application. Although the weightof each one may vary from bank to bank, theelements are the same: a profitable idea,financial stability , and the borrower ’s unwa-vering commitment to business success.

CASH FLOWDon’t confuse cash with profit. Lenders mustbe convinced that your business will haveenough cash to pay its debts at any giventime. This includes payroll, suppliers, utilities,and, of course, your business loan.

CapitalHow will you make it through the proverbial“tough times?” Will there be enough moneyto sustain and grow your venture?

CharacterAre you honest, competent, determined,savvy, and adaptable? Prove it to yourlender, and bring along a good credit score.

CollateralLenders are trained to protect their invest-ments. By securing valuable assets, they cansell (or liquidate) them if you can’t repay theloan. Such assets include real estate, equip-ment, inventory, and yes, even your personalproperty. In fact, a personal guarantee ofrepayment is non-negotiable. No collateral?No loan. It’s that simple.

ConditionsHow healthy is the overall economy and themarket for your product or service? Is yourindustry booming or sagging? Who are yourcompetitors? In the razor-sharp minds oflenders, external conditions are equally asimportant as your business idea.

Pam Thomsen, Small Business Development Center consultant, advises new entrepreneurs to refuse totake shortcuts in business planning. “People who don’t plan at the beginning suffer later.”

(OPPOSITE)Entrepreneurs Ginger and Joe Glenn

of Glenn Metalcraft, Princeton:“It’s critically importantthat you trust your bankand that they trust you.”

P

CONTINUED ON PAGE 22

C ’s of CreditThe 5

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21SPRING 2007

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22 IINNIITTIIAATTIIVVEE QQUUAARRTTEERRLLYY

in Minnesota (mnsbdc.com) and services areavailable free of charge. As a consultant tohundreds of entrepreneurs herself, Thomsenfocuses on three simple concepts:

MARKETING:“Somebody has to want or need the productand be willing to pay for it.”

FINANCING:“This includes accounting, record keeping, tax-ation, and cash flow.”

MANAGEMENT:“The entrepreneur will be wearing all the hats.Can they manage all the aspects of the business?”

Identifying personal strengths and weak-nesses reveal where more training or profession-al consulting is required to achieve success.

“People who don’t plan at the beginningsuffer later,” adds Thomsen. “Had they satdown and fleshed it out with a consultant, wemight have identified some of those weak areasright away. If they’re in their second or thirdyear of business, there’s no quick fix now.”

For lenders—an aspiring entrepreneur’sprimary target audience—business plans serveas concrete evidence that the business owner isable to pay back what he or she borrows.Contrary to the stereotype of the portly bankerin a three-piece suit who lights cigars with$100 bills, most lending professionals have theentrepreneur’s best interests in mind.

According to John Kaliszewski, theInitiative Foundation’s vice president for eco-nomic development who runs its businessfinancing programs, the worse part of his job isforeclosing on a loan.

“My top priority is creating quality jobsand local business ownership in centralMinnesota,” says Kaliszewski. “A close secondis protecting our assets. If we agreed to financeprojects written on cocktail napkins or talkedabout in a first meeting, essentially we wouldbe agreeing to ruin a lot of good people’s livesand personal credit. No lender takes any pleas-ure in doing that.”

“Going raw to a bank with just a concept

is hard for both you and for the bank,” saysGinger Glenn of Glenn Metalcraft. “They don’thave the history and knowledge of the industrynor do they share your vision.”

The Initiative Foundation partnered witha local bank to finance Glenn Metalcraft in2001 based on the enthusiasm of her late hus-band, Dennis, and the vision of their son, Joe.“He’s more driven by creative thinking andthought-out plans,” says Glenn. “Joe had thevision to create a new market for us and it wasvital that we did. With the type of work wewere doing, we would have struggled.”

For Cathie Mayr, owner of Nordic Living,a Scandinavian home store in Nisswa, payingattention to her plan helped chart a futurecourse for her business. “I spent about threemonths putting it together and two months ofthat was close to full-time,” says Mayr. “Withhelp from the SBDC, I went to the bank witheverything I needed. Now every January beforeany trade shows, we ask ourselves, ‘Is this thedirection the business needs to take? Do weneed to make any major course changes?’”

Answering those questions opened doorsfor three thriving and complementary business

ventures—a heritage arts school, interiordesign service, and yarn sales.

When an entrepreneur is ready to takeon the business plan, Thomsen advises toresist the temptations. Paying for slick, color-ful brochures won’t cover up a lack of criticalinformation. Fill-in-the-blank templates andwebsites don’t force entrepreneurs to be bru-tally honest with themselves and their busi-ness idea. Planning is a personal journeyfilled with risks and consequences, and thereare no shortcuts.

THE ART OF THE DEAL

A common saying in the commercialfinancing profession is: If you don’t come pre-pared, your three investment options arefriends, family, and fools. Whether starting abusiness or expanding one, getting the moneyto fulfill entrepreneurial dreams is seldom aneasy task. Many entrepreneurs put their life

savings on the line, maxing out credit cards,and risking the security of themselves andtheir families.

With corporate mergers and acquisitions,banks are changing like never before. AlthoughFDIC-insured lenders in Minnesota decreasedby 7 percent or thirty-five institutions since2003, they remain one of the top sources ofbusiness financing. According to a 2004 reportby the U.S. Small Business Administration,commercial banks supplied $522 billion insmall business loans. Paling in comparison,angel investors, venture capitalists, and othercompanies contributed just $46.3 millioncombined.

Just like shopping for an office computer,entrepreneurs should shop for bankers.According to Ginger Glenn, however, banksshouldn’t be compared solely on interest rates.

“When we grew and had to move to a dif-ferent bank, we checked and double-checkedthat it felt right,” she says, “that they cared, thatwe could communicate, and we weren’t lost inthe big corporate heap. Definitely interviewbanks. It’s critically important that you trustyour bank and that they trust you.”

Since all banks are regulated by govern-ment agencies and internal policies, entrepre-neurs should also be sure to collect essentialdocuments before approaching a lender orinvestor. Some of these items include a detailedbusiness plan, employer or tax ID numbers,personal tax returns, personal financial state-ments, and cash flow projections.

Ashley Vargo, the Initiative Foundation’sbusiness finance officer who bridges gapsbetween banks and borrowers, suggests thatthe most critical items to bring along are proofof owner equity and commitment. Thatextends far beyond a new entrepreneur’s confi-dence and enthusiasm. It translates to about 20percent of the total project budget and a crys-tal-clear understanding that a personal guaran-tee is non-negotiable. If the business fails andassets are sold off, the borrower must agree topersonally pay back the remainder of the loan.

“Those are very common myths we haveto dispel every week,” says Vargo, “that youdon’t need any money down, or that by incor-

CONTINUED FROM PAGE 20

Contrary to the stereotype of the portly banker in a three-piece suit who lights cigars with $100 bills, most lendingprofessionals have the entrepreneur’s best interests in mind.

04 IQ.Spring07_18-23 3/5/07 2:44 PM Page 22

porating, it somehow separates a person fromtheir loan obligations. Lenders must be thor-oughly convinced that you are 100 percentcommitted to the success of the businessbecause you understand what’s at stake andshare in the risk.”

