Chasing The Perfection Hype

When investing in any kind of asset (blog, e-commerce store, real-estate, stock etc), do not chase the perfect asset. When you chase the perfection hype, you pay top dollar for acquiring the asset. In the days to come, you realize nothing is perfect and so isn’t the asset that you just purchased.

Then you incur costs for repairs, maintenance, improvements etc for the asset to live up to its perfection hype. This makes your purchase very expensive as not only you paid a higher multiple for purchasing perfection, but also spent more money later on once it didn’t live up to it’s hype.

Instead, you could simply go for assets with visible imperfections. Any asset you buy with visible imperfections will have those priced in too which would get you the asset for a more affordable multiple.

As an example, if there is a niche Amazon FBA store with all relevant products it will sell for a higher multiple than a general Amazon FBA store. I understand why niche stores are better positioned in some cases, but in reality both niche and general stores have imperfections.

Niche stores are less diversified and hence positioned badly to weather a storm like COVID-19 when some categories get hit more than the others. General stores in comparison have visible imperfections such as that many products in the store belong to different categories. Although it may seem as an imperfection to some, it’s also a feature; the store is better diversified to weather a storm.

When buying an asset like a general store, the visible imperfection of having products spread across various categories is priced in. It is why it sells for a cheaper multiple. One could take advantage of this when buying assets and get this general store with visible imperfections. Not only the niche store has imperfections as well, it’s also a lot more expensive. Only in rare cases, it would prove to be a more fruitful purchase such as you sell it later as strategic acquisition.

Assets with visible imperfections can also be improved such that they no longer have any visible imperfections. By doing so, you can quickly increase the value of the asset.

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