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TheStreet Open House

Business Advice From Drug Dealers

BOSTON ( MainStreet) -- There are valuable business lessons to be learned from street corner drug dealers. It takes more than a gun or some muscle to make a living with recreational pharmaceuticals -- it is a career that touches upon any of the disciplines taught in an MBA program.

One might consider the shady crack seller or pill pusher as akin to an independent distributor working for a global conglomerate reaping billions of dollars a year. All the fundamentals of running a successful business are part of everyday life for a dealer.

Why do they call it dope? There's a lot to learn from drug dealers' business school of the streets.

There is securing raw goods and turning them into a consumer-friendly product; commodity speculation; and building a base of buyers and ensuring consumer retention. Customer satisfaction, brand management and advertising are all necessary to stay ahead of the competition and deter upstarts looking to snatch away market share.

While a Chipotle (CMG - Get Report) or Wal-Mart (WMT - Get Report) might have a team of experts to parse maps and demographics before picking a location, drug dealers have a more street-level approach to real estate. They need to consider the character of a neighborhood and choose a base of operations convenient to customers, yet not so close to police stations, churches or schools that they may draw unwanted attention.

There is also research and development at play. After all, someone had to perfect the art of reducing cocaine into the cheap, easy-to-move and more addictive form of crack. And basement labs everywhere are always looking to perfect their recipe for crystal meth.

In their book Rework (Crown Business, 2010), authors Jason Fried and David Heinemeier Hansson -- co-founders of 37Signals, a Web application company -- cite the value of the age-old drug dealer strategy of offering free product to new customers as a ploy to get them addicted and coming back for more. That first joint on the house is really just a loss leader intended to drive bigger, more reliable sales.

Giving away a little to get a lot is all in a day's work for ice cream parlors, coffee shops and health clubs.

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