After the meetings are over and thelender has all of the documents to evaluate apotential business investment, he or sheoften refers to an informal checklist called theFive Cs of Credit: Cash flow, Capital,Character, Collateral, and Conditions. In anutshell, lenders try to gauge credit risk, per-sonal integrity, and market conditions as wellas whether an entrepreneur will have regularcash to pay debts, “savings” to get throughthe hard times, and valuable assets to liqui-date if the loan defaults.

“You may see fancy jargon, but it stillboils down to those five Cs,” says MoDurheim, commercial lender at Farmers andMerchants State Bank in Sauk Rapids. “If youpick apart the five Cs, that’s still the basis formost entrepreneurs.”

After lenders perform their due dili-gence, one or more “Cs” may raise red flagsthat require further investigation, documen-tation, or another face-to-face meeting withthe borrower. Sometimes, the answer is no.

“You have to take a look at the reasonswhy it was denied,” provides ChuckAlbrecht, president and CEO of Mid-Minnesota Federal Credit Union. “Researchalternatives, look at those issues, and decideif it’s worth going forward. If we have to pro-vide a denial we like to provide them withresources to help solve the problem.”

Lenders will often provide helpful adviceon how to improve a credit score, tweak abusiness plan, or alleviate other risk factors.Borrowers can always explore other lendingoptions, but they shouldn’t expect differentresults if their venture isn’t financially sound.

“Most entrepreneurs tend to underesti-mate their expenses and horribly overesti-mate their sales, because they have a dream,”says the SBDC’s Thomsen. “Bankers aretrained to see that very quickly.”

Still, if a business is meant to be,the entrepreneurial spirit prevails.Challenges often bring out competitivedrive, and true entrepreneurs possess thetalent of adaptation.

“Hopefully, they’ll do something to curetheir risk and come back to me,” saysDurheim. “Those are always the ones I like towork with.” IQ

PERCENTAGE POINTSUNLOCKING THE FACTS ABOUT SMALL BUSINESS OWNERSHIP

10%U.S. workers who report that they own a business.—Kaufmann Foundation

34%U.S. businesses that don’t survive at least two years.—U.S. Small Business Administration

49%U.S. businesses that are operated from home settings.—U.S. Census Bureau

>70%U.S. entrepreneurs who are already employedby other firms when they start up.—Global Entrepreneurship Monitor

77%U.S. entrepreneurs who invested their own moneyor family assets to start businesses.—U.S. Census Bureau, September 2006

86%Minnesota businesses that employ five or fewer workers.—U.S. Department of Commerce

SPRING 2007 23

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Tom Moore, St. Cloud Area Economic DevelopmentPartnership, models the wardrobe evolution ofgrowing entrepreneurs.

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SPRING 2007 25

Deep within Netgain Technology’s granite-clad

fortress in downtown St. Cloud, thunderbolts of

critical information WHIRR through the high-tech

servers. Scott Warzecha’s office is perched three

floors above the flashing LEDs and Star Trek-look-

ing vault, where business data and software are

beamed back and forth to nationwide clients on

demand. From this enviable vantage point, he can

catch an occasional glimpse of the future and it

looks pretty darned good.

Warzecha, one of St. Cloud’s newly cele-brated entrepreneurs and technology innova-tors, is finding himself on the verge of surginggrowth. With an expanding team of twenty-one and a monthly influx of new and biggerclients, all stars seem to be aligned for hiseight-year-old firm.

“Every business owner has a nightmarestory about technology failures and theexpense of owning and maintaining IT equip-ment,” says Warzecha. “We help businessesget back to doing what they do best. We man-age their data and software from here and theonly difference they notice is that it finallyworks right.”

Netgain’s optimistic future is driven byWarzecha’s innovation, steady growth philos-ophy, and evangelistic selling when the serv-ice was so new that many thought it was toogood to be true. The company also receivedtimely financing from the InitiativeFoundation and Bremer. But even if he cansave some clients 30 to 50 percent on annualIT expenses, why is Netgain booming as otherpromising ventures fail? Are there specificindustries that hold powder-keg potential foraspiring entrepreneurs?

In a fourteen-county analysis for theInitiative Foundation, the MinnesotaDepartment of Employment and EconomicDevelopment (DEED) charted the net changein business births and deaths from 2000 to

2005. Construction and healthcare enterpris-es dominated the top-ten list of highestgrowth industries.

According to Cameron Macht, DEEDregional analyst for central and southwestMinnesota, these trends are not likely tochange. Despite recent housing and real estateslowdowns, central Minnesota’s population isprojected to swell by 40 percent in the nexttwenty years, which means construction andcontractor businesses haven’t nearly peaked.The St. Cloud area, Brainerd lakes area, andmetro-fringe counties are statewide hot spotsfor current and future growth. An aging popu-lation will also impact entrepreneurial oppor-tunities in healthcare.

“Right now, about 12 to 15 percent ofcentral Minnesota residents are sixty-five orolder,” says Macht. “2011 is the front end forbaby-boomer retirement, so the demand forhealthcare services will be tremendous.”

Although Macht is quick to point out thatentrepreneurial growth is almost never limitedto one sector and that opportunities can befound wherever there are good ideas, hebelieves that firms such as Netgain may bene-fit from growth in major industries that formthe economic backbone of a community. “Ifyou can identify an area’s core industries thatare growing,” he says, “it’s a good bet that someof the best opportunities will be in the indus-tries that support them.”

ProfitizingWhat does the future holdfor central Minnesota’s growing entrepreneurs?

By Matt Kilian

05 IQ.Spring07_24-27 3/5/07 3:06 PM Page 25

Both the St. Cloud and Brainerd areashave taken considerable effort and expense tounderstand their core industries and planaround them.

St. Cloud’s 2002 Community Assessmentchurned ten attributes such as business size,employment, productivity, and profitability tocrank out its list of strategic industries thatpower the area’s economy. The list included

Netgain’s “business service” industry and oth-ers that represented its top clients: health serv-ices, engineering/management, manufacturing,printing/publishing, and wholesale trade.

Tom Moore, executive director of the St.Cloud Area Economic DevelopmentPartnership, says that communities are betteroff supporting their entrepreneur “minorleagues,” rather than trying to attract big-namecorporations. Instead of spending his time

chasing smokestacks, Moore focuses on localentrepreneurs such as Warzecha—helping nav-igate his upstart firm through financingoptions, JOBZ tax incentives, and purchasingthe abandoned St. Cloud Federal Buildingthrough an online auction.

“Netgain was in a high-priority industrywith high-quality jobs that helped anchor ourdowntown,” says Moore. “Because we know

that local businessowners are likely togrow and stay here,we give themthe extra attentionbecause it improvesthe lives of people inour community.”

While Mooreacknowledges thatmost entrepreneurssimply can’t breakinto some of St.Cloud’s massiveindustries, he addsthat opportunitiesexist for new venturesto ride their coattails.

“Take granite, forexample, which is abig part of St. Cloud’seconomy and identi-ty,” he says. “Anentrepreneur may notbe able to own a gran-ite quarry, but theemergence of granitecountertops andhome accents makesfor a growing supportindustry because ofthe local supply. Thegranite companiesalso need their ownsuppliers and manywould rather dobusiness locally.”

