Jay Matson did not dream of becoming an entrepreneur. But being “his own boss” always appealed to him since graduating from graduate school in the late 60’s. Despite stints on the east coast and San Francisco during the era of love-ins and drug use, Jay returned to Galesburg and married a entrepreneur, single-parent from the area. He and his wife started their first retail store with $2500 that was a “pay-off” from the Chicago Transit Authority for being hit by a bus.

Today he guided our 24 MC students on his journey in developing Seminary Street into Galesburg’s best known destination.

Over the last 30 years Jay has learned a lot about how to create a destination for tourists and locals alike. Seminary Street was shaped by Jay’s vision to be a celebration of historic city centers. He pushed the city to recreate the original brick pavers in the street and special lighting. He bought most of the property over the three block area and installed awnings and restored the original brick exteriors and windows. While acquiring many properties he become a restaurant developer and gained national publicity as someone willing to transform a meat packing plant (sitting idle for years as an “eye-sore”) into a thriving eatery. He became well-known as someone that could transform empty storefronts into a destination shopping and eating experience. When he could not convince existing bakeries to open a new location on Seminary Street, he bought all of the machinery for the bakery, outfitted the kitchen and hired a baker because he was convinced the neighborhood needed a bakery.

Jay built loft-apartments for people who wanted a city-feel in Galesburg and he maintains that these units command the highest rents in the city.

He saw opportunity where others saw risk. He had his share of failures too. He invested $750,000 in a restaurant in Macomb as WIU was growing in the 80’s. When the 12% loan on the $750,000 ballooned to 21% he almost lost everything he had built. “it was a humbling experience after our success in Galesburg”.

Jay is now in the process of selling all of his businesses and even the real estate. “I am ready to retire, and we do not want to have so many employees”. The opportunity to own an outdoor shopping mall in the middle of a small city should appeal to someone who has imagination and drive. “There are so many things that can be done here”, Jay said. The opportunity to expand Seminary Street and tie merchants closer together will bring big benefits to Galesburg and revitalize downtown.

The founder of Innkeeper’s Coffee spoke to the Midwest Entrepreneurs class last Thursday afternoon. The discussion was open to anyone. In case you missed it….you can read about a classic story of how one of the best secrets in Galesburg became a $1 million business selling specialty coffee, desserts, and lunch. Mike Bond spent 20 years working in management for Bergners (http://www.bergners.com) and had a dream. Don’t be afraid to “dream big” Bond told the 20 students in attendence. “But be careful what you wish for”. His partner Johan worked in New York City and even opened the Belmont Kitchen in Washington, D.C. before starting Innkeepers Coffee in 1997. We thought we might open a nice B & B in Galesburg since we saw a classic victorian during our 20th year renuion, but that business model was not viable. “We listened carefully to our coffee customers, and we did a lot of what they suggested. They wanted food, so we added pastries, breakfast items, then a full lunch menu. They asked for desserts and we did that along with chocolate. It wasn’t what our business plan said we were going to do but it made sense to follow the business. Some of our best customers do business with us 21 times a week.”

It is amazing to see how Innkeepers Coffee succeeded in a small market where Starbucks failed by taking a greater share of wallet from each customer, thus avioding the need to sell thousands of cups of coffee monthly. The volume you would need to sell the 500-1000 avid coffee drinkers in Galesburg that have the means to buy daily coffee didn’t work for Starbucks but by going deeper and getting that greater share of wallet, InnKeepers has been very successful. There current challenges: Innkeepers best customers are 50+ and they want to appeal more to the 20-30′s crowd. Another big challenge–Finding great people who are articulate and willing to work hard.

Sherm Smith ’72 has long believed that science holds the key to solving the world’s largest problems. But the president and CEO of the Chambers Group, Inc., an environmental consulting firm, also realizes that business can’t be overlooked in the equation. He believed in science so thoroughly that he leveraged everything he owned to acquire and grow the Chambers Group.

“The most important problems, such as issues related to rebuilding Japan’s nuclear energy program or obtaining energy independence in the U.S., will be solved by scientists,” he said. “However, there is one big caveat: unless the scientists obtain grounding in project management and a sense of the balance between risk and reward, they cannot be successful.”

