<link rel="stylesheet" href="https://53.fs1.hubspotusercontent-na1.net/hubfs/53/hub_generated/template_assets/1/207928094053/1774035316615/template_footer-core-non-critical.min.css">

My First Million

14 Business Models Ranked: Which Ones Actually Make You Rich?

Tier List by Andrew Wilkinson

HubSpot's free CRM unifies all your customer data on one platform, with AI that makes it easy to understand.
Get Free CRM

Introduction

Not All Businesses Are Created Equal

The business model you pick matters way more than how hard you work.

You can grind 80-hour weeks in a restaurant and barely clear 10% margins. Or you can manage $15B with 50 employees and print $200M in fees every year. Same intelligence, same work ethic, wildly different outcomes.

Andrew Wilkinson figured this out the expensive way—$10M lost on one software company, $300k burned on cat furniture, plus a dozen other painful lessons. But he also built Metalab (design agency with hundreds of millions in profit), bought 30+ businesses through his holding company Tiny, and now owns everything from DJ software to AeroPress coffee makers.

He's seen the same problems from every angle: bootstrapped founder, investor, operator fixing broken companies. He knows which business models are traps and which are printing presses.

In this guide, he ranks business models from S tier (god mode) to F tier (avoid at all costs).

S Tier

"God Mode"

1. Asset Management with Permanent Capital

Why S tier: You get massive guaranteed fees regardless of performance, plus huge upside through carried interest if you do well. With permanent capital, investors can't pull their money, so you're never forced to sell positions at bad times. It's the closest thing to a perfect business model.

  • The Upside

    • Huge annual fees (2% of AUM)
    • 20% carry on all profits
    • Can't be forced by investors to liquidate positions
    • Much less work than starting/running businesses

Napkin Math

Bill Ackman's Pershing Square Holdings

Bill has only 50 employees managing $15B+ in funds.

  • Blended fee of 1-2% = $225M+ in annual revenue before any performance fees
  • On top of that, he gets ~16% of the profits (his “carry”)
  • Take away the costs of 50 employees, some legal and transaction costs, the profit margin is still absurdly high.

B-Tier

Strong with the right moat

2. Regular Hedge Funds (Without Permanent Capital)

Why B tier: Still an incredible business, you’re almost guaranteed to make tens of millions. But unlike permanent capital, investors can pull their money, forcing you to sell positions at the worst times. That redemption risk is what separates B from S tier.

  • The Upside

    • 2% fee + 20% carry (same as permanent capital)
    • Asset-light
    • Scales beautifully (managing $1B not much harder than $100M)

Napkin Math

If you raise $100M, you're making $2M annually just for showing up. If you 3x that money in a short period, you make $30-50M between fees and carry.

Unlike starting a business, you don't need to put much of your own money in. You're playing with other people's capital.

Permanent Capital Fund

Regular Hedge Fund

Has investors’ money forever (no fixed end date)

Investors can usually ask for their money back (redeem) after some notice (monthly, quarterly, etc.)

If investors want out, they sell shares to someone else

If investors want out, the fund itself gives them the money back (liquidates shares)

The fund doesn’t shrink if investors sell shares

 The fund shrinks as investors pull money out
CU6rpC8N_400x400

Let's say you have a large venture capital fund or a large hedge fund. You're pretty much guaranteed, over 10 or 15 years, to become a decamillionaire almost no matter what, which is a crazy thing about the model.

Andrew Wilkinson

3. SaaS (With A Moat)

Why B tier: Much better odds than angel investing—you're buying proven cash flow, not promises. If you have operational experience and capital, you can systematically improve businesses. But it requires hands-on work, capital to start, and each deal takes real effort. Not as scalable as asset management.

  • The Upside

    • Predictable cash flow
    • High net profit margins
    • Scales beautifully (adding customers doesn't add much cost)
    • Asset-light, remote-friendly
    • Can sell for high multiples

What Makes SaaS Work

The difference between good and bad SaaS comes down to a few factors:

  • High switching costs

    Retraining staff, migrating data, and workflow disruption keep customers locked in
frames-for-your-heart-wsFBV8qr9qw-unsplash

Case Study

Serato (DJ Software Andrew Bought)

  • $45M in revenue
  • $15M in EBITDA (33% margins)
  • It has been dominant for 20-25 years

Why it works—the hardware moat:

Serato is “SaaS with a hardware mode.” It’s deeply integrated with hardware manufacturers like Pioneer. DJs buy $5,000+ of hardware that only works with Serato (or its one competitor, Rekordbox).