To weekend refugeeswho share a love affair with the lake country,Brainerd’s core businesses appear to be resorts,log cabins, and specialty shops. Althoughtourism is a potent economic engine and valuablebrand, it surprisingly didn’t make the list ofBrainerd’s core industries. Similar to their St.Cloud counterparts, Brainerd leaders prioritizedhealthcare, finance and insurance, professionaland technical services, as well as metal, plastic,and wood-related manufacturing.

“We looked at six quantitative factors andthen we asked seventy leaders, ‘What do youwant to be as a community?’” says SheilaHaverkamp, executive director of the BrainerdLakes Area Development Corporation(BLADC). “Most people are shocked at thenumber of successful manufacturing compa-nies in Brainerd. They made the list becausethey generate wealth and living-wage jobs.”

The BLADC is one of the headliners in ateam of organizations that supports local entre-preneurs and established businesses. For itssize, the community is blessed with a twelvehundred-member chamber of commerce,Small Business Development Center, technicalcollege, and financing network, all working intandem to help strengthen the local economyfrom the inside out.

“When a community can identify multiplebusinesses in the same sector that feed off eachother,” adds Haverkamp, “that’s what turns thelightbulb on for entrepreneurs. There areopportunities for employees to either spin offand fill a niche or provide a local service thatthese industries need.”

Shawn Hunstad spun off in a core indus-try. After three years as a manufacturing salesrep for Stern Rubber in Staples, he also saw anopportunity to meet customer needs for plasticand polymer parts. He and business partner,Terry Stern, started the Baxter-based firm,Stern Industries, with Initiative Foundationgap-financing and a broker’s mentality. If theycouldn’t manufacture a particular part, theywould find a quality supplier, negotiate a lowprice, and pass along the savings.

Nimble responses to new markets and astaunch commitment to customer service ledStern Industries from modest sales of$200,000 in 1995 to more than $44 millionin 2006. Today, the company supplies plasticfuel tanks and other parts to Polaris’ line ofsnowmobiles and ATVs.

“In manufacturing, lots of people arenervous about China and India, but the busi-ness opportunities are still here,” saysHunstad. “I agree that the growth will comefrom Brainerd’s key industries, because com-panies like ours need things that we wouldrather get locally. It all comes down to qualityservice and finding the guy in my backyardthat can do this for me.”

To help central Minnesota towns such asBrainerd uncover local opportunities for clus-tered manufacturing, the Initiative Foundationlaunched the Enterprise Network SystemsAnalysis (ENSA) project. It’s a fancy name with


Scott Warzecha, Netgain Technology, is wired to the St. Cloud area’score industries. If they prosper as predicted, so will Netgain.

05 IQ.Spring07_24-27 3/7/07 3:08 PM Page 26

a simple concept. Find out what everyonewithin a region buys and sells, and then try tomake local business connections or identifynew niches for entrepreneurs.

“This keeps the dollars circulating withincentral Minnesota,” says Warren Williams,Initiative Foundation board of trustees chairand thirty-nine-year banking executive. “Localopportunities are not always met by big busi-nesses—they get more conservative becausethey have more to lose. We look to the entre-preneurs who are willing to take risks in orderto make their mark in the world.”

For those seeking to know the future, oneof Brainerd’s legendary entrepreneurs offersthis advice: Search within yourself. ArnieJohnson recalls his Iron Range upbringingwhen the entrepreneurial cards were seeming-ly stacked against him. Johnson’s blue-collarbeginnings included growing up in near-pover-ty, graduating in the bottom half of his high-school class, and starting his career ascent fromthe seat of a mining truck.

In 1975, he founded Universal Pensions,providing pension and IRA services to financialclients across the United States. He sold thefive hundred-employee company in 2001 for$85 million. Today, his business interestsinclude everything from commercial real estateto supper clubs to a new venture calledMinnesota Thermal Sciences, which manufac-tures life-saving containers that keep humanblood at a constant temperature for seventy-two hours.

In what Johnson calls today’s “microwavesociety,” where many new entrepreneurs seekthe fast track to fortune, he often finds himselfsharing the old-stove recipe of American suc-cess: hard work, sound planning, enthusiasm,creativity, and tenacity.

“I started with nothing, sacrificed almosteverything but my family, and today I have a116-foot yacht named Tenacity,” says Johnson.“There is no such thing as a magic pill. If youwant to become an entrepreneur, you mustlearn how to make your own circumstances.” IQ

SPRING 2007 27Source: Minnesota Department of Employment & Economic Development (DEED).

Birth & Death in Central MinnesotaNet Change in Birth/Death of Firms

Arnie Johnson, Brainerd’s entrepreneurextraordinaire, shares the old-stove recipe of

American success: hard work, sound planning,enthusiasm, creativity, and tenacity.

613

210

190

105

93

88

70

65

60

-25

-17

-15

-13

-19

-15

-13

EmergingSpecialty Trade Contractors

Construction

Real Estate

Food & Drinking Establishments

Nursing & Residential Care Facilities

Administrative & Support Services

Social Assistance

Outpatient Healthcare Services

Repair & Maintenance

Fading?

Gas Stations

Hotels, Motels & Campgrounds

Truck Transportation

Wholesale Electronic Markets

Membership Organizations

Store Retailers

Rental & Leasing Services

2000–2005 Industry Trends

05 IQ.Spring07_24-27 3/7/07 3:08 PM Page 27


f r i e n d l yHow Your Hometown

Can Ignite theEntrepreneurial Spirit

As darkness falls on Pequot Lakes,the future of Kendall Candles looks bright—thanks, in part, to an entrepreneurial community.From left: Carol Kottschade, Del Ria Kerger, and Tassy Singer.

06 IQ.Spring07_28-31 3/7/07 3:18 PM Page 28

SPRING 2007 29

By Christine Hierlmaier Nelson

06 IQ.Spring07_28-31 3/7/07 3:18 PM Page 29

a


Flickering with others, it holds the power toilluminate a community’s future, sharingwarmth in the form of jobs, tax-base, home-town character, and personal connections.Some leaders stand aside and watch the dimlightshow. Others take steps to lure and fanthe flames.

Five years ago, Sally Baumgartner took theleap into business ownership with an existingcandle manufacturing facility near her lake home.Kendall Candles, named after her daughter, hasexperienced average annual growth of 10–15percent since then. Baumgartner attributes it toskilled employees, a solid business plan, and afocus on customer needs.

But there are also things about the compa-ny’s location that helped her along. When shewas just starting out, small business specialistsfrom the technical college provided her with arearesources. She discovered a retail niche thanks toheavy summer tourism and other area businessowners that were very supportive.

Like many entrepreneurs in the BrainerdLakes Area, Baumgartner originally came to enjoythe quality of life. But the positive culture for newbusinesses was a surprising bonus. “One sourceof help leads to other sources,” she says.

“Rural communities are beginning torethink the premises upon which their economicdevelopment strategies are based,” begins thepreface for the book, Energizing Entrepreneurs:Charting a Course for Rural Communities, byDeborah Markley, Don Macke, and Vicki B.Luther. The most successful communities in thiseffort seem to be focused on entrepreneurs andhave a regional mindset for infrastructure andresources, according to the authors.

They also identify three key components ofan entrepreneurial environment and how ruralcommunities can develop them: CommunityClimate, Community Infrastructure, andCommunity Support. Several communities incentral Minnesota are already demonstrating thebenefits of this culture to foster—and sustain—creative ideas and individuals.

