CHAPTER & VERSE

Citing a long list of values he aims to keep at the core of his company, the founder of WaterFilters.net explains how he’s building a growth culture. But when the talk turns to emotions, the power found in an inspiring mission is revealed. Meet the Upsize Business Builder of the Year and four finalists who set the standard for building sustainable companies.

About this project

 about the judges

WATERFILTERS.NET

Founder pushes the ‘why’ to write his company’s tale

“We’re in the first chapter of our company,” says Jamin Arvig, founder of WaterFilters.net, and it’s a page-turner. His company is the Upsize Business Builder of the Year, as selected by a panel of judges after presentations from five finalists, themselves selected from nominations.

Revenue last year hit $37 million, up from $17 million in 2011 and $10 million in 2010, all from selling lots and lots and lots of water filters, mostly online, from a distribution center employing 60 people in Zumbrota.

“We’ve doubled every year for 10 years,” says Arvig, who holds a law degree but decided to commit to the water filter business, starting in 2002 with a website out of a tiny apartment in Minneapolis, which he operated with his wife. “The challenge of this is, how are you able to grow a company that long at that rate?”

One essential is crafting “pillars of excellence,” as he calls them, and he proceeds to explain several elaborate elements that he says guide his company’s actions. For example, the first core value is service, by employees and managers alike. “We judge our leaders on how well they help others succeed,” Arvig says.

“Everything starts with an idea before going through a culture filter, where it is matched against our core values,” Arvig explains on his nomination form for the Upsize Business Builder project. “Ideas then go to the next level to be fit into our strategic vision, before finally going to resource allocation.”

But partway through his wonkish presentation, Arvig reveals the company’s secret weapon: he’s passionate about clean drinking water, and he becomes emotional when talking about it.

“Our mission is to make sure everyone has access to clean water, so that’s the ‘why,’” he says. “We do carry it through every thread of the business.”

Suddenly, employees fulfilling hundreds of orders a day for something as simple as a water filter from a warehouse in southeast Minnesota are unified by a larger vision—and motivated to be part of a long story. At least, that’s what this CEO is striving to achieve.

FOUR DAUGHTERS VINEYARD

Allure of the grape brings farm family back together 

Vicky Vogt and her husband, Gary, farmed 5,000 acres of corn and soybeans for decades in southeastern Minnesota, raising their four daughters but then watching with regret as they moved away for jobs and life.

Then Vicky had an idea many mothers could love. “I wanted to get my children to come home and work in agriculture,” she says, so they launched Four Daughters Vineyard & Winery in Spring Valley, one of the finalists, along with the other three companies that follow, for the Upsize Business Builder of the Year award.

The family affair attracted three of those daughters home, plus a son-in-law, Justin Osborne, who went to wine-making school and now has developed the palate and the “nose” to make Four Daughters’ wine. He believes their most profitable opportunity is wholesale sales to liquor stores, because that takes less staff than their 40-employee restaurant and event operation.

Kristin Osborne, his wife and one of the daughters, heads up marketing, already her area of expertise honed while operating a public relations practice, while Vicky serves as president and others fill roles suited to each.

Those farm values are key to their growth plan, which in their second full season hit $1.2 million in revenue, up from $48,000 the year before. “We have a common sense mentality, a farmer mentality,” says Justin, speaking for the family even though he was raised a city slicker, the son of a corporate executive, “We like to have money in hand.”

Four Daughters is doubling wine production this year and is paying for the expansion ($175,000 of wine-making equipment and tanks from Europe, bottling equipment, “huge” quantities of grapes) in cash. With a $1 million investment to start the business in 2010—with mortgages on some of the farmland and real estate loans—they’ve never used an operating loan since opening their doors.

“We started small to be sure we knew how to make and sell wine effectively and efficiently and have increased production each year as we sell out the previous vintage,” they say in their nomination form. This spring they’ll break ground on an 8,000-square-foot event space, up from their existing 10,000-square-foot space, so they can host hundreds of weddings.

They’re on track to produce 26,000 gallons of wine this year, doubling last year’s yield and setting them up to become the biggest winery in the state. But they feel the need to keep building.

“Another aspect that is common to farmers is you have to get big to survive,” Justin says, pointing out there are as many as 50 other wineries in Minnesota. “We can sense there is oncoming competition and we want to be at the top of the heap before others flood in.”

MAVERICK SOFTWARE CONSULTING

Matching more ‘computer geeks’ with companies who need their services

“The big problem Maverick is trying to solve is the shortage of computer geeks,” says Martin Hebig, president of Maverick Software Consulting in Lakeville.

He’s trying to fill that gap by placing computer science students with client companies, the former who gain valuable skills and earn money while in college, the latter who often hire those part-time recruits when they graduate, and enjoy new staff members trained on their specific systems. The company makes about $5 for every hour one of those students works, charging the company $20 an hour and paying an average wage of $13.50.

Maverick started in 2006 with an office at Mankato State, and its first client was Thomson Reuters, the media and information giant. “In six months they wanted us to sign an exclusive agreement, which was the hardest decision I had to make,” Hebig says—he was worried about putting all his eggs in one basket, right when the business began.

