Survey & Ballot concentrates on elections, and on profits

When I introduced you to Survey & Ballot Systems Inc. eight years ago, the Eden Prairie company was a million-dollar business that included an uncommon service: It was managing board and bylaw elections for professional associations, nonprofits and a growing roster of electric and other co-ops.

Trouble was, a graph of the company's profit-and-loss record resembled the path of a dizzying roller coaster ride: In the 11 years after its 1990 founding, Survey & Ballot Systems (SBS) posted four losses, three profit declines and just three years of uninterrupted profit growth.

The problem was a common one among a multitude of ambitious and creative entrepreneurs I've encountered over the years: Founder and CEO Jon Westerhaus and his co-owner brother, Peter, were so intent on growth that they were taking any business that came their way, whether or not it was profitable, as they built SBS into one of the leading players in its unusual niche.

That changed in 2001, when SBS ran into a six-figure loss.

"We finally realized that consistent profit growth was more important than revenue growth," Jon Westerhaus said.

The ensuing turnaround has been impressive: Despite turning down hundreds of thousands of dollars of low- to no-margin business since 2001, SBS has grown its revenue at an 18 percent annual clip, to $3.5 million last year -- triple the level in 2001. Not bad, considering that the gross grew just 3 percent in recession-battered 2008.

Better yet, profits have grown at a 37 percent annual rate, including a 15 percent gain in 2008. And the consistency Westerhaus sought has been achieved: There was only one dip, in 2004, when the company was distracted by a move to new quarters necessitated by business growth.

SBS not only changed its financial priorities, it also focused on the business it does best: election management. While it still offers corporate, co-op and association clients surveys of customer and employee satisfaction, elections account for the majority of the business today.

The election business has attracted a rapidly growing client list that includes the American Academy of Ophthalmology, the American Association of Petroleum Geologists, the American Library Association, Land O' Lakes and the Federal Home Loan Bank of Pittsburgh. Oh yes, and eight of Minnesota's largest electric co-ops.

Overall, the number of SBS clients has climbed from 27 to 124 since 2001, Westerhaus said.

The stronger emphasis on balloting was supported by the 1999 development of a software package that allowed secure online balloting and surveying to replace the paper-scanning process. Unlike two of its three major competitors, however, SBS also offers paper balloting for association and co-op members who prefer it.

Three upgrades to the Web-election software have simplified and sped up the balloting process, with a couple of key payoffs. First, customer satisfaction ratings, which SBS charts with each project, have risen 10 percent in the past seven years, from 3.46 to 3.8 out of a possible 4.0.

As profits grew, SBS quintupled its marketing budget to $100,000 in 2006 and raised it again to $124,000 in 2007 before trimming back to $63,000 as the recession took hold last year. It will return to a six-figure level this year.

Most recently, the company has benefited from government and membership pressure on electric co-ops to use independent election services such as SBS and end what some have viewed as uncompetitive elections that favored entrenched leadership.

While Minnesota co-ops have been using SBS for years, problems in other states have opened a sizable potential market for the company, Westerhaus said.

In Texas, for example, legislators are calling for laws to require third-party election services for the state's electric co-ops. And in Georgia, a Superior Court judge ordered a large co-op to develop procedures for independent director elections.

As SBS marketing specialist Tammy Ravine put it, "Running elections for upwards of 100,000 co-op members is a complicated and challenging task, yet it's critical that the process is done accurately." SBS's enviable customer-satisfaction rating suggests that it has met the challenge.