C o m m u n i t y C l i m a t eEntrepreneurs can seem odd in a small townwhere people are used to working for someoneelse or earning their living on the farm. Localeconomic development experts and resourcesare critical to encourage a new way of life. InBrainerd, the vision of lake life provides theincentive to relocate while Central LakesCollege, Brainerd Lakes Area Chambers ofCommerce, and Brainerd Lakes AreaDevelopment Corporation (BLADC) strive tosweeten the deal.

“We have a seasonal homeowners marketingprogram,” notes Sheila Haverkamp, BLADC’sexecutive director. “We target people who knowand appreciate the quality of life.”

Haverkamp also believes that entrepreneursenjoy relative anonymity to develop their ideaswhile having access to other business experts andowners who understand their challenges and canprovide a sounding board. She believes that thoseresources should be tapped at the local andregional levels.

“They can meet one-on-one and have coffeewith business planners or private realtors andlenders or go to a networking event at the cham-ber,” adds Haverkamp. “And if you have a busi-ness component that requires site planning orapprovals, we have connections to many town-ship and county officials.”

Haverkamp worked with Dan and PatSchulist when they dreamed of owning a busi-ness near their lakehome. Dan was a patternmaker for a Twin Cities rotomolding tool manu-facturer, making the tools used to construct such

things as plastic playhouses, kayaks, and fueltanks. Starting with one employee in a formerBurlington Northern warehouse, Lakeland MoldCo. now employs eighty people and just acquireda similar company in Ohio this year.

When John Newhouse took over for theSchulists as general manager and soon presidentin 1996, he immediately focused on networkingwith other business owners and training oppor-tunities to achieve the company’s next level ofgrowth—and he found them.

“Today we work with many departmentswithin the college for hiring students,” says

Brainerd’s lake life attracted entrepreneur Dan Schulist, but it was Sheila Haverkamp (left) andservices delivered by the Brainerd Lakes Area Development Corporation that made the area feellike home for Lakeland Mold and its president, John Newhouse (right).

Carol Anderson,Community Development of Morrison County.

t its beginning,a small business can beas delicate as candlelightin the darkness.

06 IQ.Spring07_28-31 3/7/07 3:18 PM Page 30

SPRING 2007 31

Newhouse. “They often want to stay because ofclose connections to family and the lifestyle. Thecollege has also provided customized trainingand helped us acquire funding from the state.”

Connections to other manufacturers havealso proven critical, he says. “Our HR man-agers are very close in manufacturing here. Oursafety committees visit each other to get newideas and we’ve shared technology for suchprocesses as lean manufacturing. Many havebecome close friends.”

C o m m u n i t yI n f r a s t r u c t u r eYour community may send out friendly signals toentrepreneurs, but some won’t even wave back ifyou don’t have access to major highways or offeran industrial park. They also need basic businessservices such as banking, insurance, andaccounting. They need high-speed telecommuni-cations as well as experts who can help themdecipher tax and regulatory issues.

When Carol Anderson came to Little Falls asits economic development director eighteen yearsago, the town had one industrial park and shewas instructed to fill it. When she filled it, shetold city officials that if they wanted more indus-try, they should buy more land.

Through a $500,000 federal grant that thecity had to match, Little Falls developed theNorth Bluffs Business Park. Then they raisedanother $500,000 to gain a state match to build

Chief Hole-in-the-Day Industrial Park, namedafter a famous Ojibwe chief. The city also devel-oped a revolving loan fund that offers more flex-ibility to entrepreneurs than traditional financing.

To attract and retain working parents, thelargest industrial park includes a daycare center.

“You have to be creative and be in it for thelong haul,” says Anderson. “For every ten compa-nies I meet, I get one to come. But we are nowapplying for our third loan fund and other citiesare taking notice of our success.”

The diversity of industry in Little Falls is

striking: injection molding, precious metals plat-ing, precision tooling for the optical industry,woodworking, mailing, robotics, sewing, andprinting are just some of them.

Anderson explains business developmentthis way: When companies are ready to grow,they can’t always wait for the land or financing tobecome available. In conjunction with the localSmall Business Development Center and otherresources, she also keeps tabs on problems entre-preneurs may encounter and responds quickly toturn things around.

“If the owner is willing to listen, we canhelp,” says Anderson. “We’ve only lost two com-panies in all the time I’ve been here.”

C o m m u n i t y S u p p o r tWhen a community has pride in its industry andquality of life, the feeling is palpable. There arestories passed down to the next generation that

fuel creativity and a sense that “life is betterhere.” Every citizen takes part in sustaining thestory. Mentors offer their guidance to newcomersand the tradition continues.

Such is the case in Perham, a small commu-nity east of Detroit Lakes. Industry there is aneclectic mix of pet food, potato chips, andlicorice, all stemming from a homegrown entre-preneur named Tuffy.

In the 1960s, Tuffy Nelson owned a feedcompany for livestock and saw an opportunityto move into pet food. When he sold Tuffy’s toHeinz, Inc., he and his son, Kenny, started apotato chip factory called Barrel-O-Fun, whichwas later sold to G. Heileman Brewing Co.

Five years ago, the Tuffy’s plant in Perhamhad dwindled from two hundred employees atits peak to about thirty-five and was about tobe closed. Kenny Nelson pooled togetherinvestors to buy it back ten minutes before thefinal bell—so the story goes. Today, the plantemploys one hundred.

“When G. Heileman was going to sellBarrel-O-Fun, Kenny bought that back, too,”shares Chuck Johnson, economic develop-ment director with the City of Perham. He haslived in Perham for thirty years and says thatpride in the city’s entrepreneurial history fuelsmore of the same.

The local telephone company, ArvigCommunications, was among the first in thestate to offer high-speed Internet services. Fromlocal banks to private investors, the city has alsocoordinated attractive packages to bring inpromising business, says Johnson.

At a time when many towns are experi-encing a “brain drain” of college graduateswho migrate elsewhere, Johnson notes a localwoman who set up her dental practice back inPerham after receiving financing that includeda ten-year, zero interest loan from anotherlocal business.

“We have more jobs than people inPerham,” says Johnson. “And it’s because peopleare willing to get in front of the parade andmake things happen.”

Investing in a local economic developmentofficial or a micro-lending program begins toestablish the culture, according to area econom-ic development experts. Taking stock of currentassets—legal, financial, educational, realestate—and supplementing them with regionaland state opportunities will add to the entrepre-neurial focus. And finally, by making residentsand community leaders aware of the importantrole entrepreneurs can play in rural economicdevelopment, it adds fuel to the fire. IQ

Kenny Nelson’s Barrel-O-Fun is one of the larger firms curiously located in rural Perhamdue to its grow-your-own culture of business support. “We have more jobs than people,”says economic development pro, Chuck Johnson (middle).

06 IQ.Spring07_28-31 3/7/07 3:19 PM Page 31


BBuussiinneessss CCoonnssuullttiinnggAnderson Entrepreneurial Center,St. Cloudwww.haec.org(320) 251-5420Promotes excellence in entrepreneurial per-formance for the central Minnesota businesscommunity by educating, connecting, andrecognizing entrepreneurs.

AURI Ag Innovationswww.auri.org1-800-279-5010Provides staffing, research, outreach, andfunding for businesses that offer new, value-added agricultural products.

