Erica Brune of Lever1: Starting a Successful Business by Solving a Problem

About Erica Brune & Lever1

Phil Singleton: Hello, everybody, and welcome to another episode of the Local Business Leaders podcast. I’m your host, Phil Singleton, and today, we have a very special guest, Erica Brune. Erica is the president of Lever1, a Kansas City-based professional employer organization, or PEO, providing human resources, payroll and employee benefit solutions. Within five years of launching Lever1, Erica helped drive the company to become Missouri’s fastest growing company of 2017, ranked number 44 in the nation by Inc. Magazine. With Erica’s guidance, Lever1 has secured an industrywide reputation of excellence, operational reliability and thought leadership.

Erica, welcome to the show.

Erica Brune: Thank you.

Phil Singleton: Tell us, before we get started and delve into what a PEO is and the story of how that is taking off, let’s hear a little bit about your background from basically your first steps out of college, or what have you, and your path to success today, if we could.

Erica Brune: Absolutely. I started my career in New York City, working in the legal industry, doing administrative services, just like I do today, so payroll, HR and finance and worked my way up in that industry, spent over 10 years in New York City, and I really credit that fast-paced high-energy, very career-driven environment to really building the roots of who I am today. Eventually in 2008, decided to move back to Kansas City and started looking at career opportunities and was recruited by Gragg Advertising here in Kansas City and started there in 2008 as their director of operations, again doing the same type of stuff, all business related administrative type work — finance, HR and all the employee benefit programs — and joined Greg Gragg as partner in 2010. Greg, as you may know, is a serial entrepreneur, and we started acquiring and spinning off and forming startup companies left and right. At that point, we broke my team of administrators, a handful of CPAs and HR professionals, and broke off and formed Lever1 to administer services back to our other co-owned companies.

First, we thought we were creating Lever1 as a way to simplify all of our bigger conglomerate of business activities between all of our different entities, so we formed that entity, Lever1, thinking it would be our overhead company, where we’d administer business activity for our other profitable businesses and formed a PEO. So we really … I would say we fell into the PEO space accidentally, but we fell in love with it at the same time. Very quickly, we learned how impactful a PEO can be to a small business and that there are so many other resources when it comes to health insurance and payroll and access to HR professionals that small businesses primarily here in the Midwest are just not aware of, that opportunity exist for them. Still, after …
Phil Singleton: Guilty as charged. I was the same way just recently. It makes perfect sense. It doesn’t take them a whole lot of time to understand the value of it, but yeah.

Erica Brune: And PEOs have been around over 30 years. They estimate over 3 million employees use a PEO, so it’s big business, just it’s pretty unheard of here in Kansas City. So we took that opportunity. If we were going to have our PEO, Lever1, for our own business, let’s hire a sales rep and grow it. If anyone else here in Kansas City is interested in joining us, the more the merrier, the better the rates get for everybody. You spread that risk across. That’s what we’ve done over the last five years we’ve been in business. It’s been great.

Phil Singleton: What I love about that is because you basically set it up to solve your own problem, right? And then it worked really well, and you’re just like hey, we can offer this to a lot of people because it’s working so well for us.

Erica Brune: That’s exactly right. We set it up because we thought it was the way we needed to structure our business entities, not knowing that it was a revenue-generating business model.

Phil Singleton: That’s so awesome. One question just in terms of your background and history, when you joined in 2008, was that around, before or after the crash because that was a rough year.

Erica Brune: It was. Right as the economy was taking a hit, Gragg Advertising’s business was soaring. I took most of the credit that Gragg’s business was doing so well, and that’s why Greg made me partner, I always joke.

Phil Singleton: That’s awesome.

Erica Brune: Gragg services a lot of businesses in the for-profit secondary school sector. In 2008, jobs were hard to get and a lot of people went back to school to better themselves. So it was almost a reverse trend for Gragg. Their business did quite well, and that allowed us to invest in some of these other startup companies at that time when most people were not doing that.
Phil Singleton: Awesome. And you’re from Kansas City and then went to New York and came back?

