2007 Upsize Growth Challenge: Best in show

COVER STORY: 2007 UPSIZE GROWTH CHALLENGE

Best in show
Sociale, Matter of Africa and IntelAccount share growth stories
by Beth Ewen

SOCIALE MAKE & TAKE GOURMET is the overall champion of this year?s Upsize Growth Challenge, as selected by audience vote at the wrap-up event June 14.

Co-owners Lisa and Jason Hake reported significant progress toward their ambitious expansion plans this year for their meal preparation company, especially on two fronts: They used a deferred compensation plan to attract an expert in franchising to their company, and were well into the process of doing the same to gain an executive seasoned in raising capital.

When the two entered the contest earlier this year, they were hesitant about bringing on new personnel, and unsure about whether they should raise money. Through the Upsize Growth Challenge process they learned they would need to do both to realize their growth goals, they said.

Sociale joined two other companies as the winners of this year?s Upsize Growth Challenge: IntelAccount Inc., an accounts payable service; and Matter of Africa America Time, a children?s educational book publisher.

IntelAccount?s CEO David Crane reported how he tweaked his company?s business model, to focus on sales through channel partners rather than direct sales. He believes any business plan needs to be evaluated and changed regularly, he said.

Paul Dixon, president of Matter of Africa and the publisher of the Papa Lemon series of children?s books, related his company?s more careful selection of conferences and events to maximize sales, and the addition of a journal to enhance the company?s mission of teaching children about their heritage. That mission is particularly important to co-owner Lehman Riley, Riley said. He is Dixon?s cousin and the author of the Papa Lemon books.

Sociale?s owners now see
raising money as key
to stepped-up growth

by Elizabeth Martin

“YOU GUYS HAVE accomplished so much!? says Sarah Cothran of The Sage Group.

Cothran?s comment sums up the panelists? reaction to Lisa and Jason Hake?s laundry list of what they?ve been up to since their last meeting with Upsize Growth Challenge panelists.

The husband-and-wife owners of Sociale Make & Take Gourmet have:

? opened franchises in Bismarck, North Dakota, and Syracuse, New York;
? completed a six-month process of securing a lease for their Virginia franchise;
? signed their first area development agreement in Milwaukee for a minimum of three stores;
? ramped up their public relations efforts;
? started a franchise referral program;
? hired an assistant; and
? taken back responsibilities for the company?s franchise sales after they decided that the sales person they hired wasn?t working out.

But far from resting on their laurels since the first workshop in March, the Hakes also came back with plenty of questions for the panelists.

Gaining IT support
Lisa?s first question was about hiring IT support for Sociale.

Currently, she is responsible for keeping the company?s technology up and running. But with their expanding business and their new focus on delegation, she?s ready to investigate outsourcing.

Nathan Johnston outlines two common mistakes that small-business owners make when it comes to hiring information technology help.

?One is that you hire your brother?s cousin?s kid to come in because he?s smart and he knows something about IT,? says Johnston of Clientek, the Upsize Growth Challenge technology expert. ?The problem is that he knows, probably, a lot, but he doesn?t know how to run a business. He doesn?t know how to make technology work for your company.

?The second thing is that you get caught in the trap of reactive support, meaning you don?t call anybody until you have a problem,? he continues. ?The problem with that is that there are certain problems that are not easy to recover from. There are things that have significant business impact ? your backups aren?t good, that kind of thing.

?Make sure you?ve got ongoing, preventative support,? he says. ?I would avoid going to someone who says, ?Yeah, we?ll come out when you need us.' That?s a recipe for trouble.?

Lisa also asks about the benefits of hiring an individual to provide IT support versus hiring a company.

?I recommend going with a company because you can rely on them. They?ve got backup.  You hire one person, what happens when they go on vacation,? says Johnston.

Another benefit of hiring a company is the depth of resources that a company can provide. Not only does it give you access to multiple individuals with multiple skill sets, companies can also leverage larger resources. As an example, Johnston cites Clientek?s status as a Microsoft Gold partner, and explains the resources that are available to them through that relationship.

The minimum commitment for IT support is approximately 8 hours per month, says Johnston. That time will go to preventative maintenance and troubleshooting and you?ll be surprised at how quickly it goes at first, he says.

