Hoover’s Hatchery Company, Rudd

Hoover’s Hatchery Company, Rudd

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Hoover’s Hatchery Company, LLC, Rudd

Tony Halsted had grown up working the incubators and packing chicks for his family’s business, Hoover’s Hatchery Company, LLC, in Rudd, Iowa, and never intended to come back to the family business. However, thanks to the family business, Tony had a college education and a great career in business development and information technology, working for a national financial services company. But life happened and 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 and Tony realized if his mom was ever going to be able to retire, he’d have to step up.

In 2011, Tony came back to his family’s 70-year old company that had a very traditional hatchery business model:  Hoover’s Hatchery 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. The company had a lot going for it, especially its reputation for great service and strong personal connections with dealers, plus it had reliable employees from Rudd and the surrounding rural communities. Hoover’s Hatchery had talent, real revenues, and a base of productive assets, but there were also challenges.

The business was owned by Tony’s mom, Mary Halsted, through a retirement annuity; Tony wondered if it could also be his future income. To do both meant growing the business without alienating current customers. Like his mother did many years before, one of Tony’s first visits was to the North Iowa Area Small Business Development Center (SBDC) located in the NIACC John Pappajohn Entrepreneurial Center in Mason City, where he met with former director Ted Bair. Ted worked with Mary and Tony, explaining debt and equity options in developing a succession plan, plus how to start the succession planning process. With Ted’s coaching, Tony started to plan.

Tony worked on the business plan, applying his business school education and recognizing that national customers were changing, with a growing urban backyard chicken market. However, the company’s suppliers and 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), plus a black footed, black feathered chicken for the Asian immigrant market. Armed with the proprietary Red Rangers and Black Asians, Tony now needed to reach the new customers.

Tony built a website with a simple online shopping cart for less than $1,000 and Hoover’s Hatchery Company became an online business. This didn’t mean anyone knew about it, especially those target customers, so he marketed extensively on social media using Facebook and Pinterest. Hoover’s Hatchery soon became known as the expert on backyard chickens, using visuals to sell the lifestyle and not just its chicks. The gamble worked and Hoover’s Hatchery moved up in Google page rankings from being buried twelve pages deep to third on the first page. Within eighteen months, sales were up thirty percent, with the growth coming from new customers.

In 2013 Tony’s efforts were recognized by Iowa’s “Dream Big, Grow Here” contest as the state runner-up. As part of the regional contest, Tony met with a North Iowa Area SBDC business coach, Dan Winegarden, who helped Tony prepare for the state contest. Together they also discovered the potential to change the audience of the growth story, plus address possible investors.

Next, the company’s most immediate problem was production capacity. Working again with the SBDC, Tony successfully presented the company’s capital needs and growth strategy to key community banks. With debt financing secured, Hoover’s Hatchery added on to its facilities, bought additional used incubators, and even contracted out production to other hatcheries that were less effective marketers but which had excess production capacity. Tony reorganized shipping to capture new economies of scale, resulting in hundreds of thousands of chicks flying out of Minneapolis via the U.S. Postal Service every week.

The effort to plan and finance a workable succession plan continued behind the scenes with the SBDC. Not all of the opportunities panned out, with the usual buyer versus seller issues of structuring and valuation. A lot of work was done below the surface, creating the conditions for success. Hoover’s just kept getting better so the company’s negotiating leverage kept increasing. With the help of SBDC and NIACC Pappajohn Center staff, Tony developed a business plan and used forecasting models to project the growth and tell the vision for the company. This work finally helped Tony realize the succession plan to buy his mother out, with partners.

Dan helped Tony prepare for, and arranged a meeting with, a key angel investor for growth equity. The angel investor’s initial reaction was, “My wife will shoot me if I take on a new project,” but Tony’s business 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 mother’s interest and provide for her retirement. This 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.

In four short years, from 2011 to 2015, Tony led the reincarnation of a fine, but stationary, regional family business into a growth company that serves a national market and partners with national players. Vital statistics include:

  • Employee growth, from 32 employees to 72.
  • Revenue grew by three times in four years; more than 70 percent year-over-year revenue growth with eight figure results, and is on track to be four times growth in 2016.
  • Physical facilities are 200 percent larger than in 2011 and with 400 percent greater production capacity.
  • New national contracts were made with Ace Hardware and Tractor Supply Store.
  • New dealers were attracted to the traditional business lines by Hoover’s success in its new lines and its exclusive offerings like Red Rangers.
  • An investor group assures access to capital for growth, animal nutrition, and marketing depth.

Tony is now lead owner, post purchase from his mom, and CEO (up from COO) of Hoover’s Hatchery Company. Mary continues to consult, to ensure a smooth transfer of the traditional relationships. Hoover’s Hatchery is a standout example of rural business growth serving new, distant customers both through an online business-to-consumer model and through new strategic business-to-business relationships. All of this was accomplished without destroying the foundation of traditional dealers.

Tony continues to work with counselors at the North Iowa Area SBDC, including SBDC Director Brook Boehmler and Dan Winegarden. He maintains that the story isn’t over, saying, “I am beyond privileged to work with the North Iowa Area SBDC team and I let everyone know.”

The impact on the Rudd community cannot be overstated. Forty new jobs created in a small, rural community like Rudd, population 370, is a huge economic win. Twenty Iowa farms support Hoover’s Hatchery with eggs for hatching and those families also benefit. Feed mills and other area agricultural businesses also enjoy the new production demand.

Tony’s success was recognized in February 2016 when he was presented with the SBDC’s 2016 Neal Smith Entrepreneur of the Year Award at the State Capitol Building. He was further recognized by the U.S. Small Business Administration when they announced in March 2016 that he was their 2016 Iowa Small Business Person of the Year.

For more information on this Rudd, Iowa business, visit www.hoovershatchery.com, on Facebook here, or on YouTube here.

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