Has the Self-Storage Boom Peaked?
Self-storage entrepreneurs have made money in good times and bad. But the fun may be ending.
Good Morning!
Here are today’s highlights:
“How much longer can I do this?” asks the founder of an ice cream truck business.
Gene Marks offers a rundown of AI tools business owners can use right now.
Annual compensation for people with AI skills is approaching seven figures.
“We found seven people who have been with me 30 years — paying taxes, had children, grandchildren — and we were required to terminate them,” says a restaurant owner.
SELLING THE BUSINESS
Mr. Ding-A-Ling sells for $1.55 million: “Jared and Luke VanDerVeer remember buying ice cream from Mr. Ding-A-Ling on summer days when the truck came clanging down their street in Latham. Jared liked cyclone popsicles. Luke, his older brother, preferred screwball pops. Now, they own Mr. Ding-A-Ling — the largest ice cream truck company in the Albany [N.Y.] region. The VanDerVeers last week bought the business and real estate in Colonie for $1.55 million from longtime owners Brian and Victoria Collis. The assets include 52 trucks; the office and warehouse at 324 Old Niskayuna Road; and a sales territory that stretches north to Plattsburgh, south to Middletown, west to Utica and includes cities in Massachusetts and Vermont. The deal was financed by an SBA loan from First Internet Bank of Indiana.”
“The brothers see opportunities to broaden their territory — Springfield, Massachusetts, is a possibility — build the brand through social media and sign up more corporate catering, school functions, and special events. Enabling customers to book events online is an example of how the old-school business can be brought up to speed.”
“The Collises started the business in February 1973 with one truck selling ice cream for 25 cents each (even then, some customers complained about the price). Gasoline was 36 cents a gallon. They bought their second truck eight years later, and continued to grow, at one point reaching 66 trucks. They cut back a decade ago because they had spread themselves thin.”
“‘We started when I was 20,’ Brian Collis said. ‘I'm now 70. How much longer can we do this? We don't want to drop dead in the office at 80 years old.’” READ MORE
OPPORTUNITIES
Has the self-storage boom peaked? “America’s storage addiction made Mike Wagner a wealthy man. Wagner quit his physical-therapist job the day before he bought his first self-storage facility in 2011. It cost $330,000 and was losing $2,000 a month, but he got it cranking out cash, added units and sold for $1.8 million, the first of several lucrative turnarounds. Stories like this have inspired droves of would-be small investors to try their luck, and now the 41-year-old is milking the storage craze in a new way. His investment-coaching business, The Storage Rebellion, costs $297 a month to join. He charges $779 for a video-training course, with lessons on lien laws, valuation spreadsheets, and partnership agreements. For $995, Wagner will hop on a one-on-one call for 90 minutes, and $2,995 buys a daylong training session at his home office in New York’s Finger Lakes region. ‘There is more than enough wealth to go around in storage,’ he said.”
“For the past quarter-century, you could take that to the bank. There are self-storage facilities around the world, but nowhere have they been more popular to rent and profitable to own than in the U.S., thanks to Americans’ propensity to accumulate more stuff than they can squeeze into their homes.”
“Storage is the rare investment that has done well in good times and spectacularly in periods of economic upheaval. Profits exploded during the pandemic, when bedrooms became offices and basements became gyms and the displaced items had to go somewhere.”
“The question now is whether the industry is running out of room for growth. Workers are trickling back to the office and the highest interest rates in years are slowing home sales, a big driver of storage demand. Self-storage facilities have seen occupancy rates decline from records, forcing them to dangle big discounts to attract new customers.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
The Big Story in Small Business: This week, Gene Marks says artificial intelligence is becoming the biggest story in small business and highlights a slew of AI tools that business owners can put to use right now. Gene also issues a warning that owners who do not start paying attention are taking a much bigger risk than they may realize. Plus: Gene talks about team-building platforms that can help owners engage their employees, especially those working some or all of the time from home.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
HUMAN RESOURCES
The frenzy to hire people with AI skills is driving annual compensation to nearly seven figures: “Firms in industries such as entertainment and manufacturing are racing to seize on the potential of artificial intelligence by wooing data scientists, machine-learning specialists and other practitioners skilled at deploying the technology. The rush to hire is pushing up pay for technical professionals and prompting companies to hone their pitches to applicants to avoid losing out to rivals. Some companies, including Accenture, are building their AI expertise through individual hires and internal training programs. Others, including the technology company ServiceNow, say they are open to acquiring smaller AI startups as a way to scoop up talent.”