?IT support is not critical until you don?t have it,? adds James Alberts, also a technology consultant with Clientek.

Investors a must
During the first Upsize Growth Challenge session, Sociale?s owners were trying to decide whether or not to pursue outside financing to support their ambitious growth goals. But after the last meeting, it became apparent to the couple that they would need to find investors.

?The question was ?if? last time,? says Jason Hake. ?Now the question is ?how.' ?

Sociale knows that it needs to raise between $1 million and $3 million in order to finance its ambitious growth goal of 35 stores by the end of 2007 and 200 franchises by 2012. Jason and Lisa just aren?t sure how to go about finding potential investors.

Rick Wall, CEO of Highland Bank and the Upsize Growth Challenge finance expert, congratulates the couple on making the decision to move forward with raising money. He also encourages them not to be shy about their fund-raising needs.

?I think you shouldn?t feel at all uneasy about saying, ?We want to raise money,? and telling everybody you know and not feeling that it shows your business isn?t strong,? says Wall, detailing what their pitch should be:

?We?re growing, and we?ve got a good thing going, and this is a chance for somebody else to help participate in a company that?s really growing and has got great potential. Kind of have a little bit of the mentality of, ?I?m letting you in on a secret,? ? he says.

?I can tell you for sure that the people on the other side that are experienced in the business of providing capital, they?re going to know what to ask, they?re going to ask the questions and then they?ll make a decision. If they?re not interested, they will not give you money. You don?t have to worry about taking advantage of anybody.? 

Getting estate in order
?You resonated with us as far as estate planning and business succession,? Jason Hake tells Michele Vaillancourt, an attorney with Winthrop & Weinstine and the Upsize Growth Challenge legal expert. At the last meeting, she urged them to realize that such planning is a must for husband-and-wife business owners with young children.

The Hakes have begun to think more about these elements of their business, but are looking for a place to start.

Vaillancourt suggests the University of St. Thomas as a resource and estimates that hiring a lawyer to work on an estate plan would cost $15,000 to $20,000.

?If you have in mind what you want, that helps a lot,? she says.

Lisa Hake shares that Sociale conducts an annual customer satisfaction survey with excellent results: 96 percent of responding customers say they will use Sociale?s services again and 98 percent say they would refer a friend.

But Lisa also knows that it?s likely the only respondents are those who are happy with the service to begin with. Sociale is interested in soliciting more in-depth feedback from their customers through focus groups. While she has some experience with focus groups, Lisa wondered how to find the right participants.

Start with your public relations firm, suggests Sarah Cothran of The Sage Group. They may know of firms that can help you conduct focus groups. The downside is that hiring such firms can cost you between $20,000 and $30,000. An informal focus group may get you the information you?re looking for too, she says.

?Just to motivate people, feed them while they?re there and give them some complimentary passes,? she suggests.

Cothran also notes that Sociale has had some great media coverage recently, but didn?t see it on the company?s Web site. She suggests that the company contact the publications in which they?ve been featured and purchase the rights to the article or reprints of the articles. The articles can then be used both on the site and with the company?s business partners. 

Jason and Lisa Hake, Sociale Make & Take Gourmet: 612.209.2695; li**@************et.com; ja***@************et.com; www.socialegourmet.com

Promoting ?Papa Lemon?
is Matter of Africa?s
ticket to wider audience

by Sarah Brouillard

LIKE ANY SMALL independent publisher, Paul Dixon, president of Matter of Africa America Time Corp., wants a wider audience for his company?s books.

But until the day Oprah Winfrey calls (it?s not just a pipe dream: Dixon?s aunt knew Winfrey?s father while growing up), he is focused on retooling the company?s Web site and targeting the most ideal expositions, among other tactics, to showcase the Papa Lemon series.

The company has four titles, with stories taking place in a small town in Mississippi. The main character, Papa Lemon, is based on a real person, the co-owners? grandfather (Dixon?s cousin is author Lehman Riley). With his magic train, which is actually a time machine, the supporting child characters journey into the past to witness historic events, such as Dr. Martin Luther King Jr.?s ?I Have a Dream? speech, and meet important people, such as Harriet Tubman.

Dixon turned to experts of the Upsize Growth Challenge to help him figure out how to take Papa Lemon to a national stage.

