Author Topic: Interesting small business models or examples?  (Read 2612 times)

DTEJD1997

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Interesting small business models or examples?
« on: March 16, 2018, 11:38:30 PM »
Hey all:

I've been doing some work on my buildings lately.  In doing so, I've been going to hardware stores frequently.  I am happy to report that the buildings passed inspection finally.  So now the real work begins!

I've also been driving in/through Detroit proper lately and have noticed something kind of unusual...

There are a number of small, family owned, independent hardware stores in some of the WORST neighborhoods imaginable.  These places have been there for a number of years....20+ years, sometimes SIGNIFICANTLY longer.  They are not flashy...they appear cluttered and something out of the 50's or 60's.  They do not appear organized at first glance but their clerks know EXACTLY where everything is and what you might need.  They often provide services such as key making, paint mixing, pipe bending, glass cutting, blade sharpening and so on.

I also think they are frequently members of the "True Value" purchasing cooperative.

I also suppose that a good number of these stores own the real estate that they are in.

I think that they are profitable even when a neighborhood goes down in quality.  Perhaps they are even counter to the economic/prosperity cycle?  That is, a person living on the East side of Detroit is more apt to make repairs to their home/car/possessions than somebody say in the Grosse Pointes?  The resident of Grosse Pointe will hire somebody to have it done, OR they may replace the item instead of fixing or repairing it?  The Detroit resident is going to try and do it themselves?

Further, the margins/profitability of these stores may be big? 

Maybe they have dedicated customers that will travel some distance to shop at a store they know and are comfortable with?

Could there perhaps be other considerations that I am missing/overlooking?

So I would submit that this may be an interesting/offbeat/overlooked business?

Anybody have any other candidates?


DTEJD1997

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Re: Interesting small business models or examples?
« Reply #1 on: March 16, 2018, 11:41:06 PM »
WHOOPS!

MEANT TO POST THIS IN THE "GENERAL CATEGORY"

Not sure how to modify/move it?

KJP

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Re: Interesting small business models or examples?
« Reply #2 on: March 17, 2018, 04:53:57 AM »
You mentioned these are "family-owned" and the employees are very knowledgeable.  Are the knowledgeable employees family members as well?  How profitable would the business be if it had to hire non-family employees of similar quality to run all aspects of the business? 

It's possible that businesses like these survive largely because of the value that family labor provides that doesn't show up (or doesn't show up in full) as an expense on their profit-and-loss statement.  I suspect many family-owned restaurants, hotels and gas stations are the same way.

globalfinancepartners

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Re: Interesting small business models or examples?
« Reply #3 on: March 17, 2018, 05:27:46 AM »
I second a lot of what KJP mentioned.  These type of hardware stores and other small shops are common in cities.  Their long term key to survival is often whether they control their real estate or not.  The ones that rent their space, in my town at least, are forced out by rising rents as soon as their (usually very long term) lease comes up.  They have no incentive to report any net profit, of course.  They do serve to pay salaries to however many family members and usually a few older key employees who might as well be family by this point.  Some are True Value affiliated, some are smaller Ace shops, and many others have independent names and a slightly messier inventory.  Some of the inventory is positively antique in these types of places.

I have one independent shop I frequent, Clement Hardware, that has non-competitive prices but stocks window pulleys that I buy frequently.  These are the pulleys found in the tops of historic double hung wood windows that the sash cords roll over, into the pockets behind the trim where they are tied to cast iron weights.  I think Clement stocks these pulley just for me, but you need 4 per window and I usually buy their entire inventory when I visit.

These companies can survive a lot longer if there is no Home Depot or Lowes within a convenient travel time, traffic pattern, etc.  Their prices are usually not competitive or even close to Home Depot, Lowes, Walmart, etc..

