Many years ago I took at class at Wharton taught by a very old gentleman who owned hundreds of small companies, each under $1 million in annual sales. He was interested in all kinds of businesses, as long as there was no competition, no SIC code (because if it has a business category, there must be other people doing it already), and demand from customers that can’t be easily satisfied. Some examples that have stayed with me over the 20+ years since the class: A business that removed dead animals from farms. “When a horse dies, you don’t go out for bid to see who’s going to remove it!” In another case, he bought a warehouse full of old mainframe punch-card readers and then leased them out for a nominal amount each month to companies that had mainframe programs still running. He would lease them on an open-ended basis. “Just return them when you’re done” was his policy. He’d collect checks for $100 a month for each one…and none ever came back. Once he was in the accounts payable systems of his clients, it cost them more to return the device and take him off the list than it did to just keep paying him. The professor said his businesses existed “in the space between the elephant’s toes,” meaning a niche where no one was likely to find him and he could make good money under the radar of competitors. I never forgot that phrase. One of the keys to success in a small business is finding that space for yourself where customers find you but competitors don’t.
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