Erica Brune: That’s right. I grew up here. Went to Shawnee Mission South High School. Proud Raider. The day after I graduated, I packed my bags and went to school in Arizona just to have a change of pace, and it was a lot of fun. Straight to New York City.

What is a Professional Employer Organization (PEO)?

Phil Singleton: That’s awesome. We were talking a little bit in the green room beforehand. I just want to dig into this a little bit more because I was telling you, I was like, hey, you know, we’re a small agency. Let’s say we’ve got five people, maybe seven. What is a PEO to me? What would be the benefit and why and secondly, what size company can benefit from this? Is this something like … I’m guessing a freelancer can’t go up and say, hey, I need these benefits. I know just from my own experience, say for example you’re looking into group health insurance, you need to have at least one other W-2. I think everybody who starts a company at some point gets to that point, where it’s like it’s just me. Okay, now, I’ve got another W-2 employee. Now I’ve got to start thinking about benefits at some point. Can you walk me through that a little bit in terms of what size and types of companies can benefit from this?

Erica Brune: Absolutely. PEOs provide employee solutions. Employee to us means a W-2 employee. 1099 contract workers are technically in the eyes of the Department of Labor not employees. They can have multiple jobs and service multiple people and potentially have their own business that you’re contracting with them to do some work. So an employee in the PEO sense is really a W-2 employee. That can be one, the sole owner of the company, or it can be 1,000. You see that gamut utilizing PEOs for one reason or another. Certainly, the smaller the business, and we do … We have local trade associations, for example, that only have their one executive director that needs of full suite of HR services. They needed a job offer. They needed a handbook and compliance posters. They also needed to offer that person benefits or they wouldn’t be able to recruit them to come do that job.

So you can be an employee of one, and we have groups over 300, but it’s not unlikely that we’ll start servicing even larger than that. The benefit to the larger group is reducing some of the burden. They can hire another HR person, or they can utilize our services, for whether it’s background checks, an I-9 verification, payroll software. Everybody has to use something, so we solve that problem for them. Recruiting, handbooks, you name it. They can a la carte pick and choose which of the programs they want to add, even if they have 1,000 employees.

The smaller groups really benefit from the access to benefits. So you think of health insurance is obviously top of mind for most individuals and small business owners.

Phil Singleton: Like even I was going to say right now, there’s a lot of stuff going on where people are like, hey, wait a minute. Here in town, I guess a lot of folks … This is what really prompted me to get more on top of a benefits program because I had some people that worked at in the … maybe a contractor, all of a sudden were worried about access for their own personal insurance because some of the carriers are just like we’re not going to offer it to individuals anymore or not soon. And all of a sudden, we’ve got to take care of some of the people that are helping us out. So let’s get more serious about that. Is that prompting things for your business too a little bit, or do you hear that?

Erica Brune: It is. The individual market has fewer and fewer choices, and people are seeing double digit renewals, so they’re really left with very little choice. The new proposed association plan — there’s been quite a bit of talk about that — may solve that. I know that’s the intent. That will be coming down the pipe later this year, and we’ll see if that’s a new option for sole proprietors and businesses of one or two employees. We don’t offer association plans so I can’t speak too much about that, but I do know that that is an option that’s going to hopefully overcome the challenges individuals have of obtaining health insurance through their company as an employer group plan.

But the Lever1 opportunities are that Lever1 has group benefits, and clients that utilize Lever1 have access to them. That is really the definition of a PEO and how PEOs work. You think of even a 401(k). Hard to even access a 401(k) if you’ve got three to five to seven to 10 employees. Even if you can get one, the costs are pretty astronomical. Utilizing a PEO 401(k) plan overcomes some of that. In addition to cost, it’s truly the peace of mind of having that compliance done as well because as a business owner, do you want to be the fiduciary to your 401(k) plan and the administer of your benefits, and all of these thing have strict regulations that business owners, they want to focus on their business and growing their basically and doing what they do best. Outsourcing some of that risk and liability to a PEO has huge advantages.