We can refine petroleum from slate or rock, but at what cost? Scientists who make an meaningful impact at his firm learn both the skills of good science and project management, scarcity and risk/reward”. So, combining science skills with business was Sherm’s ideal company marriage. “The fact that Monmouth College is investing in the best facilities and forums for the interaction is the best educational investment I can imagine.”

When choosing a college to attend, Smith said he was drawn to Monmouth, in part, by the national acclaim it had received in the sciences.

“Monmouth had a great reputation for turning out scientists,” he said. “I had heard that not too long before I attended, Monmouth produced more science graduates that eventually became Ph.D.’s than any other small college in the Midwest. I was convinced that future problems would be solved by scientists and engineers.”

He recalls being “traditionally trained” during that heyday for the sciences.

“Scientists at Monmouth were trained to be logical and speak the language of the discipline,” he said. “I learned statistics and the value of analysis there. The scientific process came to life for me at Monmouth. I learned about what was controllable and predictable and how to work with variables to maximize the impact of my experiments. Those skills are timeless.”

After graduating, Smith furthered his studies at the University of Iowa. Prior to his current consulting work, he was at Fluor Corporation, an internationally recognized company and environmental science pioneer.

“My career there was successful because of my science preparation and Fluor’s excellent training program,” he said. “My timing could not have been better. I started just after the first environmental legislation was passed and the Environmental Protection Agency was established.”

Smith became the company expert at Fluor, helping clients do such things as obtaining government approval for new power plants, establishing acceptable emission levels and regulating the sulfur release from the burning of coal and liquefied coal.

“All of this stuff was regulated for the first time,” he said. “It was a great time to join the industry, and I loved what I did at Fluor. My competitive spirit leads me to want to do whatever it took to be the dominant player in the markets we served. I took advantage of every opportunity I had to learn more science, engineering and business.”

As an example of how the scientific discipline comes together with business, Smith recalled working as the lead environmental engineer on the design of a new coal-fired power generation plant that Louisville Gas & Electric built in an environmentally sensitive area.

“We came to an impasse with the EPA and they refused to give us a permit,” he said. “The issue was the analysis and projections we provided for the air pollution dispersion and heat from the plant running at 100 percent of capacity. I was asked by our client, ‘How do we get around this regulatory impasse?’”

Smith provided three alternatives, but the more he studied his own work, looking at the project holistically, the more he was drawn to his third option, which consisted of design changes, but which could still potentially cost several million dollars to implement.

Ultimately, as Smith’s company worked with designers, they were able to increase the height of the release stacks by 15 feet, eliminating the need to reheat the stack itself.

“We found a solution that could be implemented for less than $100,000,” he said. “The solution combined good science with business acumen. The result was that we saved the client millions of dollars.”

Smith, who hired hundreds of scientists in his career and employs 250 with the Chambers Group, has advice for students who hope to go into that field. Part of their success, he said, will come from lessons learned outside the laboratory.

“At Monmouth, I was more than a science major. I was a leader in student government and in my fraternity (Tau Kappa Epsilon). I recruited volunteers and tried to make things happen. If you can learn how to lead volunteers in a fraternity or student government, you can hone skills for scheduling events, sequencing and motivational change. Those life skills were invaluable.”

Understanding the business behind science is also a key part of achieving success.

“Young scientists must understand the business model they are operating in,” he said. “The No. 1 reason we are in business is to make money, not do good science. We need to make a profit to be able to do good science. Good science alone doesn’t pay all the bills. Many scientists just want to conduct experiments as they did in graduate school. They do not want to deal with any of the project management demands or client mandatories, so they are worth less money.”

His other advice is for scientists to be well-rounded, and be realistic in their expectations.

“No client will pay a field biologist a $100,000 annualized rate for generic fieldwork,” Smith said. “The reality is that the U.S. market values those skills at a $35,000 annualized rate. Both the client and I are willing to pay more for someone who can do the science and manage the project. Putting to use what they have learned in the field is essential, but applying that knowledge for the benefit of the client gets my attention.“

Obtaining that high level of skills doesn’t happen overnight.

“It is worth more money to my company when scientists take a natural career path — a path that normally includes project management within the first five to six years after joining the firm. From there they can lead programs or write proposals. The scientists who are paid the most learn how to combine what they need to know with what it takes to get things done in a variety of situations.”

