SBA's Small Business Persons Of The Year Are Changing An Industry

by Jeremy Nulik

Next to pictures with Mayor Francis Slay and a plaque that reads, 2006 Business Of The Year Award, three ancient coins hang with a ribbon between them.

"I got those for Christmas in 2003," says Russell Odegard. He and Michael Pruett are managing partners of DYNALABS, a St. Louis-based analytical laboratory for compounding pharmacists. "They are 1,000-year-old Mongolian coins. For a while, they hung near the door. I would rattle them together and say, ‘For every dollar that goes out, a million comes back with the grace of God and in a divine way.’"

Some would consider such a practice to be a bit superstitious for a couple of scientists; however, Odegard understands the place that science has in their business. "Science is science," he says. "But, in business, it is about people, and success in business is an art."

Whatever the ingredients for success are, the company has achieved what any person would call success. Since the two former Sigma-Aldrich employees founded DYNALABS in 2004, it has grown from two to 18 employees. "We have doubled our revenue almost every year," says Odegard. "In 2008, we made over $2 million, and we are on pace to continue growing."

Their success has earned them recognition as the 2009 SBA Small Business Team of the Year Award. This award puts them some impressive company with the likes of David Steward of World Wide Technology, Greg Sullivan of GA Sullivan and Brenda Newberry of the Newberry Group.

Like many of the award-winners before them, Odegard and Pruett did not earn this award by playing by traditional rules. They created their own customer-focused formula for success and that formula is changing the way their industry works.

The Right Timing

This run at success may not have been possible had it not been for the conviction of Robert Courtney. In 2001, the Kansas City pharmacist plead guilty to charges after it was discovered he was diluting prescription cancer drugs to increase profits.

"The patient population was crying out for protection," says Pruett. "I had a fraternity brother who was about to be appointed to the Missouri Board of Pharmacy. His first job was to write the regulations for compounding pharmacists."

Compound pharmacists combine different drugs or adjust some of the ingredients to create medicine that custom fits an individual patient’s needs. The regulations state that if a pharmacist is going to be combining or dispensing in Missouri, he needs to run a series of tests.

On a Saturday in April 2002, Pruett learned about the new regulations and that there were 4,500 compounding pharmacies and only two labs in the entire country. The opportunity was too great to pass up. By Monday, he had called his former coworker, Russell Odegard, who was still with Sigma-Aldrich.

True Partnership

"Russ made sense," says Pruett. "He looked at things efficiently with the bottom line in mind. I knew that if anyone knows how to run a lab, it has got to be him."

Odegard echoes the same sentiment for his business partner. "If I had started DYNALABS by myself, we would still be at the starting gate," says Odegard. "If Mike had started DYNALABS by himself, he would have driven off a cliff. So, there is a real good compliment. We respect each other, and we are friends."

Odegard’s steady influence can be seen in their careful beginning. By 2003, the two had completed the arduous process of mining compound pharmacies for market information. The results from this process has been the key to their success.

"Through the research, we learned that compounding pharmacists needed results quickly," says Odegard. "They wanted the testing to be affordable, and if something was wrong with the results, they wanted to know how to fix the problem."

From this data, Odegard and Pruett drafted a set of guiding principles, priorities that have guided DYNALABS vision and goals: Patient safety, affordable healthcare and business success – that is inclusive of our clients.

Not Your Average Lab

By staying focused on these guiding principles as a formula for success, DYNALABS is now among the industry’s elite for sterile lab testing.

The company developed an innovative web portal for the submission and tracking of lab samples. No more mailing results back and forth. No more phone calls wondering what the status of the tests are. The website acts like a real-time locator for the lab samples as it travels through the process. Compounding pharmacists can even download all the certificates necessary upon test completion and get their results immediately.

"If there is an issue with the results, we call the pharmacist and walk them through their process to find where it happened," says Pruett. "Also, we found out that our pharmacists felt price-gouged, so we make sure that we are affordable. Our service and respect for them sets us apart from our competition."

