You Don’t Know What You Don’t Know

My parents are in the middle of winding down their farm operation in Northern Iowa. The idea was simple: sell the land; retire and walk off into the sunset. But as they began the process, so too came layers of complication. The deal involved land that had been in the family for decades, the estate of my grandmother, multiple siblings (nine total, to be exact), and complex tax treatment. It was to say the least – complicated.  

At some point in the process, they realized they needed help—not because they lacked capability, but because there’s no clear-cut blueprint for navigating situations like this. You can only go so far on your own before the complexity outpaces what you can manage without professional help.

Everything’s Up to Date in Kansas City

With the temperature in Kansas City lately being from 90° to 100°, it is no surprise that families are trying to find ways to keep their little ones busy during the summer months that does not involve being outside. This past weekend, my husband and I decided to take a stroll through our very own backyard and head to Crown Center.

Farmers’ Market? More like Small Business Central

As the weather gets warmer and we emerge from our igloos here in Minnesota, one thing we are all looking forward to is being able to spend more time outside.

Whether you go for produce or local honey, to show off your newest cloth tote bag, or for just a sense of community, the local farmers’ market is the place to be. There is even a National Farmers’ Market Week (falling this year on August 4-10, 2024)! But what drives Americans to frequent farmers’ markets every summer without fail?

Growing an Entrepreneur Farmer

Today I’d like to share an unusual and inspiring story of entrepreneurial spirit, originality, creativity, and, perhaps most important, perseverance.

Scottie Thelman grew up in Lawrence, Kansas, the son of a doctor and a minister. Although Lawrence is a smallish town (and home of the 2022 NCAA Champion Jayhawks – just sayin’), it’s not a completely rural community. Lots of wheat and other fields around, however, and Scottie was originally inspired to focus on the business side of agriculture.

The Allure of a Family Business

I recently attended an event where the former CEO of a well-known company discussed what it is like to run a family business. The first thought that went through my head was “wow, if all the members of my extended family owned a business together it would be an absolute disaster!”

While I still whole-heartly agree with that statement, I also got to thinking about many of the benefits that would come from being part of a family business. Of the people I know who are actively involved in a family business, which is surprisingly a lot when I stop to think about it, almost all of them have commented on the sense of purpose that they get from their work.

The Corporate Transparency Act: A New Federal Reporting Requirement for Businesses

Warning: This post is pretty lawyerly, and certainly more technical than is the case for most entreVIEW content, but we thought the potential implications of this new law were worth detailing.

As businesses prepare for the year ahead, that planning should include analysis of compliance with the Corporate Transparency Act (CTA). The coverage of the CTA is very broad and requires certain business entities to submit a report to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Although there are exemptions, those exemptions essentially apply to entities that already have fairly extensive reporting requirements (i.e., banks or large companies), which means that smaller companies not currently subject to such reporting requirements will likely need to comply with submitting the reports. Although the CTA recently became law, FinCEN must issue regulations to implement the new ownership reporting requirements within one year (by December 31, 2021).

I. Main Rule

The main CTA reporting provision requires each applicant forming a corporation, limited liability company or similar entity to file a report with FinCEN containing a list of the beneficial owners of the corporation, limited liability company or similar entity that identifies each beneficial owner by:

1. full legal name;
2. date of birth;
3. current residential or business street address; and
4. a unique identifying number from a non-expired passport issued by the United States, a
        non-expired personal identification card or a non-expired driver’s license issued by a State.

Furthermore, if the applicant is not a beneficial owner, the report must also provide the identification information described above relating to such applicant.

II. Definitions

The following are some of the definitions in the CTA:

applicant — any natural person who files an application to form a corporation, limited liability company or similar entity under the laws of a State or Indian Tribe.

beneficial owner — means a natural person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise:

1. exercises substantial control over a corporation, limited liability company or similar entity;
2. owns 25 percent or more of the equity interests of a corporation, limited liability company
        or similar entity; or
3. receives substantial economic benefits from the assets of a corporation, limited liability
        company or similar entity.

III. Timing of Reports

It is anticipated FinCEN’s subsequent regulations will describe in detail the timing of reports; however, based on the CTA, businesses should be aware of the report timeframe for the following:

• Existing Entities — Any reporting company that has been formed or registered before the effective date of FinCEN’s regulations is to submit a report within two years of the effective date of such regulations.
• New Entities — Any reporting company that is formed after the effective date of FinCEN’s regulations will be required to submit a report when formed.
• Annual Reports — Not only must entities make an initial filing, but they must also make an annual filing listing the current beneficial owners and the information required in the initial report as well as any changes in beneficial owners during the previous year.

