"Sleeper Industry" Examples?

June 09, 2023

by an member in San Juan, Puerto Rico

I could really use some help uncovering industries to go after.

The main attributes I'm searching for in an acquisition include:

B2B Services (My background)

Recurring / Contractual Revenue

Low Cyclicality / Seasonality

Low Ongoing Capital Expenditure Needs

Resistant to Macro Economic Trends & Customer Price Sensitivity (as in, It serves a Critical Need in the Business)

Large Addressable Market with Little Business Consolidation (Fragmented), or

An Obscure, Out-of-Sight Business Segment with Few Competent Competitors.

Low Risk of Technological Obsolescence

Low Risk of Regulatory Threats

Non-Commoditized (No “Race to Bottom”)

High Competitive Barriers

I might be wasting my time hunting a unicorn, because the only things that come to mind are:

1: Technology-Enabled B2B Services (Excluding Marketing Services)

2: Business Process Outsourcing

3: Regulatory & Compliance Related Services

4: Facilities Management (Maybe)

Any ideas as to what industries I could be missing?

As a final note, I'm looking USA-wide that may be run as absentee.

Edit: formatting

Reply by a searcher
from State University of New York (SUNY) in Buffalo, NY, USA

Like you mention in your post, you’re looking for a unicorn with all the criteria you’ve mentioned. Even if folks had an industry that checked all of those boxes, I’m not sure they would be likely to share as it would obviously be a very attractive industry for them to explore themselves. If it’s a well known industry then multiples are going to be sky high if it checks all those boxes.

Similar to when you buy a house, pick a few must haves and have a bunch of nice to haves. The nice to haves should be issues or risks you feel uniquely comfortable handling. For example, if you have a lot of experience managing inventory, you are likely more comfortable with a business that holds a lot of inventory than someone who doesn’t have the same background. That means you can pay slightly more than the other buyer and your risk adjusted returns should be equal or greater.

One way to find industries that check a lot of boxes is to just start getting deals in the door. I’ve come across so many interesting niches by just looking at stuff.

Reply by a searcher
from National Defense University in Santa Rosa Beach, FL 32459, USA

I think a good ol' "evergreen" businesses such landscape maintenance (in a warm climate area so you don't have seasonality issues) and commercial cleaning businesses will fit most of your criteria. They may not sexy, but they will churn out the cash if they're run well.

+6 more replies.

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