What’s The Secret To Fast Growth?
It’s no secret to most business owners today that the economy remains uncertain, even after a few years of modest growth in the wake of the recession. There seem to be challenges around every corner.
But some Twin Cities businesses are posting strong growth. All five of the Minnesota companies selected here were on the Inc. 5000 list, an annual survey that tracks the fastest-growing private companies in America.
Yes, the economy has improved in recent years. But there’s no single reason these companies are seeing robust gains. Each company here is in a different industry. Our sampling ranges from e-commerce retailing to IT consulting. According to the Inc. survey, for example, Eagan-based Lyons Trading Co.’s revenue grew a dizzying 897 percent in the three-year period from 2012 to 2014.
What is the common denominator among the leaders of these five companies? Every one has a bullish outlook on the future as they continue to build their companies.
Recessions Fuel Entrepreneurs
Company: ThreeBridge Solutions
Revenue 2014: $38.9 million
Revenue 2015: $45 million
Business: ThreeBridge Solutions is an IT and business consulting firm that works primarily with large corporate clients.
The economy was in the tank in 2009, perhaps the low point of the recession. For Jim Kelly, it was the perfect time to start a company.
“I think it’s the best time to start, because when you’re at zero you don’t need much sales to grow,” he recalls with a laugh. “In a down market, most firms are licking their wounds,” says the CEO of ThreeBridge Solutions. “You come in with a fresh attitude. It’s a good time to start a company, in my opinion.”
In a little over six years, the growth of Minneapolis-based Three Bridge Solutions has been exponential: from zero to $45 million in revenue in 2015. Jason Elder, managing partner and CFO for ThreeBridge Solutions, joined the company in 2010.
“It’s both IT and business consulting. It’s heavily focused on project-based work,” says Kelly.
If a client, for example, is implementing a new software system, but doesn’t have in-house staffers who know the new program, that’s where ThreeBridge Solutions comes in.
“Companies use consulting firms for a variety of reasons, but it’s usually [that] they don’t have enough horsepower and/or they don’t have the subject expertise,” says Kelly, who notes that many of his clients are Fortune 500 companies. “We’re a company that’s built to scale for large clients.”
Kelly says that he sees many companies spending money again after putting projects on hold from 2009 to 2013, during the recession and its aftermath.
For Kelly, a key part of what sets ThreeBridge Solutions apart is the attention it pays to its employees, investing in professional development and training.
“At the core of everything we do, our passion is big on building careers,” says Kelly.
His philosophy is simple: A happy employee will do a better job for the client.
In that same spirit, the company’s subsidiary Boom Lab is designed to train and mentor recent college graduates in the nuts and bolts of the consulting business.
“A lot of our growth is coming from Boom Lab. We invest a ton of energy in these professionals,” he says. He notes that many millennials have a college degree, but are not prepared for the working world. “They come out of college not really ready for corporate America.”
At the same time, Kelly says, companies have not been doing a great job of mentoring and building the next generation of employees and leaders. “Corporate America needs to restock their talent pool,” says Kelly. “And not many of them know how to do it.”
You’ve Still Got Mail
Company: SeQuel Response
Headquarters: Eden Prairie
Revenue 2014: $16.9 million
Revenue 2015: $27 million
Business: A direct-mail marketing company that also provides data analytics and creative services for clients.
In today’s wired world, it seems like everything has gone digital and everyone is glued to their smartphones at all times. Direct mail as a marketing tool for companies sounds like something from a bygone era. But Tom Rothstein, partner and president of Eden Prairie-based SeQuel Response, says that direct mail remains the cheapest and most effective way for companies to find new customers.
Rothstein and Jay Carroll, COO and managing partner, founded the company in January 2010 with the idea of being a direct-mail marketing agency that designed and tailored campaigns for clients.
“We do all the creative and the strategy, all of the data and analytics that go into a campaign,” says Rothstein. The company outsources the print production and mailing of the direct mail materials.