IV.  Exemptions

Not all entities must comply with the reporting requirement as the CTA provides certain exemptions. Those exemptions largely apply to companies that already face existing reporting requirements. However, just because a company meets an exemption does not mean the entity can take no action. The CTA requires an entity claiming an exemption to identify the specific exemption it is claiming, state that the entity meets the requirements for the exemption and provide identification information for the applicant or prospective officer, director or similar agent certifying the above information. There are additional clarifications for the exemptions below, but for brevity’s sake, those have been removed. As such, the listing should be used for purposes of understanding the general nature of the exemptions and not as an authoritative guide for specific requirements of each exemption.

Farmers Are the Ultimate Entrepreneurs

Fall is here (although it looks like winter outside at the moment!). This time of year always makes me think of farmers across the upper Midwest harvesting their crops. I consider farmers to be the ultimate entrepreneurs and, generally, some of the smartest and most determined people I have ever met.

Like many entrepreneurs, 2020 has presented a lot of challenges for farmers who, even before this year, were already battling declining profit margins, low commodity pricing and increasingly unpredictable and extreme weather patterns. Farmers are constantly innovating, growing businesses by themselves and taking full responsibility for the success of their products, from seed to harvest. I think entrepreneurs can learn a lot from America’s farmers.

Here are three things entrepreneurs can learn from farmers: 

• Use your mission as motivation. For an entrepreneur to be successful, the entrepreneur better have a mission that matters and motivates them. A farmer’s mission is to produce the world’s food and other essential agricultural products. Farming is essential and fundamental to society. An entrepreneur’s mission should be equally as critical.
• Employ data analytics. Farmers rely on sophisticated data analytics to aid their decision-making, such as what crops to plant and when to plant them, whether to contract in commodity futures and when to sell products. Data allows farmers to evolve and to avoid relying solely on historical practices to dictate future actions. Entrepreneurs should use data to help them innovate with knowledge and confidence, particularly when you’re operating in a high technology environment where things can change rapidly.
• You are only as good as you word. Farming communities are typically small and a farmer’s word means everything.
  Trustworthiness matters and can be a key driver in establishing a positive business reputation, business longevity and key business relationships. Of course, written agreements are relevant and can be important (how could a lawyer like me say anything different). Like farmers, entrepreneurs should value their verbal commitments at least as much as written legal agreements. 

There exists a misconception that farmers and farming are behind the times. Those of us who work with or have been exposed to farmers feel the opposite way. Just like high tech startup entrepreneurs, farmers frequently embrace innovation, work tirelessly and are among the first to take on risk and innovate if there is a potential return. 

A Global Pandemic — Why Not Launch a Business?

You can probably think of lots of reasons why not to launch a business during a global pandemic. If you’re my 13-year-old daughter, you see nothing but opportunity.

Why? Maybe because she’s the daughter of a lawyer who spends his days working with risk-taking entrepreneurs? Maybe because she’s easily bored? Maybe because she just has a lot of entrepreneurial drive (and a bunch of time on her hands)?

The real answer is that it’s because her New Year’s resolution was to turn her love of baking into a “neighborhood” business. Unlike many of us (remember those resolutions to stop snacking or to go to the gym more?), she actually took action: she put together a detailed list of everything needed to launch the business and started checking things off. Items included everything from branding and recipes to registering our kitchen under the Minnesota Cottage Foods Laws.

Of course, then things like life and COVID-19 got in the way! With time on her hands (8th grade distance learning only took her about 1.5 hours a day), she renewed her enthusiasm for the idea after we returned from our one-day trip to Ecuador (which was supposed to be a 10-day spring break trip to the Galapagos Islands…). 

But, like any good entrepreneur, she needed to be able to adapt to a rapidly evolving situation. Instead of trying to go door to door in the neighborhood, she contacted the New Brighton Farmer's Market and secured a bi-weekly space for the summer. About three weeks ago, she officially launched Zizzy Baked GoodZ and sales have been booming! She sold out her inventory her first week at the market (half way through the day) and almost sold out twice as many items the second week — including her “Rainbow Pride Cupcake” (complete with Fresh Pineapple Buttercream), pictured above. She’s even already filled several custom catering orders!

So You Want to Bring Your Business to the Fair? An Insider’s Perspective on Vendor Life at The Great Minnesota Get-Together®

It’s the day after Labor Day, and we’ve just wrapped up our second year of business at the Minnesota State Fair in what seems likely to be a record-breaking year for attendance. Our St. Croix Saddlery booth had a successful run with a decent increase in sales over last year, attributable to the combination of more educated buying, an improved setup, a strong sales team, and fantastic weather. We learned a lot in our first year that made this year easier, but the Fair is still a big deal with its own challenges. I know many other entrepreneurs dream of joining the Fair as a vendor, and I thought I would share just a handful of truths that I’ve learned in my experience.