Phil Singleton: That’s awesome. So what’s really interesting about the way you guys started this business and probably I’m just guessing here, but partially a key to some of the launchpad of the growth to it is that, like we were talking about, you had a problem internally with Gragg and maybe some of the Gragg umbrella of companies. You guys came up with this solution to solve that first. So right out of the gate when you started the company or separated out, you had a few clients already, right? Your own client, basically?

We did hit the ground running.

– Erica Brune

Erica Brune: Absolutely. We did hit the ground running.

Phil Singleton: Like you were saying, it was basically set up … go ahead.

Erica Brune: You do have to have a volume to obtain some of these compelling products, and so we did have that advantage of having our sister companies as our first clients to even get launched and get off the ground. It really is a very expensive venture to launch a PEO, and it takes quite a few years to really get the momentum going with the volume. So us knowing that we were doing this as our overhead anyway certainly gave my business partners some understanding of we weren’t expecting to generate a revenue the first year. We never set that expectation. It’s a good thing we didn’t because …

Phil Singleton: But you did have the critical mass.

Erica Brune: Yeah, it’s nearly impossible to do. It takes quite a bit of volume and time before PEOs can really be profitable and have a really great compelling product to offer.

…we really got involved with as many local organizations as we could. We were out in the community on boards and volunteering and participating so that people started to know who we were and had confidence in our business.

– Erica Brune

Phil Singleton: So part of the next step then, you’re just another startup company like the rest of us, except you had a nice … the fact you had the critical mass, you had some clients. At some point, you went out to market, started offering this. Can you walk us out how that went, did it go to Gragg Advertising? Did you guys just start marketing out yourself like other businesses? What are the things that you did? Did you go to trade shows? Can you give us some steps?

Marketing & Sales

Erica Brune: We did a real boots on the ground approach. Lever1 easily targeted and identified that Kansas City was the market we wanted to go after. So I wouldn’t say that the trade show and the traditional advertising strategy was going to be right for us right off the bat. So we really got involved with as many local organizations as we could. We were out in the community on boards and volunteering and participating so that people started to know who we were and had confidence in our business. Because it’s hard. It’s hard to recommend a business that’s only been around one year, two years. So we really needed to have those relationships and trust with our partners so that they felt comfortable referring us. And then I would say strategic partnerships has really been the key to our success in the last few years. Partnering with people who are already doing well, already servicing the same segment that we wanted to service. In a true referral partnership agreement, start offering each other services. That seemed to be the lower hanging fruit than just trying to put a traditional radio spot out there. I’m part of an advertising agency. I know that works. But as a small company, that’s just not feasible with your budget. So we really did the boots on the ground approach.

Our public relations effort is low cost. You can write articles and participate and get content out. I mean, you’re the king of that. So those things really do work in building a business credibility so that when you do have meetings with prospects, they can get online and see that the business is really substantiated and you’ve got some really good referral relationships to back that up.

Phil Singleton: I just love the fact you guys came up with this. Super explosive growth in a short period of time. Then of course, you come in recently, we were talking in the green room, you’ve been able to leverage this to a really smart PR content marketing program. We were kind of laughing, like right now, in this period of time in 2018, you’re pretty much everywhere in Kansas City. I’m seeing you on magazines and on LinkedIn, all sorts of journals and this kind of stuff. I’m sure that helps snowball, obviously, right? Because when people see the success, they get some education. Like I was drawn into it. I saw it and all of a sudden, I had no idea what a PEO was. I don’t know if that makes me stupid or not, or I’m just like one of the other small businesses that don’t understand what it is. All of a sudden, it’s like oh wow. That makes a lot of sense. But it’s the content marketing …

Erica Brune: Yeah, no. It doesn’t make you stupid. We didn’t know what a PEO was, and we started one.

