Being a small business owner isn’t easy- Just ask George McGovern

In 1988 George McGovern, former democratic Senator and 1972 presidential nominee, was out of the politics business and decided, somewhat haphazardly, to become a hotelier. He bought the leasehold on Connecticut’s Stratford Inn having no experience in running a hotel, or any small business for that matter. Unfortunately for McGovern it didn’t take him long to realize that the system he’d helped create was about to eat him alive.

In 1972 McGovern seemed to think government intervention was the solution to most anything. The American public didn’t buy it and between 1988 and 1991 George McGovern got first hand experience with government intervention from the other side of the table, the small business owner’s side. An article in the LA Times in the spring of 1990 caught up with McGovern and his new endeavor. McGovern, having now experienced the ups and downs of small business life claimed,

I wish I’d done this before I’d run for President. It would have given me insight into the anxiety any independent businessman or farmer must have…Now I’ve had to meet a payroll every week. I’ve got to pay the bank every month…I’ve got to pay the state of Connecticut taxes…It give you a whole new perspective on what other people worry about.

In 1991, unable to find financing, McGovern had to close the doors of the Stratford Inn. After running the small-business gauntlet, and essentially failing, McGovern wrote a few articles relating his experiences and to the surprise of many declaring the U.S. government’s "intervention" he had previously touted was a serious pitfall to the U.S. economy. He wrote that "legislators and government regulators must more carefully consider the economic and management burdens we have been imposing on U.S. businesses" citing his own difficulties with fire protection standards and endless tax forms. McGovern was convinced that health and well-being, a clean environment and economic justice could still be attained without the incessant paperwork, complicated tax forms, the numerous regulations, and seemingly endless reporting requirements knowing that many small businesses could not pass these costs on to consumers and be competitive or profitable. He was right.

Out of Touch on the Amazon River

Today I’m leaving for a 2 ½ week cruise in Brazil and Venezuela. I’ll be out of touch and won’t be posting during that time. However, Megan Beeler, Agracel’s researcher, will be keeping you informed on some of the projects that she is working on. So please continue to check the blog site. See you again in a couple of weeks.

Double-Wide Trailer Contribution vs. Million Dollar House

My interview with John Larsen has been ringing in my head for the past day. There was one comment that he made that didn’t make it into my early morning blog that is too important to not post.

“The wealthy out-of-towners own probably 65% of the land here. Someone in a $1 million home will only come up here 2 or 3 times per year. They will have less of an impact upon this town than someone who is living in a $30,000 double-wide. Those people spend ALL of their money in the community. We wanted to come up with something to hopefully inspire these wealthy people and get them to invest back into the growth of the community. We need to engage them.”

Larsen’s "Bring Back the Kids Campaign" has the potential to inspire several of those second homers. Stay tuned.

Bring Back the Kids

“Our theme isn’t jobs, jobs, jobs. Rather it is to bring back the kids to their hometown,” said John Larsen, CEO of HomeMovie.com (www.homemovie.com). He was telling me this week about his efforts to create a better working environment in the small town of Winthrop, WA (population 350) where he moved his company a year ago.

“People who grew up here can’t always come back. You lose vitality in the town as a result. These kids would sacrifice to be able to come back home, but they aren’t going to come back to wait tables. Ten of our sixteen employees are local kids. When they grew up they all wanted to get away. Then they got to a certain age and all they could think about was moving back. They’ve told me that they had hoped that someone like me would start a company like this and show people what was possible.”

Larsen started his first company in Seattle but moved it to Lake Tahoe, growing it to over 100 employees. He sold it and started up HomeMovie.com 3 months later in Everett, WA, a Seattle suburb. He moved to “out of the way” Winthrop 3 years ago, running the business remotely. “Then I got to Winthrop, saw the dynamics of this community and decided to move the company here. It would have been easier to run the business with all of the infrastructure that is already in place in the Seattle area.”

The initial move did not go well. Plans to provide the fledgling company with high speed fiber fell thru. Larsen had to run his own fiber 40 miles to the town to be able to accommodate his streaming video operations. He started in a run down old mill in 3,000 sf, has remodeled a 10,000 sf old skate barn and is planning a move into a new 20,000 sf building that will include a conference center that he hopes to use to entice other Seattle entrepreneurs to move to Winthrop.

He’s gotten buy in from the local people for his campaign of bringing back the local kids (www.bringbackthekids.com). “This is a very environmentally sensitive area, but even the most green person around can’t quibble with Bring Back the Kids. I’m convinced that the only way to preserve great areas like this is to create good paying jobs here. We are going to do it.”

Larsen is the kind of entrepreneur that many agurbs® would love to have. He is making an impact in tiny Winthrop with a plan that will be interesting to follow.

From Ag to “Aging in Place” or “Diversified Job Base”

Twenty years ago DeWitt, IA was virtually a 100% ag town and ag was in a major recession. The citizens decided that they had to do something different for the welfare of their citizens, their children and grandchildren. They could have sat back, done nothing and just aged in place like a lot of places that I visit. They didn’t! Today, they are a thriving, diversified town of 5,000 with a wonderful future.

