Small Business and Franchise Success Stories

There is much to consider when deciding whether to start a small business or franchise or buy an existing small business or franchise, and beyond the initial capital investment, the continued investment of time should certainly be a factor. All small business and franchise owners must be willing to invest a good portion of time into their enterprise, but those who do proper research might be able to buy a relatively cheap small business that can be improved, thereby saving time and money.

Paul Malstrom followed this business strategy when he purchased a small storage facility in Vale, CO in 2005. Malstrom retired earlier that year after three decades with the Oregon Agricultural Department, and knew that he wanted to do something different. He also knew that he wanted a little more control of his retirement funds.

“I wanted to do something else with [my retirement funds], and so I drew out all of my retirement funds from the state of Oregon, rolled it into the IRA and then over to the 401K. It was a big jump for me, because I hadn’t done a lot of business just to make a living.”

Malstrom wanted whatever investment he made with his funds to allow him a working retirement, which would allow him to find a better return on his retirement funds until his wife retires from teaching school in 2011, at which point he plans to sell the business. This gave Malstrom a relatively small window before his established exit strategy, and so commercial real estate seemed to be one of his best options.

“Four years ago, the residential real estate market was really up and it was kind of scary. I thought I would try commercial real estate. Working with a realtor, I came across this business and it looked like it was something that I could grow. I bought the one unit here in Vale, then we picked up a second one later when we were in Ontario.”

The first storage unit that Malstrom purchased had a companion business as part of it that seemed slightly unconventional to him at the time: It also sold cell phones and cell phone plans for a cellular startup company, US Cellular. He and his wife were initially dubious of whether this additional business would be a match for them, but it exceeded their expectations that when they acquired their second storage facility they immediately began dealing US Cellular there, too. Both sides of the business have grown: They have at times had 100 percent occupancy and the phone business now almost makes as much as the mini-storage. The latter side of the business is a little more high maintenance than the former, though, and this has created jobs for others within Malstrom’s working retirement.

“It’s quite a bit to keep up with for somebody. Models are changing all the time; the promotions are changing with the carrier; it’s a lot to keep up with, so I have a couple [people] that work for me. They’re really sharp with cell phones and they do a great job,....”

Malstrom admits that he was surprised most by the cost of running a small business, and like every business owner he recognizes certain things that he could have done better.

He emphasizes the importance of understanding the books as well as you can before you purchase a small business or franchise because it can help you negotiate a fair deal and is something you will eventually need to learn anyways as the owner.

“A basic understanding of QuickBooks is useful. Just about everybody in small business uses QuickBooks and bookkeepers and accountants want things in that format. Reading the accounting statements closely before buying a business can help you know whether the business is making money or not, whether it has room to grow, and so whether you are doing the right things in buying the business.”

This is especially true for those who are using retirement funds to buy a small business or franchise. All investments carry a certain level of risk, and small business ownership carries additional responsibilities. Careful due diligence and planning are essential to protect one’s assets and one’s family and to ensure that the investment provides more opportunity than burden.

Despite the heavy costs and the added responsibility, Malstrom is pleased with his investment and remains confident that it will pay off well in the long-run.

“I missed the fall on the stock market; I missed the fall in the real estate. The return has been good.”

There are many lessons to be gleaned from Malstrom’s story.
  • One can sometimes combine two very different small businesses to maximize one’s profits within the same space.
  • A strong understanding of the cash flow and value of a business is absolutely essential, and familiarizing yourself with accounting and the common platforms used to conduct it is an excellent way to start.
  • Using retirement funds to buy a small business or franchise can be a big leap, but could provide a great return on investment.


Post a Comment