Douglas Oberhelman, CEO of Caterpillar spoke on campus today about four central topics:

1. The last 20 years at Caterpillar and the next 20
2. His personal legacy and dreaming big
3. Accountability-the essential ingredient for successful employees and organizations
4. Government policy

The first topic demonstrated Doug’s great optimism for the future. At CAT, the revenues in 1992 were $10 billion. Twenty years later it is over $60 billion. He expects that number to jump to 70 billion next year. Specifically he discussed the global expansion he has seen (or helped drive) from the perspective of leaving something better off than it was when you started. He expressed thanks for Lee Morgan, former CAT CEO (Monmouth College trustee chair) for leaving a legacy of positive momentum and “setting things in order” to work better for the “next guy; they set us up” [When I joined CAT], I was focused like any other recent graduate on paying off my students loans. I didn’t think, “I will be the next CEO of this company”. But as he had more international experiences, Doug saw the great potential at CAT and a vision of leadership grew in my mind.

Oberhelman has seen so many challenges met and positive changes at CAT over the last 20 years. The last time a CAT CEO spoke at Monmouth College (Lee Morgan), Doug reminisced about that earlier era. “There were 1991 predictions that the Japanese were going to take over everything, manufacturing, finance and even real estate; buying Rockefeller Center in NYC and everything in Hawaii. Now everyone predicts the Chinese will be dominant in a few years and own everything”. Doug does not agree with those pundits, but expressed knowledge that we face some major choices as a nation, including political leadership. This is the least productive political environment in my lifetime–it must be improved to realize greater prosperity and growth as a nation and overseas.

“Growth is good and dreaming big is essential for anyone who wants to be successful”. Oberhelman was optimistic about CAT and the global economy. Even though 20 years ago the world had 1.5 billion less people living on the earth, the last twenty years saw almost 3 billion people lifted out of poverty.

“As a company, we are focused on productivity. Productivity comes from quality built equipment and products that work 24/7. As a company we have proven we can build those quality products. [But they are not the cheapest available] Nowhere is that more obvious than in the Chinese where there are 100 + competitors and more construction than you can imagine. CAT plans to operate 26 manufacturing facilities in China (they now have 17 factories in operation) where they ran only one sales office in 1992. We built a second company under another brand name to sell less expensive equipment to supply demand in Chinese domestic market. It is our core business to focus on value, not price  so as other less expensive products enter the market we were persuaded to produce product at a lower price point in China. I do not see that as a future direction, but it works in the current state of the market there.

He dreams under his watch he will “set them up” (future CEO’s of CAT) for even greater growth, maybe “seven times” its current revenue projection of $70 billion to $490 billion in 2032. Oberhelman would be happy to see the number of employees increase three-fold from 150,000 to 450,000 worldwide under that kind of revenue growth. CAT hopes to provide job opportunities and prosperity everywhere they operate. As an example of the commitment to stay ahead in quality and durability, CAT spent $450,000 on R & D in 1992 and recently spent over $2.5 billion in 2011. They successfully exported $3 billion of products in 1992 and project well over $20 billion in 2012. “95% of my customer base is now overseas”.

His vision of accountability and leadership is unique. “I like the metaphor of running a hardware store”. When someone calls or comes in with a problem you know you better answer the call [because Walmart is down the street, and cheaper than you are]. You find a way for CAT products to be the solution.”

Management is the area where “the desk is a dangerous place to view the world. I trust my team and let them go”. Doug makes it a practice to see at least one customer a week. Oberhelman is definitely keeping it real at CAT.

What do Dr. Dre, Owl City, Roberta Flack, and Styx have in common? From their individual music styles, one would be hard pressed to find a common denominator .My guess was they are all famous artists in completely separate music genres with huge followings. But all four artists are or were promoted and managed by Ron Spaulding. Ron is currently the President of Fontana Distribution, the music promotion arm of Universal. Universal Music Group is owned by Vivendi Entertainment http://www.vivendi.com/vivendi/-accueil-en-, a huge entertainment conglomerate based in Paris.

What does all of this have to do with entrepreneurs? Mr. Spaulding runs what I characterize as a venture capital firm for popular music. He sees hundreds of artists, promoters, music studio owners, and agents each quarter. He and his staff funded $26 million dollars of music and marketing resources for over 100 different groups. Fontana funds the promotion, distribution, and in-store display for both retailers such as Best Buy or digital content on i-Tunes.

