Yves here. Perhaps this is just a coincidence, but this is the second story in a month where Kansas is breaking with convention to help its economy. The first, as readers may recall, was the state legislature bucking the Koch brothers in voting for Medicaid expansion. This is a clever approach to help important, established local businesses operating when their owners want to retire.
One reason for running this post is in case any readers have university or business school connections and think their school might consider this idea. RedTire has been in operation long enough that it should have most of the bugs worked out.
By Kaela Bamberger. Originally published in Yes! Magazine
In Kansas, a new matchmaking service is helping transition small businesses to new hands. Could it be a model for the rest of rural America?
When asked what makes a place worth staying in, most people don’t immediately think of a pharmacy. But if there’s nowhere nearby to get a prescription filled, inconvenience can lead to relocation. In a state like Kansas, where nearly a third of the population is rural, a local establishment like a pharmacy or dentist’s office can be a stronghold of community life.
Take the city of Concordia, Kansas, with a population just over 5,000. Doug Funk set up shop here after finishing pharmacy school at the University of Kansas. “I always wanted to do something where you could be your own boss,” he says. In 1985, after working for several years in a hospital pharmacy and in other jobs, he bought Funk Pharmacy and brought his life to Concordia.
For 30 years, business was good, and the pharmacy employed as many as 12 people at a time. He had “really, really loyal customers,” Funk recalls, “your average, everyday Joes.” Over the years, Funk became a well-known and respected pharmacist.
Eventually, when he was getting into his 50s, Funk started to consider retirement. He spoke to a few folks he thought could take over the business, but none of them offered a fair deal.
“They basically wanted to steal it from me,” says Funk. “They wanted to pay a lot less than what it was worth.”
Funk would have had a hard time trying to use a traditional business broker—a professional specialized in the buying and selling of companies. Firms in small towns are less attractive to brokers, who typically only work in more densely populated areas, and for a high price.
Thankfully, Funk had heard of a program for people in his situation, and turned to them for help. The program, called RedTire, was similar to a business broker, but it was free of charge and happy to make deals in rural areas.
RedTire has nothing to do with tires; instead, the name is short for the phrase “Redefine Your Retirement.” The staff do everything from appraising the business to vetting the buyer, and even offer counsel after the deal is done. While traditional business brokers work to maximize the advantage of the party that hired them, RedTire focuses on making the fairest deal possible for both sides. As of December, it has brokered the sale of 27 businesses, which together employ more than 200 people, in sales that total $22.6 million. The program has grown steadily in the five years since it launched, and now gets more work requests than it has the capacity to take on.
Some of the businesses RedTire transitions would probably have disappeared if the service wasn’t there. Steve Kelly, the vice president of economic development at the Chamber of Commerce in Lawrence, Kansas, says that he’s seen many small businesses close when the owner couldn’t find a new person to take over. “Not only do you have a business owner that’s in a bad spot, you potentially put the whole community in a position of loss,” he said.
And when small towns lose businesses, people leave with them, explains Wayne Bell, the district director of the Wichita, Kansas, branch of the federal government’s Small Business Administration. “It is vital to the life of a small town to have those businesses that may have been there for some time. It’s important that they’re able to hand off the business to another owner that’s interested in retaining the services right there in the town.”
And that’s exactly what happened for Doug Funk, when an acquaintance named Robb Rosenbaum expressed interest in buying his pharmacy. RedTire made sure the deal went smoothly.
In 2015, the Rosenbaums made the move from Kansas City, Missouri, to Concordia to take on Funk Pharmacy. Robb was a bit nervous to relocate his two small children to such a tiny city. “But that has been excellent, actually,” he says. “They have done better than ever could have been expected, both of them.”
Robb now owns the pharmacy jointly with his wife, Meredith. Because Funk was running a tight ship, Rosenbaum says it’s been an easy transition. Besides filling prescriptions for individuals, the pharmacy also serves hospice patients and even the county jail.
“Out in a rural community like [Concordia], we kind of do a little bit of everything,” says Robb.
In addition to their work at the pharmacy, both Rosenbaums serve on local boards: Robb at a local foundation and Meredith at the Concordia Chamber of Commerce.
Both Funk and Rosenbaum are alumni of the University of Kansas, which hosts RedTire. The university is key to the program’s success, and students benefit from every part of it. Business students help staff the program and get a paid learning opportunity, while alumni get free help with the buying and selling of their firms.
After five years in business, the folks at RedTire are looking into how to share their model with other institutions.
There’s been plenty of interest in emulating the idea, says Denton Zeeman, program manager. But when it becomes clear that RedTire doesn’t charge its clients, many institutions tend to abandon their plans to replicate the project. “There has to be some social corporate responsibility, and therefore support from the university,” Zeeman says. He is confident that, with some personal support from RedTire, other universities could get something similar up and running.
“This need exists probably in every country, and I do believe it exists in every state in the U.S.,” says Zeeman.
