I was feeling rather shaggy this morning so I stopped at my local barber shop for a haircut before heading to the office. (Yes, that’s a picture of my haircut. I feel so much lighter!) The barber and I talked over the CNN News and got around to the subject of the economy. Turns out his boss, Mr. Tony, just bought one of the town’s oldest barber shops a few blocks away, on Main Street. They do about 350 haircuts a week there (at around $11 each). He reportedly paid less than six figures for the shop, which has a fabulous lease–the rent is only $900 a month. So the shop does around $200,000 a year in cash sales and rent is around 5% of that.
Mr. Tony also owns two other shops in town–the one I was in this morning and another two blocks away. He owns the land and the buildings they sit on as well. When Dunkin’ Donuts moved in next door they wanted to buy his shop to make room for additional parking, and offered him quite a lot for it. He turned them down. He didn’t need the money. He also owns two more barber shops in the next town over…and has a few rental properties in the area. He keeps a low profile. He’s only 34 years old. He does not invest in the stock market. Why bother? His businesses generate plenty of cash dividends for him.
I think small business entrepreneurship is going to look more and more like Mr. Tony’s model in the coming years. Smart people will find a niche that may not be sexy but has low overhead and is reliable (i.e. recession-resistant). They’ll take advantage of opportunistic moments to buy out competitors, for cash. Then they’ll pick up a real estate investment here or there, just a simple house or two, with reliable tenants and a residual income stream. Mr. Tony could care less about the recession.
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