Joseph Drups, founder of Drups Ventures, buys businesses to incubate high-return, passive income portfolios.
Want to know the biggest mistake I made in my first three business acquisitions? I was an investment hunter. In industry speak, I looked for good deal flow, a.k.a. hunting for a lot of investments. Experts, top books and even mentors told me that multiplying deal flow was the key to success. Seven acquisitions later, I can confidently say they were wrong.
Here’s the truth: Hunting for more deals is like trying to shoot a target at 1,000 yards with a shotgun. It’s the wrong tool for the job. The real winners aren’t finding generic opportunities—they’re making them.
The Costly Trap Of Investment Hunting
When I started investing in and acquiring businesses, I followed conventional wisdom. I scoured listing sites, worked with brokers and joined investment groups. I was doing everything “right,” but I realized I was playing the same game everyone else was.
Every time I found a “good investment,” so had multiple buyers. This competition drove down returns and lost deals. Worse, I was letting the market dictate my options instead of creating custom opportunities.
The breakthrough came when I began over-investing in core competencies, creating a unique niche. I built digital marketing skill sets, purchased businesses with intellectual property and focused on digital companies. Then I started training operators and going deeper and deeper into this niche.
The more layers of skill sets and core competencies I added, the more I could sculpt the perfect investment for me, investors and operators. This shift changed everything by allowing me to bring value to each investment.
By being able to add a significant amount of value, now each target I discovered was worth more to me than what others would pay for it. With this new toolset, when I calculated returns, the numbers told a different story. I could increase the value of the business by 20% or more, on average, after a few months of making the investment.
Engineering Perfect Opportunities
Here’s how to shift from investment hunter to investment creator:
1. Start with capabilities, not opportunities. What unique skills, resources or insights do you have or can you over-invest in?
2. Look for businesses and niches that have huge gains from adding your core capabilities.
3. Focus on synergy potential. How could this business make your other investments or businesses stronger?
The real magic happens when you can sculpt investments to exactly meet your needs while adding core capabilities that increase the value of the investment. I call this the Portfolio Incubator Strategy. Each new investment should bring something unique to the table that benefits the entire portfolio.
Think of it like assembling a sports team. You don’t just want good players; you want players whose skills complement each other and make the whole team better.
Building An Untouchable Empire
This approach provides three key advantages:
1. Natural moat: Your investments become increasingly difficult to compete with as you improve.
2. Risk reduction: Diversification across complementary businesses provides natural hedging.
3. Network effect: Each new addition adds to the value of the existing businesses.
Stop asking “Where can I find good investments?” And start asking “What value can I bring to the investment?”
This shift requires more upfront work, but the payoff is worth it. Instead of competing for investments, you’ll be creating opportunities others can’t touch.
The Real Cost Of Investment Hunting
Let me share a concrete example.
When I first looked at GloFX.com, most would have only seen the surface—a company selling festival accessories and diffraction glasses that had made the Inc. 5000 list and added $2 million in sales within a few years.
But I saw something different. I saw how GloFX.com’s capabilities of product development and the executive team could benefit our broader digital portfolio and how our strengths could transform GloFX.com. On the other side, our on-demand manufacturing, ability to generate intellectual property and digital marketing background could bring added value to them. While others just saw a festival accessory company, I saw a platform business with complementary core capabilities.
The transition wasn’t easy—it required rebuilding the culture from the ground up. But the business added to our core capabilities. By focusing on value creation, we turned GloFX.com into a key part of our capabilities.
Your Next Steps
Here are a few tips when first getting started:
• Develop clear criteria for how your skill sets can translate to unique business value then double down by over-investing in yourself and your unique value.
• Create value-add capabilities that can benefit multiple businesses in a targeted niche.
• Think in terms of process, skill sets and core capabilities rather than individual opportunities.
The market is full of “good” investments. But true wealth isn’t built by finding good investments—it’s built by creating value.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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