Winner of the 2016 Iowa SBDC Neal Smith Entrepreneur of the Year Award
Tony Halsted, Hoover’s Hatchery, Rudd IA
Tony Halsted never intended to come back to the family business. He’d grown up working the incubators and packing chicks. Thanks to the family business, Tony had a college education and a perfectly great career in business development and information technology for a national financial services company. But plans change. Tony’s father was killed in an automobile accident, leaving his aging mother to run the hatchery. A couple of potential succession plans outside the family never quite materialized. Tony realized if Mom was ever going to retire, he’d have to step-up.
In 2011, Tony came back to a 70-year old family company with a very traditional hatchery business model. Hoover’s sold day-old chicks to elevators and feed stores and their customers primarily through a paper mail order catalog, phone orders and some regional delivery trucks where the drivers were also the sales representatives to the local dealer. There was a lot right about the company, especially a reputation for great service and strong personal connections with dealers and reliable employees from Rudd, Iowa and the surrounding rural communities. The company had talent, real revenues and a base of productive assets. But there were also challenges.
The business was Mom’s, Mary Halsted’s, retirement annuity. Could it also be Tony’s future income? To do both meant growing the business without alienating current customers.
One of Tony’s first visits was to the North Iowa Small Business Development Center and then Director, Ted Bair. Ted worked with Mary and Tony to explain debt and equity options in developing a succession plan and started the planning process. One of Ted’s SBDC dictums is plan to plan. That’s what Tony did with Ted’s coaching. It’s worth mentioning that Mary had consulted with the North Iowa SBDC as far back as Rich Petersen, advice that was reflected in the good things Tony was counting on as his foundation for growth.
Tony worked the plan and applied his business school education and recognized that nationally customers were changing with a growing urban backyard chicken market, but that the suppliers, the hatcheries, were all pretty much like Hoover’s, with aging owners and aging business models. Tony sensed opportunity.
He wanted to get away from just selling a commodity so he entered into an exclusive genetic licensing agreement for a red-feathered meat chicken that looks like a traditional Rhode Island Red layer (egg laying hen) and a black foot, black feather chicken for the Asian immigrant market. Armed with the proprietary Red Rangers and Black Asians, Tony needed to reach the new customers.
He built a website with a simple online shopping cart for less than $1,000. Hoover’s was now an “online business.” That didn’t mean anyone else knew, especially those target customers, so he marketed extensively on social media, including Facebook and Pinterest. Hoover’s became the expert on backyard chickens and used visuals to sell the lifestyle, not just chicks. It worked. Hoover’s moved up Google page rankings from buried twelve pages deep to third on the first page. (And the first two served big commercial layers, not Tony’s market.) Within eighteen months, sales were up thirty percent (30%). And the growth came from new customers, not cannibalizing the traditional dealer base and revenue stream.
In 2013 Hoover’s efforts in social media were recognized by the Iowa Dream Big, Grow Here contest as state runner-up. As part of the regional contest, Tony met North Iowa SBDC business coach, Dan Winegarden, NIACC’s Director of Business Acceleration. Dan helped prepare Tony for the state contest, but together they saw the potential to change the audience of the growth story, to address investors.
Now the problem was production capacity. Working with the North Iowa SBDC, Tony presented their capital needs and growth strategy to key community banks. With debt financing secured, Hoover’s added-on, bought additional used incubators, and even contracted out production to other hatcheries that were less effective marketers but had excess production capacity.
Tony reorganized shipping to capture new economies of scale. Every week hundreds of thousands of chicks fly out of Minneapolis via the U.S. Postal service.
The work to plan and finance a workable succession plan continued behind the scenes with the North Iowa SBDC. Not all the opportunities panned out with the usual buyer vs. seller issues of structuring (asset vs. stock) and valuation. For both the client and the SBDC consultant a lot of work was below the surface creating the conditions of success. Hoover’s story just kept getting better so the Halsted’s negotiating leverage kept increasing. With the help of SBDC and Pappajohn Staff in Mason City, Tony developed a business plan and used forecasting models to project the growth and tell the vision for the company. They helped Tony realize the succession plan to buy his mother out with partners.
Dan arranged a meeting with and helped prep Tony for a key angel investor for growth equity. The angel’s initial reaction was, “My wife will shoot me if I take on a new project,” but Tony’s story was just too good to resist. It wasn’t just a growth company, but a growth industry niche. Tony arranged new debt and equity investors to buy-out his Mom and provide for her retirement. It meant sharing ownership with outside investors, but the investors brought synergistic knowledge, connections and resources to the table. It was the classic entrepreneurial lesson. It’s better to own a smaller share of a much bigger, growing enterprise, than all of a smaller, stagnant business.
From 2011 to 2015, four short years, Tony led the reincarnation of a fine but stagnant regional family business into a growth company, serving a national market and partnered with national players.
- Employee growth, from 32 employees to 72
- Revenue grew by 3X in four years, more than 70% year-over-year revenue growth with eight figure results, and is on track to be 4X in 2016
- Physical facilities 200% larger than in 2011 and with 400% greater production capacity
- New national contracts with Ace Hardware and Tractor Supply Store
- Simultaneously, new dealers were attracted to the traditional business lines by Hoover’s success in new lines and the exclusive offerings like Red Rangers.
- An investor group led by Steve Weiss assures access to capital for growth and animal nutrition and marketing depth.
Tony is now lead owner, post purchase from his Mom, Mary, and CEO (up from COO). Mary continues to consult to assure a smooth transfer of her traditional relationships. Hoover’s is a standout example of rural business growth, serving new distant customers both through an online B2C (business-to-consumer) model and through new strategic B2B (business-to-business) relationships. All this was accomplished without destroying the foundation of traditional dealers.
Tony Halsted and Hoover’s continue to work with the North Iowa SBDC including both Director Brook Boehmler and Dan Winegarden. The story isn’t over. Tony says, “I am beyond privileged to work with the North Iowa SBDC team and I let everyone know.”
The impact on the community cannot be overstated. Forty new jobs in a small rural community like Rudd (population 370), is a huge economic win. Successful entrepreneurs create opportunity and benefits far beyond their own family. Twenty Iowa farms support Hoovers Hatchery with eggs for hatching and those families also benefit. Feed mills and other agricultural businesses enjoy the new production demand. Tony’s strategic vision and tactical execution are stellar. His prior corporate experience in business development using the power of information technology, transferred exceptionally well to his own company. He’s grown revenue, managed the human resources needs of an expanding company, improved margins and profitability, raised both debt and equity, and established relationships with strategic partners. Tony has been the exemplar of a great SBDC client. He is coachable and action oriented. No matter how great the advice and assistance, execution and business judgment fall on the client. Tony delivers.
Tony Halsted was recognized with the 2016 Neal Smith Entrepreneur of the Year award by America’s SBDC Iowa.