Agriculture was always the backbone for places like DeWitt. It wasn’t necessarily flashing, but it was steady. Farmers sold their crops, bought goods locally and the community moved gradually along. When crops were good, lots of pickups and other high value goods were sold. When they were poor, farmers buckled their belt a bit tighter and sales in the town fell.

The 1980s were a sea change in that equation. Crop prices fell, growing conditions were erratic and the number of farmers fell dramatically. I was out in Iowa during those years and it was an era reminiscent of the Great Depression. Fortunately, it didn’t last.

During those times several citizens of DeWitt decided that they could no longer be totally dependent upon agriculture. They started several industrial parks, built industrial spec buildings and recruited in companies that were looking for good workers with a mechanical ingenuity and work ethic that is often found in farming places like DeWitt.

Today the town has 14 manufacturing companies that they have recruited in over the past 15 years. These plants employ over 1,000 people with the largest a glass manufacturer with 285. One of the local plants is owned by a family out of New York, which moved all of their telecommunications and data systems to DeWitt after 9/11. Evidently they figure that Iowa is a bit safer than New York.

DeWitt is a very progressive community with a beautiful local aquatic center and new library. Last year 40 new houses were built, quite a few for a town the size of DeWitt. Their one negative is that they can’t pass referendums for their schools. They’ve had 7 in a row go down in defeat. Hopefully, they’ll realize that their children are their future, invest in that future and pass a referendum.

DeWitt is the kind of town that I love to visit. It has friendly people, visionary leadership and a solid base on which to build. It is a community looking forward, rather than lamenting what might have passed them by. The people of DeWitt are creating their own future.

Beautiful Setting, Historic Architecture and Quality of Life

Chillicothe, Ohio sits along the Scioto River in a beautiful setting with towering hills and bluffs surrounding the town. Numerous state parks in the county add to the recreational options available in the community.

The downtown and several residential areas offer an opportunity to buy stately buildings at a fraction of their value in larger cities. Houses in the bluffs overlooking the downtown and river valley are available for $150,000 to $250,000. Already, some Columbus, Ohio residents are making the drive south and investing in the community.

Two mall retailing chains were started in Chillicothe and still make their headquarters there. Petland was started in 1967 when Ed Kunzelman, a local teacher, started to sell goldfish on the side. The firm with 40 local employees has almost 200 stores and is still run by the founder. Kitchen Collection started here as an outlet store for a local Alcoa pot and pan plant. It also has about 40 employees and is locally owned.

The community puts on an annual outdoor drama, Tecumseh, which depicts the life of the famous Shawnee Indian leader. The 30,000 tourists/year make it the number one historical outdoor drama re-creation in the country. Chillicothe’s own professional baseball team, The Paints, offer professional baseball in a hometown setting.

Chillicothe is the largest town in a seven county area and as a result has developed into the regional center for retailing, medical care and manufacturing jobs.

The unique downtown, recreational opportunities and great quality of life there make it an ideal place for people looking at getting out of the rat race of the big cities. It has tremendous potential as an entrepreneurial Mecca.

Ohio’s First Capital at a Crossroads

State capitals often have a corporate feel about them. I’ve found the same thing in former state capitals also, like Milledgeville, GA and Vandalia, IL. Last week I was in Chillicothe, OH, the first state capital of Ohio, and noted the same thing.

When Ohio became a state in 1803, Chillicothe was chosen as the first state capital, until it was later moved to Columbus. The Ohio-Erie Canal construction in 1831 passed thru the town and the construction of the Marietta and Cincinnati Railroad made Chillicothe a transportation center. An early settler Colonel Daniel Mead purchased a paper making plant that eventually became the Mead Corporation, now Mead Westvaco. Mead has dominated the town ever since.

Mead Westvaco at one time had 3,000 employees in the town of 21,000. Today it is down to 1,700 and is at risk of falling further. Both local plants and numerous corporate jobs were thrown up in the air when the fine paper division was recently sold to Cerberus Capital Management, a New York City leveraged buyout firm. Cash flow orientated firms like Cerberus tend to cut expenses to the bone. Mead’s research division with 125 high paid jobs in town is probably most at risk.

Other big employers in town with over 1,000 employees each are a Kenworth Truck Plant, the local hospital, two prisons and a VA hospital. Marvin Jones, head of the Chillicothe/Ross Chamber of Commerce told me, “This has always been a company town. Mead and some of the others have always been big drivers locally.”

Unfortunately, as I’ve seen in my travels, you can no longer safely build a local economy around government or big corporate employers. Tomorrow: Chillicothe’s future.

Bum Knees to Serial Entrepreneur

Rick Cole was a construction worker until his knees gave out on him in the mid 80s when he was in his early 30s. It was time for a career change. Since he lived in Cincinnati he contemplated going to work at Kroger in their distribution center, but instead decided to uproot his young family moving north to Urbana, Ohio where he ran a small, five person box plant.

Rick told me, “It was a big cut in pay for me. We were home schooling our kids and the entrepreneur who owned the box company let me do the interior partitions for the boxes. We weren’t on the clock at home. We were only trying to survive.”

Four years later he decided to do the partitions full time, but still at home. In the next four years he and his wife Debbie grew the business from their garage into a chicken coop and finally into a dilapidated building in town. By 1995 they had enough business that they built a new 12,000 sf manufacturing plant, which has grown to 64,000 sf today.

