How an Idea and a Facebook Post Led to a $49 Million Tiny Home Business

What do you do when you're running a company but see an unfilled need in a totally unrelated market? If you're Colton Paulhus, you get together with your family, start your own company and, a year later, start franchising.

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Getting started

In 2019, Paulhus was running a marketing company when he had an idea. "I saw an ad on Facebook for tiny homes being built locally," he says. He reached out to his dad Scott, a 30-plus-year construction industry veteran, and asked some questions, trying to figure out if his idea was feasible. Then, Colton put his own ad on Facebook for tiny homes, curious to see the response. "Within three days, we had 300 people interested, and I'm thinking, There's a market here."

Soon Colton, his brother Austin and Scott were in business building tiny homes on wheels as Anchored Tiny Homes. But it wasn't long before the company switched its focus from tiny homes to the more regulation-friendly ADUs (Accessory Dwelling Units).

"We pivoted at the end of 2020 when the law got more favorable in the State of California for ADU use," Austin Paulhus, Anchored's COO, says. "Now we specialize in just doing ADUs because the market is so big."

Tiny home or ADU?

There are similarities between tiny homes and ADUs, and most people wouldn't notice much of a difference. The distinction — and therefore, the trouble — is mostly in the classification.

A tiny home is a small, often mobile dwelling that prioritizes space-saving design. They are typically under 400 square feet and can be on wheels (mobile) or a permanent foundation. Consequently, in many places, tiny homes are classified as mobile homes, even when they're built on a permanent foundation.

An ADU is a secondary dwelling unit with its own independent living facilities (such as a kitchen, bathroom and sleeping area). They are typically located on the same property as a primary residence and can come in the form of a basement apartment, above-garage apartment, or, in this case, a standalone, non-movable structure on the property.

How a municipality classifies these similar types of structures can — and should — weigh heavily on franchisees.

Related: Is Franchising Right For You? Ask Yourself These 9 Questions to Find Out.

Deciding to franchise

Anchored Tiny Homes began franchising in 2020. Three years later, the team has no regrets. "We haven't looked back," Colton, who's the company's CEO, says. "We did $16.7 million in sales our first full year and then last year we did $49 million, so we're set to grow pretty substantially this year."

There's also one unique aspect of this construction-based franchise: "You do not need to have construction experience," Colton says. "We've got some franchises that are sold and getting ready to launch in Austin, Texas, Jacksonville, Florida, Salt Lake City, Utah, a few different places, and none of [the franchisees] have construction experience."

Beware: Regulations can differ by municipality

Despite the widespread popularity of tiny homes and ADUs, thanks in part to shows like Tiny House Nation, some states are more friendly — less regulated — than others, making legally owning a tiny house relatively straightforward.

"Most of the time, it's up to the local jurisdiction, and each city and county is different," Colton says. "There are a few states that ADUs are approved at the statewide level." Right now that's California, Florida, Rhode Island, Washington, Oregon, Connecticut and Vermont, all with various restrictions and clauses.

On the other hand, New York has always presented a challenge to those interested in tiny home living. The state has historically prohibited the use of mobile tiny homes for permanent living arrangements, restricting their use to temporary or emergency circumstances. However, recent legislation has softened regulation on ADUs in the state.

The local and state regulations concerning ADUs and tiny homes are something potential franchisees should research with the help of an attorney before purchasing a franchise.

Related: Become a Franchise Owner in 5 Easy Steps

Franchisee requirements and support

Colton says the company provides franchisees with a marketing team, an appointment-setting team and assistance with the various permits and legal issues that arise from jurisdiction to jurisdiction.

In addition to a financial commitment, there are certain qualities Anchored Tiny Homes is looking for in a franchisee: "The number one thing we want out of a franchisee is someone who's going to buy into the brand and then have sales skills," Colton says. "We generate the leads; it's just a matter of the franchisee convincing them that we're the right company to do it."

What Scott, a co-owner, looks for in a franchisee is more abstract: "The 'go-getter' mentality," he says. "The ownership mentality. They do whatever it takes to get the job done and sell the units and build a business. This has to be a hands-on person; this isn't a burger franchise."

The market for ADUs and tiny homes

The tiny home market is expected to balloon to more than $2.5 billion by 2030, marking a huge opportunity for builders. Although costs can fluctuate due to material supply and other factors, including Covid-19 and the war in Ukraine, Colton says the industry has weathered those storms well, and he's optimistic about the role tiny homes and ADUs can play in the country's housing market.

"There are anywhere seven to 10 million homes that need to be built across the country," Colton says. "We're not going to get there with single-family homes. So that's where we believe we come into play. There's a huge market."