Shark Tank Fooled You

The startup/VC/Shark Tank culture ruined what business should be.

Almost every episode of Shark Tank is a passionate inventor with a grand vision for a moonshot idea.

And nearly every VC investment we hear about in the news is a similar company, with a VC investing at 100x TTM Revenue for a Hail Mary shot at getting in early on the next Facebook or Uber.

Most of the time, these businesses completely fail and lose all their investors’ money.

But we only hear about the few successes, so our brains are trained to think that this model is what success looks like.

These portrayals of entrepreneurship in the media give many beginners the wrong idea of what business building is all about. I suspect that many thousands of otherwise talented entrepreneurs and business builders have wasted years chasing down fruitless ideas inspired by Shark Tank.

I’d argue that there are two much better paths for 99% of people who want to run a business:

1. Start a boring business in a predictable industry that already has huge demand
   

2. Buy an existing business

The cold hard truth is that most startup founders will NEVER find product market fit. They’ll come up with a seemingly genius invention, spend months building it, only to realize no one really wants it (or realizing that distribution is actually pretty hard).

Stop chasing shiny objects and focus on making money. 

The Idea Guy ($0 in profit)

There are a thousand proven business models out there to pursue. Millions of customers have money ready to spend on services like plumbing, cleaning, and landscaping.

Outside of the typical consumer services, there are also thousands of businesses ready to pay for services like web design, marketing, or IT support.

Inventing a brand new product that no one has ever seen before is taking the hard route. Maybe that’s okay if you’re already rich and don’t need to make money now, but it’s not a good idea for beginners.

I’d challenge beginning entrepreneurs to get into the most in-demand business possible. Your learning curve will be much shorter because you’ll get more reps in from actual demand that exists in the market.

There’s a reason many of the most successful entrepreneurs we know of started by mowing lawns as a teenager or reselling garage sale finds on eBay.

It’s because they started with a predictable business model and worked their way up to the more challenging levels of business building. 

Buying a Business

If your end goal is owning and operating a profitable business, buying a company is one way to skip the long hard years of starting a business from scratch. In many cases, the business someone starts may end up never making money. Buying a business can save you years.

Many debate the buy vs. build question. I’ve done both.

I bought 2 facility management companies in 2020 and 2022. I also am building a peer group for entrepreneurs and an offshore HR/Recruiting company.

Buying allows me to skip several years of work starting up a company and building it up. Building allows me to set the culture and team how I want from day 1. But often, the upfront investment to buy a good business is well worth it to skip years ahead of where I otherwise would be.

You will have a much higher success rate buying a business than creating a new product or service.

When creating a new product from scratch, like they tell you to do on Shark Tank, there are so many factors working against you. Unknown demand, no proven way to get customers, and negative financial momentum.

But buying a business is the opposite: You’re buying a known quantity and can eliminate almost all the uncertainty that comes with building a “cool” startup.

A key caveat being creating a product/service that already has product + market fit. Often referred to as a “boring business”.

The takeaway: Stop trying to invent a brand new product. Stop trying to reinvent the wheel. Buy an existing business that already has customers, and become a great operator. Or build a “boring business” with established product + market fit.

Your wealth will come from being a world-class operator, not from coming up with a “revolutionary” new idea.