Unveiling the Timeless Gems: Businesses That Stand the Test of Time
Starting a business is often accompanied by risks and uncertainties, making the entrepreneurial journey a challenging one. While success in business is never guaranteed, some ventures have managed to defy the odds and achieve remarkable longevity. In this article, we will explore businesses that have demonstrated amazingly low failure rates, standing as beacons of resilience in the ever-evolving market landscape.
Essential Utilities and Services
Industries that provide essential goods and services tend to exhibit remarkable stability. Businesses in the water, electricity, and waste management sectors, for example, are integral to society’s functioning. As long as these services remain indispensable, their demand remains steady. While new players may enter these industries, established providers enjoy a natural advantage due to the high barriers to entry and the trust they have earned from the public over time.
Healthcare and Pharmaceuticals
Healthcare is a timeless industry, as people will always require medical services and medications. With advancements in technology and increasing life expectancy, the demand for healthcare services is expected to rise steadily. Pharmaceutical companies, too, have proven resilient, driven by ongoing medical needs and innovations in drug research and development.
Food and Beverage
The food and beverage industry is another sector with consistently high demand. People need to eat, and consumer preferences continually evolve, creating opportunities for new entrants to cater to changing tastes. Established businesses can leverage their brand recognition, supply chain efficiency, and economies of scale to maintain a competitive edge.
Renewable Energy
As environmental concerns become more pressing, renewable energy companies have experienced significant growth. The global shift towards sustainable practices has bolstered the long-term viability of renewable energy ventures. Governments worldwide are increasingly supporting the transition to cleaner energy sources, offering incentives and subsidies to renewable energy providers.
Insurance Services
Insurance companies are designed to mitigate risks for individuals and businesses alike. They provide financial protection against unforeseen events, such as accidents, illnesses, and natural disasters. Due to the ongoing need for risk management, insurance remains a stable and essential industry.
Education and Training
The demand for education and training persists across all ages and industries. Whether it’s formal education, vocational training, or online courses, people continuously seek knowledge and skill development to enhance their personal and professional lives. Successful educational institutions and training providers adapt to changing learning preferences and remain relevant in the ever-evolving digital landscape.
IT and Technology Services
The tech industry is renowned for its rapid advancements and innovation. Technology companies that stay at the forefront of the latest trends and constantly adapt to meet customer needs tend to thrive. As technology becomes more deeply integrated into our lives, businesses that provide IT services, software development, and innovative solutions are likely to endure.
Conclusion
While no business is entirely immune to failure, certain industries have historically demonstrated an impressive ability to weather economic downturns and changing market conditions. Essential utilities, healthcare, food and beverage, renewable energy, insurance, education, and technology services are among the businesses with astonishingly low failure rates. Nevertheless, even within these industries, success is not guaranteed, and adaptability, innovation, and customer-centricity remain crucial for sustaining long-term prosperity. Aspiring entrepreneurs can draw valuable lessons from these resilient ventures and apply them to their own journeys in pursuit of lasting success.
Video Transcript
What Are Businesses That Never Fail or Have Amazingly Low Failure Rates?
Well, if you look at statistics, you will see that there are certain types of machines like coin-operated laundry centers, Coke and Pepsi, and snack machines (I guess vending machine businesses), and rental properties because typically, even if you are just breaking even on the rental payments, your property is appreciating in value on average over time. Other options that are less commonly known include having a salon where you rent out chairs to the stylists. So you are essentially providing an environment where people can rent from you. Another similar scenario is where you have a commercial building and tenants rent from you to run their business. Often those rental arrangements are for a long period of time, and that can be a low-risk option. Sometimes coworking spaces can be low risk once they get started and have a vibrant established community because essentially the owner of the coworking space is renting out desks, offices, or rooms to long-term business tenants. So that can have a low likelihood of failure. Another option is utility companies. Not easy to get into, but it is fairly well established that a utility company has a monopoly or near-monopoly for providing gas or electricity or cable and internet services. So that is another example.
Those examples aren’t really helpful if you don’t want to go into one of those industries or niches. And so, perhaps a more helpful response to finding a business that has a low failure rate is to look for a business in any industry that has a moat around it. What I mean by the moat is that there is something that protects that business from other competitors getting in.
Blue Ocean Strategy
There was a book a few years back called Blue Ocean Strategy, and it basically talks about when you are out in a blue ocean where it is just blue water and nobody else is competing with you, you have an extraordinary advantage, and it would take a long time for somebody else to come in and try to compete with you. But if the ocean is red with blood because there are so many ships fighting for the same fish or fighting for the same space, a very competitive environment, you are going to be very distracted by competitors and them dropping prices and trying new approaches, etc.
Examples of Blue Ocean Strategy
So, what are some examples of this? You may not remember this, but when I was growing up, PCs (window-based computers) were taking off, and Apple decided to take a very different approach. They decided to be the computers for the education space. And then Apple decided to be computers for people who are into audio and video. And then Apple came out with Integrated using a mouse in a graphic user interface. Now, of course, Windows eventually adopted that, but Apple was creating things that didn’t have competitors, at least for quite some time.
