Upsize Growth Challenge: Roden Iron

After whirlwind month, Roden Iron hits the basics, gains capital

by Beth Ewen

“I FEEL LIKE I’VE AGED 10 years since I’ve seen you,” says Kelly Roden to the group of experts who gathered in May to advise her firm and the two other winners of this year’s Upsize Growth Challenge.  It’s all been a whirlwind.

The president of Roden Iron Inc. in Milaca details the heavy lifting she’s done since she first met with the group in March, spurred both by advice from the experts to get her company’s finances in order, and a trial by fire when her husband and business partner, Brian, took a crew of ironworkers to a big job in Iowa and was gone for a couple of weeks in April.

During that month we had five jobs come in and we had only one foreman, no trucks, no money, she says. My payroll went from $3,000 a week to $20,000 a week. Also, the union dues and benefits package went from $6,000 to $11,000 due each month, up to $29,000.

I was real shocked and not sleeping nights, of course. It’s been a major wakeup call for me, says Roden, who started the union steel erector company about a year ago.

Roden says she came to the first workshop with a list of three relatively small topics, including whether to rent or own new vehicles, how to retain ironworkers, and whether to add office staff. I realized I had bigger issues going on, she says.

So Roden got busy. While researching finance options she discovered the Initiative Foundation in Little Falls, www.ifound.org, and met with the director, who also referred her to the Small Business Development Center in Brainerd, a state agency.

Folks there helped her put her cash flow statement and balance sheet together, and helped her get $130,000 in working capital. That includes a $50,000 loan from the Initiative Foundation, which followed a $50,000 line of credit from Falcon Bank in Foley, Minnesota, and a $30,000 equipment loan, also from the bank, secured by equipment.

She expanded her company?s Web site, a strong point for her company because Roden?s background is in e-commerce and Web development, and the previous company she started operates in that arena. That company generates about $350,000 in revenue each year, money that Roden is pumping into Roden Iron.

Her company is now being invited to bid on more projects than before, she says. We weren’t even being invited to bid before,” she says. “I think a lot of that has to do with the Web site.”

She started a newsletter called Beamline, and introduced it a bit sheepishly to her crew ? she figured a bunch of ironworkers would scoff at the newsletter, but they realized they liked it. She started a safety bonus, paying $50 for each 180 hours with no accidents. “I use it as an opportunity to talk about safety,” she says about the newsletter and cash awards.

She’s learning to rely on her company’s estimator, who had retired from a competitor?s firm, as a mentor who can teach her the ropes of the bidding process. He’s an adviser and says, in general, this is how you deal with stuff, Roden says. She plans to reward him with bonuses tied specifically to profits realized from future jobs.

She continues to add foremen and crews to handle the new jobs, a challenge because the I-35W bridge reconstruction, as well as the Twins baseball stadium and the soon to rise Gophers stadium, are keeping hundreds busy.

Elin Raymond, president of The Sage Group in Minneapolis and the Upsize Growth Challenge marketing expert, urges Roden to recognize that her newsletter and safety initiatives are part of her company?s brand, and she should emphasize such efforts with customers.

It’s a great differentiator, Raymond says. What you’re saying is your job is going to be safer, and you initiate buy-in from employees. All of these things lead to an improved project outcome. You’re building a wonderful brand and reputation.

The goal is to get her customers to recognize the value Roden’s approach adds to their job. If you can move your segment of the business to value bidding rather than lowest cost, that will help, Raymond says, although both she and legal adviser Mark Gleeman acknowledge it’s a difficult move.

If you push back a little bit your entire industry will love you, says Gleeman, attorney with Winthrop & Weinstine in Minneapolis, referring to the practice of lowest-cost-wins bidding.

He urges Roden to continue her practice of seeking collaboration from the company’s foremen when bidding for jobs. It’s the buy-in that matters, he says.

Roden asks the Upsize Growth Challenge technology experts whether to purchase GPS or global positioning systems for her foremen, or laptops so foremen can file daily reports from the job sites.

