What is the perfect business for today? In my opinion, this is what it would look like:
1. I’ve mentioned my first criterion already. It would be a real business that could become more valuable over time and eventually be sold for millions of dollars. Single-store retail enterprises, as I’ve said, seldom qualify. Most have a net zero balance sheet when they are mature. You can sell them for a portion of the inventory and physical assets. That’s about it. No big payday.
2. It would have unlimited upside potential. It could go from 10 million to 100 million as easily (actually, more easily) than it could go from zero to a million.
3. To have that kind of upside potential today, it would have to have the entire world as its marketplace – not just a local community or even an entire country.
4. Richard Russell pointed out in his essay – and, of course, I agree with him – that the perfect business would sell a product that benefits from “inelastic” demand. Inelastic means that the price you charge for the product is determined by you, not the market. If you are selling canned goods or beer, for example, you can’t charge whatever you want. But you can do that if you are selling luxuries, rarities, or unique pieces. That’s one of the reasons I like the art business. (Still, as those of us in that business know very well, even art can be affected by the market. Prices have dropped by about 30 percent in the past year.)
5. In addition to benefitting from inelastic demand, it would be a product that could not be easily substituted for or copied. Ideally, as Russell said, it would be “an original, or at least … something that can be copyrighted or patented.”
6. The perfect business would not employ blue-collar workers. Forgive me for saying this, but, in my experience, the hassles are just not worth it. Working with professionals is infinitely easier.…
