The distance between downtown Milwaukee and Chicago’s Loop is only about 90 miles. However, for many southeastern Wisconsin companies, that distance might as well be 1,000 miles, and there might as well be a fence at the state border.
Many local companies are intimidated by the size of the Chicago market, they don’t have a network there and their frame of mind from a sales territory standpoint stops at the sign along Interstate 94 that welcomes people to the Illinois Tollway. So, they’re content to continue doing business in the metropolitan Milwaukee market of about 1.7 million people.
Just imagine, however, if those businesses could overcome that stigma and find a way to tap into the Chicagoland market, where they could reach another 9.5 million potential customers. But how?
Expanding a company’s territory into Chicago isn’t much different than creating a foothold in any other market, according to many executives familiar with the Windy City marketplace.
“It’s not any different than doing business in Milwaukee,” said Thomas Beug, chief executive officer of The Summit Group LLC, a group of business consultants who work together to help their clients. “It’s just more expensive and bigger.”
Beug grew up in Chicago, but he has lived and worked in Milwaukee for many years. He has helped several Wisconsin clients tap into the Chicago business market over the years, and he’s working on a side project there now.
Actual barriers between Milwaukee and Chicago, from a business perspective, are largely nonexistent, Beug said.
“This is one big market – Milwaukee to Chicago,” he said. “The same things (that succeed) here will end up working for you there. You have to get to know people, and not by running ads on TV. You have to join the chamber (of commerce) and the Better Business Bureau, talk to your neighbors and begin networking. You need to understand that it will take a couple of years to drive your business to the point that it will make it interesting.”
However, while Milwaukee and Chicago may be close geographically, they are still miles apart from a business culture standpoint, some are businesspeople say.
“Here, you have to build trust before someone will work with you,” said Dave Stamm, president of Stamm Business Technologies Inc., a Milwaukee-based information technologies firm founded in 1994. “You need a lot of referrals, and you have to get to know people. In Chicago, clients rarely check our references. Price is not an issue. (Chicago clients) just want to know how fast you can start and how fast you can get it done. People don’t want to wait.”
Because Chicago is so much larger than Milwaukee, the business community is not as tight-knit and reliant on personal connections, Beug said.
“It’s different in Milwaukee,” he said. “They talk about six degrees of separation between yourself and anyone you want to know. In Milwaukee, there’s usually only one degree of separation. Almost anyone you could want to meet you can get to from one of your friends. In Chicago, it’s more like three or four (degrees of separation).”
Opening the new office
Stamm Business Technologies has been doing business in Chicago since 1997.
Instead of opening a satellite office there, the company hired an employee who worked from his Chicago-area home. When that employee moved on, Stamm hired a second home-based Chicago area employee, who worked with the company until 2004.
Between 1997 and 2004, Stamm’s Chicago business grew to more than 50 clients. All new business came from referrals.
However, by 2004, Stamm needed to constrict its Chicago presence because of the expanded work load in Milwaukee. At the time, the company didn’t have enough employees to staff a full-time Chicago office, and it needed to end its relationship with the home-based employee there, Stamm said.
“We have high standards here, and we couldn’t deliver,” Stamm said. “Our staff here was really busy. We still had less than 10 people, and we couldn’t spare a person (for a Chicago office).”
The company kept a few Waukegan clients. The firm also held onto eight to 10 downtown Chicago clients that it could easily reach via Amtrak.
Today, Stamm has grown to 19 employees. The firm recently upgraded its downtown Milwaukee headquarters, and Stamm now plans to open an office in downtown Chicago later this year. One or two employees will move to Chicago when the company opens the new office. Other employees who will work from that office will be hired from the Chicago area.
Due to the growth in both Chicago and Milwaukee, Stamm expects to hire 10 to 15 new employees this year.
“We’ve hired three this year already,” he said. “We need one to two a month. Downtown Chicago (business) is still growing. We have 16 clients there now. And the clients are still coming. We’ve turned down two leads there. There’s a lot of work. We’re just not ready yet. Milwaukee is a great place for our headquarters. And Chicago is a great place to go find work.”
Companies that want to open offices in Chicago will need to allocate enough resources to the project, Stamm said.
“If you do open an office there, you will have to send some of your core staff,” he said. “Hiring local staff and trying to manage them there from here is a nightmare.”
Ascedia ascends
Ascedia, a Milwaukee-based Web site developer, began its Chicago venture with a non-staffed sales and support office in the market about two years ago, said Dan Early, the company’s president. Employees are doing Chicago work from the Milwaukee headquarters and travel to the Chicago office to meet with clients.
However, the company’s Chicago business has grown, and Ascedia will move two employees to the Chicago office in the next six to 12 months, Early said. One employee will move from the Milwaukee office, and the second will be a new hire.
Having a Chicago office has helped boost sales and new contracts there, he said.
“It has helped us to have that presence in the Chicago office because of the sense of commitment you get with an office,” he said. “Clients will take ownership of your growth.”