Three of their four children work with them today. Rick told me, “They really were co-entrepreneurs with Debbie and me. At 8 years of age they started putting these partitions together by hand, but they caught the vision right from the beginning. Today they are our biggest asset as a company.”

And the Coles are seeding other companies in Urbana today. Their daughter-in-law has started a home healthcare business that employs 35, one son has set up a company to do specialized partitions and plans are in the works for a new downtown coffee shop in Urbana. The coffee shop is an offshoot of missionary work to help poor coffee farmers in Kenya, Costa Rica and Nicaragua get a better price for their crop. The Coles set up Hemisphere’s Coffee Roasters to assist in this effort.

Rick’s parting words to me were on point, “We came up here to go to work for an entrepreneur. We spun off and have helped to spin off other entrepreneurs. Entrepreneurs breed entrepreneurs.”

Great vision! Big supporter of his adopted hometown! Their web site is www.colepak.com.

Johnny Appleseed—America’s First Franchisor?

From my history lessons I’d always gotten the impression that Johnny Appleseed was a bit of nut. An interesting nut who planted apple trees all over the young United States, but still a nut! I learned this past week that perhaps history should take another look at Johnny Appleseed.

I was in Urbana, Ohio and visited the Johnny Appleseed Museum. Joe Besecker, director of the Johnny Appleseed Society, told me about Johnny Chapman, more commonly known as Johnny Appleseed, “He was a missionary for the Swedenborgian Church and supported himself by selling apple trees. He would set up small nurseries along creeks, having a local farmer take care of the young seedlings for him. He would travel around the country setting up new nurseries. It helped him that the Homestead Act required every homesteader to have 50 fruit trees planted within 2 years.”

As I read Johnny Appleseed’s biography this weekend I reflected on how entrepreneurial he was in setting up his apple tree distribution network, perhaps being America’s first franchisor. He established the Johnny Appleseed brand all over the country. And, if he was a nut he was a smart, wealthy one. He ended up owning over 1,000 acres of land in the rapidly growing young America.

Class Actions—Who Wins?

Yesterday President Bush signed legislation which forces class action lawsuits to be filed in federal court rather than in the “magnet” state courts that have been popular for the trial lawyers. Mississippi was such a “magnet” until state laws were changed there in 2004. Today, Madison County, Illinois in southern Illinois is the top choice of the trial lawyers.

Madison County has had a 5200% increase in the number of class actions filed since 1998. Eighty-six percent of the cases filed there involve plaintiffs or defendants from outside of the state.

An example of the abuse of the current system was a class action that was settled last year against a company that sells bottled water. This lawsuit argued that their water didn’t come from a spring and was unsafe to drink. They won, resulting in the class members receiving a coupon for 50 cents off for their next purchase of this water, that they had alleged wasn’t safe to drink. The class action lawyers walked away with a check for $1.35 million.

Something isn’t right. There is clear abuse. I’m hopeful that this new legislation will be beneficial for us in the long term.

Palo Alto to Failure, But Determination Leads to Success

Farmers in the area undoubtedly laughed and looked with amusement upon a young couple from Palo Alto, California who moved to the Midwest to plant raspberries. The first year they underfertilized the bushes and they all died. The second year they purchased an irrigation system but failed to clean out the pipes correctly and ended up overfertilizing the replanted bushes. They died again. The average person might have given up and gone back home.

But Robert and Sara Rothschild weren’t ordinary people. They had grown up in the construction business, understood how long it could take to set up a new business and kept at it. After all, they had moved to Urbana, Ohio because they were looking for a better place to raise their young family. So they replanted their raspberries for a third time.

The third time was the charm. Everything clicked and they had a bumper crop. In fact they had such a big crop that there were more berries than there were people who wanted to pick their own berries. Ruth Runian, a local woman suggested that they make all of the extra berries into jam. A chef in Columbus told the Rothschilds about a burgeoning new niche in gourmet food and they went to a food show with samples of their product.

From that inauspicious beginning, Robert Rothschild Farms (www.robertrothschild.com) has grown into a wonderful Urbana based business, shipping product to over 5,000 retailers in all 50 states and to many foreign buyers. In the past five years they’ve built a 5100 sf restaurant/gift shop on the farm, have plans for a cooking school and eventually a bed and breakfast. Every year the 95 employees go on a company trip. In 2004 they went on a Bahamas cruise and this year they’re headed for Cancun.

Four years ago the Rothschilds turned over operations to Mary O’Donnell who was with Little Tykes in Cleveland. She grew sales 34% last year and plans to “expand their gourmet food line, broaden what they offer, focus upon national accounts, and get more shelf space from our existing customers,” she told me.

The Rothschilds have given back to the community. They also bring a lot of tourists into town.

I’m glad that they didn’t give up after those crop failures. Entrepreneurs like them don’t give up easily.

If you go to their farm try their new Raspberry Chipotle Salsa. It is my favorite.

Bob Villa Would Love This Town

Bob Villa would love this town. It has a very unique downtown with dozens and dozens of wonderful old buildings. The town has several parts of it that have house after house of grand old houses built in the 19th and 20th Century. For the past two days I’ve been in Urbana, Ohio giving a series of talks and touring the town.