• It’s not a bonanza. We’ve all heard tales of the business owners who work two weeks at the Fair and get to retire the other 50 weeks of the year. Perhaps this is true for some of the most popular food vendors, but it’s certainly not the case for me or most other vendors. Our sales over 15 days at the Fair are roughly equivalent to one average month’s sales in our store, but there are a lot of expenses that go with that (see the next paragraph).
• It’s expensive. In addition to paying a relatively high booth fee (it varies depending on your vendor category, location, and sometimes your total front footage), you also pay a significant assessment for utilities that is split among all vendors. On top of that, you have your own booth costs (for us, tents, lighting, and fixtures), huge inventory costs, admission for all of your employees (the Fair requires this, and the vendor ticket discount is the same as the early-bird discount at Cub Foods), parking if necessary, and of course wages for all the extra staff you bring aboard.

Keep Control of Your Venture

Every founder I work with is concerned about control. And rightly so, given that their new venture is their baby and the beneficiary of a lot of sweat and money out of their own pockets.

Usually the discussion gets interesting when the company begins issuing shares to employees or raising funds, but sometimes we dig into it right at formation. There are various creative methods to approach the issue.

Some traditional methods include implementation of voting agreements or the like, but for a startup looking to add and retain employees in a competitive market those methods may not be an ideal approach, plus they can be overly complex and it can become a burden making sure every employee signs an agreement that nobody other than legal counsel understands. Another method is to implement a dual-class of shares to give one or more founders the sole vote or “super” voting rights.

An American Buyer in Italy

This past week I had the extreme privilege of attending the 120th annual Fieracavalli (translation: Horse Fair) show in Verona, Italy. This is a massive exposition comprised of over 12 buildings, eight arenas, and seemingly endless outdoor exhibitor areas. There are a multitude of events going on simultaneously, from B2B vendor booths to public shopping to educational shows for school children to world class jumping competitions. It’s completely fantastic and overwhelming!

I was graciously invited to attend Fieracavalli by the Italian Trade Agency. They brought in a small group of buyers from the American equestrian industry in the hopes of building business relationships and increasing the Italian brand presence in our U.S. market. They took wonderful care of us, from the comfortable Lufthansa flights to the beautiful Hotel Giberti accommodations. They even surprised us with tickets to the historic 120th anniversary dinner, set in a courtyard and building where Mozart himself was rumored to play music in his youth, and they gave us VIP accommodations to the spectacular “Gala D’Oro,” or Golden Gala, with performances from some of the best equine acts in their country. As one of the few delegates treated to this magnificent display of hospitality, I feel compelled to share my amazing experience.

Holiday Tipping for Small Business Owners

The holidays are an incredibly busy time of year for most of us, whether we’re running holiday sales for our customers, trying to close a year-end deal, or preparing for an annual inventory. Amidst all the hustle and bustle and buying holiday gifts in between, it’s easy to forget the service people who have been helping to make our businesses successful all year, but this is a great time of year to remember them with a small token of appreciation.

The Emily Post Institute publishes a helpful holiday tipping guide for all kinds of home service providers, and offers some factors that we business owners should consider in tipping as well:

• The quality and frequency of the service you receive.
• Your relationship with the service provider (for example, the UPS delivery driver who always has a biscuit for our store dog and knows us by name gets a bigger tip from us).
• Your location; tipping averages tend to be higher in larger cities.
• The number of years you've been using the service.
• Your budget.

Tips are generally in the form of cash, but need not be (and in fact some businesses prohibit their employees from accepting cash gifts or even gift cards). The second most popular gift among business owners appears to be chocolate. At my business, we sent out big Costco stacks of holiday treats to two local service providers with large staffs.

30-Day Offline Shopping Challenge

I’d like to start this entry on a personal note, with a tribute to my dear uncle, Robert Mattern, who passed away on March 25 at the age of 80.

Uncle Bob was my first entrepreneurial inspiration. During my entire lifetime, he owned and ran Mattern’s Bait Shop in Aberdeen, South Dakota, and was still running his beloved shop at the time of his death.  As a child, I spent hours in the shop during every trip to Aberdeen, gently fingering the colorful lures and fancy rods on display, playing with the minnows in the tanks, and - most of all - observing Bob as he interacted with, and truly helped, his many loyal customers.  Bob’s obituary captured these relations well: “Customers sought out Mattern's expertise in fishing and hunting, his knowledge of the best fishing spots and his skill in repairing fishing reels, rods and ice augers.  Bob and [wife] Linda appreciate their customers and consider them friends.”

