Is that business idea you have any good?

Who doesn’t love coming up with business ideas? Well, probably a lot of people, but those people probably aren’t reading my writing. After spending 8 years in traditional finance, the jump into entrepreneurship has been scary, but highly rewarding. The number one takeaway for me throughout this whole experience is that the idea is far less important than the execution. Anyone can come up with ideas, but how many people can take that idea and turn it into reality. That’s where the hard work (and a bit of luck) comes in. 

My partner and I started WeHero with no outside funding and took an idea to market, found product market fit, and have grown our team to continue serving more clients. This hasn’t been easy, and we’ve made a lot of mistakes. We view these mistakes as learning opportunities and real-life practice. As we continue to enable our team members to lead more of WeHero, we’re incubating new ideas and turning them into reality. We’re doing this for two main reasons:

1. We enjoy it.
2. We want to create more business opportunities for ourselves. We have big goals. 

So, now we’re focused on turning our crazy ideas into reality and have set a goal to incubate four new businesses per year. We’re initially focusing on the social impact space given our passion around the market and the natural overlap with WeHero. We’re assuming we have a 25% success rate with these ideas so of the four new businesses we start each year, one will end up finding product market fit and hopefully be cash-flow positive. Given this return profile, we’ll need to test quickly and be judicious about our investments. We’re hoping that over the next few years, this approach will help us build a portfolio of cash-flow generative businesses that we’ll manage with dedicated teams for each company. 

While there are a million things that I could share related to this strategy, I want to cover three today.

1. How do we vet our ideas?
2. How will we execute these ideas?
3. How’s this going?

How We Vet Our Ideas

One of the key factors for us having success in this model is ensuring that our ideas are not only good ideas but also fit into what we view as our sweet spot from a value creation perspective. Because of the natural tendency to get excited about new ideas, we need an unbiased, unemotional way to judge these ideas. We built an incubation checklist that we complete for every new idea we have for tracking purposes. Not only do we want to understand if we’re picking the right ideas but also want to know what traits end up being successful over time. You can see the entire sheet here, but I want to summarize a few of the key points. 

Our most important questions:

1. Can we test this effectively with under $10-25k of investment?
2. Can we become cash-flow positive in 6 months or less?

More traditional questions around the business:

1. Recurring revenue?
2. Barriers to entry?
3. High gross margins?
4. Margins improve with scale?
5. Industry tailwinds?

Return Potential:

1. This business has exit value – would someone buy it?
2. Does this business have the potential to distribute $250k per year? $2.5m per year?

How We Plan to Execute These Ideas

It might go without saying, but my partner and I only have so much time in a given day. Not to mention, we’re good at ideas and bringing people together, but not much else…

To successfully do this over time, we need to bring in the right people to join our team to bring our vision to life.  We rely heavily on resources and systems we leverage for our other businesses and then bring in dedicated talent as the business needs it. This table below lays out what we view as our sphere of influence across the new launches:

We’re currently testing a few different models for our team. Do we want to bring-in one CEO for these projects who handle a number of different things? Alternatively, would it be better to bring in a group or part time people who are all specialists in their given field. In an ideal world, it would be a combination of both, but our current view is that it will entirely depend on the business and the type of leadership it requires. 

For the businesses that perform well, we’ll promote internally or bring in leaders to be the CEOs for the businesses. To successfully replicate this model over the next 5 years, we need to have day to day managers that are heavily incentivized in the success of each business. Apart from getting these businesses to cash-flow profitability, this is going to be by far the hardest part of this experiment. 

How’s the Experiment Going So Far?

It’s still early, but we launched our first incubation project at the end of Q2 2022. The Impact Job, is a social impact focused job board and weekly newsletter (laughs guaranteed). Overall, we’d give it a B performance and it has been a success for a few reasons:

1. We found great people to join this experiment. They’re passionate, creative, and fun. 
2. We’re finding a fair amount of initial success. We’re not cash flow positive yet, but we could be if we were prioritizing it. The value of the asset is 5x what we’ve invested in it already so we could have a cash-flow positive exit if we so desired. 
3. As we scale, there are a number of different levers we can pull to increase revenues and none of these would increase overhead. 

If you want to learn more about this experiment, I wrote about the launch of it here. I then wrote an update piece at the end of Q3 that summarized our progress over the first 3 months. You can find it here. We’ll continue to write about the project quarterly. 

I haven’t talked about our next experiment publicly, but we’re excited about it and just hired a full-time business development representative to help us launch. It’s an agency model and while it won’t be a $10m business, we think it has the potential to generate meaningful cashflow over its lifetime. 

The Continued Journey

This will be an experiment and we’ve set aggressive goals for ourselves because if we’re not achieving these goals, we’re not going to achieve the results we’re looking for. We’ll continue to share updates around the various incubation projects quarterly and hope you’ll follow along. We’re always looking for individuals who have an idea and would be excited to start something. My partner and I would be thrilled to provide support and financing. 

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