Urbana is beginning to be discovered by professionals from Columbus and Dayton, which are both less than an hour away. The grand old houses are a fraction of the price of what they would sell for in those two cities. And, it’s a great small town with a quality of life that many people are looking for as they think about putting down roots. I spoke with several who have already made the move. More will follow.

Urbana has a new YMCA, a new 9 mile long bike trail, a four year liberal arts school (Urbana University), the only Johnny Appleseed Museum in the country and many other amenities. I was also impressed with the number of entrepreneurs who were at my talks, more than I typically see in most towns. People are engaged, asked great questions and are ready to take Urbana to a new level.

Tomorrow: One family who moved from Palo Alto to Urbana, going onto great success. You’ve tasted their goodies.

Impact of One Auto Supplier on a Town

Last week I was in HN Automotive for a presentation from the governor for another expansion that they were undertaking. HN has been a client of ours since 1995. They started with only 2 employees in 10,000 sf, but grew at a steady rate and today employ 110 in 127,000 sf.

And what is the impact of one company like this? According the Illinois State Chamber of Commerce’s calcs, 100 manufacturing jobs result in 415 more jobs because of the multiplier impact. Other benefits are: $13 million in personal income annually; $5.5 million in bank deposits; 7 more retail shops; $7.7 million more retail sales; $540,000 in added tax revenue; and many other benefits.

Those benefits are why we spend so much time trying to bring companies like HN Automotive into our buildings in the agurbs®.

Impact of One Assembly Plant

Nissan Motors opened an assembly plant just north of Jackson, MS in Canton, MS in May, 2003. The plant currently employs 5340 and is considered one of Nissan’s most productive plants. Mississippi hadn’t had a tradition in automotive manufacturing until Nissan landed there. The impact in Jackson has been tremendous, but I contend that this is the type of facility that can impact a number of small towns throughout the state with new auto parts supplying plants.

Almost 50 new firms, hiring approximately 5,000 people have sprung up in 18 towns throughout Mississippi. Some have only a handful of employees. Few have over 300 employees and the largest, Johnson Controls in Madison, has 600.
Virtually all of these auto suppliers today are built around the focus factory concept that was popularized in Japan. The factories are smaller, which takes out several layers of bureaucracy, and results in more of a teamwork approach. It is much more productive than the old model and even the US auto manufacturers have caught onto its advantages.

States like Alabama and Mississippi that have developed a very progressive approach to companies like Nissan are winning the battles for these types of plants. States in the upper Midwest that are still trying to hang onto the old way of operating will probably lose in the long term.

Auto’s Regional Change

Auto production has moved south in the past decade. I have developed a series of slides for one of my talks that show auto plants in the 1980s, 1990s and in the 2000s. The 2000s slide vividly shows how the new plants have moved south, particularly into Alabama and Mississippi. This month’s Federal Reserve Bank of Chicago’s Fed Letter is titled “Caution ahead—Challenges on the Midwest’s role in the auto industry.”

The Fed points out that the Chicago District, which encompasses Michigan, Indiana, Illinois, Wisconsin and Iowa, share of passenger car production has fallen to 32% in August, 2004 compared to 50%+ as late as 2002. “Until the end of 1996, the core of the auto region, the states of Michigan, Indiana, and Ohio was home to the majority of auto industry jobs.”

I’ve never thought that the agurbs® made any sense for an auto assembly plant. These plants are too large and totally dominate any economy. There generally isn’t a good diversification in the communities in which they are located. When the plant is humming, times are good. But, they don’t always hum.

However, I’ve always been much more interested in auto parts suppliers, feeling that they can add a great deal to an agurb®. Agracel has several clients who make auto parts in several of our buildings and have spent a great deal of time studying trends in this industry.

As the Fed points out in their study, “on average for every auto assembly job in the U. S. there are six in related parts production, as well as ancillary jobs.” These parts plants are usually in close proximity of up to a day’s drive away. With numerous assembly plants in the upper Midwest, a large number of parts suppliers located there also. In the three year period from 2000 to 2003, “the industry shed 155,000 jobs, the vast majority of these are concentrated in the auto supplier segment of the industry. Michigan, Indiana, and Ohio fared worse than the rest of the country, losing 17% of their parts industry jobs.”

The Fed’s conclusion is that this shift from the dominance of autos in the upper Midwest is not over. They point out that another four Big Three assembly plants are scheduled to close in the next year in the upper Midwest. The surge of auto production in the south, due to changing demographics and much more favorable labor laws, will be a huge boost to that region even as the normal “auto zone” upper Midwest loses dominance and sheds jobs.

Tomorrow’s blog is on the impact of one auto assembly plant in Mississippi.

More Diesel in the Water

Yesterday I related the story of how the small town of Plain City, Utah spawned 4 giant national trucking companies. I was fortunate to visit Plain City, but should have driven another 20 miles up the road to Brigham City, a community of 17,400. Little did I know that Brigham City helped to start the truck stop industry. What is it with these Utah towns being so entrepreneurial in the trucking industry?