Once you've invested in that hardware, you're not switching to some random college kid's AI DJ software. The manufacturers won't integrate with random new entrants either. They want stable, established partners.

As long as being a DJ is considered cool, people will want to do it. And Serato owns one of the toll roads to that dream.

andrew-wilkinson-headshot

You really have to find something with a limited amount of competition or high switching costs.

Andrew Wilkinson

4. Buying Brick-n-Mortar Businesses

Why B tier: Much better odds than angel investing—you're buying proven cash flow, not promises. If you have operational experience and capital, you can systematically improve businesses. But it requires hands-on work, capital to start, and each deal takes real effort. Not as scalable as asset management.

  • The Upside

    • Buying proven cash flow
    • Can see operational improvements clearly
    • Apply best practices across portfolio
    • Much better odds than VC/angel investing
    • Build real value, not paper value
LP Image - Finding Market Opportunity (1920 x 1920 px) (6)

Case Study

From Building to Buying

Andrew started design agency Metalab, wildly successful, made money, then tried starting 10 other businesses. Almost all failed. He'd put $10-15M into "terrible businesses." 

"If I had just taken $1-2M a year and just bought businesses and improved them, I think I'd be much farther ahead than I am today," Andrew said. 

That's what he eventually did. He and Chris sat down with $4-5M from Metalab profits and started Tiny. That amount compounded into what's now a $250M+ revenue business managing 30+ companies.

Check out Tiny

C Tier

Solid but limited

5. Agencies


Why C tier: You can make hundreds of millions in profit (like Metalab), but you're constantly swinging between feast and famine. One client decision can destroy your business overnight. Can't scale quickly without ruining culture.

  • The Upside

    • Asset-light (just people and internet)
    • Can charge premium rates with reputation
    • Cash flow positive quickly
    • Hundreds of millions in profit possible

Thought Exercise

Worst Case Scenario for An Agency Owner

You win a big client like Walmart. They come along and say “we want to give you $10M of work over the next year.” You start panicking, go out and hire 30 people for the account. Then a new PM takes over that team at Walmart and they just cut your budget. And all of a sudden you're left with 30 people that you have to lay off.

andrew-wilkinson-headshot

It's a business where you're either making a ton of money or you're about to go out of business constantly, and you swing between those two things. Because of that lumpy nature, I'd maybe give it a C... It's really, really a hard business.

Andrew Wilkinson

6. Real Estate

Why C tier: Predictable path to building generational wealth, but extremely illiquid with capped returns. Great for family dynasties over decades, not great for entrepreneurs wanting liquidity and unlimited upside.

  • The Upside

    • Predictable, stable asset class
    • Builds generational wealth
    • Can use leverage (debt) to amplify returns
    • Tangible assets with intrinsic value

Thought Exercise

The Illiquidity Trap

You'll meet people who have $2B of real estate, but the actual profits that come out of it are like $20M a year.

It’s amazing money that makes their family wealthy, but they don't actually have that much liquidity. It’s often tied up in the next project and the next and the next after that.

andrew-wilkinson-headshot

The reason I don't really do much real estate is because I don't like anything with a ceiling. There's a ceiling on that rent. And you can't innovate to make more money. Whereas in a business, let's say a digital business like a web design agency or a software company, you can take your profits and you can actually grow the business.

Andrew Wilkinson

7. Local Services (HVAC, Plumbing, Pest Control)


Why C tier: Defensible and cash-flowing if you dominate locally, but fundamentally hard to scale beyond your area. Tech entrepreneurs buying these businesses face immediate cultural resistance from blue-collar workers. Best for people already in the trades.

  • The Upside

    • Essential services, always in demand
    • Defensible once you dominate locally
    • Can win with internet marketing + operations
    • Cash-flowing businesses

The "who the fuck are you?" problem

Tech bros who buy local services businesses immediately face resistance from blue-collar workers who don't respect or trust them. 

“Let's say you're a very enterprising HVAC technician, and you want to start one of these businesses, you can do phenomenally well. But I think they're actually quite difficult to operate for an outsider," Andrew said.

8. Most Marketplaces


Why C tier: Most fail because matching supply and demand perfectly is brutally hard. Winner-takes-most dynamics mean second place gets nothing. But if you can get it to work and become the top choice, you’re in the A tier.

  • The Upside

    • Network effects create massive moats
    • High margins once at scale
    • Asset-light
    • Winner-takes-most = huge returns for #1
Good Example Bad Example
Airbnb — when it becomes a verb, you've won. 

Construction tool marketplace — Andrew has seen so many try and fail.

 

andrew-wilkinson-headshot

Small marketplaces are really hard. We own some, and I think it's like lightning in a bottle. If you can get supply and demand to match, they’re phenomenal businesses, but they're highly competitive.