At the first session held in March, Dixon was advised to maximize his company?s limited resources (there are only two employees).

With Roseville-based Web developer Evolve Systems, he plans to redesign the company?s Web site, by optimizing it better for online searches and making it more user-friendly.

Dixon is also expanding and promoting the brand. Enticing students to learn about their own family heritage is a goal of the company, so he has created a 5-by-7-inch, 80-page self-directed heritage journal, with an imprint of Papa Lemon?s portrait on the front cover. The company hasn?t begun packaging it yet, but it will probably be available for sale this summer, he says.

He also created a worksheet ? ?an extra add-on for students? ? with a word search and pictures to color, including information on the Papa Lemon books and the Web address.

The company is expanding its inventory as well. Dixon plans a 2,500-copy reprint of the second book, and a possible reprint of the first book, at the cost of about $1.50 per book.

?It?s a huge event for us,? Dixon says.

The company is making better use of its human resources, by getting choosier about which conventions and expositions it will attend to sell books. One of them, the Minnesota Association of Christian Home Educators annual conference, held in Rochester in April, was very lucrative.

Between 4,000 and 5,000 people attended ? a huge turnout, says Dixon. Though the company competed with other big publishers, it sold about 200 books.

?People were buying books left and right. Some were buying five at a time,? he says. The company encourages multiple sales: three for $15 or four for $20, compared to $5.99 for just one book.

The opportunity to market to the true end user ? children, via their parents ? was the biggest advantage the conference offered. In the past the company targeted education conferences, but schools officials, they find, have many constraints on their budgets and more red tape to navigate.

By contrast, home-schooling parents can spend their dollars more freely.

The company has also thrown its hat into the ring for some national television exposure. Lehman Riley has submitted his application to African American Lives 2, a new PBS series where one person will be chosen to have his or her roots mapped through DNA analysis and genealogical research. The shows are a follow up to African American Lives and Oprah?s Roots, which focused on celebrities.

The company is awaiting an answer on the show?s ultimate selection. About 2,000 have applied so far, says Dixon. ?That fits into what we?re doing,? as a company.

Name revision?
Before making any leap to a national stage, Dixon wants to streamline his branding and marketing. The company is widely identified by its Papa Lemon brand, and less so by Matter of Africa America Time Corp. Dixon told marketing and legal experts at the second UGC session that he?s thinking about revising the business name, and wondered about the advantages of doing business as Papa Lemon Enterprises.

Upsize Growth Challenge legal expert Michele Vaillancourt, an attorney with Minneapolis-based Winthrop & Weinstine, says Dixon needs to check whether the name is available under state law. A quick way to find out is to call the Minnesota secretary of state?s office. If it is available, file a Certificate of Assumed Name and have it published in a public-notice newspaper, such as the St. Paul Legal Ledger.

There?s one more step. It?s also important to check federal trademark laws, she says. For a simple search, the company should check the United States Patent and Trademark Office: www.uspto.gov.

?Right now you?re being referred to as Papa Lemon,? says Sarah Cothran, the Upsize Growth Challenge marketing expert and public relations manager with The Sage Group, a Minneapolis-based marketing and communications company. ?If that?s truly what you?re going by, and what you?re out marketing and promoting, you should really formalize that and be out there reinforcing that.?

She uses the example of consumer-products manufacturer Procter & Gamble, which is much less well-known than its popular Tide detergent brand name.

The experts also suggest making the Web site the centerpiece of the company?s marketing campaign.

For starters, the story of Papa Lemon should be a focus.

?That?s the appeal,? says Elin Raymond, president of The Sage Group. ?It?s a wonderful, magical story that?s real.?

The company should make sure it?s told the right way, by keeping it succinct and in one place; not scattered throughout the Web site. Viewers don?t want to scroll down to find information, says Cothran.

Raymond suggests putting more testimonials on the Web site, starting with the huge stack of ?I love Papa Lemon? letters Dixon has received from children.

Dixon could also post a case study, a real-life, anecdotal example of how the books can be used in a classroom, Raymond says. He may interview a teacher to find out his or her teaching strategy, the students? reaction to it, and the results. Dixon can then use that case study to pitch to selected media, like schools, teachers and librarians, or it could be printed on a single sheet as a ?giveaway? at conventions.