Paul Larsen, Planning and Economic Development Coordinator for Brigham City, related to me that Flying J Truck Stops, one of the three largest in the entire country started and was headquartered there until four years ago when it moved to Ogden. He told me, “The founder of Flying J was Jay Call. Jay lived here locally and loved to fly, thus the name of the business. He died a couple of years ago flying some friends to Sun Valley.” The company has $4 billion in annual sales and had a $23 million payroll in the town, which is HUGE in a community of this size. One of the main reasons that they moved from Brigham City was inadequate telecommunications infrastructure.

“The loss of Flying J lit a fire under our economic development program and we are making lots of progress. Our hope is to become the kind of small community that a Flying J type company would consider for a corporate location, or in which another Jay Call type entrepreneur would feel comfortable growing a business. Our telecommunication infrastructure will soon be world-class.” Paul is referring to the Utah Telecommunications Open Infrastructure Agency which will provide a state-of-the-art telecommunications backbone to every business in the community. Bandwidth will no longer be a limiting factor for a company like Flying J.

It’s too bad that they didn’t have this telecommunications infrastructure operational or perhaps they wouldn’t have lost Flying J. But Brigham City is a well diversified community with a strong agricultural (famous for their peaches and cherries) and manufacturing base. It has tremendous potential as a tourist and recreational location. Its history goes back to its founding in 1851 and it is the site of the Bear River Migratory Bird Refuge, where they are building a new visitors center, hoping to attract hundreds of thousands of bird watchers. Did you know that bird watching is the fastest growing leisure activity in the USA?

Paul told me that their manufacturing base is anchored by a “budding carbon fiber/composites cluster with ATK Thiokol, HyperComp Engineering, and IsoTruss Structures being significant players.” That is a great base to build upon.
Brigham City sounds like my kind of town. It’s too bad that they lost Flying J, but it sounds like the wake-up call from that loss has spurred them on tremendously. They have come to their “fork in the road” with this loss, but it hasn’t stopped them. They are pushing ahead, down a new fork, and are going to be on the cutting edge of telecommunications. I hope to visit in the near future.

More Trucks Than People

“I like to say there was diesel in the water, and we were conceived in a sleeper cab,” is how Jerry Moyes explains how three of the nation’s top 100 trucking companies were birthed in Plain City, Utah. There are only 3,500 people who live in this small agricultural town, but 25,000+ trucks on the highways from the companies that started here. I drove to Plain City recently to try to find out how one small town could nurture such an entrepreneurial focus.

The original trucker was Chester Rodney England who started out delivering farm produce in a Model-T. His sons, Bill & Gene, returned from WWII and with one used diesel truck started C. R. England. Carl Moyes drove for the Englands. His son Jerry started driving with his dad at age 14 and founded Swift Transportation in 1966. Kevin and Keith Knight and their cousins Randy and Gary Knight worked for Swift for over a decade, before they split off to start Knight Transportation. Gene England’s son, Jeff England, started Pride Transport in 1979. Jerry Moyes said, “I remember playing with toy trucks in the sandbox with Jeff.”

Driving into Plain City you would never guess that four major trucking companies, 3 in the top 100 (England, Swift and Knight), all started out in Plain City. It is a typical farming town. There are pickups parked on the street, stacked hay is visible from the town center and city hall was manned by one secretary. Someone from a big city might consider it sleepy. For me, it was tranquil.

In looking thru a history book on Plain City at city hall I found a picture of George Moyes, Jerry’s uncle, driving a milk truck. There are a lot of dairies and small farms around Plain City. As I continued my search, I recalled Juvenile Judge Steve Seymour telling me several years ago, “You know Jack, I’ve never had a dairy farmer’s kid in my court. They learn at a very early age the importance of hard work and how you have to take care of everything.” I’m sure that same work ethic was instilled in the Englands, Swifts and Knights at an early age and is why Plain City is the birthplace of so many national trucking companies.

My only disappointment is that all of the four companies are headquartered in other locations. England and Pride are in Salt Lake City. Swift and Knight in Phoenix.

Free Land

On today’s front page of USA Today there is a great article about what small towns in the Plains states are doing to attract economic development. The article (http://www.usatoday.com/printedition/news/20050209/1a_cover09.art.htm) focuses specifically on Kansas and the six communities throughout the state that are giving away residential lots if you agree to come build a home there (http://www.kansasfreeland.com/). Not only are they giving away the land, but they’ll help you with your down payment. They’ll help you find a job. They’ll help you acclimate to a different way of life. And they’re doing all this for one reason, to save their towns.

This concept of recruiting citizens to small towns with incentives is a trend that is catching on. Throughout the Midwest and Plains states, communities are working to stop the “brain drain” and embracing “hometown competitiveness,” a strategy developed by the Center for Rural Entrepreneurship in Lincoln, NE. These communities are realizing that hunting for big companies to come in and support a community isn’t a sustainable economic development plan. They have recognized what I see as the new paradigm shift in economic development, the essentialness of entrepreneurs. They encourage people to move into their towns, set up shop, and live the American Dream. These communities are building their futures one family at a time, on free land.

Entrepreneurial Greenwood

Greenwood impressed me as an “Entrepreneurial Town.” It is a community that has an incredible number of entrepreneurial companies and their impact is felt throughout. I was only there for a couple of hours, but met more entrepreneurs in those two hours than I’d meet in some towns in a lifetime.

