Profit in the Shadows: Strategies for Inconspicuous Businesses

How to Build Profitable Businesses in Unattractive Niches

Welcome back to our weekly series, The Winning Entrepreneur: Your Weekly Guide to Success, a program designed for ambitious entrepreneurs and people who want to turn their ideas into successful businesses. Last week we talked about quiet leadership , today we’re going to talk about strategies for under-the-radar businesses.

When you think of successful businesses, your mind immediately goes to tech giants, luxury brands, or innovative startups. Yet some of the most profitable companies operate in industries that rarely make the news: maintenance services, industrial supplies, logistics, distribution. Warren Buffet himself has often invested in these “boring” businesses — solid companies, with steady cash flow and limited competition.

How to Build Profitable Businesses in Unattractive Niches

The key to creating a profitable business in an unattractive industry is to change your perspective. Let’s look at the example of Clayton Homes , one of Warren Buffet’s invested companies. They operate in the manufactured home sector, a market that few would consider glamorous, but which offers stability and attractive margins. Buffet saw the potential not in fashion, but in necessity: people will always need affordable housing.

Another example is Oatey Co. , a plumbing products company. This unassuming business has provided steady profits due to the ever-present demand for home and commercial repairs.

How to spot these opportunities:

Identify constant needs: Industries that meet basic needs (maintenance, cleaning, repairs) tend to be stable even in times of crisis. For example, pest control services or the supply of building materials are in demand regardless of economic trends.

Evaluate the competition: Unattractive markets are often less saturated, leaving more room for differentiation. Consider the industrial laundry sector, where efficient service can create a strong competitive advantage.

Analyze Profitability: Traditional businesses often have predictable costs and loyal customers, which are key to sustainable growth. For example, specialty cleaning companies have high margins due to customer loyalty.

Techniques for Identifying Opportunities in “Boring” Industries

One of the secrets to discovering opportunities in less glamorous sectors is curiosity. A case in point is that of Joe Coulombe, founder of Trader Joe's. Instead of focusing on traditional supermarkets, he created a niche format, all under his own brand, offering special products at ultra-competitive prices, transforming the ordinary into the extraordinary.

Another example is Waste Management, a leading waste disposal company in the United States. An unglamorous but essential sector. Thanks to efficient management and technological investments, they have dominated an often overlooked market.

Practical tools for finding ideas:

Talk to those in the field: Workers, technicians, and suppliers often see inefficiencies that a business owner can solve. For example, the logistics industry offers numerous opportunities for improvement through automation and digitalization.

Look at customer frustrations: Recurring problems are valuable clues to opportunities. Consider the home services sector, where a lack of professionalism opens up spaces for quality operators.

Study foreign markets: Often, successful business models abroad have not yet spread locally. For example, the concept of dark kitchens has spread rapidly thanks to the growing demand for delivery.

Strategies to dominate markets ignored by the big players

Big players tend to snub markets that are considered small or low-profile. This leaves room for those willing to specialize. An example is Fastenal, an American company that sells small industrial parts — bolts, screws, tools. It's not a glamorous sector, but thanks to impeccable logistics and excellent customer service, it has become a market leader.

Other examples include Pool Corporation, which distributes swimming pool supplies. It is not a glamorous industry, but thanks to an efficient distribution network and specialized service, they have built a dominant position.

How to Stand Out in These Markets:

Focus on quality of service: In sectors where the product is standard, assistance can make the difference. An example is Cintas, leader in the supply of corporate uniforms thanks to an impeccable service.

Specialize: Being the best in a narrow niche is often more profitable than competing on a large scale. Companies like Grainger, who specialize in industrial supplies, thrive on their specific expertise.

Create barriers to entry: Develop exclusive relationships with suppliers or customers, or invest in hard-to-replicate skills. For example, specialized maintenance companies create competitive advantages through advanced training of their staff.

How to Turn Traditional Businesses into Profit Machines

Sometimes, you don't need to reinvent the wheel, you need to make it spin better. Take the example of See's Candies, another Warren Buffett portfolio company. They sell candy, but they've transformed a simple product into a beloved brand, maintaining high quality and caring about the customer experience.

Another example is Rollins Inc., a leading pest control company. With efficient management and a focus on quality service, they have transformed a “boring” industry into a profit machine.

Levers to increase profitability:

Optimize Processes: Cut unnecessary costs without compromising quality. Companies like McLane Company thrive on flawless logistics.

Differentiate your offering: Even in standardized industries, product or service innovation can create extra margins. Take Servpro, specialized in post-damage recovery, which stands out for its speed and efficiency.

Invest in local marketing: In less crowded markets, a strong local presence builds loyalty. Service businesses like lawn and gardening companies thrive on local reputations.

Must-Reads

For those who want to delve deeper into these strategies, I recommend:

“The Outsiders” by William N. Thorndike: Stories of CEOs who created immense fortunes with unconventional approaches.

“Common Stocks and Uncommon Profits” by Philip Fisher: How to Spot Companies with Hidden Potential.

“The Essays of Warren Buffet” by Warren Buffet: Practical Lessons in Investing and Business Management.

Profit often hides where few look. With curiosity, analysis and strategy, it is possible to build solid and lasting businesses in seemingly unglamorous sectors. After all, as Buffet teaches, fashion passes, but value remains.