How and Why to Start Another Business When You Have an Existing Business: Entrepreneur MBA 1.2
Is it better to grow your existing business or start another business? David Hauser who is a serial entrepreneur best known for being the founder of The Grasshopper Group, which recently sold for $160 million, talks about How and Why to Start Another Business When You Have an Existing Business on today’s Entrepreneur MBA Podcast. Hosted by Financing Solutions Stephen Halasnik.
The Entrepreneur MBA podcast’s purpose is to help EXISTING business owners grow their companies past the $10 million in revenue per year benchmark. Here is the host, Stephen Halasnik
Introduction of Host, Stephen Halasnik
Stephen Halasnik has built several successful companies over the $10 million mark including an Inc 500 fast-growing. He loves speaking with successful business leaders and learning about what makes them, and their businesses, tick. Stephen’s current company, Financing Solutions, makes getting a line of credit fast, easy, and inexpensive.
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Summary of Podcast
David and I meet at MIT/EO Birthing of Giants program in 2007 which is a 3-year program where the 50 fastest companies go through a 3-year program meeting for one extensive week per year to learn about entrepreneurship.
David’s company, Grasshopper at that time was at $6 million in sales per year. Each year they were starting to double but the problems of the organization started to show.
Common theme in the businesses he choose to start: Businesses based on problems he saw he had himself and that he felt needed to be fixed.
Grasshopper: David wanted a phone service that made him seem more professional and one that allowed business owners to stay more connected to their customers. There were no cell phones when Grasshopper first started.
Chargify: Provided reoccurring billing solutions for others.
Superfat: Is a company that he just really believes in.
Did a few companies in high school. One was sold recently called Returnpath which is a company that makes sure that email marketing programs get through to people.
One reason that entrepreneurs start another new business when they have an existing one is entrepreneurs get bored. We create stories around us about why we should start another business. i.e. the market is already saturated so we can’t grow it much more.
If your business may not grow that big maybe look at starting other companies that combined might be bigger together.
Sometimes the company you start can’t get above a certain amount because of business reasons.
David created a separate division called Grasshopper Labs inside of Grasshopper to help look for other businesses.
David believes that you should really challenge yourself when you say you can’t grow your business a lot more.
Make sure that you play to your strength when you are looking at starting another business instead of starting a business completely outside of your core competency.
Making a big shift into a new field is really hard.
Recession and Expansion in an economy has a real effect on small businesses.
David believes that the second most important step is opportunity evaluation.
- Size of market
- Small market that is growing
- Some advantages to targeting the industry
- Just go out and do something. Action over talking
David would always keep notes about new problems to solve so when he was looking for a new business he would flip back through his notes. What’s interesting to him?
A mistake he made was he started looking at problems to solve to start a business, but those problems were not in the same field his core competency was.
He failed in 3 businesses before he realized that he needed to stay within his core competency which was selling to small businesses.
Don’t chase business opportunities if you don’t have any passion behind it.
Listening to early investor feedback can be a big distraction because an investor has different goals than an entrepreneur.
When are investors needed in business:
- A business that has tremendous capital requirements
- A business that has a first to market advantage
- Most companies don’t need investors
An Angel investor needed to be in at least 10 deals. 9 will fail and one might make it but that one that makes it has to really make it.
David’s investments in angel funding have basically break-even but he does angel funding for many other reasons.
Grasshopper grew tremendously after David attended Birthing of Giants because his organization got more professional. i.e. daily standing huddles, creating a great culture, defining a culture, implementing processes, leadership and management improvements
The bigger your company the more important processes or best practices become to your growth.
As Grasshopper grew, David started to hand off management to his team.
You have to work on your business, not in your business. If you are taking customer calls you can’t be looking for other businesses to start. Everything needs to be off your plate.
After David sold unstoppable, he started really getting interested in the health and wellness industry. So much so that he wrote a book about his experiences called Unstoppable: 4 steps to Transform your Life
David made a lot of changes in his life and he wanted to write about that experience. He has always stayed in shape but had a hard time losing weight. Even when he was doing triathlons so he wrote a book about his experiences of losing weight and getting healthier.
David only invests in businesses now that are already producing $1 million in sales per year. Invests in 1-3 companies like this a year.
David’s new life mission is helping to empower others.