Greenwood was the Cotton Capital of the World in the 1930s and Staplcotn, a local cotton selling coop, got its start here years ago. It’s still headquartered in a beautifully redone series of old downtown buildings. They have 150 high paying jobs in the town.

Two catfish processing plants are also headquartered in Greenwood. Heartland Catfish and America’s Catch were both started here and employ 800.

But it’s not just ag that drives Greenwood today. “We grow cotton and catfish, but that is not all that we do,” said Fred Carl, founder of Viking Grill. He started the company in Greenwood with the help of 10 local investors. It’s still headquartered here and employs over 1,000.

There’s also J. J. Ferguson Sand & Gravel (construction—263 employees); The John Richard Collection (home decorating accessories—345); and Hickok Electronic Corp. (testing equipment—106). All started here and are still run from Greenwood.

I also found some very small entrepreneurial companies in Greenwood. Kornfeld’s Store is a small retail store that has been featured in national publications. It specializes in VERY large sizes. Murray Kornfeld told me, “We go up to size 84, 10x jackets, 80” belts and other big sizes. We are the biggest big and tall store in the state. I’ve got 6x tall shirts and 8 x camouflages. How do you camouflage someone that big?” I was at a loss for words as I tried to imagine someone that big in camouflage.

Cindy Tyler started The Mississippi Gift Company (www.MSGifts.com) in 1993 in Greenwood. She sells over 500 food and gift items that are made by over 120 Mississippi gourmet food companies. Today she sells her products all over the world from her catalog and website along with retail stores in Greenwood and the state capital of Jackson.

As I drove out of Greenwood I shook my head wondering how one small town like this in the depressed Delta could be so entrepreneurial. I’m going to go back to try to find out why.

A Dreamer With Passion Builds a Masterpiece

Who but a dreamer would think of building a $10+ million boutique hotel in a town of 19,000, out in the middle of nowhere? Greenwood, MS which lies on the banks of the Yazoo River in the heart of the Mississippi Delta was once a wild riverboat town. It boasted 19 saloons on the riverfront. It hadn’t changed a lot since those days, until the founder of Viking Grills decided to redo its downtown.

Only someone like Fred Carl, who dreamt of and developed the high end residential grill market, would ever dream of such a thing. I’ve found many such dreamers who were passionate about their hometowns in my travels. I’ve often said that one person with passion, like a Fred Carl, is better for a community than 50 or 100 people who “are just kind of interested.” Fred Carl is not “just kind of interested.” He is a dreamer and doer.

He bought the dilapidated historic Hotel Irving which had become a rooming house and several other buildings in the downtown area of Greenwood, spending millions rebuilding it and opening The Alluvian, a 50 room boutique hotel. Carol Daily, the president of his Viking Hospitality Group told me, “We opened in May, 2003. Conde Nast called it one of the top 100 hottest new hotels in the world. The architect was from Mississippi, as is all of the art. We got it mainly from Delta artists with a theme of earth, water and sky.”

“Viking uses the hotel on Sunday, Monday and Tuesdays for their training groups. That is usually the downtime for most hotels. Viking holds training programs 35 weeks/year. They fly into Memphis and spend Saturday night at the Peabody. Then they make their way down to Greenwood, which is 3 hours away. We are selling a luxury product and want to get them into the luxury experience.”

“We have a library of 350 books written by Mississippi writers. We are working on a library of Delta music also.”

They are plugged into the Delta and are doing a lot to promote everything Delta. The Alluvian is training “Delta Tour Guides”, doing oral histories, holding cooking classes, and promoting tourism of the Delta.

Their oral history of the restaurants of Greenwood offers an interesting view of the city’s immigrant families’ creations. Lusco’s was a depression era Italian immigrant’s dream and is still run by the 4th generation of the family. Giardina’s, opened in the late 20s, has been recreated in the Alluvian. The Crystal Grill, almost a century old, was where we had lunch. It was quite an experience! Also in the oral history are Mattie’s (soul food); Pearl Johnson (hot tamales); Cotton Row Club; and Spooney’s Bar-Be-Que.

Greenwood is one of the most interesting small towns I’ve visited in my travels. It’s clear to see the impact that a dreamer like Fred Carl can have on a community. Oh, that every town could have such a person!

Home of the Range

Who would ever guess that the upscale kitchen range revolution would be birthed in a rural Mississippi town? And by a lowly home builder? And that Greenwood, MS once the cotton capital of the world would become a hotbed for entrepreneurial activity? More on the entrepreneurial hotbed in the next couple of days.

Today, I want to focus upon the birth and growth of one of the great American stories of developing a dream into reality. Fred Carl was a fourth generation home builder who loved to cook. He wanted a commercial-type range for his new house in 1980 but couldn’t find any. He was frustrated that there wasn’t anything available for his new home. He thought that there might be other new homeowners who would also want a fancier stove in their kitchen.

Fred drew conceptual drawings during that frustrating time in 1980, but he didn’t start the business until late 1983. He raised money from ten local individuals, people who knew Fred and shared in his vision to launch the very first commercial range for home use in the USA. It wasn’t going to be an easy journey.