Phil Singleton: That’s awesome. I’m going to guess that you’re seeing some benefits of doing that content education out there in terms of getting your story out and online and in the media. Is that helping or are you guys seeing …

Erica Brune: Absolutely.

Phil Singleton: That’s great.

Our phone, for the first time, over the last 12 months has started to ring. People are getting on our website and submitting for more information. As a business owner, that is just the icing on the cake.

– Erica Brune

Erica Brune: Absolutely. Our phone, for the first time, over the last 12 months has started to ring. People are getting on our website and submitting for more information. As a business owner, that is just the icing on the cake. We have a great outbound marketing and business development program. But when the phone actually starts ringing, it is … boy, it feels good. So yes, that content and that we’re so grateful to all the media and the publications that have picked up our story. I think the product, like you said, this is something that is so needed for business owners, and they just don’t realize it’s out there. That has helped us get quite a bit of attention. It’s just so needed with the change in the health care environment, and the Department of Labor is issuing stricter and stricter laws. The federal administration has not issued, in my opinion, continued strict guidelines for employers. Therefore, state by state, they’re implementing their own laws, such as we’re seeing paid sick time, and we’re seeing equal pay and we’re seeing all these things come through that as a business owner you can’t just rely on the federal regulation if you operate in multiple states. You’ve really got to keep track state by state of how to manage employees in a compliant way. I think business owners are feeling that in addition to the obvious health care lack of resources.

It’s just helped us get quite a bit of attention, and like I said, business owners like yourself are saying hey, this is even an option? I’m going to check it out, and so our phone has started to ring, which is …

Phil Singleton: Exactly. It’s there, and you start looking … you start peeling away the onion and you’re just like oh my god, this is … you’re a one person or five person or 10 or maybe even a 20 person company. Most of the time, the owner’s got their sleeves rolled up is doing some of the work in those cases. So just to have to think about a little bit of this stuff is kind of a headache. So just knowing that it’s out there. I’m looking at this and I’m like geez, that’s pretty cool because it sounds like by the way you’ve got this set up for a PEO, it’s almost like you’re able to access certain types of benefits that would be like a much larger company has and all of a sudden, you’re able to get it.

Erica Brune: That’s right. The recruiting. Mm-hmm (affirmative).

Phil Singleton: Yeah. Really cool. The coolest thing about this to me as a marketer is that you set it up as your own idea. You guys went out, and it sounds like you did the hustle, which I know Greg is all about too, right? You actually probably went out, you networked, you joined the stuff. You did a hardcore outbound stuff. I’m sure the phone played a part in that too. Now you got out based on the success that you’re having, really short period of time, super fast growth. You’re able to leverage that out into an inbound approach. Right? And now the story’s getting out there, and now the leads are coming in based on that. So you’ve got the full inbound-outbound kind of a circle going. Super cool. I mean, that’s just like … You see when you lay it out and do it the way you guys have done for a new startup business, I mean really fast, successful growth over a short period of time. Of course, it didn’t just happen by luck. You’ve got some really smart people like yourself and some of your partners behind it. Super awesome story for Kansas City. It’s so inspirational to see this kind of stuff, one. And two, also to be like wow, this is really cool. It’s going to help a lot of businesses, right?

Erica Brune: Yeah. Thank you. Thank you. It’s exciting for us at this time, and I think the next phase after explosive growth, which is what we needed and wanted, is that our products and our solutions now just keep getting better every year because the more people we have in our PEO, the more that that risk is spread and the more opportunities we have to offer different solutions to clients. We’ll just continue to keep attracting more and more people is the goal. That will help everybody that participates.

Favorite Things & Places in Kansas City

Phil Singleton: So awesome. Let’s switch gears a little bit. I always like to ask people, successful entrepreneurs, anybody in Kansas City, what their favorite things in Kansas City are. You moved back here, so there’s obviously, aside from probably family, things you love about it. But is there anything in particular? Do you jones for a particular type of coffee or bakery or restaurant? Places you like to take friends that have never been here, haven’t seen in a long time that are like, “You’ve got to try this is Kansas City or go here.” Any kind of favorites there that you can give some shout outs to?