Latino Economic Development Centerwww.ledc-mn.org1-877-724-5332Provides business development services toLatino entrepreneurs, including help withunderstanding financing and regulatoryprocesses.

Metropolitan EconomicDevelopment Associationwww.meda.net(612) 332-6332Provides business consulting services tominority-owned businesses, including plan-ning, technical assistance, sales development,and procurement.

Minnesota Technology, Inc.www.minnesotatechnology.org(612) 373-2900Provides business/technology consulting andtraining services for manufacturing and high-tech companies in Minnesota (fee-based).

SCORE “Counselors toAmerica's Small Business”www.score.orgwww.stcloudscore.org(320) 240-1332Volunteer business professionals provideonline resources and counseling at no charge.

Small Business Development Centerswww.mnsbdc.comProvide business counseling services forprospective and current business owners at nocharge. Services include business planning,loan application preparation, sales and mar-keting assistance, accounting, and financialanalysis.

>Central Lakes College, Brainerdwww.clcmn.edu/smallbusiness(218) 855-8142 Counties served: Aitkin, Cass, Chisago, Crow Wing, Isanti, Kanabec, Mille Lacs, Morrison (northern), Pine, Todd, Wadena.

>St. Cloud State University(320) 308-4842Counties served: Benton, Morrison (southern), Sherburne, Stearns, Wright, Swift, and parts of Mille Lacs.

FFiinnaanncciinngg && TTeecchhnniiccaall AAssssiissttaanncceeAfrican Development Centerwww.adcminnesota.org(612)333-4772Provides business consulting services andfinancing to African entrepreneurs.

American IndianEconomic Development Fundwww.aiedfloans.org(651) 917-0819Provides gap financing, technical assistance,and culturally relevant business education toenrolled Band members who wish to start orexpand businesses.

Initiative Foundationwww.ifound.org1-877-632-9255Provides supplementary financing for locallyowned new and expanding businesses thatcreate quality jobs in central Minnesota com-munities.

ResourceGuideSSmmaallll BBuussiinneessss

Central Minnesota entrepreneurs have access to a broad spectrum of high-quality consult-ing services and financing options. Most services are available at no charge. Compiled by theInitiative Foundation’s economic development team, the following is a non-comprehensive list-ing of our region’s most trusted allies of small business. For more, visit www.ifound.org.

SOURCES OF ASSISTANCE FOR YOUR BUSINESS

07 IQ.Spring07_32-37 3/5/07 3:41 PM Page 32

SSPPRRIINNGG 22000077 33

Local ResourcesContact your local city or county administra-tor/clerk, economic development office, utili-ty provider, Housing and RedevelopmentAuthority (HRA), or chamber of commerce.Visit www.ifound.org/business_resources.phpfor a comprehensive listing of centralMinnesota resources. Also see:

>Association of Minnesota Countieswww.mncounties.org

>Minnesota Association of Professional CountyEconomic Developerswww.mapced.org

>League of Minnesota Citieswww.lmnc.org

>Minnesota Public Utilities Commissionwww.puc.state.mn.us

>Minnesota Rural Electric Associationwww.mrea.org

Mille Lacs Band of OjibweCorporate Commissionwww.corporatecommission.com1-800-746-9805Provides technical assistance, training, andlow-interest loans to tribal businesses.Services include business plan development,accounting, management, marketing, andfinancing.

Minnesota BusinessFinance Corporationwww.mbfc.org1-800-593-0123Provides financing for new and expandingbusinesses using the SBA 504 program.

Minnesota Chippewa Tribe,Native AmericanBusiness Development Center(218) 335-8583Provides technical assistance, training, andbusiness loans to tribal businesses.

Minnesota Community Capital Fundwww.mncommunitycapitalfund.org1-800-860-6223Provides financing for business expansionsusing the revolving loan fund resources ofmember organizations.

Minnesota Department of Employment & Economic Development (DEED)www.positivelymn.com1-800-657-3858

www.mnwfc.org1-888-438-5627Provides business development services tohelp companies start up, expand, or relocatein Minnesota; find and train employees; pro-mote international trade, and finance businessexpansions. Publishes A Guide to Starting aBusiness in Minnesota.

Northeast Entrepreneur Fundwww.entrepreneurfund.org1-800-422-0374Provides no-charge as well as fee-based con-sulting, training, and financing for prospectiveand current business owners.Counties served: Aitkin, Carlton, Cass, Cook,Crow Wing, Itasca, Koochiching, Lake, Pine,St. Louis.

Regional Development CommissionsProvide gap financing as well as planning,consulting, and technical assistance to centralMinnesota businesses.

>Region FiveDevelopment CommissionCounties served: Cass, Crow Wing, Morrison, Todd, Wadena.www.regionfive.org(218) 894-3233

>East Central RegionalDevelopment CommissionCounties served: Chisago, Isanti, Kanabec, Mille Lacs, Pine.www.region7erdc.org(320) 679-4065

Small Business Administrationwww.sba.govProvides financing resources for businessstart-ups and expansions including 7(a), 504,

and disaster assistance loans. Website offersonline tutorial for business planning, includ-ing sample business plans and templates.

USDA Rural & Community Developmentwww.rurdev.usda.gov/mn(651) 602-7800Works with private-sector and communityorganizations to provide financial assistanceand business planning in rural areas to createquality jobs and promote a clean, rural envi-ronment in under-served areas.

WomenVenturewww.womenventure.org(651) 646-3808Provides consulting, coaching, training, andfinancing to both women and men who wantto start or grow a business.Counties served: Anoka, Carver, Chisago,Dakota, Hennepin, Isanti, Ramsey, Scott,Washington, Wright.

OOnnlliinnee RReessoouurrcceessBizpathways.orgwww.bizpathways.orgBusiness planning guide and template thatcan be saved and edited online. Site also fea-tures a searchable database of financialresources. Membership fee required.

James J. Hill Reference Librarywww.mnpower.biztoolkit.orgComprehensive resources for business plan-ning, market research, management, andgrowth. Expanded website access sponsoredby Minnesota Power.

Kauffman Foundation e-Venturing™www.eventuring.orgProvides articles written by entrepreneurs andcompiles “best of the best” web content forstarting and running high-impact companies.

Official Business Linkto U.S. Governmentwww.business.govA partnership of twenty-one federal agenciesthat provides a single access point for govern-ment resources for starting, growing, andfinancing small businesses.

07 IQ.Spring07_32-37 3/7/07 3:25 PM Page 33

07 IQ.Spring07_32-37 3/5/07 3:41 PM Page 34


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rmed with high-tech GPS and sonar systems in a retro-fitted fishing boat, Mike Wood planned to float everynavigable square-foot of the Midwest’s most popular

lakes. By braving the thickest weed beds and shin-deep sandbarsthat would strike fear into the heart of any well-invested fisher-man, he would transform a goldmine of lunker-lair intelligenceinto some of the finest digital fishing maps in the United States.

At least, that’s what he told any lender who would listen to himin the early 1990s. All he and his wife, Connie, had to show for theiridea was “a lot of smoke and mirrors and things to come,” says Wood.“It was difficult to justify the product and market we envisioned.”

In spite of its futuristic concept, the Initiative Foundation sawthe company’s potential in Little Falls, given the town’s boat man-ufacturing industry and proximity to the Brainerd Lakes area.When other lenders said, “No, thanks,” the Initiative Foundationpartnered with Pine Country State Bank to take on the unsecuredpart of the loan. The calculated risk paid off.