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One part of this story that I found striking:
Aren’t public universities supposed to serve the public? If the state legislature was on the ball, it could shake loose some funding for a program like this. It seems like everyone would win.
It seems to me that those reluctant institutions think they will act as brokers, and are thus dismayed to see they cannot charge profitable fees.
In fact, I am intrigued: how did that RedTire initiative get off the ground? Who had the vision and how did they convince the university of Kansas to support them in the first place? Appraising businesses requires quite some work, there are certainly legal issues (due diligence, liability), there must be outreach effort to let people know of the opportunity to find businesses resp. people willing to take them over. It is an impressive action — and I wonder how it was organized.
By the way: the chart at the top made me uneasy. In a period of 20 years, it shows a near-complete collapse of the small and medium-sized town economy — while large urban areas seem to monopolize all growth.
This is what you get from multinational corporations and a corporate duopoly running the political system and the whole damned country (right into the ground). Like you, I found the pace of change displayed in the chart above absolutely shocking.
And the establishment parties thought they could maintain their lock on power while this was going on?
Add the graph displayed in Gaius Publius’s post today: http://www.gallup.com/poll/180440/new-record-political-independents.aspx
to the chart in this post, and you’ve got a pretty complete picture of this moment in time.
In a resource extraction economy it doesn’t matter. Once they wipe out the resources in one area they move on to the next. See also: the rust belt.
Those rural areas are no longer profitable for the power brokers and elites.
Great to know about this. Please keep posting stories about heroes as well as villains!
But, but, but, this is pinko sosheelism! They don’t charge a fee! Costs are paid by the gubmint funded university! Why haven’t the Kochs stomped all over this?
This is an initiative that should be noticed by President Trump. It seems to me it is right up his alley. I hope somebody with more clout than me can bring it to his attention.
And I also hope it gets lots of attention from the commentariat here.
Thank you, Yves! Bravo, RedTire!
Why is it up his alley? It competes directly with several of his scams over the years. If you can use a socialist government program, what need is there for Trump U/?
Universities are also often in prime locations to provide such a service, as they tend to be in small towns/cities, surrounded by Concordia-esque communities. Which means they’re going to understand and see the needs of these small towns better than some LessWrong techie-oriented non-profit on the coasts.
Thanks for this post.
“How it Works” from the RedTire website:
http://redtire.dept.ku.edu/how-it-works/
This is a great story. Thanks. This service is a perfect example on how to stem the tide of neoliberalism. Certain public institutions have the duty to perform socially important tasks in a non profit manner. The cost of maintaining them should be undertaken with volunteer labor, donations, and tax subsidies. Neoliberalism survives by driving the thought of non profit organizations, centered on the public good, from consciousness. Neoliberalism is the subversion of public trust and goodwill. It is an ongoing form of brainwashing that has been very successful.
Small prosperous communities have been the backbone of America since its inception. The neoliberal program to hollow out the country, and plunder it’s riches, has reached a critical juncture. The failure of neoliberalism is the externalities eventually catch up with you. They cannot be ignored forever. This story points to a solution, so will be ignored, or crushed by the status quo.
This is the type of institution that needs to be self funded by workers and small businesses. Honest brokers are needed to maintain the systems, and honest workers are needed to supply the labor. Honest government is needed to supply the security that all this activity can occur unmolested. It is the exact opposite of the plunder economy that we currently are trapped in, and why energy, and resources are wasted on both the democratic and republican parties. The republican trickle down economics is a failure and the democrats have given up on the common people. The time for direct action is now.
To my mind, those wishing change should direct their money, time, and energies into supporting organizations like RedTire, and those like it, directly. A political party dedicated to following principles actually bringing about results for people will arise out of these efforts organically. Political institutions follow community.
Well said.
SMEs are often not only the critical centre and lifeblood of many smaller communities.
Unlike many bigger businesses they tend not to exist in a state of ‘real or imagined’ perpetual tax deductible debt, they’re effectively anchored to the place where they do business, and crucially are also the one of the most reliable (and compliant) providers of vital tax revenues for government.
Really makes you wonder why governments the world over apparently seem to do so little to nurture more of them or at the very least sustain the ones that are left?
https://news.ku.edu/redtire-program-earns-2016-ueda-award-excellence
“The program is a free service and is financed by the KU School of Business and grant support from the U.S. Department of Commerce and the U.S. Economic Development Administration.”
Great program. Not quite sure how much the state government is funding it though since KU School of Business probably has a decent endowment and two federal agencies are providing grants.
Thank you for this, Yves – it’s so refreshing to read of good things happening in these much derided “flyover” states. As it happens we drove through Concordia a few days ago, and will be doing so again this week on our way back to Nebraska from OK (another fine mess I got us into -but not due to location). We shall make sure to stop off in Concordia and give their small businesses in the downtown area some custom.
Democracy at Work, started by Richard Wolff, has a program that works with retiring business owners and their workers to transition the business over to worker-democratic enterprises.