Another more current example is Tesla. When Tesla came out with electric vehicles, people said, “This is ridiculous. It has never been done. And there is a reason it is never been done because it can’t be done. You can’t put enough batteries into a vehicle to actually have it drivable for a long distance. Those sorts of batteries don’t exist.” Well, what did Tesla do? It designed those batteries and manufactured those batteries. And for a period of time, if you wanted an electric vehicle that was able to actually be used to drive long distances and actually worked well, you had to go with Tesla. There was nobody else out there. They had a blue ocean. No other ships were competing with them. No other businesses were competing. Another way to look at it is that being in this new space had a moat.
Building Your Moat
So if you are thinking about investing in a company or growing your own company, often you want to think about what is that moat that you can have. Because if you go into a space and your only approach to competition is a better price, or we are going to get to the customers first, it is really tough. It is tough because quickly, competitors can adapt to whatever you are doing. You have a lower price, they have a lower price, and that is just a race to the bottom.
The Power of Niches
So thinking about how can your company have a blue ocean strategy. How can your offering be unique? And maybe it is finding a niche that is not being served well. And you dominate that niche, and you say, you know what? I am not going to try to be all things to all people. I am going to be the only one that is providing help in this niche. Generally, that is going to be a narrow market segment.
Examples of Niche Market Dominance
For example, instead of saying, I am going to be an accountant to all businesses or all small businesses, you say, I am going to be an accountant to chiropractors. And then when you go out to chiropractors and meet with them, you can say, you know what, I am not aware of any other accounting firm in this area that provides services just to chiropractors, or perhaps it is just to SAS (software as a surface) companies, or it is just to content creators and influencers, or just to sports players, professional athletes.
By picking a market segment that you can serve that nobody else is specifically targeting, often you can establish yourself in that area and get a head start over anybody else because a lot of times people in a company are trying to be all things to all people or sell to all segments. It is this fear that “Hey if I have my offering too narrow, I am turning away other money.” But as the saying goes, “There are riches in niches.” And so, by focusing on a narrow niche, you often can create a moat around your company that is hard for anyone else to get into. That is an example of a moat from a branding or marketing perspective.
Let’s talk about other possibilities. Maybe you are the only one who has access to a certain material or a certain piece of equipment.
An Example of a Highly Specialized Market
I once talked with a company that produced, I believe it was the little rubber or metal piece that goes on leather footballs so that you can fill the air into a football. And they provided that to all of the footballs used for the NFL and for college. So they found that the market rate at the time for those little pieces was like $1.20 each, but they made a strategic decision to sell them for about 30 cents apiece. And they did that because they offered such a low price that nobody else would even think about getting into the space, and they had done that by refining their equipment, their manufacturing process so they could produce this so much cheaper than anyone else that they found no competitors even thought about getting into their space.
I will give you one more example. There is a business that provides testing services to computer motherboards that go on satellites and other high-tech equipment that either handles extreme cold, extreme heat, or extreme vibration. And this company developed the equipment that provides testing for those motherboards. So if you are a manufacturer of these motherboards, you want to have the testing so you can get a rating done. This company created the unique equipment that does this. It costs hundreds of thousands of dollars to do this. And it would take a long time of research and development for anyone else to create this equipment. They kept highly confidential what was in this equipment. And so they use trade secrets rather than patent protection for this equipment because patent protection means you have to register a patent, and now the public knows. They can just read the patent and see how you are using this equipment.
Summary
All right, so going back to the original question, how do you find businesses that will never fail? There, of course, are niches out there and industries out there where you can find that, but I think of looking at a moat. The other thing that can help reduce any company’s odds of going into failure is having an entrepreneurial operating system. For example, the entrepreneurial operating system discussed in “Traction: Get A Grip On Your Business,” which is a book by Gino Wickman. I highly recommend that book for companies with 10 to a hundred employees. After a hundred employees, the fundamentals of that book still work well, but you have additional layers of complexity, and so you will need to add other layers of management and systems in place to ensure accountability and results.
Conclusion
If you have other questions about things we have discussed or other legal topics or business topics of importance to entrepreneurs, CEOs, and leaders running companies, please feel free to add them into the comment section below. I will use those questions to generate ideas and topics for future Live Q&A sessions that you can watch right here.
If you want to be alerted to the next live Q&A, you can subscribe to the YouTube channel and click notifications. You can subscribe to our newsletter to get an email update at aaronhall.com/free. If you follow us on one of the other social media platforms, you may, if the platform allows it, get some sort of update regarding our next live Q&A. I am Aaron Hall, an attorney for business owners and entrepreneurs. This is an educational program so that you can spot issues to discuss with your attorney, avoid common problems in companies, and hopefully, enjoy the rewards of a more successful company and life. Thanks for joining today.