He approached every manufacturer of commercial ranges in the USA with his idea, but they all turned him down. He said, “When I first came up with the idea for Viking, people laughed at me and sent me on my way.” He finally found a California company that would help him engineer the product and contract manufacture it for him. Testing and certification took years and it wasn’t until 1987 that the first stove rolled off the production line. You need a lot of patience to be a successful entrepreneur!

Homeowners loved it! Sales exploded and Fred decided to move all production back home to Greenwood, MS in 1989. He thought of moving to Jackson, MS to grow the business and went so far as to rent space there, “but, I saw that it didn’t feel right. I’m a local boy and I decided that I’m either going to do this in Greenwood or not do it at all,” Fred said.

His first plant was a 35,000 sf former distribution warehouse that his father had built in the 50s. Today the company has four manufacturing and distribution facilities in Greenwood, totaling over 500,000 sf. The corporate headquarters are located in the old Opera House and a collection of ten historic cotton buildings constructed in the late 1800s and early 1900s located on the banks of the Yazoo River.

Viking, still privately owned, employs over 1,000 people in this Delta town of 19,000. Annual sales exceed $250 million. The product is sold throughout the US and Canada and is found in more than 80 other countries throughout the world.

“We use the Viking Grill as a great example of what we can produce here,” Robert Ingram, Executive Director of the local economic development agency told me. Tomorrow, how Greenwood, the Home of the Range, is benefiting from Viking’s cultural influence.

Second Place Aint Always Bad

I’ve found that one of the worst things to happen to you in economic development is to come in second place. I’d rather come in 10th place than 2nd. In 10th place you quickly move on, while in 2nd place you can drive yourself crazy second guessing what you could have done differently to land the new project. Huntsville, Alabama was such a second place town.

In 1949 the U. S. Air Force was looking for a location for their multi-million dollar Air Engineering Development Center (a.k.a. wind tunnel) somewhere in the South. Huntsville, an obscure cotton town of 16,000, was one of the finalists but “we realized that Tennessee’s powerful congressional delegation forced the Air Force to locate in Tullahoma,” said Tom Johnson who headed up economic development in Northern Alabama at the time. “We were really let down.” Huntsville had come in 2nd place. It was worse than kissing your sister.

But, this time there was a second prize. The U. S. Army was looking for a location for some German rocket scientists. This was no grand wind tunnel. These were former enemies whose “pay is only enough to keep them in cigarettes.” People were outraged. The Federation of American Scientists protested. One townsperson was quoted in the local paper, “The last time our boys had seen Germans, they were shooting at them.” As it turned out, it was the best “second place disaster” to happen to a town.

Early in 1950 Dr. Wernher von Braun and his team began operations in Huntsville on rockets and missiles. Johnson said of the event, “We welcomed the news, but, at the time, we still had rather had the wind tunnel.” A front page article in the May 14, 1950 Huntsville Times headlined prophetically: “Dr. von Braun Says Rocket Flights Possible to the Moon.” Some local residents undoubtedly believed that these German rocket scientists were crazy. Those same residents would literally carry Dr. von Braun on their shoulders thru the streets of Huntsville on July 24, 1969 when Apollo 11 landed on the moon.

Today Huntsville is no longer a quaint cotton town. It is a booming metropolitan area with 250 aerospace companies employing 27,000 employees in this high tech cluster. Today Huntsville with over 150,000 residents is “Rocket City U. S. A.” That wind tunnel is still in Tullahoma which has grown to 18,000 from less than 10,000 in 1950. Sometimes it isn’t so bad to come in second place.

A Depression Era Legacy Still Paying Off

The roots of the success of Agri-Fab were planted during the great depression when Leah Harshman set up Community Industries to help provide employment for members of the Church of Jesus Christ, started by her father in 1871. She set up companies to make candy, sew goods and make agricultural equipment.

The ag equipment company ended up in bankruptcy in the mid 60s and was eventually bought by Montgomery Ward. In 1975 they sold the company to MTD, which planned to close the 250 person plant in Sullivan, Illinois.

I was in Sullivan earlier this week, a town of 4,400, to keynote their annual Chamber Banquet which honored Agri-Fab for all of the contributions that they have made to the community. Sullivan is also well known for their Little Theater on the Square, a wonderful performing arts theater.

Ron Harshman, one of the ex-employees chosen by MTD to help liquidate the plant, developed a business plan to allow them to keep it open. He raised funds from five other local citizens and convinced MTD to lease them the plant equipment from the closed factory and invest in the company. They christened the new company Agri-Fab, intending to do subcontracting in the agricultural equipment field.

Today, they’ve evolved into a leader in lawn and garden tools. They have a joint venture with Sauer-Sundstrand, Hydro-Gear, that is a leader in integrated hydraulic transmissions. Agri-Fab and Hydro-Gear have over 1,000 employees in Sullivan. They give back to their community and are a great example of what a local company can do to benefit their community.

My sixth key is to Maintain Local Control. Hydro-Gear is what can happen to a town that gets this local control. Ron Harshman and his team have fulfilled Leah Harshman’s wildest dreams, creating way more jobs than she could ever have imagined and helping to make Sullivan the progressive town that it is.

Wal-Mart Observations in Idaho

Last week Wal-Mart opened a new supercenter in Idaho Falls, Idaho. I visited the store the day after the grand opening, so I just missed getting the chance to see Chester the Cheetah, the Pillsbury Doughboy, and the Coca Cola Polar Bear. Despite not getting the chance to see these food icons, I still found the store very interesting.

