I Saved My Business by Investing in a Startup
By Jeff Hill, Franchise Owner, 1-800-GOT-JUNK, Bellevue, Wash.
In my first five years of running the Bellevue franchise of 1-800-GOT-JUNK, a junk removal company, our revenue grew from $200,000 to $1.4 million. Then the economy tanked in 2008, and our sales took a 40% hit over an 18-month period. I thought I would need to radically downsize the company.
Instead, I did something counterintuitive and completely unplanned: I invested in a small startup. By sharing resources, co-branding, and bringing in third-party expertise and funding, we were able to maximize efficiency and increase profits in both companies.
Too many resources, not enough business
Because we had experienced constant growth for the past five years, I had hired staff and purchased equipment anticipating another season of hyper-growth. So when the economy tanked in 2008, we had more resources than we needed or could afford to maintain. Business was so slow that year that I was only using four to five of the nine trucks I'd purchased.
We have between 10 and 20 employees depending on the season, and I thought I might have to permanently lay off some team members because meeting payroll was getting difficult. Morale was bad enough as it was -- the last thing we needed was a bunch of layoffs. But I didn't think I had a choice: Our expenses were beginning to outstrip our revenue.
Striking a deal
Then I heard from Doug Burgoyne, the owner of FROGBOX, a Vancouver-based startup company looking to expand into the Greater Seattle market. He'd seen the success I'd had in developing the 1-800-GOT-JUNK brand in the region, and he wanted me to invest in his company and help them grow.
We were both environmentally-conscious companies with compatible business models. We even served the same core demographic: women from ages 25 to 45.
Doug needed my experience breaking into the Seattle market and support from a business with operational resources like trucks, office space, and staff. My business needed an infusion of energy from a young, innovative company. That spring, I decided to join forces with FROGBOX.
The financial factor
I made a strategic investment in the company and opened its first corporate location in the States. Doug and a silent partner continued to own the majority of the business, leaving some equity open for future investors. My umbrella company, J Cannon H, LLC, is comprised of the assets from my 1-800-GOT-JUNK franchise and the FROGBOX partnership.
Investing in a startup was a strategic business decision, but I also saw it as a good way to safeguard my assets. By partnering with FROGBOX, I was able to diversify my business portfolio in case 1-800-GOT-JUNK continued to slide.
Sharing resources
After we'd finalized the deal, I couldn't offer Doug much startup cash, but I could share operational resources. I immediately turned one of my unused junk trucks intp a FROGBOX truck. I also share a warehouse space and office space with FROGBOX. We're even able to share insurance costs.
The partnership prevented me from needing to make any layoffs. Now, if there's not enough for an employee to do at 1-800-GOT-JUNK, we can have him help us out at FROGBOX by cleaning boxes, washing trucks, or supporting both businesses' marketing efforts. FROGBOX even leveraged our previous IT guy to design their back-end systems. The ability to share resources means we use them more efficiently and there's less waste.
Our partnership has also helped both companies pick up lucrative contracts that neither of us could have gotten on our own. We've gotten several co-branding opportunities with major Seattle-based companies like Ecomovers, Airvan Moving, and Hanson Bros. Moving and Storage. And here's the best part: Moving is the #1 generator for junk, so often customers come to FROGBOX first for help with their move, and then ask for a recommendation for a junk removal service. So what's good for FROGBOX is good for 1-800-GOT-JUNK and vice-versa.
Growing together A few months after partnering, FROGBOX participated in the Canadian reality TV show "Dragon's Den," where investors hear pitches from owners of startup companies and decide which ones are worth their investment. FROGBOX sold 25% of its stock to a couple of investors for $200,000, which we spent on equipment like new trucks and plastic moving boxes. One of the new investors is Jim Treliving, a co-owner of Boston Pizza, one of Canada's largest franchise chains. He now sits on the FROGBOX board of advisers, and will be a major help when we begin to franchise the company in the coming year.
Since forming the partnership, 1-800-GOT-JUNK's revenues have stopped sliding, and are holding steady at around $1 million a year and profits are up. More importantly, morale is back up and I find myself more excited than ever when I imagine what the future holds for our two companies.
-- As told to Harper Willis
Since turning his business around, Jeff Hill has run three half-marathons and lost over 65 pounds.
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