Upsize Growth Challenge: Permac Industries

Permac’s CEO crosses off tasks on way to reaching 25 percent growth goal

by Sarah Brouillard

DARLENE MILLER, CEO of Permac Industries, says she didn’t waste any time putting into action the advice given by Upsize Growth Challenge experts last March.

When she arrived at her office after the first seminar, Miller says she called her attorney to draw up a noncompete agreement for a key new employee a suggestion made by Mark Gleeman, an attorney with Winthrop & Weinstine and the Upsize Growth Challenge legal expert.

For her company’s Web site alone, Miller says she wrote down 22 ideas at the previous meeting. All were included in a complete overhaul of the site, which experts felt seemed old-fashioned.

She’s also addressed research-and-development tax credits with her CPA (her engineer’s hours may qualify for full credit); implemented bonus splits for employees who refer successful new hires; locked in at 6.38 percent for her building loan; and sent out two surveys: one to employees to ascertain their understanding of Permac’s benefits, and one to customers to determine how well they know Permac’s capabilities.

But reaching her largest goal to increase sales by 25 percent has been more elusive.

We’re not there yet, says Miller, reporting that sales in May were down 3.9 percent since last year.

While the company hasn’t lost any contracts and profitability is in fact higher than last year Permac has been holding onto a lot of inventory for customers, skewing overall sales figures. When this is taken into account, Permac is in fact ahead about 8 percent or 9 percent since last year still far short of her target, says Miller.

Nevertheless, business development is on the upswing. Minnesota Valley Medical Manufacturers Network, an organization Miller co-founded, continues to be a source for prospective customers. And making new contacts should get even easier, thanks to the addition of a new outside sales manager, who?s been busy attending chamber of commerce meetings and other networking events.

Until his arrival, Miller was the sole face of Permac. Now I feel like we have two of us out there representing, she says.

Perhaps another draw for new customers will be the newly revamped Permac Web site, which shows off the company’s capabilities and clean shop much better than its predecessor did.

Miller says she and her son will perform regular updates to the site. To prevent a backlog, Dave Larson, senior technology consultant with Clientek in Minneapolis, the Upsize Growth Challenge technology expert, suggests they also enlist a sales manager to add and refresh content.

For the sake of efficiency and security Miller should consider a system of workflow controls, where some employees have permission to make changes, and others can review and approve them, says Kirk Hoaglund, CEO of Clientek.

Now that Permac is coming to rely more on its Web site, Miller also needs to double-check domain and hosting records.

You need to make sure absolutely sure that all bill and ship records point only to you, says Hoaglund.

In Permac’s case, Miller’s name should be listed as the ownership, administrative, billing and technical contact. Usually, owners are listed as the first two, but they may not be for the last two, leading to confusion and possible disruption of the company’s Web site and e-mails. Renewal notices are easily missed because they’re sent to the wrong recipient or they’re mistaken for spam and deleted.

All companies can check their domain records at www.register.com

Another crucial data issue often overlooked is proper care of back-up tapes, says Hoaglund. It’s the easiest thing in the world to penetrate, he says.

Part of the problem is they’re so innocuous-looking, and therefore easily left in the backseat of an employee’s car, to be just as easily stolen.

Hoaglund recommends hiring an agency, such as Iron Mountain, to take the tapes and keep them in a secure facility. The service costs a few hundred dollars a month. In between pick-up appointments, he suggests Permac store the tapes in an on-site lockbox.

In addition to safeguarding confidential company data, Miller may want to reexamine her timetable for budgeting and forecasting, says Bryan Ross, a CPA and partner with EideBailly and the Upsize Growth Challenge finance and operations expert.

While Miller says she performs those tasks once a year, and then reviews figures each month, Ross recommends she speed up that cycle and update the numbers quarterly  especially now that the company is introducing new bonuses and benefits.

You’re starting to do some more incentive-type things for employees, so you’ll want to measure that against performance and see where that’s all leading to.
Shorter-duration budgets also help owners spot issues and problems sooner, he says.

