Because I read so many business books and speak to so many business owners, I figured I’d heard almost every business analogy out there.

I had NOT heard about “The Turducken Problem”… until I met Paul Vallée.

Paul Vallée is a serial entrepreneur who built his career at the forefront of technologies that enabled the exchange of work over the internet. Paul founded Pythian in 1997 as a way to allow anyone to work from anywhere, essentially inventing virtual collaboration. 

Under his leadership, Pythian developed ground-breaking tools that enabled teams to work and interact seamlessly and securely even when dispersed across multiple jurisdictions or multiple continents. Then, from Pythian a second company -- Tehama -- was born to address new challenges around security. Tehama’s virtual office-as-a-service technology allowed enterprises to manage, onboard and audit third party vendors, remote teams and freelancers by providing compliant, secure, cloud-based desktops, available globally, on demand.

When I spoke with Paul a few weeks ago, for this episode of I’m a Millionaire! So Now What? we discussed spinning off to scale up.

We talked at length about how Paul’s initial business spun off a new, innovative business solution, and the challenges that many smart, creative entrepreneurs face starting, scaling and selling the businesses that evolve from all their great ideas.

That, my friends, is “The Turducken Problem.”

Before I get into The Turducken Problem, I want to say how excited I am that Paul is one of our panelists at Double to Sell. He’ll be part of Lessons from the Trenches, featuring five business owners who have successfully exited a business, speaking candidly about their experience, challenges and learnings.

If you’re ready to start planning your cash-rich exit or succession from your business and want insight from past successful sellers, please apply to attend Double to Sell, taking place on May 6, 2020 at the historic Museum of Nature in Ottawa.

Okay. So back to The Turducken Problem, as Paul explained it:

“You take a turkey and you debone it. Then you put a duck inside it deboned. Then you put a chicken inside it deboned, and then you wrap it all up tight and you put it on a rotisserie and roast it until it’s done. It’s delicious. Turkey is a commodity. There’s a futures market for turkey. There’s turkey liquidity. Ducks are a commodity. You can buy ducks from any meaningful butcher. Chickens are an ultra commodity. There’s a liquid market for chickens. If you want to bring chickens to market, you don’t have a problem..."

 

“But turduckens are illiquid because they’re a pre-combined (blend) of three different commodities. If you happen to have a turducken and need to sell it today, you might not be able to sell your turducken today. And so we call this The Turducken Problem because while we thought the recipe was delicious, financial sponsors all said the same thing: I love your services business, but my investment thesis for this fund doesn’t permit me to take on the risk of your venture component. Or from venture capitalists: I love the vision for your technology venture initiative, but there’s no way that I can invest in a business that has such a large head count on the professional services side. We ended up with a problem around accessing the capital that we needed to give both businesses the oxygen that they deserve.”

I found this fascinating, because it highlights the tension that exists between big visions and great spin-off ideas.

I’ve written before about the importance of a Vivid Vision and a Big Hairy Audacious Goal, and we’ve heard that a vision that’s bigger than its founder is critical for scale and for sale.

Paul had the enviable challenge of leading TWO different-but-related businesses and hit a snag. A few, rare entrepreneurs can pull off multi-business focus. Paul mentions Elon Musk as an example. But for many entrepreneurs, after the start-up stage and during the scaling stage, it can become very difficult, even impossible to find the resources, the ‘oxygen’ to scale multiple businesses. And when they’re interconnected, you end up with a Turducken problem.

What this reinforces is the importance of picking your lane.

Of course, I appreciate that it can be agonizingly hard to avoid all the ideas, shiny objects and great business models that you’ll encounter as a career entrepreneur. We are constantly pushed and pulled away from our original vision. But for most people (perhaps Elon Musk is the exception that proves the rule) clarity, focus and discipline will make it far easier to access the capital you need to leverage your impact.

Paul points out:

 “For an entrepreneur, I would say the most important thing I learned in the last few years is the importance of having a single mission and a single vision and to unite everybody behind it. And I would say that when Pythian was just one business and Tehama lived inside it, this was clearly a problem, and now that the companies are separated, they’re both much healthier and thriving a lot more. And so that is one lesson learned, which is: it’s much better to spin out early than to spin out late.”

To maximize your exit strategy, it’s better to niche than embed. Because when a strategic buyer comes to look at your business, they’re going to think Do I buy, or do I build?

What do you do better than anyone? What are you truly passionate about? We confuse the potential buyer or investor when the core purpose of the business is unclear.

Is what you have so unique that in order to duplicate it, it would take someone else far too long and cost too much? If your buyer can’t compete, they’ll start to realize they need to acquire.

Go back to your vivid vision and dig into your original WHY.

Then join us at Double to Sell and meet Paul Vallée in person. Our Lessons from the Trenches panel will help you get clarity, ideas and maybe even avoid mistakes as you plan your cash-rich exit from the business you’ve built.