Erica Brune: Absolutely. I love Dolce Bakery. I live over in the Leawood-Prairie Village area, so that is hard to resist, as you can imagine, getting a morning breakfast there. Quay Coffee in the River Market. That’s right near our office. There’s a reserved table, where I spend a lot of time there. Like most of us, we do coffee, lunch, happy hour. Then I always shoot straight over to Tom’s Town at 4 when they open and have a drink there, which is definitely one of my favorite places.

Phil Singleton: Aha. Cool. That’s one of the things.

Erica Brune: Have you been?

Phil Singleton: It’s funny because for us, I’m down south, so I only go up really for client meetings and things like that, but I always am like once you’re there, so many cool things that are within walking distance or so close that you kind of miss out when you don’t actually work in the scene. That’s one of the coolest things about Kansas City is all those places. That’s why I always like to ask folks. I’ve got a long list going now of places that I have to go. Some people go, and they’re just like oh man, I’ve never heard of that place. I’m glad I heard that on the show, and I’m going to check it out. So it’s always great to hear people’s favorites.

The 10,000 Question

Let’s wrap up with something I like to call the $10,000 question, which is you guys got to start over, let’s say, again tomorrow. The problem with Lever1 … I’d say problem is it seems like you guys almost did everything right because very few people set it up this way with … You just had everything kind of it seems like working in alignment, which enabled you to get over a four, five year period of time such high growth that you’re getting national recognition for it. So when I ask this hindsight’s 20/20, how do you improve on what appears to be a perfect ride? Although I’m sure, I’m guessing there were probably little bumps in the road. So anything that you could share on how maybe you’d do it differently if you had to start this over again. Maybe give us a little insight…

Erica Brune: Sure. We started this company out of our own pockets. So it took quite a bit of time before we started yielding a profit, and that’s not realistic for a lot of people. If we were to do it over again, we would prefer to turn a profit sooner, no doubt. So I would say …

Phil Singleton: Was that because of trial and error? Things like that? What kind of … was it the learning process? Or what was the …

Erica Brune: I think I just didn’t approach it as a profit center. We were investing in the best software and the best programs because that’s what we needed for ourselves. And that was good. It’s been good for my clients, but it took a while to overcome those startup expenses. What I would say is if I were to do it over or to start something else is really find those strategic partnerships right from the get go. For us, that could be a bank or an insurance agency or some like product that already has a big portfolio of clients and sidle yourself next to them because together, you have a much better chance of getting some volume going than if you just try and do it all yourself. I’m going to just start cold calling and start from scratch. That is a slow ride up the mountain. But if you can come up with a business idea or a service that complements and partners with somebody that’s already very successful with a big portfolio of clients or prospects and just go at it together from the beginning, I think I would see much bigger results earlier on.

We’ve done that now, and that’s really helped fuel our pipe, but it took a while for me to figure that out. Because everybody … you know, you think oh, it’s my own business, my own product. I’m just going to do it myself. I would redo that and rethink that.

Phil Singleton: That’s so awesome. Look, this has been really amazing. You and your company, you’re a true inspiration and make the Kansas City business community really proud. It really gets me going because I’m just like this is so cool to see somebody have this level of success over this short period of time.
Erica Brune: Thank you. Appreciate that, though.

Phil Singleton: Really appreciate. Seriously, we all look up to you, and I really appreciate you spending this amount of time and sharing such awesome insight. How can our listeners, if they want to follow you or your company, where do we go online to continue following the story?

Erica Brune: Yes, it’s www.lever1.com. And that’s L-E-V-E-R and the numeric one. You can find us on Facebook, Twitter, LinkedIn.

Phil Singleton: That’s perfect. Hey, really appreciate this. Thank you once again, and we wish the continued success of Lever1.

Erica Brune: Thank you. Appreciate it.

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