Today, Waypoint Technologies and its LakeMaster brand areamong the leading digital and paper lake-mapping providers toanglers in the country.

“It was not feasible to make the move without them,” says Wood.When the six Minnesota Initiative Foundations were formed

in 1986, they received special IRS permission to provide businessloans, a rarity for foundations. Working in partnership with privatelenders, the Initiative Foundation has assisted in starting andexpanding more than seven hundred locally owned businessesthrough $23.8 million of its own lending resources.

“The days of ‘smoke-stack chasing’ as an economic develop-ment strategy are gone,” says Kathy Gaalswyk, InitiativeFoundation president. “When a community loses its local business-es, it loses its identity. Helping people who already live in and careabout their community will provide the greatest long-term impacton our local economies.”

The major goal is to create quality jobs in the centralMinnesota hometowns that need them most. In the past twentyyears, the foundation has helped businesses secure more than8,000 quality jobs with a current target wage of $15.60 per hourincluding benefits.

“When you talk about economic development, it all starts withliving-wage jobs,” says John Kaliszewski, Initiative Foundation vice-president for economic development. “If you don’t have a good job,

nothing else we do as a foundation will matter very much to you.”Initiative Foundation lending programs fill the gap when a

proposed business appears too risky for a traditional lender. Banksand other private lenders are often restricted by federal laws, cred-it, and collateral policies even when the entrepreneur presents asolid business plan or has an existing business.

“Ideal applicants have a strong business plan, a solid relation-ship with a local banker, the willingness to work hard, and creativ-ity,” says Gaalswyk.

Working closely with central Minnesota economic develop-ment professionals, the Initiative Foundation helps to coordinatethe right public/private financing package.

“[The foundation was] able to make adjustments as we grewand ran into some challenges,” says Wood. “They’ve always beenthere with words of encouragement.” IQ

Floating a LoanLake-Mapping Firm Buoyed byInitiative Foundation Financing

AA Mike Wood shows off LakeMaster’s digital maps to theInitiative Foundation’s John Kaliszewski.

Direct Business Loan Fund

$50,000 to $250,000 for targetedindustries such as manufacturers,technology-based business sectors,and value-added agriculture.

Technology Capital Fund

$50,000 to $500,000 for emergingtechnology ventures and estab-lished companies adding produc-tivity improvements through theuse of technology.

Seed Capital FundUp to $50,000 equity investmentsfor emerging ventures, financingproduct concept, development,and market research.

Green Business Loan Fund

$50,000 to $250,000 for firms thatprotect and preserve the environ-ment through products and servic-es related to recycling, renewableenergy, waste transformation, andemerging technology.

Microenterprise LoanGuaranty Fund

$50,000 guarantee against bankdefault for very small businesses thatmeet community needs or advanceentrepreneurship opportunities forracial minorities, women, youngadults, and low-income individuals.

Foundation Financing Programs

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fter serving as a police officer in the military, Robert Dorrdreamed of a career in the Minnesota Highway Patrol. Itnever happened. Not having 20/20 vision meant no job.

Dejected, the young and often struggling Native American workedhimself through electrician’s school and settled for launching an inter-national security firm that generates more than $60 million each year.

Meet the new face of American entrepreneurship.According to the Kauffman Foundation, which studies entrepre-

neurial activity nationwide, minority entrepreneurs outpaced non-minorities by 7 percent in 2005. While they are starting more busi-nesses at a faster pace, they also face unique challenges such as povertyand racial stereotypes.

“I came from a dirt-poor Native American family,” says Dorr, pres-ident and CEO of Deco-Inc. in Baxter. “Many of my business friendshad companies to inherit or parents who had enough to help them getstarted. I didn’t have anything and that made getting operating capitalvery difficult.

“After a while, I just gave up and focused on finding work on thereservations,” he says. “That proved invaluable, because when thegaming industry started in the early 1990s, enormous opportunitiesopened up.”

Like most entrepreneurs, he glimpsed an open window of oppor-tunity and leapt through it. After developing skills in installing securi-ty systems in 1998, he believed the market was ripe to provide inde-pendent security for government facilities and tribes across thecountry and worldwide. After securing government contracts, hiscompany grew from three employees to more than twelve hundred inless than five years.

“You have to have a plan, put a lot of thought into the busi-ness, and make the absolute most of every opportunity available toyou,” he says.

The U.S. Small Business Administration offers special programsto assist minority-owned businesses. The agency offers assistance inbusiness development and specially designated firms may be eligiblefor priority preference in government contracts.

“There are good programs out there,” says Dorr. “You just have to

be ambitious enough to go after them.”Many immigrant groups are developing their own resources to

meet unique start-up needs. The Latino Economic DevelopmentCenter in Minneapolis works to build economic opportunity, leader-ship, civic involvement, and political influence by nurturing Latino-owned businesses.

“Our community faces the same challenges as any other ethniccommunity when starting a business,” says Ramon Leon, executivedirector of the Latino Economic Development Center in Minneapolis.“It’s the lack of understanding how the system works, technical assis-tance in our own language, collateral to acquire financing, and some-times legal barriers.”

Hussein Samatar, a Somali native and founder of the AfricanDevelopment Center in Minneapolis, cites the complexities of theAmerican financial system as a major barrier.

By launching economic development centers, Leon and Samatarhave been able to help educate, guide, and provide assistance to theirethnic groups in ways that culturally meet their clients’ needs.

In 2006, the African Development Center trained fifty-five entre-preneurs. It also leveraged $4.8 million in business loans including itsown fund, which now exceeds $1 million.

The Latino Center focuses on organizing the Latino communityaround economic development issues and helping small businessowners plan and run their businesses effectively and legally.

While immigrants arrive in the United States with millions collec-tively invested in college education and training in foreign systems,Leon says that few get opportunities to apply their education in theUnited States. He also cites additional pressures to, “not end up worseoff than when they left.”

According to Samatar, immigrants often have more pressures onthem to succeed. Those pressures often include the need to supportfamily members in their home country. “Newcomers take risks thatothers don’t,” he says. “Their most common characteristic is a strongdetermination to succeed.” IQ

Diverse EntrepreneursFace Unique Barriers to Success

AANative American Robert Dorr’s advice to minority entrepreneurs: “You have to have aplan, put a lot of thought into the business, and make the absolute most of everyopportunity available to you.”

Culturesof Business

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hey appear out of nowhere during a would-be entrepre-neur’s darkest hour, answering desperate pleas, renewinghope and confidence, and delivering that which seemed

to be impossible to obtain alone. That’s why they call them angels.Although their motives are more economic than angelic, angel

investors offer opportunities for Minnesota entrepreneurs to pres-ent their ideas to affluent people and community organizationswho want to invest locally and diversify their portfolios at the sametime. Many angels are joining forces for greater investment powerand levels of business start-up funding that aren’t easy to find.

According to the Kauffman Foundation, less than 3 percent ofventure capital funds are now invested in start-ups. Instead, manyfunds favor established companies that are on the verge of goingpublic or will soon be sold to a competitor. Angel investment, how-ever, is on a high growth curve and is estimated to have pumped$20 billion into new ventures in 2004 alone.