SeQuel Response has tapped a strong vein of growth, posting revenue of $27 million for 2015—up roughly 60 percent from 2014.
The company’s clients are sending out 15 million to 20 million direct-mail pieces every month. The company’s client list includes AIG, LifeLock and Medica.
“The channel itself is pretty healthy when you look at direct mail. The beauty of direct mail is it has shelf life,” says Rothstein, who has been in the industry since 1990.
With direct mail, Rothstein says, some potential customers don’t just throw the mail away; they’ll set it aside to refer to later. While the response rates of 0.5 to 1 percent sound low, it can still translate into big money for a client that sends out 250,000 pieces of mail.
Rothstein says that one of the company’s strengths is its data analytics work to determine who winds up on the list to receive the mail.
“We’re very strong in data. I think data is critically important,” he says. But he adds that the data is always changing and lists need to be updated: “We’re constantly tweaking that as we gain more intelligence.”
Rothstein says that the full-service approach of SeQuel Response pays off for the company’s clients. “We find that marketing departments are stretched in resources.”
The year ahead for the company will be a busy one. The company moved to a larger space in Eden Prairie in February and will ramp up the digital side of its business.
“This year we’ll do north of $40 million,” says Rothstein.
Looking to Outsmart Amazon
Company: Lyons Trading Co.
Revenue 2014: $10.3 million
Revenue 2015: $15 million
Business: The online retailer runs the Proozy.com website selling apparel, as well as golf and fitness products.
Jeremy Segal started Lyons Trading Co. out of his garage in 2006. But now the Eagan-based e-commerce company, which runs the Proozy.com web site, is battling it out with Amazon and other online competitors. It’s not exactly what Segal had in mind when he started the company.
The original business was Lyons Golf Co., which specialized in golf products.
“We started as a wholesale company and we sold products to a lot of mom-and-pop stores,” recalls Segal.
But then the recession hit. “When the economy went down, people didn’t want to golf as much. That’s when we got creative,” recalls Segal.
The company started selling a wider array of merchandise, adding apparel and merchandise, including fitness and yoga products, aimed at what Segal calls the “active lifestyle” customer. The company entered the e-commerce arena three years ago and launched the Proozy.com website in March 2015. Since refocusing the company, growth has been strong.
Segal’s goal is to build an online retailer that offers cheaper prices and superior customer service than its competitors do. The company has more than 200,000 customers, and Segal says that people who buy from the website often refer family and friends.
“Everybody wants to wear and own name-brand apparel and merchandise, but they don’t want to pay top dollar for it,” says Segal.
The company carries a host of well-known brands including Adidas, Nike and Columbia.
“A couple things that make us really different is our relationship with our suppliers. Our goal is to own a product cheaper than anybody else,” says Segal. “We work on fairly thin margins.”
Although Lyons Trading is just a fraction of the size of online giant Amazon.com, Segal argues that Proozy.com offers better deals than the e-commerce behemoth does. It uses fulfillment centers in multiple states.
“In terms of our pricing, it’s going to be better than going to Amazon,” says Segal.
Proozy.com is not yet a household name. But Segal, who began as a “one-man show,” has big plans.
“Our goal is to get to a million customers. Our goal is to be a $100 million company,” says Segal. “We’ve hit a point where we’re no longer begging brands to work with us. We now have manufacturers coming to us and saying, ‘What can we do to get on the site?’ ”
Lighting Up Growth
Company: Energy Management Collaborative (EMC)
Revenue 2014: $60.3 million
Revenue 2015: $55 million
Business: Performing energy audits and installing lighting retrofits and conversions for business customers.
The switch has been flicked in the commercial lighting business. Energy-efficient lighting has gone mainstream as prices drop and the technology continues to improve. Plymouth-based Energy Management Collaborative (EMC) is basking in the glow of changes in the market that are driving more businesses to install more-efficient lights to drive savings. EMC CEO Jerry Johnson says that it’s a matter of simple math for many of his customers: “This is a place where you can take energy costs out of a budget fast, so you can see real, hard savings,” says Johnson. “That’s a very powerful thing.”