To me, this is the essence of the small business experience.  I love the personal touch, the joy of a bright and tidy display, the pleasant sounds of people working together, and the knowledge to be gained from an experienced shopkeeper.

The Magnolia Story

On HGTV’s Fixer Upper, Chip and Joanna Gaines “take the worst house in the best neighborhood” and “turn it into their clients’ dream home.”  A husband-and-wife team, Chip manages the demolition and construction, and Joanna designs and styles the interior.  At the end of each episode, Chip and Joanna ask, “Are you ready to see your fixer upper?” as their clients eagerly await the first look at their newly-transformed home.  Now in their fourth season, Chip and Joanna have millions of viewers captivated by their playful rapport and signature modern, rustic style. 
    
In addition to raising four kids on a working farm and starring in a top-rated TV show, they run quite a few businesses in Waco, Texas. Their empire includes a real estate company, Magnolia Realty; a construction company, Magnolia Homes; a furniture line, Magnolia Home; another furniture line, Magnolia Home Furniture; a collaboration with Loloi rugs; a quarterly lifestyle magazine, Magnolia Journal; a bed and breakfast, The Magnolia House; a real estate subdivision, Magnolia Villas; their quarterly lifestyle magazine; and the Magnolia Market, a shopping and dining destination in downtown Waco. 

More Than a Hobby: The Story of Hobby Lobby

This past weekend, I finished reading the book More Than A Hobby: How a $600 Start-Up Became America’s Home & Craft Superstore. The book, written by Hobby Lobby Founder and CEO David Green, recounts the Green family’s modest beginnings in 1970, operating a miniature picture frame-making business out of their garage, and eventually turning it into Hobby Lobby Stores, Inc., a privately-owned arts and crafts retail giant that is today headquartered in Oklahoma City and operates over 600 stores nationwide.  

Understandably, for readers who are not arts and crafts enthusiasts, your only familiarity with Hobby Lobby may be its role as a defendant in the controversial Supreme Court case, Burwell v. Hobby Lobby Stores, Inc., which was decided in June of 2014. The Green family’s Christian values certainly influence Hobby Lobby’s business practices, including the chain’s retail hours of 9 a.m. – 8 p.m. Monday through Saturday, the closure of all stores on Sundays, and the full-time paid chaplain at corporate headquarters. But religion aside, certain of Hobby Lobby’s other business practices may prove influential to entrepreneurs.  

Show Your Customers Some Love this Valentine’s Day!

Customer acquisition cost – the cost you pay to bring in each new customer – is one of the most frequently discussed metrics by business advisors and in entrepreneurial articles.  Sources vary in their statistics, but the consensus is that on average, it costs somewhere between four and ten times more to find and sell to a new customer than to a current one.

It is also widely understood that people like to be acknowledged and appreciated.  Dale Carnegie’s second principle of human relations directs us to “show honest and sincere appreciation.”  He says, “Nothing else so inspires and heartens people as words of appreciation.”

The Widow Clicquot and the Business of Bubbly

The pop of a cork evokes celebrations, the Jazz Age, weddings, and New Year’s Eve kisses.  A few years ago, I traveled to Champagne, France, with my mother and sister in search of the birthplace of the alluring bubbly. As Francophiles and budding oenophiles, we were in heaven. 

After touring prestigious Champagne houses, small family-run Champagne production facilities, charming villages, and picturesque vineyards, my passion for Champagne has grown, from both a gustatory and a scholarly perspective.  Along the latter lines, I recently read Tilar J. Mazzeo’s The Widow Clicquot: The Story of a Champagne Empire and the Woman Who Ruled It (Harper Collins, 2008), an intoxicating biography of the entrepreneurial Grande Dame and the origins of the business of Champagne.

Relationships are Key to Building Business

This past week I made the 25-mile trek to see my allergist, Dr. Wyatt, an experienced doctor and just generally a great guy.  He is out of network for me, which means that, in addition to driving an hour round-trip, I pay a semi-steep co-pay to see my doc.  So why do I do it?

It’s all about the relationship!  I’ve seen Dr. Wyatt for 30 years.  Every time I visit, he asks about my horses and my business, and my family (by name).  I look forward to my annual visit and I would miss Dr. Wyatt if I went somewhere else.

What: Joseph Wechsberg, The Merchant Bankers (Pocket Books, 1968)

Why: A fascinating look at the origins of some capitalist behemoths.