What did Mr. Spaulding talk about yesterday? He stressed integrity, curiosity, embracing change, and straight talk. He developed his contacts as a retail buyer of music for Shopko Stores, and was involved with retailors such as JCI, MusicLand, and Best Buy in Minneapolis. One of his heroes is Howie Long, who asked everyday what he could learn, or how he could improve his performance on the football field. He said we all should be open and vulnerable to others ideas and new methods. He reads voraciously and his recommendations include Soar with your Strengths: http://www.amazon.com/Soar-Your-Strengths-Revolutionary-Philosophy/dp/044050564X/ref=sr_1_1?s=books&ie=UTF8&qid=1332945743&sr=1-1

An inspiring book for business managers and individuals on how to achieve the absolute best by focusing on strengths and steering away from weaknesses and The Seven Spiritual Laws of Success:http://www.amazon.com/The-Seven-Spiritual-Laws-Success/dp/1878424114/ref=sr_1_1?s=books&ie=UTF8&qid=1332945921&sr=1-1

Mr Spaulding begins each day reading the NY Times, WSJ, LA Times, and USA Today. He worries about the sense of entitlement with teenagers and college students. He believes you must earn and learn to move up and stay relevant. It is not enough to know the right people, or have the right toys. “Dreams are the most potent driver for success. You cannot achieve success alone so you need to treat people with respect. You have to exercise faith too”. He is very clear with expectations for employees and business partners. “Everyone on my staff can recite our sales goals and key drivers for Fontana’s success”.  

“I was so blessed to graduate from Monmouth College. I came from a background that did not encourage study at college or business as an occupation. It was a great leadership opportunity for me and I found out I did not want to be an attorney during my time here”. One of Ron’s greatest accomplishments was helping Hip Hop become a recognized music genre 15 years ago. His greatest challenge has been helping the artists and industry come back from the decimation caused by Napster and free file sharing. “We (the music industry) lost 50% of our revenues and the fight back has been grueling. I am proud to say Fontana has been one of the few profitable music publishers during the last four years with the growth of i-Tunes and digital publishing. Our international opportunities continue to grow and we plan to see exponential growth in the next 5-10 years overseas. The recognition that artistic material is intellectual property that deserves protection is growing in places like China. That means there is great opportunity out there”.

Spaulding majored in Government and Philosophy and was an ATO while here at Monmouth College. Part of his experience most valuable to Ron was his leadership opportunities. He served as President of the Pre-Law Society, Politics Club and ATO. Mr.

Spaulding has held leadership positions within the entertainment industry including Priority Records, Elektra Entertainment Group, and Warner Music Group. Fontana provides expertise and resources as the “best in class” operator for independent labels and artists crossing all music genres. His primary interests are golf, entertainment, motorcycles, new technology and business development.

Manufacturing is making a come-back in Western Illinois and Eastern Iowa and this is no where more obvious than outside Roseville at the Fusion Tech Headquarters. I was at their offices with my 24 students yesterday for a tour and Q & A session with Brandon and his senior staff.

There is a positive buzz in the air. Brandon recently annouced a major expansion with a new $2.5 Million Dollar facility and 72 new hires slated for the next 12-18 months. Fusion Tech evolved from a installation team approach for big companies such as BPI http://www.beefproducts.com/ to manufacturing their own brand of food processing equipment. Recently, Fusion Tech expanded its roster of major manufacturing clients to include John Deere, Case, and many other major exporters. Brandon estimated around $10 Million in annual sales but that projection shifts with the economy. Fusion Tech is a job shop that started on Kathy’s parents farm house garage in 1997. They specialized in quick turnaround of precision crafted machine parts for industrial companies but quickly moved into manufacturing. Their manufacturing philosophy is tied to the latest technology, but most importantly, the shifting needs of their customers.

One example of how far they have come is their current project with Hitachi Mining in Japan. They are making critical parts for the largest trucks Hitachi builds, parts that other job shops could not create cost effectively. “We turn around orders in weeks rather than the industry standard month or two”.

Fusion Tech has grown by word of mouth. They pride themselves on doing quality work with the latest tools. They demonstrated the water drills, lasers, and other machinery used in creating football field sized AC units, food processing air purifiers and handlers, and signs or precision parts created by their staff. The only thing Brandon mentioned that was a big impediment to even more hiring and greater profitability was the high taxes in Illinois. “Individuals need a tax break too”.