“The online-dating platform Hinge, a part of Match Group, is advertising a vice president of artificial intelligence role that comes with a base salary of $332,000 to $398,000 a year. A vice president of AI and machine-learning position at Upwork, which operates a marketplace for freelance workers and other professionals, comes with an advertised salary of $260,000 to $437,000 a year.”
“Total compensation, which typically includes bonuses and stock-based grants, can push overall pay much higher. A product manager position for a machine-learning platform at Netflix lists a total compensation of up to $900,000 annually.”
“A challenge for many employers is that so many different types of companies want AI talent now. Walmart is hiring for a position on its conversational AI team that includes a base salary of $168,000 to $252,000 annually. Procter & Gamble in Cincinnati is recruiting for an AI engineer with a listed base salary of $110,000 to $132,000 a year.” READ MORE
The owner of a landmark Florida restaurant demands a change in immigration law: “Richard Gonzmart, the fourth-generation owner of the iconic Columbia Restaurant chain based in Tampa, says it’s time for politicians to start listening on immigration. When federal immigration authorities arrived at his Sand Key restaurant in Clearwater to find outdated and noncompliant work documents for 19 of his employees, he was forced to fire them all — including seven people who had worked with his family for decades. ‘With 2,000 employees, it becomes very difficult to monitor it,’ Gonzmart said in an interview. ‘We think they’re legal but, when we had to check, we found seven people who have been with me 30 years — paying taxes, had children, grandchildren — and we were required to terminate them.’”
“It’s a scenario that’s playing out across Florida with restaurants, construction companies, and farms searching for workers as the political rhetoric over immigration is clanging up against a tight labor market and expanding population.”
“Gonzmart said that many of his employees were hired at a time when the state didn’t require companies to obtain documents showing proof of eligibility to work. Under Florida’s new law, state and local law enforcement officials are authorized to enforce federal immigration laws and, even before the state law took effect on July 1, he said, ‘many people with papers did not renew them because of the concern that the government was sending them back.’”
“‘I told them I wouldn’t let them go, and they threatened to arrest me,’ he recalled. ‘I said, That’s a good idea. Why don’t you all come and arrest me? But let me know when, so I can have cameras here! Then, they sent me a $500,000 fine, and I let them go.’”
“‘I’m very proud of Gov. DeSantis and everything he’s done. I really am,’ said Gonzmart, a lifelong Republican. ‘It gave everybody confidence and that’s why so many people are moving here…But my concern is the governor putting in a law that says those who have an expired driver’s license cannot renew it because they’re no longer legal. They cannot work. Their papers are no longer legal.”’ READ MORE
USER EXPERIENCE
Our best wishes to Russ Starke, CEO of Think Company—a web design business and a Small Giant—who has been thinking about digital accessibility: “If it sounds like a no-brainer that organizations would want to provide access for as many people as possible—that this would simply be good business (let alone good citizenship)—you’re right; it sure should be. In fact, at any given point roughly 15 percent of the population of the United States is disabled in some way, temporarily or permanently. A powerful and memorable quote often shared on the subject is that ‘If you live long enough, you will experience some disability. We are all temporarily abled.’ I’ve always held this concept close, but it was once again brought into sharp relief for me in April when I needed emergency eye surgery for a detached retina, resulting in physical restrictions and major vision impairments that I’m still navigating.”
“With fresh first-hand perspective, I was truly amazed how behind major organizations continue to be concerning digital accessibility, despite the laws requiring otherwise. When accessibility is a consideration at all, it still often feels performative and marginalizing.”
“Organizations often believe that designing for digital accessibility is going to bloat the cost of projects and make them unfeasible. However, today’s best designers and developers include these considerations as part of their standard toolsets and SOPs—so in reality, no, it often doesn’t cost more if you have the right team.”