Miller should also speed up the time it takes to get paid by customers, says Rick Wall, CEO of Highland Bank and the Upsize Growth Challenge finance and banking expert. Rather than wait for cash, he suggests she set up an ACH direct-deposit plan for customers.

Miller says she already has one in place for Perman’s largest customer, but hasn’t pursued it with the others yet.

Another topic she needs to address soon is that of succession, says Ross. Miller says she doesn’t have a plan in place, although she has arranged for an ad hoc board of directors to convene and make decisions if something were to happen to her. Her son, who works as director of operations at the company, is the likely successor.

There are a lot of options for succession, including ways to transfer ownership without giving up control, says Wall. But the key is to start exploring all the possibilities early.

James Ford with EideBailly in Bloomington says it’s important to separate the emotional aspect from the process. He suggests Miller have a candid discussion with her son to hash out each one’s expectations. Some companies have found that meeting individually with a consultant or intermediary is helpful.

There are plenty of local resources out there to assist, says Ross. The Center for Family Enterprise, a research organization at University of St. Thomas Opus College of Business, offers knowledge and skills about how best to run family-owned and closely held companies.

On the topic of legal matters, Miller has had her attorney draw up a noncompete agreement for her newly hired outside sales manager.

With noncompete agreements, an employer must offer so-called consideration.

It doesn’t have to be money, explains Mark Gleeman with Winthrop & Weinstine. It can be increased job responsibility. It could be a promotion. It could be a company vehicle. It has to be some kind of benefit they didn’t have before that you can clearly show is new. But it can’t be the job itself, unless it’s a new employee.

Employers need not offer consideration to employees in the same form and amount, but it should be consistent among employees at a particular level and area, he says.

Besides human resources, Miller needs to take a closer look at her brand, says Elin Raymond, president of The Sage Group in Minneapolis and the Upsize Growth Challenge marketing expert.

Permac’s services and capabilities are distinctive among its peers, and she needs to bring more attention to that.

I think you need to focus more on getting the word out about your brand differences, like the technology, the way you run your operations, the inventory management, even the outsourcing management, she says.

The retooled Web site is a good start, but Raymond suggests upping the ante by hosting seminars on those very topics, providing customers the opportunity to check out Permac’s facility. Any and all presentations should be recorded, and later converted into podcasts.

The company also has mainstream appeal, being woman-owned and uncommonly pragmatic on its take of the globalization of the manufacturing industry. Permac would make great fodder for media outlets trade magazines, but also daily newspapers.

“It’s a unique approach to have a U.S. manufacturer say, You know, I will help my clients manage any outsourcing needs that they may have, whether it’s with a U.S. company or offshore.? You’re becoming a single-source provider, says Raymond.

[contact] Darlene Miller, Permac Industries Inc.: 952.894.7231; dm*****@**************es.com; www.permacindustries.com

WHAT THE EXPERTS SAY

ON CASH FLOW.

Speed up the time it takes to get paid by customers, advises Rick Wall, Highland Bank. Rather than wait for cash, set up an ACH electronic-funds transfer for customers.

ON DATA BACKUP.

A crucial data issue often overlooked is proper care of back-up tapes, says Kirk Hoaglund, Clientek. They’re easy to penetrate, especially since they’re small and innocuous-looking, and can be unintentionally left unattended. Hire a vault agency to take the tapes and keep them in a secure facility. The service costs a few hundred dollars a month. In between pick-up appointments, store tapes in an on-site lockbox.

ON BRANDING.

Up the branding ante by hosting seminars on a variety of pertinent industry topics, providing customers the opportunity to check out your facility, says Elin Raymond, The Sage Group. Any and all presentations should be recorded, and later converted into podcasts.

ON COMPENSATION.

With noncompete agreements, employers need not offer consideration some sort of incentive or benefit to employees in the same form and amount, but it should be consistent among employees working at a particular level and area, says Mark Gleeman, Winthrop & Weinstine.

ON SUCCESSION.

When dealing with succession issues with family members, it’s important to separate the emotional aspect from the process, says James Ford, EideBailly. Having each party meet individually with a consultant or intermediary can help the communication process along.