'Long game' starting to pay off for logistics startup ProServ

Brian Johnson was starting to hate his job. He loved the work he did. But the company was growing faster and that meant more meetings and planning sessions and less time on the work he enjoyed — building relationships between freight owners and carriers.

So in 2014, Johnson left C.H. Robinson Worldwide — the Eden Prairie-based Fortune 500 firm that is the largest third-party logistics provider — to start ProServ Logistics with co-worker Dave Buhl.

They set up a modest office in the front of an Eden Prairie warehouse owned by a friend of Johnson's and did the office build out in startup fashion — with their own labor.

Like most midcareer entrepreneurs who venture out effectively, he had to rely on financial savings and the support of family. Johnson's wife, Jenny, could tell he was losing his passion for his corporate job, so when he presented her his startup idea, she told him to go for it.

"We weren't buying a job, we were looking to build a $100 million a year company some day," Johnson said.

Johnson, who started at C.H. Robinson in 1989, was adamant about honoring his former company's two-year noncompete agreement that is typical in many industries, including logistics.

"The most challenging part was enduring that noncompete," Johnson said. "The hardest part was the uncertainty."

Johnson helped bridge the gap by taking a six-month consulting contract and spending previously earned equity awards from C.H. Robinson. During the next 18 months, as stresses and uncertainties mounted, he found solace in going to yoga with his wife and spending time at their family cabin.

During the interim, he also met regularly for coffee with Buhl. The two had known each other at C.H. Robinson and each admired the other's approach to business, Johnson in sales and Buhl in technology.

Buhl had moved on from C.H. Robinson in 2010 and started a design-build firm and was involved in a handful of other businesses as well. But he liked the way that Johnson worked at C.H. Robinson and let him know that if he were ever to go out on his own, he would be there.

In turn Johnson said Buhl inspired him with his different business ventures.

Johnson and Buhl built their initial employee base from trusted former C.H. Robinson colleagues like Diane Johnson and Eric Jex. In turn, the employees signed on because they were energized to be building something again and the creative problem-solving challenges that come with it.

Johnson is 55 and Buhl is 57, and Johnson joked there is no ageism at ProServ. The average experience among ProServ's 13 employees is 20 years in the logistics industry.

Johnson and Buhl partnered with some other former C.H. Robinson employees who had started EKA Solutions Inc. to pilot a transportation-management system, a key component for a logistics company.

Now five years in, the startup company has momentum. In the third quarter, when much of the third-party logistics industry saw decreases, ProServ said it had a 20% increase in revenue and an 11% increase in profits. Buhl said the company forecasts $22 million in revenue for 2020, and the ambition now is to be a $250 million company.

In contrast, C.H. Robinson had revenue of $16.6 billion last year.

"We are in a really good position, technology wise, staff wise, philosophy wise. Our board of advisers, our investors are all on board," Buhl said. "They all understand this is a long play."

Lots of private-equity money has been pumped into the logistics industry — much of it for companies hoping to utilize technology and apps to match available trucks with freight. In early November, for instance, Seattle-based Convoy Inc. received $400 million in funding from investors that included Alphabet Inc.

A lot of the digital startups are focused on transactional relationships. Johnson and Buhl believe there is still room in the highly fragmented freight brokerage business for their relationship-based approach.

"The talent we have is really good at managing both the customer side of the business and the supplier side of the business," Buhl said. "We treat the carrier as a customer."

Johnson's clients appreciate that business model as well. "He approaches almost every situation with a 'How can we work together on this attitude' " said Dusty Morgan, president and CEO of Riteway Express, an early client of ProServ.

Riteway is a 35-truck carrier based in Brevard, N.C., that specializes in moving plastic soft-drink bottles and food containers. Morgan said that since he has been working with ProServ, he has been able to open up additional lanes of business and utilize his trucks in ways that benefit more customers.

"If there is something minor that he can do that can make things work, he listens and tries to do it," Morgan said. "It makes a carrier feel more like an integral part of it, like an actual participant, instead of a cog in a big machine."

Now, Johnson's startup bet is finally starting to pay off.

"It took over two years, in addition to the two years that I sat out [because of the noncompete], before the 'value' creation at ProServ exceeded what I was taking home at the end of my tenure" at C.H. Robinson, Johnson said.

"I've now exceeded that, and my upside here is exponentially greater than it ever could have been at CHR based on my role now as a majority shareholder at ProServ."

Patrick Kennedy • 612-673-7926