A Business Model That Keeps on Giving



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If there were an Entrepreneur's Hall of Fame, Wayne Huizenga would be a charter member. Most people recognize the Wayne Huizenga as being the former owner of the Florida Marlins baseball team, and the current owner of the National Football League's Miami Dolphins. These are the types of gaudy baubles a billionaire entrepreneur collects. However, his success came from the most elemental business: trash hauling.

Mr. Huizenga started as a small time cartage operator for a waste disposal firm in south Florida. He worked his way into sales and ultimately bought a small firm. In the 1960's waste disposal was a local, independent, mom and pop type of business in the United States as well as in most industrialized countries. There was no scale. Each trash removal firm worked on contracts negotiated with local governments. There was always the fear of political winds changing and effecting a contractors future status.



From his perspective as a small time operator in a highly fragmented industry, Wayne Huizenga knew that he needed a safety net, not wanting to be tied to a sole municipality for his firm's sustenance. His idea was elegantly simple: he would build a national firm, with appropriate leverage and economies of scale, by buying up key independent garbage hauling firms in strategically important markets. This would provide the strength to expand in every secondary market and standardize this formerly sclerotic industry.

This idea evolved into Waste Management. Mr. Huizenga became a billionaire when his firm, after ascending to the number one spot as an international garbage-hauling firm, with contracts spanning the United States, Europe and Asia, was listed on the New York Stock Exchange. The simple idea of consolidating hundreds of independent firms under one roof and standardizing the service menu was a thoroughly disruptive new business model. Former owners for these independent businesses were induced to sell by offers of stock, options and management contracts.

With a billion dollars in hand, Mr. Huizenga could have retired and collected art, cars, coins or stamps. He could have hung out with the idle rich. Instead, he applied the business model that created Waste Management to a completely different business category: home entertainment. In the 1970's, with the market introduction of first beat-max, and subsequently VHS technology, and then the rapid descent of retail pricing for home video players, thousands of independent retail stores popped up offering video for rent. The ability to rent a popular movie tape and play it when desired in the comfort of one's home, was a huge change in behavior and the method of delivering entertainment to the masses.

Wayne Huizenga was restless, looking for a new challenge and open to any opportunity that offered huge potential upside rewards. He saw it in a small, but growing firm: Blockbuster Video. Today, the consumer recognizes the Blockbuster brand as a generic term for home entertainment. 25 years ago, Blockbuster was one of a handful of movie rental chains, several sold franchises, all were regional, struggling for capital to fund expansion, and competing against locally owned stores. The same fragmented industry distribution channels that existed in the garbage removal business were immediately obvious to Wayne Huizenga. He pounced.

After purchasing Blockbuster Video, Mr. Huizenga began the same type of assimilation program he pursued with Waste Management. Small, local video rental chains were purchased. The Company was listed on the New York Stock Exchange and the funds raised fueled a rapid expansion. The leverage and muscle that Blockbuster gained was utilized in purchasing product from the major Hollywood studios at more favorable terms than any competitor could negotiate. Small locally owned stores could not compete and thousands closed, creating more expansion opportunities for Blockbuster.

Blockbuster Video was a growth company with a huge following on Wall Street. Mr. Huizenga had replicated the success of Waste Management in a completely different industry. While Blockbuster was at its apex, he sold the business to Viacom. Hauling garbage is a highly needed, but largely unappreciated service. Renting movies is a service that is less important, but much more desired by the public. The same business model worked perfectly in two totally opposite areas of opportunity.

Blockbuster Video and Waste Management made Wayne Huizenga one of the most recognizable and successful entrepreneurs of the 20th century. Most people with but a small slice of this type of achievement would be completely satisfied and content. Not so with Wayne Huizenga!

Seeking another fragmented industry, where the opportunity to roll-up local and regional outlets would enable repetition of the Blockbuster Video and Waste Management successes lead Mr. Huizenga to the world of used car sales and marketing. He immediately recognized the same dysfunctional market forces, absence of scalability and pricing inefficiencies so readily apparent in the video rental and garbage hauling business.

During the 1990's auto leasing became wildly popular. These cars are leased for a set term, typically returned with average or below average miles and dealer maintained. The problem for the automobile industry was, and is, the inventory glut that occurs as leased cars are returned. This created a unique opportunity for Wayne Huizenga and his favorite business model.

He launched Auto Nation with a public sale of equity on the New York Stock Exchange. Today, Auto Nation is the largest seller of late model used cars in the world. Inventory is vast, offering virtually every popular model in great depth and variety. The scale and national reach of Auto Nation, enables pricing to be very sharp, almost always significantly lower than local dealers. In addition, all prices are negotiable and fixed, eliminating one of the major negatives to purchasing a car, haggling over price.

Three times, in three totally differing industries, Wayne Huizenga has applied a uniquely disruptive business model that has streamlined sluggish, non-dynamic business categories. He started very small. He thought very big. This is a perfect template for every prospective entrepreneur to study and utilize.

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