Kirk Hoaglund, CEO of Clientek in Minneapolis and the Upsize Growth Challenge technology expert, advises keeping it simple.

Figure out the concrete business value before you go in too far, because it can be expensive, he says. All business processes can work without computers. When you automate something you can’t automate against human nature. So, first follow the rules you already have before you make new rules.

The No. 1 thing is that every dollar that’s spent matters. Any time you’re planning a tech solution, step back and say, what’s the problem I’m trying to solve, and what’s the cost? If it costs a dollar it better be giving more than a dollar back, Hoaglund says.

Roden meets with the Upsize Growth Challenge finance and operations experts last, and Rick Wall, CEO of St. Paul-based Highland Bank, and Bryan Ross and James Ford, CPAs with EideBailly in Bloomington, praise her for getting a better handle on her growing operation.

This is great. You’re thinking ahead. You’re planning. You’ve damped down some of the fires, Ross says. I know you’re scrambling, and it’s hard, but that foresight is really important. I applaud you for that.

They share specific kudos for Roden:

Roden has documented loans from her in-laws, including the interest rate owed, something that was lacking before.

She’s looking hard at which general contractors jobs she will bid for, avoiding jobs if there are tons of details or several crane trips. As her company’s veteran estimator says, Kelly, you can have all the jobs if you bid low enough.

She’s paying herself and her co-owner husband a modest regular salary, rather than waiting until money’s readily available. It’s important to budget for that, Ross says.

She’s negotiating with customers for payment up front, and is billing right away rather than waiting until the end of the month. She also keeps careful track of change orders so she can bill properly, something that not all contractors do, she says. That’s important because all those things turn into cash at the end of the day, says Ford of EideBailly.

She’s working closely with OSHA, the federal workplace safety agency, which will consult with Roden Iron to improve safety on their jobs. Roden will then be eligible for a discount on workers compensation insurance.

You’ve really gone a long way toward helping your cash flow situation, says Wall of Highland Bank, who then stresses that Roden has to keep vigilant. What are the industry’s cycles? What is the job pipeline? What happens when work stops in the winter?  What will the tax obligation be at the end of the year?

I’m fishing for what unexpected might be out there, Wall says, and that’s what every business owner needs to do as well.

Wall then shares a parting rule, applicable to every growing company. Continue to conserve your cash. Don’t say, We’ve made it, and I’m going to buy this. Just wait and see because you just don?t know what the next turn will be.

[contact] Kelly Roden, Roden Iron Inc.: 320.983.5440; ke***@*******on.com; www.rodeniron.com

WHAT THE EXPERTS SAY?

ON BRANDING.

Be open to sharing your successes with your employees and with your prospective customers, says Elin Raymond, The Sage Group. ?Highlight all of those things that set you apart from the way it?s always been done.

ON SHARING INFO.

It can be difficult to know how much information to share with employees, says Mark Gleeman, an employment law attorney with Winthrop & Weinstine. But he thinks it?s best to open up, because it’s likely to lead to collaboration and buy-in. They want to know more, he says about employees. So if you’re comfortable with it, do it. It’s the buy-in that matters.

ON  TECHNOLOGY.

You have to watch out for bright shiny objects and cool blinking lights, because it costs you something, says Kirk Hoaglund, Clientek. So you better get something from it. And you have to know upfront, in concrete business terms, what you’ll get from it.

ON DRAWING A SALARY.

Business owners should get in the habit of paying themselves from the beginning, says Bryan Ross, EideBailly. It’s important to budget for that, he says. You don’t want to just be taking draws because it causes havoc for lending practices. Also, of course, it causes havoc in a business owner’s life.

ON NEGOTIATING WITH VENDORS.

It can help to be upfront with vendors and customers about a cash crunch, says Rick Wall, Highland Bank. But be careful to emphasize that such a situation is temporary. They can’t afford to have you fail on them. You don’t want that to come out to a vendor or customer.