I frequent 4 such shops in New Orleans and they serve their purpose but none are near the big boxes.  One cuts single pane glass in a hurry for me, one swaps out my sodastream tanks, one sells me window pulleys and one sells me a hard to find MAPP gas for a torch.  They are also smart enough to stock certain items other stores refuse to carry, like a certain bolt for a Makita disc sander that all painting crews in town use but nobody else feels like stocking.  Every crew in town knows where to find it same day...

Always one rent rise away from extinction though

DTEJD1997

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Re: Interesting small business models or examples?
« Reply #4 on: March 17, 2018, 07:44:37 AM »
Hey all:

Thanks for the replies!

I am going to speculate that all of the hardware stores I've considered own their real estate.  Real Estate in the city of Detroit is inexpensive, sometimes VERY inexpensive as compared to other cities.

As to the employees, I would guess that SOME of them are family members...but I would also guess that a good portion are probably not.  I am also going to guess that a good chunk of the employees are very long term...but some are not (some are in their 20's?).

Most of these stores do not have immediate competition from the big box retailers...BUT one of them does!  There is a family owned store that appears to be one of these prosperous independents only about 1.1 miles from a Home Depot and 1.5 miles from a Lowes.  This location has been in business since 1946.  I am sure they own the land & building(s), and they have a lot of rentals AND services.  The store is "crowded" with inventory, packed floor to ceiling with narrow isles and almost every inch is used for something.  I passed them countless times without going in, but did one day.  They have knowledgeable clerks and you can get in & out FAST.  So I am now a repeat customer, TIME IS MONEY!

Jurgis

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Re: Interesting small business models or examples?
« Reply #5 on: March 19, 2018, 07:59:44 AM »
The only thing for which we like the neighborhood Ace Hardware store is mulch. I prefer to buy bagged 3 cubic foot bags and I need a bunch of them. Ace stocks the Jolly Gardener bags that just fit what I need. Home Depot/Lowes nowadays have 2 cubic feet expensive artificially colored mulch, which is total crap.

Not sure what I'm gonna do if Ace closes or discontinues the mulch. I hate ordering loose mulch pile and nobody ships the pallet of 3 cubic foot bags to residential AFAIK.  :(

Edit: The service @ local Ace varies from OK/great (young kids mostly) to snobbish (old guys, owners??). I don't think it's better than Home Depot/Lowes. I would not go there except for distance/convenience+mulch availability. ;)


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« Last Edit: March 19, 2018, 08:04:31 AM by Jurgis »
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LR1400

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Re: Interesting small business models or examples?
« Reply #6 on: March 19, 2018, 08:46:44 PM »
I see these small businesses succeed:

1. Select franchises
2. Scrap metal business
3. Car wash franchises/roll ups
4. Real estate investment/partnerships

I know multiple people worth over $20mill in these sectors and with many over $50milll - $100mill net worth.

Spekulatius

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Re: Interesting small business models or examples?
« Reply #7 on: March 22, 2018, 06:55:19 PM »
I see these small businesses succeed:

1. Select franchises
2. Scrap metal business
3. Car wash franchises/roll ups
4. Real estate investment/partnerships

I know multiple people worth over $20mill in these sectors and with many over $50milll - $100mill net worth.

Real estate has made probably more people wealthy than any other asset class or business. Having a long term view and local knowledge, plus being in the right place are key factors.
To be a realist, one has to believe in miracles.

valueorama

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Re: Interesting small business models or examples?
« Reply #8 on: March 23, 2018, 06:15:10 PM »
Real estate has made probably more people wealthy than any other asset class or business. Having a long term view and local knowledge, plus being in the right place are key factors.

On real estate the key success is being able to do repairs on your own. Need to put in manual labor first to later go hands off.

Morgan

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Re: Interesting small business models or examples?
« Reply #9 on: March 24, 2018, 05:33:33 AM »
On real estate the key success is being able to do repairs on your own. Need to put in manual labor first to later go hands off.

This is very true. You just won't have cash from operations to grow if you hire outside contractors for everything.