Startup Grind
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Startup Grind

Source: Wired

The Rhyming Rule of Business

And when to call it quits

If you are like me, you probably have a lot of projects going on. I’m a bit ADD and can suffer from shiny objects, hence why I advise startups (rather than building them myself). I like having my hands in a lot of things.

And while I know that isn’t ideal, it works for me.

But there is one very important rule: your businesses better rhyme. When you have multiple projects, you need synergies to survive — team, industry, focus etc…

Your missions need to align between businesses — progress on one benefits both. If not, you are in trouble.

But more often than not, we start something, build some success and eventually transition to something else. When is it time to call it quits?

Evolving as an entrepreneur

I recently decided to step away from FBA ALLSTARS, the ecommerce podcast I built alongside my Amazon company (and grew to a top player in the space). My goals have changed, Amazon is no longer exciting for me.

I sold the ecommerce business and finished the transition in 2017. And while doubling down on I what I knew would have been a solid strategy, I am thinking much bigger (I invest in and advise startups changing the world).

Ecommerce wasn’t enough for me, not anymore. And the overlap with The Syndicate and my more recent endeavors wasn’t much.

But then again, I’d built FBA ALLSTARS into something special. What then? Why throw away success?

I personally believe in diversifying income and assets. There was so much value in the content and community, it would be a waste just to give up — so I decided to find someone smart to replace me. Plus the podcast was still making good money.

But who should replace me? As founder and CEO, this can be challenging. Whether your heart is in the business or not, this is still your baby. You built it from the ground up and want to make sure your successor does you proud.

I did a lot of thinking.

Exiting a business

Startups are typically acquired or IPO — investors need liquidity. Few companies stay private forever.

But not all companies are venture backed. For FBA ALLSTARS and the majority of businesses, neither option is necessary or common.

I couldn’t IPO — are you kidding me. And an acquisition wasn’t likely either. So when I decided to call it quits (because I needed more time for my new projects), I pursued an alternative route — an “earnout/rev share”.

Podcasts are hard to sell because they are personal and usually centered around a host. It is hard to tell if a transition will be successful… How will listeners react?

Cash flow is king

While liquidity matters for investors, cash flow is better for entrepreneurs. Consistent income trumps a short term payout every time, especially in terms of total value and tax considerations.

So, rather than “selling” the business, I gave it away. I found an ecommerce genius and master marketer and said “Want a free podcast? We can split the revenue.”

In my opinion revenue shares are ideal. Whether hiring a CEO or handing off a business, incentive alignment is the most important thing — we both win as the podcast and revenue grow.

I’m incentivized to continue helping as needed and Nemo wants to build it as big as can be: win-win.

A sigh of relief

Running multiple businesses is hard. Doing so when there is little to no alignment is almost impossible. It is mentally draining, especially when you want to be done.

When I meet founders working on multiple projects, I always push them. Which has a bigger upside? Why are you running the other business?

It almost always centers around sunk costs. “We have worked so hard to get here, why give it all up? It won’t take that much work…”

Source: CustomerExperience.com.au

I have made this mistake (many times!). Don’t fall for the trap. It always takes more work and more energy.

“United we stand, divided we fall” [this is talking about attention too!!]

Are you working on multiple projects? Why? Which are you most passionate about? Which is most promising?

Everytime I have sold a business, I was incredibly relieved. Finally being done takes a massive burden off your shoulders. It frees your mind to focus on shit that actually matters.

Are you really rhyming?

For a long time I ran both FBA ALLSTARS (the podcast on all things Amazon and ecommerce) and The Syndicate (the show on early stage startup investing and our accredited investor group).

In one sense, the projects rhymed really well. Both were podcasts, both revolved around startups and companies… isn’t that enough?

If you have to ask, the answer is obvious. When we ask questions, we are trying to convince ourselves of something we know to be false.

There is ZERO synergistic benefit to pursuing both projects. With the exception of occasional cross-promotion, I was living in two totally different worlds.

And while differing perspectives are important, too much deviation is counterproductive. After selling my ecommerce business, there was absolutely no reason to continue the podcast (besides making money). Inevitably motivation faded, I slacked and quality suffered. That isn’t fair to myself or my audience.

Unrelated sidenote: repeat rhyming

As an angel investor, I’m always excited to speak with repeat founders. When an entrepreneur has had a hit and is back building another business in a similar industry, that is a really strong sign. Not only are they experienced and capable of building a team, but they are excited about the space.

“History doesn’t repeat itself, but it often rhymes” — Mark Twain

There is no better predictor of future success than past performance. Repeat founders with relevant experience rarely struggle to get funded.

Closing thoughts

We could go way off the rails talking about rhyming, randomness and entrepreneurship as a whole. But I think you get the point…

It all comes down to questions and understanding yourself and your motives:

  • What are you working on, and why?
  • Are you tackling multiple projects?
  • Is that a good idea?

I don’t have the answers to any of this. All I know is offloading unrelated projects feels really freaking good.

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Matt Ward

Matt Ward

Climate Syndicate Lead @ 4WARD.VC | Startup Strategy & Growth Advisor @ mattward.io | Serial Founder: 3 Exits | Looking to join top Climate/Impact VC Fund