RedTire could do the same thing, drawing any needed expertise from newly graduated students for businesses like dental or pharmacies… the workers, the new pharmacist or dentist, the owner, and the state work out the finances. The state would provide the loan, and can expect to benefit from the counter-cyclical nature of worker -democracies that would likely prevent further degradation in rural areas.
One more data point I can add is a friend whose favorite yoga place closed because the owner was retiring, and none of the instructors could handle the responsibility. This is a town with a median income of 90K, so it’s not poor by any means. A service like this could have kept the place open easily me thinks.
If a big purpose of local gov is building and sustaining community then I’m surprised all of them don’t have such a service.
Thanks for this post. Great idea.
I hope this can get shared across the country bc this is what’s needed. I have read articles in various local nooz papers about similar issues and problems across rural CA – which covers a lot of territory, as you might imagine. Small town pharmacies, doctor and dentist offices often have older owners who want to retire but cannot find someone to buy their business from them. If they finally retire and close their business, the small, rural town is really hurting. Residents may have to travel long distances to obtain basic services.
I am not connected to anything that I could pass on this info, but I hope it gets disseminated. And yes, Trump should find about this and highlight it as a great model.
Hope Walgoon’s doesn’t see this and drop a store onto the next streetcorner, that being their MO.
My grandparents lived in a tiny town in Kansas that barely exists anymore. Probably in another decade the remaining elderly residents will die off, and there are no new people coming in to replace them. Just search for “Kansas ghost towns” to see many websites documenting the phenomenon. Hopefully this initiative can do something to help some of the remaining communities.
Update on 1st paragraph of the article:
Ks. House failed to muster votes to override Gov. Brownbacks veto of Medicaid expansion (Brownback is a total Koch tool)
One other issue that would make one pause is that there is a Wal-Mart in town with a Pharmacy as well as one other one. So the issue is in a county of 10k folks how many pharmacies do you really need? So its not like folks could not get prescriptions filled. It may be the issue of the number of pharmacies that made it hard to sell the store. Note that the other non Wal-Mart pharmacy also has locations in at least 2 towns also. So a stand alone pharmacy is always going to have a hard time surviving. In particular with the move to mail order for chronic drugs. It would be interesting to see the number of births in the county relative to population or do folks go to Salina or Manhattan to have children. I do know if you look at the statistics in the Texas Almanac you find that a lot of small counties have fewer births than you expect since folks need to go to a bigger county to find OB/Gyn Services (Try Kimble or Edwards counties in Tx for example) or places like Austin, NV etc.
Actually what states need to do is to authorize telemedicine so that big city physicians can see patients remotely with a nurse or EMT to take vital signs. In particular Psychiatry needs this authorization.
Concordia btw is a county seat but was established by the Railroads on the principal that a farmer using horse and buggy needed could do a 5-10 mile round trip in a day. As usual with small towns on non mainline rail routs the railroad is now torn up.
I love the content within this piece, and in particular its description of one highly effective way to subvert the neoliberal TINA narrative.
My only quibble with this piece relates to my utter contempt for the use of the word “transition” as a verb. This usage is just another corporate neoliberal bullshit tell — exactly like “innovate” especially when used as a verb — and should be eschewed by writers of substance and moral principle.
Interesting concept. Strikes me as a combination of the student earning education credits, while he/she works outside the classroom in the real world on an unpaid internship. I see some real benefit here that is not easily reducible or definable into bottom line $$$. Because profit seekers look to grab the ripe low hanging fruit from the big trees in the lush forests, what RedTire is doing is not attractive to them. But undeniably this is a win-win-win situation brought to us without $$$ driving it through — for the students, the new and retiring business owners, and the community these businesses reside in. Thanks for sharing this. The world could use a little more Mayberry and a lot less neoliberal profit wastelands like Detroit, MI in it.
Michael Hudson at the University of Kansas, (Missouri), is another treasure.
Perhaps ‘flyover country’ the site of the worst problems is where the economic solutions for our country’s decline will originate instead of on the ‘intellectual’ coasts from whence the problems originate.
Prof. Hudson is indeed a treasure. He’s at the University of Missouri in Kansas City (UMKC).
I hope you are right about “flyover country” being the place where solutions are found.
You have lost the bigger picture. Small towns are dying, just because of the Rustbelt syndrome. Acquisition of small farms, lead to just big farms. Just as a small farm needed a family and day labor to run that’s all it takes to run one large farm. Add mechanisms to aid labor, you can cut the day labor costs. Same thing happened in Detroit.
The argument about colleges, begetts the argument, endowments of patrons. Such a program is a creation of patrons, such as the business school, and the chairs of those departments. Each chair has to raise pledges, and publish.
I liked the linked article more, but I am partial to co-ops and ESOPs. Thanks very much.
How much was the move to mail order pharmacies hurting his business? I noticed the recent Penny’s store closings seem to be concentrated in small towns. Is the internet shopping going to kill small town America?