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Last Update: Monday June 21, 2021

Key Idea: Expand With Horizontal and/or Vertical Integration

Andy Murstein has been studying Medallion's customers all of his adult life.

Key Question:


And,  how do I spot opportunity?

Stick with your current customers.  Watch them.  Ask them what their problems are.  Back in 1979, when Medallion decided to sell some of its taxicabs, they naturally approached their current drivers. That's when they learned that their drivers were unable to obtain conventional financing to purchase the cabs. Medallion "took the paper", financing the sale themselves. Once these transactions occurred, Medallion was a taxicab business and a lending institution as well.

Q: Why would a company move away from its core business and take on the risk of managing a start-up within the established business?

A: Most of the business owners we meet say, "The idea for a business is less than 2% of the result." So much of the work of business is devoted to sales and marketing -- as much as 80% in some industries. If you already have a customer and can provide additional products or services then your total cost of selling is reduced. Medallion knew their customers, who had been their employees for many years, very well. As far as the Mursteins were concerned, the risk was minimal.

The key to expanding into new businesses is integration. Horizontal integration, which the Mursteins really excel at, is providing new goods or services, outside of the core business, to an existing market of the business. Vertical integration, another effective way of expanding the revenue base and bottom line profits of a business, occurs when a company ventures into a new part of the supply chain that the business is already part of. For example, a manufacturer with an established product and distributor network might decide to open some retail locations and sell directly to the end consumer.

Think about it

Are there opportunities for integration, horizontal or vertical, in your business?

Clip from: Medallion Financial

New York City:  Meet Andy Murstein.   He is the grandson of the founder of a taxi business.   Andy has transformed that business to be a bank for immigrants, minorities, and women.

Andy's grandfather began as an immigrant taxi driver.  By the time Andy's dad joined the firm, they had a fleet.  They then began financing the acquisition of taxi medallions for new immigrants.  They became a Small Business Investment Company (SBIC) and now, after an IPO and subsequent rounds, Andy is buying up finance companies.  Within just three generations, this family business will have become a billion dollar business!

Medallion Financial has become a large SBIC quickly because they were already  making loans to immigrants and minorities to buy their taxi's medallion.  Andy is doing exactly what his grandfather suggested: "Stick to your niche and you'll get rich."

National Association

You can find an SBIC near you.   Listings are within the website of the Small Business Investor Alliance.

Medallion Financial Corp.

Andy Murstein, CEO

437 Madison Avenue
New York, NY 10022

Visit our web site:

Office: 212-328-2100

Business Classification:
Financial Services

Year Founded: 1937

Expand With Horizontal and/or Vertical Integration

ANDY: Before 1979 we really only owned and managed cabs, but now we wanted to get into a new area within a cab business and we went into financing. And financing was a natural step for us because when we started selling some of the taxis that we owned in 1979, we saw that there was no financing source available for it, so we had to take back the paper ourselves. We thought it was a great opportunity since no banks would lend to this business for whatever reason, to start lending to the cab industry and that's how we started. In the cab business, it's really how hungry you are and how much you want to succeed in business.

So what I think is great is you have a lot of minorities who come here from abroad, who want to be their own boss. They can't open their own real estate company, there's perhaps a lot of obstacles. It takes a lot of money. But the cab business is something they can go into right away. We'll finance 80 percent perhaps of their purchase price, they'll have to come up with a small down payment, and then they make their own hours, they do what they want, they feel like they own something. A lot of banks for some reason do not lend to the people that we lend to. They're excellent credit risks.

The problems that banks have with them is they don't have long financial histories. They don't walk into the door with five years audited financial statements. They probably don't know what an audited financial statement is. So we give them the opportunity to really succeed in business where banks pass on them for whatever reason. And our loan losses -- we've lent over $300 million in the cab industry since 1979 and never once lost one cent of principal or interest on any loan we've ever done in the history of the company. I don't think one bank in the United States can make a statement like that.

HATTIE: (Voiceover) Medallion Funding depends on great people like Marie Russo.

HATTIE: Nice to meet you.

MARIE RUSSO: You, too. Welcome.

HATTIE: I've heard you're everybody's mother, so I just gave you a hug on the face just like that!

MARIE: Thank you.

HATTIE: Can you tell us what you do around here? MARIE: I am vice president and chief operational officer of the company.

HATTIE: Now what does operational officer mean?

MARIE: I oversee everything that goes on in the company.

HATTIE: So you're human relations. You're hiring and firing.

MARIE: I'm human relations. I hire. I fire. I sign all checks. In here we have our work staff in accounting who does all postings of our receivables.

HATTIE: So you all know who owes money.


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