With a generational shift taking place across Montana’s community of small businesses, some will transition to new ownership but most will not. Those that don’t could simply vanish from the landscape.
Goodworks Ventures of Missoula has quietly launched a new effort to purchase stable, profitable companies and help them grow under new leadership.
In coming years, Goodworks Evergreen, as the program is known, could lead to a perpetual holding company open to investors who find value in transitioning small businesses to community ownership.
“Our goal is to be a perpetual holding company we can make publicly accessible through a stock or a bond,” said Kiah Hochstetler with Goodworks Evergreen. “We’re probably five years down the road from that. But really, what we’re looking to do is build this community capital of community-owned businesses.”
Several small Missoula businesses last week were honored for their longevity, including Office City, which opened in 1916, and Caras Nursery & Landscape, now 123 years old. The latter has transferred through three generations of family, a rarity among small businesses.
Most of the prominent businesses that have dotted Main Street over the years were founded and owned by Baby Boomers who are retiring at a rapid rate. Subsequent generations aren’t large enough to fill their shoes and many of those who are interested can’t afford to buy the business.
“In looking at Montana as a whole from our impact investment lens, we’ve seen there are these quality businesses that have been around for a long time struggling to transition,” said Hochstetler. “They get an acquirer and they’re interested in the business, but they don’t have the means to pull the capitalization together to purchase the business and transition it.”
The resulting impact can take many forms, including the loss of jobs in small communities. It can also be felt in towns with fewer amenities. If the only grocery store closes, or the hardware store, the impacts run community wide.
“Goodworks Evergreen is really about transitioning these businesses,” Hochstetler said. “Part of our conversation with these owners is also about legacy. They’ve spent 20, 30 or 40 years building their business, or sometimes it’s a second-generation business. So how do we transition that?”
Under its new program, Goodworks Evergreen is stepping in to purchase those businesses directly and transition them to new leadership. It recently purchased Dons Home Center in Hamilton and closed the deal on the owner’s 75th birthday.
Hochstetler said Goodworks Evergreen is currently working to purchase a Missoula business, and it hopes to have one more deal secured by the end of the year. That would bring its business holdings to three, though it looks to grow that number over time.
Hochstetler described the process as a “miniature Berkshire Hathaway for Montana.”
“We need to get $50 million in size, but we’ve got a lot of businesses to buy before we can make the math pencil on that,” Hochstetler said. “Our ultimate goal is to bundle these companies into a publicly accessible financial product, allowing for broad-based Montana ownership of Montana companies.”
The plight facing small businesses was articulated in Missoula last year when the Art Attic considered its own future. The locally owned frame shop was purchased by Janel Woodworth from its original owner in 1978.
After 40 years, Woodworth was looking to retire, but finding a new owner wasn’t easy. She finally found Emily Hall, who now owns the business.
“There was nobody to take over,” Woodworth told the Missoula Current last year. “Finding a buyer and finding somebody who has the passion to take on the business is very difficult. We Baby Boomers are retiring.”
Under its new program, Goodworks Evergreen is looking for businesses owned by an aging owner that employs more than five people and nets more than $200,000 a year. It’s also looking for individuals interested in operating a business with the support of the Goodworks team.
After acquiring its first business, Goodworks Evergreen increased the prevailing wage by $2 an hour and provided health insurance to full-time employees, marking a first for the small business. It looks to repeat that process with each new acquisition.
“We’re continuing to do our venture investments, but we’re also focused operationally,” Hochstetler said. “We’ll identify a general manager, put them in place and work with them. We help provide marketing and accounting services at the Evergreen level, so we can help bring those (expenses) down.”