Brandon claims he spends less sleepless nights than in the past over worry he could get financing for the factory expansion or that his company was too focused on his largest customers. He started with only $200 and some tools in the garage. “Despite the fact that key employees and I spent 100+ hours on the job some weeks, I enjoy what I do– installing our products, and I realized that if I had not started this, 50+ people and their families would have to find work somewhere else. It was a dream that turned into reality over the last 14 years”.

Jim Hankes of Thrushwood Farms spoke at Midwest Entrepreneurs yesterday about his $3MM business in processing meats. Mr. Hankes opened his business in 1978 as a specialized meat packer, but has recently begun plans to double his capacity and square footage in his Galesburg plant. The growth has not been an “easy ride”. “The entire decade of the 80ies was very tough for us”. Jim was originally enthusiastic about the concept but did not start with a detailed business plan. “We wrote out a few things on a napkin, but we were not totally sure what we were getting into. Like every other entrepreneur, the lack of capital was a huge restraint to growing our business”.

Since 2001, the locally grown or produced food category has grown in popularity and Thrushwood has seen its business double or triple its size during the last decade. “We are now doubling down our investment in the finest machinery from Europe and the best facility and people we can afford to maintain the highest quality reputation”. That investment is beginning to pay off for Hankes and his two sons who manage the company. His biggest concern for the future is the increasing level of taxes and oversight by government bureaucrats who’s focus is finding problems to “validate their existence” .

We expected a 20-30 page report every few years from inspectors outlining what needed to be improved or fixed after each factory audit. Now those reports are 150+ pages and contains hundreds of mandated changes that equate to thousands of dollars of expenses that do not benefit our customers. All of this extra expense to satisfy regulators goes on the backs of entrepreneurs. “I am concerned what will be left for my sons with all of the taxes, regulated processes, and time and resources to accommodate and respond to factory audits.  Despite the worries, Jim is optomistic this decade will be Thrushwood Farms best.

“My advice to students is simple: 1) do internships and demonstrate you are willing to work hard. 2) Demonstrate curiosity and the willingness to learn something from almost anyone and everything you do”. Hankes told his own sons that “A” grades are not as important as the internships or jobs you work and what you did with the opportunities you are blessed with.  Don’t get into debt–Hankes had a time when he was paying 19% interest and had no possibility of prosperity. He vowed to only borrow when rates are reasonable and maintains a “leveraged business” because the high cost of quality machinery.

Jim admires the marketing Of Jack Links but warns that most of the product is imported from “who knows where?”. The success of Thrushwood is buying from someone you can trust-like a good neighbor.

No entrepreneur needs to remind her counterpart that living in the material world is feast or famine. The same principle applies to securing funding for your start up venture. When you need to borrow it is not available. When you are flush with offers from angel investors, banks, or venture capitalists, you are not likely to need it. A FORMER STUDENT (and first-time entrepreneur) HAS A GREAT E-COMMERCE business model. Yet he cannot find $100,000 in seed funding for his early stage venture. This former international student is smart but not well connected, even though he has secured some good development/programming talent at a bargain rate.

Another successful entrepreneur “snapped his fingers” at a few venture firms and secured a preferential term on his seed financing and first round without having to shop his business plan/model. In the world of venture financing, it really is who you know and what you have done in the recent past. Is that so different from succeeding anywhere else?

Michael Vipond (2004 Graduate) and Todd Stone (1984 Graduate)represent the best of the Monmouth College business graduates. They both came to Monmouth from middle class backgrounds and have become executives for General Grind in Aledo, Illinois. General Grind was a “job shop” for years, doing things CAT, John Deere, and Harvester did not want to do. They made and forged steel parts.

Today, with the work of Michael, Todd and a vibrant CEO, General Grind is one of the largest employers in Mercer County and boast millions in annual revenues and over 400 employees.  According to Michael and Todd, General Grind’s secret to success is their willingness to invest in new technology and adapt to a changing market.

One strategic advantage is the size and scale of their operation. Another is the dedication and attention to detail and deadline that make Michael, Todd, and General Grind so dependable. The company processes and manufacture parts with 4 million pounds of steel monthly. They utilize just in time inventory and produce some of the largest parts for their customers–including axles for mining trucks that are almost two feet in diameter and support the largest commercial trucks four stories high!

Michael is the CFO and focuses on the relationships with customers, banks, insurance companies, and vendors. Todd focuses on the production process and the employees. Both commented on the importance of obtaining a college degree for the challenges in management, but believe that on the job training is always important since “you don’t know, what you don’t know” until you face a new opportunity or challenge. That was the case when the management team decided to diversify into gun shaft production. It took General Grind time and investment to learn the business, but when the ag business became soft in 2008, the gun business grew and took some of the excess capacity.

We discussed the trend towards less vertical integration by its customers so that they can achieve better financial returns. With this trend it is important for General Grind to continue to become more efficient and monitor its own profitability. Based on Q1 results, they are tracking towards the best year ever.

Lee Celske spoke Tuesday on about starting  his own business and achieving his dreams. One dream he had was starting a building products company. Another was buying and maintaining rental property in Florida. 

Some people think that entrepreneurship is something that is born in you.  You either are one or you are destine to fail or quit when times get tough.   A good case study for that argument is our recent Midwest Entrepreneurs speaker Lee Celske.  Lee is a very dynamic individual; he is constantly on the move – physically, mentally and professionally. 

When you are one of eleven children in a Milwaukee, you have to learn to survive.  He has been a banker in Texas, an options trader in Chicago, a bond trader in London, a mayor in Aledo, an adjunct professor in Monmouth, an investor/entrepreneur in South Dakota and a real estate owner in Florida.  In addition, he takes lots of pride in being a good husband and a great father.  Business, family and community are all important to him. 

 Lee possesses the two essential characteristics of entrepreneurship – 1) the ability to see the opportunity and 2) the willingness to take the risk necessary to take advantage of the opportunity.  Lee entertained the class with stories about his multiple lives and his will to survive.  Each time his life changed, he re-invented himself and learned new skills and new industries.  When he had to learn the ins and outs of the Chicago trading pits, he did.  When he had to move his family to London for the welfare of his child, he did.  When he has to re-learn trading in a new country with new customs and cultures, he did.  When he had to get a graduate degree from the London Business School in the London School of Economics, he did.  When he had to move back to Western Illinois for family reasons, he did.  When he needed to lobby in Washington D.C., he did.  When he had to raise capital to finance his new business ventures, he did.  When had to be a one-man marketing, advertising and production company for his new business, he did.  When he had to pick up the pieces of his failed business and move on, he did.  As they say “it ain’t braggin’, if you done it.”  And he has done it.

 He is also a man of confidence.  It takes an extremely self-confident individual to take all the risks that he has taken and Lee has that confidence.  He believes in himself and he believes in his family and he believes in his future.  “Just around the corner, there’s a rainbow in the sky.” 

 In addition to demonstrating for the students the personal character of almost all entrepreneurs, Lee showed the students something that is critical to learn but extremely hard to teach.  He talked to them about dealing with failure.  His latest greatest business venture failed.  After a couple of years of hard work, he had all the pieces in places to start a company to build a new type of house based on an innovate green technology.  Recycled waste glass was mixed with a resin to create a new building material that had many highly desirable characteristics – strong, non-flammable, well-insulated, quickly assembled, and affordable. 

Lee got a license to make and sell houses using the patented technology developed by an inventor in England.  A credit-crunch recession hit.  The housing market turned down, bank financing become a challenge and the inventor was found guilty of misrepresentations and fraud. Then the project collapsed.  Then the lawsuits began. Then the failure of the project became a reality.

The truth is that many, perhaps most, entrepreneurs fail at least once and often more than once.  Only the winners are still around to tell their success stories.  Those who failed are hard to find and they are almost never willing to talk about their failures.  It is not easy to talk to strangers about your failures.  But Lee Celske does lots of things that are not easy.  There as many, and perhaps more, valuable things to be learned from failure as from success.  Lee was not destroyed by the failure of the project – the project failed; not Lee.  The failure of the last project is the opportunity to start the next project and Lee has already start a another new life.    

 The energetic, confident, risk-taking Lee Celske was off to his next project.  It was a valuable learning experience for Lee and it was a valuable learning experience of the students in Midwest Entrepreneurs.  Thanks Lee.  We can hardly wait to hear about the next project.