Ascedia’s Chicago-area office is in Niles, a northern suburb. The location, close to Interstate 90, makes it easy for the company’s employees to drive to and from Milwaukee. Most of Ascedia’s Chicago-area business is with companies located in the northern suburbs, Early said.
When moving into the Chicago market, demonstrating commitment is key, Early said.
“You have to expect that you will spend more money to get into the market (than you would here),” he said. “But you will get that back if you’re successful. You can’t say, “‘I’m going to try it.’ You have to commit.”
That commitment will likely take about three years to pay off, Early said.
Ascedia’s success in the Chicago market is driving its decisions to open offices in other cities. The company will open an office in Madison later this year and another in Orlando, Fla., in 2008, Early said.
“Credibility happens when you open an office,” he said.
A new hub
IT firms aren’t the only Milwaukee companies making headway into Chicagoland.
Chrysalis Packaging & Assembly Corp. (Chryspac), a Milwaukee-based inspection, assembly and packaging company, opened a satellite division in Hillside, a Chicago suburb near I-290 and the Tri-State Tollway, in mid-2005.
Chyspac president William Beckett said the company opened the location after
he was approached by Donna Firman, who is now vice president of operations for Chryspac and manages the facility in Hillside.
International Truck, a Chicago-based manufacturer, had an emergency inspection project. Firman hired temporary workers and was able to quickly meet International Truck’s inspection needs. After the project was finished, International Truck asked Chryspac to open a Chicago facility, Beckett said.
Chryspac started in a small temporary space and moved into a 20,000-square-foot facility within four months. Since opening, Chryspac has steadily grown its business in Chicago.
“International (Truck) has referred 28 new customers to us,” Beckett said. “We advertise on the Internet, but we get a lot of business from referrals.”
Chryspac’s Hillside office now has about 10 employees, Beckett said.
“Initially, it’s just an investment,” Beckett said. “We’re getting to the break-even point down there. We’ve invested there over the last year. It gives us a place to grow, relationships to build on and more depth in management.”
Chicago is essentially the commerce crossroads of the Midwest, with major highways, railroads, ports and two international airports. Beckett said the city’s prominence from a shipping standpoint may allow Chryspac to expand into new areas. The company is now doing some warehousing at its Chicago-area facility, Beckett said.
Chicago’s business climate is far less personal than the way business is conducted in Milwaukee, Beckett said.
“It’s objective as hell,” he said. “In Milwaukee, I get a lot of subjective comments. Nobody asked me where I was from in Chicago.”
Another power grid
Brevient Technologies LLC, a Milwaukee-based software development firm, will open an information-relay center in Chicago later this year, said Matt Lautz, chief executive and technology officer and founder of the company. Brevient also handles voice and Internet conferencing for clients, and its Chicago location will host servers that relay signals between clients.
“The advantage to our customers will be that if the Milwaukee facility goes down, Chicago can roll over (and handle the traffic) and vice versa,” Lautz said. “Traffic will be split between the two. And it will triple our capacity.”
Chicago is on a separate power grid than Milwaukee and is considered a different geographic area, even though it is only 90 minutes away, giving Brevient’s network more security, Lautz said.
Having a data center there will also open new doors to different carriers and customers, Lautz said, because Chicago is a high-profile hub in the telecommunications world.
Although contracts are not yet signed, Lautz said Brevient’s Chicago data center should be open within the next 30 to 45 days. It will be located in one of the “telecom hotels” near Chicago’s Loop.
“That’s where players like Vonage are hosted,” Lautz said. “It will help take us to the next level.”
Financial connections
Wisconsin-based financial institutions, such as M&I Bank, Associated Bank and Johnson Bank have had branch locations in Illinois for years.
Ridgestone Bank, headquartered in Brookfield, opened a new branch in Schaumburg, a northwestern Chicago suburb, last week. The Schaumburg branch is Ridgestone’s first satellite branch.
Bruce Lammers, who bought the bank last September, said the 3,200-square-foot Schaumburg branch will need to expand soon because of his growth expectations in Illinois.
“I’ve spent part of my career in both states (Illinois and Wisconsin), and I know the lay of the land in both states,” he said.
Most of Ridgestone’s customers are owners of small to medium-sized businesses, Lammers said, and Chicago’s northern suburbs have many owner-operated businesses.
Since Lammers bought the bank last year, it has increased its staff from 20 employees to 40 people. Most of its new employees work in the Schaumburg branch.
Milwaukee businesses that want to enter the Chicago marketplace need to do significant research and field work before they fully enter that market, Lammers said.
“You’ve got to find someone you know and trust and spend time in the markets,” he said. “There’s no way that someone from Milwaukee can become comfortable in the financial world if they don’t understand the fundamentals of the markets they’re trying to serve – like land values, rental rates and business dynamics. You’ve got to spend time in that market.”
“Chicago is just a lot bigger community,” Lautz said. “It’s a little faster-paced, but it’s not that much different. Business is still business.”