At the entrance to the new store was the Wal-Mart Fly Shop, the first of its kind in the country. No it’s not a new Fear Factor fad shop! They sell equipment and flies for fly fishing. Eastern Idaho has some of the best fly fishing streams in the world, so selling fly fishing products makes a lot of sense.

I asked Jim Evans, whose official title is merchandising supervisor but who sure looked like the general manager, how they happened to get into selling flies. He told me, “The district manager thought that it might make sense here, so they tried it.” Evans is an avid fisherman who told me that the shop is aimed at first time and intermediate fishermen.

As I wondered around the store I noticed that Wal-Mart has continued to take the cost of their buildings down. Five years ago at a NAIOP Conference a speaker talked about how Wal-Mart had found that they only stayed in their buildings for about 12 years. By putting on a 12 year roof instead of a 20 or 30 year roof and doing some other changes they were able to save several dollars/sf.

Wal-Mart’s new Idaho Falls store has been value engineered from even five years ago. They’ve taken the ceilings out of the stores and the linoleum off of the floors. I’m guessing that they’ve taken a couple more dollars per sf out of the cost of a building. And, when you’ve got almost 5,000 stores, a couple of dollars per square feet is $1.5 billion. Real money!

A new report, “Wal-Mart 2010” by Retail Forward looks at this continuous cost cutting and innovation of to predict that the behemoth retailer will continue to grow market share and share-of-wallet. They predict that its sales will top $500 billion by 2010 from $284 billion in 2004; and it will own 12% of the non-auto/non-gasoline retail sales in the USA (compared to 8% in 2004). The report says, “Wal-Mart will continue to push the boundaries of what its customers will allow it to be.”

Both the Fly Shop and the cost cutting on their buildings are great examples of what makes this world-class competitor such a powerful force. They’ve pushed decision making down the organizational chart for merchandising and continue to cut costs in whatever area they see possible and practical.

Honoring the Job Creators

I was the keynote speaker last week at the East Idaho Business Awards Program put on by the Regional Development Alliance, Inc., a ten county regional economic development organization. Regional efforts such as this are a very strong effort to allow smaller towns to stand out in the crowd. It takes courage to recognize that economic development in one community helps the neighboring ones in the long term. It doesn’t make sense for them to fight each other, when they should be working together.

The counties in this effort range in population from only 1,000 to over 80,000. Four of the ten have less than 10,000 in the entire county, and these are BIG counties.

Honored at the luncheon was AMET, which I mentioned in yesterday’s post. Other manufacturers were: Premier Technologies (185 employees), that started locally in 1995; Blackfoot Brass (16), also locally started in 1990; Lost River Ballistics (8), that moved to the very rural county because it was where the owner wanted to live; DuBois Leather and Shoe Company, which has sold boots and orthopedic shoes in 38 states; and QBeam Products (95). Also honored were several in the professional and services business.

While a 20 or 30 person operation might not sound like a big deal to someone from a large city, in a county of under 5,000 this is generally one of the larger employers in the county. They are always the first place that people in town go for donations, often provide a high level of professionalism, and provide excellent employment opportunities. They are usually the backbone of a small town or county.

America’s Family Community

Rexburg, Idaho is one of the 397 agurbs® that I identified in my book. I visited it on Thursday while I was touring several communities in Eastern Idaho. I was impressed with what I saw.

Rexburg is an example of a town that has literally had to rebuild itself. In 1976 the Teton Dam, a Corps of Engineers dam, burst because of a design flaw, hurdling 19 miles of water thru the Upper Snake River Valley. Word was quickly spread thru the valley, allowing people to scramble to higher ground. Rexburg was covered with 5 feet of water within hours. Eleven people died in the disaster. But Rexburg and the other communities hit by the flood didn’t give up, rebuilding their towns back, one building at a time.

Rexburg, which has grown from 15,791 in 1999 to 22,000 in 2004, is undergoing a real boom. Three years ago a small two-year college was converted to BYU—Idaho, several local manufacturing companies are expanding, and the wonderful quality of life is attracting many to move to Rexburg and the region.

Several call centers have located in Rexburg because of BYU—Idaho. Not only are there 10,000+ students, but there are 70 different languages spoken by these students. This language proficiency is a tremendous benefit derived from the two year missions of young people from the Church of Latter Day Saints, more commonly known as Mormons. This language base will become more important as we become a more global economy. I’d bet that several local entrepreneurial companies will result from this language advantage.

I visited AMET, a local manufacturer that started in Rexburg in 1990. They have doubled their employment in the past year as their business has continued to grow with the introduction of a new product line. They build specialized “state of the art” automatic welding systems. Their systems have been purchased by Lockheed Martin, Boeing, Ford, Caterpillar, GE, General Dynamics and many other companies. Their equipment is used to build the space shuttles’ external fuel tanks. Don Schwemmer and Dave Stompro started the company in Dave’s basement.

Rexburg is like most of the agurbs® that I’ve gotten to visit in the past year. It is a friendly, dynamic “town on the move”. And I love its motto, which is “America’s Family Community.”