EMC’s revenue actually dipped in 2015 compared to the previous year, but Johnson says that’s an anomaly because the 2014 numbers included a large one-time job for a single customer. Looking ahead, Johnson is expecting EMC to post revenue of $90 million to $100 million for 2016.
“We’ve already got about $70 million on our books right now. That’s in the pipeline right now,” says Johnson. “We’re going to take another big step this year,” he explains. “We’re probably going to increase our business another 50 percent. We’re making a big investment in people to be ready for that tsunami of business that’s going to be coming our way.”
Johnson says that in a fast-changing industry, it’s important for companies and leaders to adapt. “Change doesn’t throw me off,” he says.
He adds that in 2014, 75 percent of the lights that the company installed were fluorescent and 25 percent were LED. For 2015, those numbers completely flipped: 75 percent LED and 25 percent fluorescent.
As the company has grown, Johnson says that the board of directors has steadily supported reinvesting profits in the company.
Most of the company’s work involves retrofits and conversions of lighting systems in existing buildings. Johnson sees a lot of room for growth: Johnson says he’s seen estimates that only 6 percent of the total lights installed are LEDs.
More and more companies are starting to see the light of the savings that they can tap simply by having better bulbs installed.
“They’re looking for the best return on investment that they can get, which is really driven by wattage reductions,” says Johnson. “Our advocates are our customers—a lot of our expansion and growth has been driven by word of mouth.”
Bridging Social Services
Companies: Morning Star Financial Services, Orion Associates
Headquarters: Golden Valley
Employees: 2,353 for all related companies
Revenue 2014: $44.2 million (Morning Star), $107.2 million (Morning Star, Orion and related companies)
Revenue 2015: $55 million (Morning Star), $124 million (Morning Star, Orion and related companies)
Business: Providing financial and related services for social service organizations and individuals.
Landing one company on the Inc. 5000 is impressive, but two companies led by Dr. Rebecca Thomley—Morning Star Financial Services and Orion Associates—are on the list. But it’s even more complex than that: All told, the connected enterprise includes 11 related entities, including two nonprofits, in the social service arena.
Thomley’s mother, Marya Hage, founded Meridian Services in 1980 in St. Cloud to provide services for people with developmental disabilities. A related nonprofit, Zenith Services, was founded in 1999. Orion Associates began quietly in 2000 to manage the business of the two related entities. But under Thomley’s leadership, the related companies have grown to more than 2,300 employees across several states.
In 2006, the group started to expand nationally, with the launch of Morning Star Financial Services in Utah. Morning Star provides financial management for people who receive public funds to care for a family member who is elderly or has a disability. Morning Star has expanded its services to Colorado, Ohio, Oklahoma and Tennessee. (In Minnesota, another related company, Orion ISO, provides similar services.)
“We are the bridge between Medicare dollars and those families,” says Thomley, who is CEO of Orion Associates and president of Morning Star Financial Services.
It remains a family business. Thomley’s brother, Stephen Hage, is chief administrative officer for Orion Associates. Morning Star Financial Services is a joint venture owned by Thomley and her oldest son, Nicholas Thomley. Management offices are in Golden Valley.
It’s been an unlikely career path. “This is a second career for me; I’m a clinical psychologist by training,” says Thomley.
But the pace of its growth has brought challenges for the companies.
“You don’t go from a small company in central Minnesota to a company that is managing this number of people without some growing pains,” says Thomley. “We have grown so rapidly.” Thomley notes that as the company has expanded, the staff is not as closely knit as it was when the companies were smaller.
“That’s hard to give up,” says Thomley. “We run this company as a team, with a team approach. All of our jobs have gotten quite a bit bigger. How do you decide when it’s too big?”
Burl Gilyard is senior writer for TCB.