For entrepreneurs, there are prices to pay to get an angelinvestment—increased pressure to grow quickly and giving up anownership stake in the company. With venture capital, a similarinvestment option, owners also must be willing to sell or go publicafter a few successful years.

Finding angels and tracking their growth has been difficultbecause they have traditionally operated as “silent partners.”Entrepreneurs can find potential investors through a regional angelinvestment network (RAIN) or local economic developmentresources. Networks like Twin Cities-based RAIN Source Capitalare springing up around the country to make investments moreefficient and profitable for individual angel investors.

“We are forming one new fund a month within an eight-stateregion,” says Joan Wurzer of RAIN Source Capital, which helps setup angel funds and screen investment opportunities. “Ourinvestors are looking for high-growth potential, typically $10 mil-lion in sales within five years.”

The level of financing within RAIN funds is $5 million or lessper venture, Wurzer says. The advantage of angel funds for start-ups is that they can present to fifteen to twenty angel investors atonce. At last count, RAIN Source Capital has invested $60 millionin forty companies.

Complex screenings and administration headaches makenetworking a welcome option for angels, says Gary Marsden,chair and investor in the St. Cloud RAIN Fund. Including theInitiative Foundation, the St. Cloud RAIN Fund has twenty-sevenmembers who have contributed $1.2 million ($25,000 or$50,000 apiece) and have so far invested in three Minnesota ven-tures. Their goal is ten.

“You have to be a qualified investor, meaning you have to beable to afford to lose your investment,” Marsden explains.“Conversely, there are rewards if you are lucky enough to find aMedtronic before it becomes Medtronic.”

Doug Hennum, CEO of ChamberMaster in Brainerd, locatedangel investors through the Brainerd Lakes Area DevelopmentCorporation. ChamberMaster develops management software forsmall- to medium-sized chambers of commerce. Hennum knewthat financing such nebulous assets as software would be a hard sellto a banker.

With the Initiative Foundation and several angel investors inthe Brainerd area, Hennum was able to tailor a package that hasallowed he and his partner, Rob Neumann, to maintain control andhave the financing to move his company to the next level ofgrowth. Currently, ChamberMaster has seventeen employees and isadding an average of twenty new clients each month.

“In our case it’s been nothing but positive,” says Hennum. “Theyhave provided us with excellent guidance and gotten us throughperiods that we probably couldn’t have handled on our own.” IQ

To learn more about Minnesota RAIN Funds or venturecapital, visit these websites: www.rainsourcecapital.com,www.granitequity.com, www.collaborative.net.


Angels Among UsRegional Investment Networks Take Flight

TTWinging it: Gary Marsden is one of the St. Cloud RAIN Fund’stwenty-seven angel investors.

BY CHRISTINE HIERLMAIER NELSONANGEL INVESTING

08 IQ.Spring07_38-45 3/7/07 3:31 PM Page 42

SPRING 2007 43

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> K E Y S T O R Y

Lee Hanson, Karen Ihnen, GeriPohlkamp, and Tina Yorek are

the foundation’s newest assets inits mission to strengthen centralMinnesota communities.

LLeeee HHaannssoonnBoard of Trustees

A new member of the foun-dation’s board of trustees and aveteran attorney at Gray PlantMooty, Hanson concentrates hispractice in closely held businesslaw, including acquisitions, merg-ers, estate planning, commercialreal estate, and tax planning.

He has a B.A. from ConcordiaCollege and a J.D. degree from theUniversity of Minnesota. In 1970,he joined Gray Plant Mooty asa shareholder.

His community leadershippositions include St. Cloud AreaUnited Way, the Boys and GirlsClub of Central Minnesota, theCentral Minnesota Council of theBoy Scouts, The Salvation Army,and Bethlehem Lutheran Church.

Hanson has a wealth of lead-ership experience with Minnesota

foundations, including the St.Cloud State UniversityFoundation, the Minnesota StateColleges and UniversitiesFoundation, and the Bishop’s TaskForce on Economic Reform. Healso helped establish the HaroldAnderson Entrepreneur Center.

KKaarriinn IIhhnneennEarly Childhood Specialist

As a home economicsteacher, preschool owner,University of MinnesotaExtension Service educator, andparent, Karin Ihnen has beeninvolved in family related activi-ties for decades.

As the Initiative Foundation’searly childhood specialist, a newlycreated position, Ihnen providestraining and support to earlychildhood coalitions and volun-teers. She helps to increase publicawareness and strengthen com-munity efforts to support youngchildren and their families.

Ihnen is active on severalchurch boards/committees andas a 4-H adult leader. She is a

member of the MinnesotaEducation Association, UnitedFor Kids Initiative, andCommunity Engaged ParentEducation Coalition.

TTiinnaa YYoorreekkProgram Assistantfor Grants & Training

A recent graduate of St.Cloud Technical College with anadministrative assistant degree,Tina Yorek is excited to be puttingher education to use.

“I feel very privileged to be ina position where I’m able to utilizemy training,” says Yorek. “I’m con-tinually challenged and encour-aged to grow and I can work for aworthwhile organization withpeople I respect and admire.”

In her new position, she pro-vides support to the foundation’sHealthy Organizations Partnershipand VISTA programs as well ascommunity and donor funds.

Yorek is active in her church,enjoys reading, gardening, andquilting, and volunteers withProject ASTRIDE, a local thera-peutic horseback riding program.

FANTASTIC FOURFoundation Adds More Talent to Board, Staff Team


GGeerrii PPoohhllkkaammppMethamphetamine &Youth Development Specialist

A recent empty-nester, GeriPohlkamp and her husband are get-ting reacquainted, and the cattlethey raise are getting a little moreattention. A lifelong Pierz resident,Pohlkamp loves the centralMinnesota area.

As the methamphetamine andyouth development specialist,Pohlkamp travels across the region,helping communities engage youthin leadership and service as well asbattle the meth epidemic.Pohlkamp joins the foundationwith seventeen years of work expe-rience in college settings and tenyears on the Pierz Public SchoolBoard. She is also active in herchurch and serves as an officer inthe women’s group. IQ

“The foundation’s successis determined by committedand passionate leaders and weadded four outstanding ones,”says Kathy Gaalswyk,Initiative Foundation president.

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SPRING 2007 47

> E A R L Y C H I L D H O O D

Ever since his father wasdeployed to Iraq, a preschool-

er has shown signs of depression.An infant returns home

after a lengthy hospital stay.She is agitated and unable tocalm down even though she isphysically well.

Children under age five in St.Cloud are experiencing theseemotional and mental healthproblems, but most go untreated.Parents and caregivers are oftenunsure where to turn.

The Initiative Foundationand area leaders are hoping to

strengthen early childhood men-tal health services for childrenand families in the St. Cloud,Sartell, and Sauk Rapids/Riceschool districts. With $1.5 millionfrom the Bush Foundation, theInitiative Foundation selected theSt. Cloud area as one of six pilotsites to participate in thestatewide Early Childhood MentalHealth Initiative, the first of itskind in Minnesota.

The goals of the program areto raise awareness of children’smental health needs, determineexisting services and gaps, and

train parents and care-givers how to recognizethe signs and get help.

“Although there aremany excellent servicesfor children in the com-munity, there is a lack ofmental health profes-sionals trained to workwith very young chil-dren and their families,”says Jane Ellison, project man-ager for the new Greater St.Cloud Early Childhood MentalHealth Coalition.