But the relationship proved fruitful, and Maverick went to university towns in Wisconsin, Iowa and others with Thomson, before branching out to attract a handful of other large clients that could each make an $800,000 commitment to the firm.

Then Hebig began thinking of ways to scale the model down, to serve smaller companies and smaller colleges, as well, and at a career fair Maverick’s booth was set up next to Apple’s. “They hire MIS students, give them a laptop and they work at home,” Hebig recalls.

“So we said, that’s the answer,” but when they approached clients with the idea, worries about security loomed. “That was our problem to solve,” Hebig says, and after about a year of work they’re now giving it a try. “We put a chip in the laptop and encrypt the hard drive,” Hebig says, allowing them to pair students anywhere with companies everywhere.

“It allows us to grow our business a lot faster and our margins are better,” Hebig says. “We can push this out nationwide, and it’s a social enterprise.” Maverick posted $5 million in revenue in 2012, up from $4.1 million the year before and $3.4 million the year before that.

RENTERS WAREHOUSE

With brand properly tweaked, founder spends big-time to grow quickly

“Today is my second month as a retired 28-year-old,” says Brenton Hayden, as his introduction to judges hearing the stories of the five finalists for the Upsize Business Builders project.

It’s an attention-grabbing opening line, and the founder of Renters Warehouse, the six-year-old “professional landlord service” as they learned to call it during a re-branding initiative, follows with some impressive statistics: $5.17 million in revenue in 2012, up from $1.8 million in 2010. Debt free. Operating in 13 markets in nine states. Second-largest such service in the country.

Aggressive advertising has fueled the growth, mostly in radio but also during the Super Bowl, from a start of $196,000 in revenue its first year. They spent more than $2 million in 2012 on radio advertising, and Hayden credits the effort to making Renters Warehouse “a household name in Minnesota.”

“We’ve only been on the radio for three years and we are now edging out Toyota” as the largest radio advertiser in the state, he claims. Before the advertising, though, came the focus groups, where Hayden learned the “property manager” title that most such companies use meant nothing to consumers—customers surveyed were unable to name the main tasks property managers do.

But when “landlord” was used, everybody knows the drill. Now, “we refer to ourselves as professional landlords,” Hayden says.

Hayden is an early “retiree”—although it’s clear he doesn’t mean that he’s out of the game—because two months ago he appointed his long-time trusted employee as CEO. Now Hayden acts as “a walking billboard” and chief brand spokesperson.

“I knew this business was going to outgrow my expertise,” he says to explain the change in titles and roles, and he enrolled at MIT’s entrepreneurial education program, among others, to learn how to lead a fast-growing business.

He’s developed his own business philosophy in just a few years, which includes his rejection of some of the common lines. You’ve heard the saying, “fail fast, fail often and learn from your failures,” Hayden says. “I thought that was cool” when he first learned the adage, but then he changed his mind.

“I thought that was the stupidest thing I’ve ever heard. Why learn from failure—you only learn what not to do. I believe you should learn from successes,” he now contends.

TORQBUDDY LLC

Inventor by necessity builds tools to fill a need

Jeff Backlund was satisfied with his residential remodeling and construction business for years. “At the time I was lazy and content with what we were doing,” he recalls—and then came the housing crash.  “A year later the wheels quit turning and we closed the business.”

His lifestyle downgraded quickly. “It was feast no longer and famine for sure,” he says, and he took a job selling tools.

But he read every magazine he could, attended every seminar he learned about, and finally made his move. “I squirreled away enough to compete with my competitor,” and start his own tool business.

In 2010 Backlund discovered an opportunity in Northfield, where a city employee had been injured turning a fire hydrant on the street. “I took a look. We didn’t have a tool for him,” Backlund recalls, so he decided to invent one.

He worked for a year on a prototype that didn’t work at first, but he tweaked it and tested it until it did. “We worked with 30 cities with the HydrantBuddy,” as the tool is called, “and we redesigned it to work on all the hydrants across the United States,” he says.

That operating mode is vintage Backlund, who seeks out sources of information and pieces together resources to pursue his goals. In his nomination form he describes his methods this way: “We managed to put the pieces in place to design and build a newly patented, award-winning product.

“Being a small company we have to draw resources from the existing business community and local organizations such as SCORE, American Durable, a government contract manufacturer, several Minnesota cities to field test and use the product and other companies to help market the products.”

Now that tool has a patent, and then he invented an add-on, “another tool that does a job in 10 minutes what it used to take two people half a day to do,” he says. He believes the future for his company lies in those inventions.

The HydrantBuddy weighs 26 pounds and sells for $4,500; it costs $2,000 to produce, and he knows he has a long way to go before the company truly takes off.

But he’ll keep educating himself and others in his quest to build an invention to fill a need.

Backlund was gracious enough to say he was inspired by participating in the Upsize Business Builder project, and honored to be a finalist. “It was a pleasure to be part of it” and the competition “has given me inspiration to buckle down even harder to achieve the goals I have for my business,” he says.