You may have heard the saying, “Great oaks from little acorns grow.” The Oxford Dictionary of Quotations tells us that this proverb has its origins in medieval England, but it continues to be an apt description of entrepreneurialism. This is especially true in the context of the huge merchant banks that once dominated—and, in some instances, still do dominate—the capitalist West from the small area known as the City of London. And, to my knowledge, no book describes this world better than Joseph Wechsberg’s The Merchant Bankers.

First off, this is an oldie but goodie, a snapshot taken in the mid-1960s. Some of the banks described in detail here, most notably Baring’s and Lehman Brothers, have since bitten the dust in spectacular ways. That does not detract from the stories behind their rise in influence and affluence. As Wechsberg notes, “Men have always been fascinated by the spectacle of other men making big money.”

Nearly all of these capitalist empires started as family businesses, where “there is one pioneer, who began with nothing and died rich.” They also originated out of other businesses: “Almost all merchant bankers were merchants before they became bankers. They traded with certain commodities in certain parts of the world, and later found it more profitable to leave the actual trading to others and to deal in credit instead of goods.” The book is loaded with tidbits along these lines. Did you know that Shell Oil (recently reported to be exploring the acquisition of BG for $70 billion) started as a company that traded in shells and grew into an oil company whose name reflects these lowly origins?

Even after great success, these dynasties have rarely rested on their laurels. One merchant banker summed up the secret of their success this way: “No one in the City ever stops learning.” That’s something any entrepreneur will recognize as key to the entrepreneurial way of life.

Recap of the ACG BOLD Awards

Recently, I attended the third annual ACG BOLD Awards. Some background: ACG is the Association for Corporate Growth, and ACG Minnesota is the area’s premier mergers and acquisitions organization. Its membership includes corporate executives, private equity investors, investment bankers, and other mergers and acquisitions intermediaries.

The BOLD Awards recognize “Minnesota organizations and individuals who demonstrate innovative and imaginative efforts to positively impact the community and grow Minnesota.” There are four award categories—Small Corporate, Middle-Market Corporate, Large Corporate, and Non-Profit—and nominees must have demonstrated innovative approaches and BOLD ways to address challenges in their respective market.

Nominees are judged on criteria including Innovation, Talent Management, Growth, Collaboration, and “Daring BOLD.” More than 60 companies were nominated for the 2015 BOLD Awards, and the winners are….

• Small Corporate: Surgical Science. Established in 1999, Surgical Science is a developer of virtual reality surgical simulation training systems for medical professionals. The company’s first product, LapSim, provides best-in-class procedural simulation for appendectomy, advanced suturing, gynecology, bariatrics, and more. Recently, the company unveiled its TeamSim creation, the industry’s first interprofessional simulation trainer. 

• Middle-Market Corporate: Angie’s Boom Chicka Pop. Founded in southern Minnesota by Dan and Angie Bastian, Angie’s Boom Chicka Pop is one of the country’s fastest growing natural popcorn brands. Angie’s popcorn and puffs are certified gluten-free, made with non-genetically modified ingredients (with no effect on taste!), and come in some pretty fun packaging. The products can be found in natural food, grocery, club, and mass retail stores nationwide. Angie’s was also the winner of the overall grand prize, the “Boldest of the BOLD” Award.  

• Large Corporate: ABRA Auto Body & Glass. Founded in Fridley in 1984 and currently headquartered in Brooklyn Park, ABRA is a nationally-recognized leader in collision repair, paintless dent removal, and auto glass repair and replacement. ABRA has exhibited impressive growth in recent years, fueled primarily by the acquisition of existing facilities and the continued construction of new locations. Currently, ABRA has over 270 company-owned or franchised centers in 20 states. 

• Non-Profit: Pinky Swear Foundation. Formerly the Miracles of Mitch Foundation, the Pinky Swear Foundation recently rebranded itself to honor the pinky-swear promise made between a father and son. Founded by Steve and Becky Chepokas in 2003 in memory of their son Mitch, the Pinky Swear Foundation helps children with cancer and their families by providing support for basic needs. For the past 12 years, the Pinky Swear Foundation has hosted the largest children’s fundraising triathlon in the U.S., and has provided more than $4.5 million in financial assistance and quality of life support. The Pinky Swear Foundation is currently undergoing expansion into 11 new markets across the country. 

These four BOLD Award winners showcase entrepreneurship and inspiration at their best, and it was enjoyable to spend an evening hearing their stories. For more information on ACG Minnesota, see here, and mark your calendar for next year’s ACG BOLD Awards on February 23, 2016.