Andrew Wilkinson

D Tier

Might be more trouble than it's worth

9. Freelancing

Why D tier: Owner-operator trap. You ARE the business. It's owning your job, not owning a business. Can provide a living but won't make you rich unless you scale it into an agency.

  • The Upside

    • Low barrier to entry
    • No employees to manage initially
    • Location independent
    • Keep all profits yourself
    • Can charge premium rates if specialized

Where Andrew Started

Making websites out of his apartment as a freelance web designer. This was the foundation, but staying here would have been a mistake.

"I think there's nothing wrong with freelancing or a restaurant or a corner store or that sort of thing. But fundamentally, it's an owner-operator model. And it doesn't really scale unless you scale it."

10. Content Creation

Why D tier: Golden handcuffs. Stop showing up and your business goes to zero. Can't take a vacation without it affecting income. Only reaches A tier if you're in the right niche with massive trust and can take equity in businesses (like Andrew Huberman).

  • The Upside

    • Can be highly profitable
    • Highly defensible (personal brand)
    • Simple to operate (just you and camera/mic)
    • Low overhead, location independent

Case Study

Why Is Huberman in The A Tier?

1. Good niche: Promotes health supplements (very profitable with high customer LTV). He can charge a lot for advertising. If he did candy reviews, he won’t get nearly as high affiliate margins. 

2. Personal charm: He can bring “$20M of free marketing to any business he becomes a part of.” So if he takes equity or owns businesses, he grows them massively — Andrew did a Yerba Mate business with him that’s grown 3-4x since he got involved.

andrew-wilkinson-headshot

If you don't show up, and you don't bring the fire on the camera every single day and you stop posting, your business goes to zero. And I think that it's a bit of a prison for some people.

Andrew Wilkinson

11. Short-Term Vacation Rental

Why D tier: One city council vote can destroy your entire business model overnight. Regulatory Russian roulette.

  • The Upside

    • Can be very profitable initially
    • Relatively passive income
    • Can start with one existing property/space
    • Higher returns than traditional renting

Laws Impacting Airbnb Hosts

  • Andrew bought a beautiful apartment in Vancouver. Used it occasionally, Airbnb'd it the rest of the time (28 days/month). Making a fortune. But when the City of Vancouver changed regulations, it cost him the business. He now has a regular tenant, but it’s nowhere near as profitable as running it as Airbnb.

  • Shaan’s parents had an Airbnb property in San Francisco, but when the city changed rules to max 90 days per year, 9 months of their cash cow disappeared overnight.

E Tier

Extremely hard

12. Angel Investing

Why E tier: Playing roulette with your money. An "expensive hobby" more than a business. Everyone sees the Jason Calacanis Uber wins, nobody sees the 999 losses. Andrew has $30M tied up he'd rather have in stocks or real estate.

  • The Upside

    • Can make huge returns on winners
    • Get to help founders
    • Learn from many businesses
    • Network effects (meet other investors/founders)

13. Restaurants

Why E tier: One of the hardest businesses in existence. 10% margins on a good day, work seven days a week, endless operational complexity. Someone has to wake up at 2am to bake bread. One sick person breaks the whole system.

  • The Upside

    • Good "passion business" if you love food
    • Community impact
    • Build a valuable brand
    • Multiple revenue streams (dine-in, takeout, catering)
andrew-wilkinson-headshot

If you want to make money and get rich, I don't think that's a good way to do it. Like if you go into the gym and you try to deadlift 300 pounds on day one, you will hurt your back and never come back. Entrepreneurs who go into restaurants have a rough go [like that].

Andrew Wilkinson

F Tier

Avoid at all costs

14. MLMs (Multi-Level Marketing)

Why F tier: Fundamentally unsustainable. Makes money by recruiting the next sucker, not by selling actual products. 

  • The Upside

    • The founder can make a lot of money (if willing to risk jail)
    • First couple layers can make decent money

The Decision Matrix

  • Need liquidity?

    • SaaS, Agency, Content, Hedge Funds
    • Real Estate, Angel Investing

The Caveat

You can pick the objectively best business model and still end up miserable. Or you can pick a "worse" model doing something you love and build a life you actually want.

The tier tells you the odds. Your gut tells you if you'll actually do it 3,000 times. Pick the highest tier where the daily work doesn't drain your soul. Because 20 years from now, you'll either have built something that compounds or you'll have spent two decades doing work you hate.

Choose accordingly.

Want More Business Insights Like This?

Subscribe to My First Million
MFM_Channel Cover