To gain credibility, it may be worthwhile to have the Papa Lemon books reviewed by a library or education association. Also, Dixon should consider positioning the company as an education thought leader.

Many teachers want to have a multicultural program, but don?t know how to develop one, says Raymond. Providing them with a how-to guide can help them, and help promote the company.

Dixon or Riley could write educational articles and publish them in trade publications and other magazines. Getting the Papa Lemon name out into the media, and into cyberspace, helps the search-optimization process.

?Rich and fresh content is what?s going to drive people? to the Web site, says Cothran.

While retooling the Web site, the company should ask the Web developer about how it can track statistics about its usage and popularity, and then how to interpret and maximize that information, say technology experts.

 ?I find what people often overlook is: what is the path to the Web site, what pages get hit the most often,? says Nathan Johnston, technology expert and associate partner with Clientek, a Minneapolis-based IT consulting company. ?You can use that information for almost immediate feedback on the question of what you?re putting out there and whether or not it?s resonating with your folks.?

The Web site is a company?s calling card, and it must be ready for instant accessibility. If you say you have something posted on the Web site, it?d better be there, says James Alberts, a technology consultant with Clientek.

These days the Web is at most people?s fingertips. Convention attendees can check a Web site from their cell phones, and even the youngest students know where three or four computers are in their vicinity, he says.

Going digital
Besides an Internet presence, the company should also consider having a digital one.

For some children, ?their focus is so on that medium. So if they haven?t seen it on a screen, it doesn?t exist,? Johnston says.

That doesn?t mean getting rid of the print format altogether. Instead, Dixon should use DVDs and CDs to pique children?s interest and introduce them to Papa Lemon.

?Schools are going to clamor for you even more if you have ready to go a lesson that will go along with? the book ?that?s in digital format that a teacher can drop into her computer,? says Alberts.

?Children are a lot smarter technology-wise than their parents are and their parents? parents are,? he says. ?Digital is a format that children not only can understand but it allows them to dream even further.?

But digital also resonates with adults, he says. He advises the company to revamp its presentation style at expositions and conventions. Instead of posters, he suggests Dixon use a small picture-frame computer to display a PowerPoint presentation.

?The only thing it does is flash different things on there. But don?t you know, that?s the only thing people look at when they come by ? it grabs their attention. You don?t need technology in order to tell your story. You need it in order to get their attention.?

Until the day digital becomes the preferred format for reading, books are still Matter of Africa America Time Corp.?s main product, say UGC finance and accounting experts.

Craig Murphy, partner with McGladrey & Pullen, an accounting firm in Minneapolis, suggests the company hire a professional salesperson to move more units, and attend more events.

?Obviously you can?t be at two places at the same time.?

Rick Wall, CEO of Highland Bank, based in St. Paul, says a bigger press run can drive down the printing costs and increase the company?s margins. Setting quotas for a salesperson can ensure the additional inventory will be sold.

Paul Dixon, Matter of Africa America Time Corp.: 612.730.8217; in**@**********du.com; www.papalemonedu.com

To speed revenue gains,
IntelAccount turns to
private-label model

by Beth Ewen

INTELLACCOUNT has  been growing, says CEO David Crane, but not as fast as he would like for the almost two-year-old firm.

?We were like, why? And we came to the conclusion that small companies haven?t realized there?s pain in this,? he says, referring to accounts payable, which his company handles for clients on an outsourced basis, and which he says can save them serious money. ?I?m doing an enormous amount of missionary work.?

Since the first Upsize Growth Challenge workshop in March, Crane met with his board and began to discuss in earnest a shift from direct sales to a private-label model. He?s conducted research with a couple of banks and accounting firms.

He says they became much more interested when he discussed tangible benefits ? that is, revenue from selling IntelAccount?s product under their names, rather than simply a more loyal customer base that he had promoted before.

?When we started talking about private label, and they could resell and make money, the resonance changed,? Crane says.

With board approval for a switch in emphasis, probably 70 percent on private-label and 30 percent on direct sales, everything else will change, too, Crane realizes. And so concur the experts gathered to help him and the other two winning Upsize Growth Challenge companies at the second workshop in May.

The trick will be finding the right channel partners, and developing motivated relationships with them.