“Second, even if it did cost more, would that cost really offset losing 15 percent of your potential market? Because people with disabilities 1) are in your target audience and 2) are absolutely using digital tools. If your offerings aren’t accessible, they’re going to find and spend money with the ones that are.” READ MORE
RETAIL
After 10 years and despite its success, a store for billionaires is closing: “The shop, called Tiina the Store, offered a finely honed selection of minimalist, often eye-poppingly costly, designs for men and women — brands like Toogood, Arts & Science, Arpenteur, or Dosa; heritage labels like Bergfabel, Elgin of Scotland, and Wommelsdorff; or indies like the cult Italian designer Daniela Gregis. What it also provided was relief from the onslaught of luxury goods that have colonized retail on the storied East End of Long Island.” The owner, Tiina Laakkonen, explains:
Why close a successful business? “There are a couple of reasons. When I started out, I thought, ‘I’m going to have a cute little store, sell a few of my favorite things, it’ll be sweet.’ But when you open a business and it grows and grows, suddenly that’s all you do. For better or worse, it takes over your life. There was no way to put on the brakes.”
“I had no concept of who those people were or how they dressed. But then people began showing up, and pretty soon you began to realize that, ‘Oh, this one is a billionaire, this one is a billionaire, and this one also is a billionaire.’”
“A store like mine appealed because people could discover labels they’d never heard of or seen. It’s a different idea of luxury. My aesthetic is not everybody’s aesthetic, but if you wanted beautiful things pulled from all over the world, this is your store.”
Or was. “Well, the building’s on the market, and the shop is closing in September. But I’ll be back in some form. I’m not emotionally attached to Tiina the Store. Ultimately, the reason for closing is that, rather than tweaking, it’s easier to shut the door. Move on. Chapter done.” READ MORE
MANUFACTURING
The billions of dollars in CHIPS Act spending isn’t just for big businesses: “Small and large business owners looking to network, partner with other companies, or find new opportunities can apply to get on the CHIPS for America teaming partner list. It’s open to any small business that may not be eligible to apply for funding on their own, or large companies looking for small companies to help fulfill their own requirements under the CHIPS Act.”
“This fall, the Chips for America program within the Commerce Department will release a funding opportunity for smaller projects, aimed at constructing, expanding, or modernizing facilities for semiconductor materials or manufacturing equipment.”
“The opportunity will be for any project below $300 million. That could include proposing to create a ‘fabrication cluster,’ in which a consortium of organizations come together to promote a manufacturing ecosystem.” READ MORE
BUSINESS MODELS
Will Uber and Lyft ever make money? “Costs have come down; fares are up. This month [Uber] reported an operating profit of $326 million for the second quarter of the year, its first time in the black. Uber’s glee was heightened on August 8th when Lyft, its domestic arch-rival, reported yet another operating loss, of $159 million. Lyft’s market value remains in the doldrums, down by 85 percent from the level at which its shares began trading publicly in 2019, six weeks before Uber’s.”
“Still, for Uber, breaking even is a low bar for success. Even adding in the latest profit, the company has clocked up $31 billion of net losses since its first available results in 2014. Investors now have $21 billion of invested capital tied up in the company.”
“The hope, of course, is that Uber’s profits, having broken above ground, will now soar into the stratosphere. Hold your horses. In the past five years over 60 percent of the firm’s revenue growth has come from businesses other than ride-hailing.”
“Most important has been food delivery, which surged during the pandemic. Uber’s profit margin—before interest, tax, depreciation and amortization—when ferrying meals is less than half that when ferrying people.” READ MORE
THE 21 HATS PODCAST
Can I Go Dig a Hole? This week, in episode 163, Liz Picarazzi, Jennifer Kerhin, and Sarah Segal talk about whether they ever wish they could go back to their corporate lives. For Liz, there was a period during the early days of Covid. For Jennifer, it was when she made the transition from a consulting business to an employee business. These days, none of them can imagine going back—although Sarah did have a rough week recently when she lost two clients. “It's just the way of the world,” she tells us. “When businesses are looking to cut costs, it’s outside agencies that go first. But when it's two of your largest clients in the span of a week, it's like, ‘Really? Can I go dig a hole, put myself in it, and just stay there forever?’”
What she’s actually doing, as we discuss, is figuring out some new ways to attract more clients. We also discuss whether everyone needs a business plan and whether the three owners ever wonder if someone else would do a better job running their businesses.
“‘When I actually put down a business plan in writing, I was able to say, No, to potential or current clients when they asked me for services that I didn't think were in my wheelhouse. Because before, when I was just sort of trying to make it through, sometimes I accepted work that I shouldn't have.’”
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren