Why the blue ocean strategy won't make you rich


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Why the blue ocean strategy won't make you rich:

Most new entrepreneurs think they should start something inspired by the blue ocean strategy which was an idea popularized by a bestselling book in 2005.

The blue ocean strategy = Focusing on new ideas, pursuing a market with few competitors, and trying to change consumer behavior with a new/brilliant product that focuses on innovation first.

I think this approach is completely wrong.

Unless you are already rich, every business you start should be cashflow positive within the first 6 months. If it's not, you need to pick another idea.

I’d much rather start a business in a red ocean instead.

A red ocean = a business in a proven market where people and companies are making money TODAY.

Why operate here? Because I can study that market. I can pick and choose the opportunities that I want to pursue. I can assess the way things are done and figure out if I can compete or have a competitive advantage of some kind. I can study my competition.

Most people will read this and think, but Nick, entrepreneurship is supposed to be cutting edge! In the red ocean, companies are in a fierce competition for customers! It’s a race to the bottom!

They couldn't be more wrong.

Competition = People are making MONEY here today.

These is ZERO risk to choosing a business model that already works. More competitors means that this market is thriving, and you just need to capture a small slice of an already existing large pie.

Red ocean industries are things like:

  • Real estate
  • Insurance
  • Recruiting
  • Marketing services
  • Home services
  • Pest control
  • HVAC, etc

None of these industries are new, and all have billion dollar plus competitors with room to build many more $10M+/year revenue businesses across the country.

The competition is fragmented and many local businesses aren't as good as you think.

You'd be surprised by how many companies are horrifically bad at answering the phone and doing what they say they’re going to do.

Many still don’t have a website. Few run ads or do great marketing yet they still make millions of dollars per year.

Don’t believe me?

Call around for home service companies to come do work at your house this month. Ask them to build you a deck or remodel your kitchen over the next 90 days. One in five will answer the phone. One in 20 will have enough time to put you on their schedule.

Most won't even want to start with the holidays coming up and will try to push it to next year.

There is a massive shortage of these “old school” businesses.

The competition is weak. The owners are resistant to change. They are in a red ocean, but their service offerings are subpar so there is still room to compete and win.

Taking the path of least resistance:

On top of this, I think too many entrepreneurs are gluttons for punishment.

They love doing hard things for the sake of it. They think of entrepreneurship like a gladiator in an arena fighting to the death against all odds. Success = glory after facing massive challenges.

That is bullshit.

Business is a series of games and some games are easier to win than others.

Think about it like this:

You are playing a 1-on-1 basketball game against another human and $20,000 per month every month is on the line for the winner.

You get a choice:

Do you want to play against LeBron James or a 5th grade girl?

The winner gets $20,000 per month every month.

I don’t know about you but I'd personally pick the 5th grade girl every time. This isn’t a “see who can do the hardest thing” competition.

Remember something important about business:

The degree of difficulty doesn't count. We’re not doing an Olympic gymnastics routine. There aren't more points for accomplishing something really hard. In business, you can get paid really well for doing easy things over and over again, but you can also get paid zero for doing certain hard things really well. Business isn’t a David Goggins ultra-endurance workout.

Trying to start the next Tesla or Facebook is like playing against LeBron James. Starting a self storage company or a pest control business or a decking company is much easier.

So what should you do?

First, always copy what works.

Do what normal people have already done and succeeded at. Find an area where relatively average people succeed more often than not. Where 6 out of 10 or 7 out of 10 businesses make money and the founders aren’t necessarily spectacularly smart.

There will always be people who think that stronger competition means a bigger potential reward. And most of the time it does. But they are forgetting the odds of success and the weighted value of taking that chance.

Would you rather have a 70% chance at $20,000 per month of profit vs 0.005% chance of a $50 million exit?

The 70% chance at $20,000/month is a better deal to take for 99.999% of people. By far.

Most new founders are convinced that being an entrepreneur is getting $10 million for beating LeBron vs $20-30,000/month for beating the 5th grade girl. They’ll think taking moonshots is the only way to go because of that 0.0001% chance they build a billion dollar company.

I used to think this too.

I studied the tech titans who succeeded against all odds—Musk, Zuck, Gates, Jobs.

For a while I wanted to be them. Now I know better.

I’ve met incredibly rich folks without college degrees who don’t know how to “reply all” to an email. They have built multi-million dollar businesses and live phenomenal lives.

It’s not as complicated as you think.

All they had to do was pick the right game to play with relatively good odds of success and stick with it for 20+ years. You can do this too.

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A few tweets from this week:

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I interviewed a few candidates that were amazing but I don't have space for right now:

Respond to this email if you'd like an introduction and $1k off the recruiting fee.

Lastly, here's a great thread from Nathan Barry (Founder of ConvertKit.com -- Soon to be Kit.com) with examples of folks you can hire this month:

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Onward and upward,

Nick Huber

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I have financial interest in many companies mentioned in this newsletter.

Nick Huber

I own a real estate firm with over 1.9 million square feet of self storage and 45 employees. I also own 6 other companies with over 400 employees. I send deal breakdowns with P&Ls. Newsletter topic: Real Estate, Management, Entrepreneurship

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