?I always function best when I see it done somewhere else,? says Rick Wall, CEO of Highland Bank and the Upsize Growth Challenge finance and operations expert.  He advises studying other models of companies that sell through multiple channels, and duplicating such efforts.

All will depend on motivating that sales force, which is difficult enough to do, Wall points out, when one employs them directly. ?In many businesses it?s so hard to motivate your salespeople and now you?re one step removed,? he cautions.

Still, he thinks Crane could pull it off if he puts his effort into building the right model with the right financial incentives. ?I can see how it can work with a strong sales support from your company,? he says.

He urges Crane to keep moving quickly.  ?You?re at the forefront of this now. If you can capture your market now, you?ll be a lot better off,? Wall says.

Craig Murphy, an accountant with McGladrey & Pullen in Minneapolis and just the kind of partner that Crane would like to sign up, thinks Crane is making the right move by pursuing private labeling.

He says he and other accounting firms are pitched countless products that will ?add value? to their clients, as the salesperson inevitably says, but they?d be far more interested in something they could actually sell.

?I like the private label idea, and the rub is how to make the compensation work for both sides,? says Murphy, who helped the Upsize Growth Challenge winners during both workshops make progress toward their goals.  ?I don?t have the answer, but that?s the right question.?

He encourages Crane to target companies and industries that would likely have the most pain from accounts payable, such as industries with high numbers of invoices, multiple sites, and employees spread out all over the world.

All in the contracts
Michele Vaillancourt, an attorney with Winthrop & Weinstine and the Upsize Growth Challenge legal expert, tells Crane that just about anything he wants to achieve with channel partners can be written into his contracts.

She recommends including ?carrots and whips? in any contract. But first, she urges, pay close attention to the chemistry and motivation of the potential partner. ?You can?t do it all contractually,? she says. ?First you have to be comfortable with the partner.?

After that important step, you can put just about anything into a contract that the other party will agree to, and the more specific the better.

For example, IntelAccount could specify a certain amount that the partner must sell in a certain time period, or a certain amount that the partner would need to invest in marketing the product, or direct access to the end-user customer if the arrangement through the partner didn?t pan out.

Elin Raymond, president of The Sage Group in Minneapolis and the Upsize Growth Challenge marketing expert, recommends that IntelAccount do a phone survey of their customers to find out which terms might be attractive.

She also suggests that early partners be given favorable terms, so they?ll be willing to share information with IntelAccount and help the firm come up with workable arrangements.

Crane?s outreach efforts have paid off since the first workshop, especially the education he?s been doing at Raymond's urging.

Crane counts off the positives: ?We did our first press release. We had two case studies published? in targeted publications read by finance professionals. ?They resulted in a 20-times jump in our Web site hits.?

That led to a partner in California contacting IntelAccount, and an invitation to speak at the executive education center at Columbia University in New York. ?The networking opportunity at Columbia is outrageous,? he says.

The May article about his company in Upsize, he says, led to Administaff?s contacting him. Administaff is the nationwide professional employer organization, and he hopes the interest will bear fruit. For example, Administaff has a Center of Influence program, which Crane describes as a preferred vendor program  in which he would like to participate.

He even figures there?s a possibility for a partnership with Administaff, or a firm like it. ?If we were to do something with Administaff that would put a salesperson in every one of their offices?? he says, clearly liking the possibility.

Raymond applauds his efforts, and suggests he make sure that as his company?s focus shifts to a different business model, that he change his messages and targets as well.

Nathan Johnston, a consultant with Clientek in Minneapolis, the Upsize Growth Challenge technology experts and host of both workshops, points out another new challenge for IntelAccount that comes with the private-labeling strategy: IntelAccount will need new service level agreements that specify exactly what it?s responsible for, and what is in the hands of the intermediary partner.

?You?ll have to deal with those things,? Johnston says. ?Make sure the SLA is something that protects you, not just guarantees what you?ll do. And never include in an SLA what you can?t control.?

Crane, who expects to be cash-flow positive at his company this summer, and at that point would turn again to angel investors for more money, figures that?s just one more thing on his plate as he pursues what he hopes will be IntelAccount?s winning strategy.

David Crane, IntelAccount Inc.: 612.605.3161; dc****@**********nt.com; www.intelaccount.com