For more information or to

HARD FEELINGSPreschool Emotional Concerns Drive St. Cloud Initiative

participate in coalition activities,contact Project Manager JaneEllison at (320) 258-1103 or SCSUProfessor Glen Palm at (320) 308-2129, ext. 5635. IQ

Jane Ellison, Greater St. Cloud Early ChildhoodMental Health Coalition.

09 IQ.Spring07_46-52 3/7/07 3:44 PM Page 47

> M E T H A M P H E T A M I N E

Beware, parents. Its contentincludes illegal activities,

graphic violence, and inappro-priate language, but it could saveyour child’s life.

The Initiative Foundationawarded a $10,000 grant to bringCLIMB Theatre’s Shattered totwenty junior and senior highschools in central Minnesota.More than five thousand stu-dents have experienced the liveperformance that depicts howmethamphetamine takes a stran-glehold on the life of an averagehigh school girl.

“Youth are absolutelyimpacted after they experiencethis,” says Geri Pohlkamp,Initiative Foundation metham-phetamine and youth develop-ment specialist. “It gives them aglimpse into the addictive powerand consequences of meth. Theyusually sit in stunned silence andthen give the actors a standingovation. We don’t often get thatkind of reaction.”

Students also get a uniquechance to discuss the perform-ance and the dangerous realitiesof methamphetamine use in their

school. Unlikeother lyceum-type pro-grams, CLIMBTheatre actorsconduct class-room activitiest h r o u g h o u tthe day.

According to surveys, morethan 94 percent of students indi-cated that they thought the playwas realistic and believed that itreinforced their decision to steerclear of methamphetamine.Another 89 percent reported

they learned how to discourageothers from using the drug.

“The presenters were so con-vincing,” says a teacher from IsleHigh School. “They were young,spoke at the student’s level, andnever spoke down to them.” IQ

SHATTEREDMeth Performance Shakes Up Students

The foundation brought CLIMB Theatre’s Shattered to twentyschools and more than 5,000 students.


09 IQ.Spring07_46-52 3/7/07 3:44 PM Page 48

> E C O N O M I C D E V E L O P M E N T

Thanks to three organizations,the Initiative Foundation

received a year-end boost to itseconomic development effortsthat support locally ownedbusinesses and quality jobs incentral Minnesota.

With a $100,000 contribu-tion to the Seed Capital Fund, Pauland Lynn Hunt of Hunt UtilitiesGroup (HUG) wanted to help life-changing entrepreneurial ideas getoff the ground. Focused on ecolog-

ical living, HUG’s own projectsinclude straw-bale construction,self-heating buildings, and alterna-tive energy. Their gift will targetgreen business ventures.

The Calvert Foundation’ssimple goal, to end poverty, droveits $500,000 investment in thefoundation’s Direct Business LoanFund. Businesses that receivefoundation financing create living-wage jobs that pay more than $15per hour including benefits. Since

1995, the Calvert Foundation hashelped disadvantaged communi-ties—and the people in them—work their way out of poverty.

High-tech companies willhave more financing options in2007 thanks to Wells Fargo’s$650,000 investment in the foun-

HOLIDAY BONUSBusiness Financing Programs Get Year-End Support

dation’s Technology Capital Fund.“We’re certain this invest-

ment in the Technology CapitalFund will help strengthen theregion’s technology sector,” saysDavid Wiese, community devel-opment and specialized lendingfor Wells Fargo Minneapolis. IQ

SPRING 2007 49

David Wiese, Wells Fargo Minneapolis.

St. Cloud State—a smart investment in a global education.

www.stcloudstate.edu • 877.654.SCSU

09 IQ.Spring07_46-52 3/7/07 3:44 PM Page 49

09 IQ.Spring07_46-52 3/5/07 4:13 PM Page 50

SPRING 2007 51

09 IQ.Spring07_46-52 3/5/07 4:14 PM Page 51


sGUEST EDITORIAL

ntrepreneurship is an American legacy. Benjamin Franklinargued that widespread business ownership was essential

to a strong democracy and society. Minnesota clearly shares thislegacy with remarkable homegrown ventures dotting large andsmall communities. For community leaders, the opportunity foreconomic and social renewal is wait-ing, if you are willing to explore it andinvest in it.

Building an entrepreneurial cul-ture is the most important develop-ment opportunity central to yourcommunity’s future. It representsmore than just business development.Entrepreneurial behavior also buildsgreat schools, governments, recre-ation systems, nonprofits, and thevery institutions that enable our qual-ity of life. Becoming an entrepreneur-ial community opens many doors.

The fact that the United Stateshas dominated the world’s economicstage for decades no longer assures usof world dominance in the twenty-first century. We simply can’t competeglobally on price or even technology.America’s key to a bright economicfuture rests in our ability to innovate.Entrepreneurs play a central role infinding innovation and putting it towork to create economic vitality.

Decades of research now provide a compelling case thatnations and regions with strong entrepreneurship levels are doingbetter economically and socially. Studies by the London School ofEconomics (GEM), the Lowe Foundation, and others documentthe entrepreneurship and economic performance connection.Entrepreneurial ventures generate two-thirds of job creation, two-thirds of business growth, and 50 percent of innovation.

From very rural Valley County in Nebraska, where personalincome is now growing at twice the state’s average, to suburbanLittleton, Colorado, which has doubled job creation in a decade,there are now concrete examples of how entrepreneurship-baseddevelopment makes a real difference.

Other examples include the Entrepreneurial FriendlyCommunities initiative in Georgia, the Papajohn EntrepreneurshipCenter in Iowa, new centers for entrepreneurship in Texas and

western North Dakota, and a brand-new thirty-eight-county entre-preneurship initiative in western Alabama and eastern Mississippi.

In an era of declining state and federal engagement, com-munities must take responsibility for their own futures. Withentrepreneurship, there is no “right course” to take, but allow

me to offer some suggestions from ourfield experience:

Form a small working group.Charge them with exploring entrepre-neurship as a development strategyfor your community. Be sure toinclude entrepreneurs.

Do your research. Tap localresources such as the InitiativeFoundation, explore community mod-els, and, most importantly, take fieldtrips to places such as Fairfield, Iowa,or Tupelo, Mississippi.

Survey local entrepreneurs..Ask them to identify barriers that standin the way of growth, as well as thecommunity resources that have beenmost helpful.

Start small. Ramp up successfulefforts or bridge a small, but critical,gap in services. In time, you can helprenew your community economicallyand socially by harnessing the power oflocal entrepreneurs.

Engraved into the stone of my home state’s capitol buildingare the words “A Community Has a Work to Do.” Chances aregood that your community was founded on and has prospered his-torically because of civic and business entrepreneurs. I challengeyou to seriously explore what entrepreneurship has meant to yourcommunity and how it is a key to your future. IQ

EE

Don Macke is with the RUPRI Center forRural Entrepreneurship. Macke has morethan thirty years of rural development expe-rience. He is co-author of “EnergizingEntrepreneurs—Charting a Course forRural Communities.”

Long Live the EntrepreneurAmerica’s economic future depends on our homegrown ability to foster innovation

ILLUSTRATION BY CHRIS MCALLISTER

BY DON MACKE

09 IQ.Spring07_46-52 3/7/07 3:44 PM Page 52

spring 2007 iq magazine

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