Using the latest lab technology and the website as a communications and data hub, DYNALABS took a two week waiting period and turned it into a 24 to 48 hour turnaround for their pharmacists.

Customer Focus Helps Them Make Their Own Luck

DYNALABS’ rise to success has not been without challenges, the largest of which was funding. Some of their initial investors were pharmacists who wanted to help champion their cause. As the company grew and desired to expand its service and product offerings, they knew they would need additional funding.

However, with the constraints of building a business, Odegard and Pruett decided against chasing down investors and instead focused their energies back toward their guding principles. They thought that by focusing on customer success first, they woudl be successful.

Then, the strangest thing happened. People approached them and offered them money. Specifically, St. Louis County Economic Development.

"We had asked them for a loan earlier in 2004, and they said they didn’t have any money’" says Odegard. "Then in November, they said, ‘We have $100,000 for you.’ It turns out that they had been looking for money for us all along."

It was just months later that an almost identical serendipitous opportunity fell into their lap. In December 2005, Pat Bannister, director of business development for St. Louis Business Development Corporation, asked if Pruett would meet with the mayor and other city leaders to discuss funding. Pruett did not have to say a word in the meeting. Bannister did the negotiating.

"After that meeting, the city gave us $150,000 in a subordinated debenture," says Pruett. "All we had to do was stay in the city and continue to have high paying jobs."

In both of these cases, Odegard and Pruett had an advocate working on their behalf to sell their business idea.

"We communicate the business concept effectively, especially to people who don’t have to invest in us," says Odegard. "They are not worried about giving us money, so they want to help."

Cheating Death By Staying True

Since that time, DYNALABS has not needed to seek any new outside funds. After a year, the company was in the black, however, in 2005, two things happened that would have killed most companies.

In June of 2005, they hired a salesperson so they could focus on their business. That same month, their largest customer and one of their initial investors was sold to a larger pharmacy that did not use DYNALABS. Within 30 days, they lost one-third of their business and increased their payroll expenses.

Odegard and Pruett held their breath for a few months as their salesperson began to pick up more accounts. Then, they got news that would make any business owner cringe.

"In October, our administrative assistant came in and said, ‘You have $600 left in your checking account and payroll is tomorrow,’" says Pruett. "We had lines of credit with the bank to make payroll, and October ended up being a record month, because we had so much due in receivables."

Several months later, legislation was passed that removed reimbursement of respitory medicine. That took away another third of their business. However, thanks to hiring on an experienced sales professional and staying true to their mantra of making their customers successful, they were able to match what would seem like calamity with confidence.

"Within six months, we lost one-third of our business…twice," says Pruett. "We got through it for a lot of reasons. But, really, we are the best game in town when it comes to sterile testing. We focused on the 24-48 hour turnaround and forced our competition to follow us."

Continued Innovation

DYNALABS continues to innovate in ways their competition could never predict. Using the $150,000 they received from the City of St. Louis, the firm created a prototype for a DynaLyzer, a transportable, in-house identity/potency testing device designed specifically for use by hospital pharmacists.

"Instead of sending us the sample and waiting for the results, the pharmacist, using our device, can test medicine right away," says Pruett. "What was a 24 to 48 hour turnaround is a matter of minutes. Also, they can test as they are making a batch of medicine instead of waiting to the end. So, they can make adjustments to the batch instead of throwing it out."

The firm is also working on another software-based venture, DynaSoft, based on five years of lab data and their experience with using web-based applications.

Odegard and Pruett see any future innovations as an extension of their guiding principles. These new ventures are aimed at making pharmists as successful as they can be.

"Our success is a consequence," says Odegard. "So, what is the event that is going to cause that consequence? It is our customer’s success, so we are going to do anything we can to make that happen."

For Odegard and Pruett, understanding the customers’ desires, and over-delivering on them has led to DYNALABS’ past success and that same focus and intent will lead to their future success.

"We are not here to test," says Odegard. "Testing is a means to an end. We are in business to make pharmacists successful, so they can concentrate on making patients safer."