I was invested in a company called Tax Partners from 1998 to 2006. It was founded by two talented entrepreneurs in Robert Dumas and Mike Sanders. Dumas’s background was as a CPA specializing in sales tax preparation for telecom companies. Sanders programmed the system which automated the tax preparation process.
We grew the company successfully focused on the telecom market. After growing and reaching profitability, we started to think we were too dependent on telecom. We believed we could increase the overall value of the company by pursuing additional vertical markets.
Stick to What You Know
So we sought advice from the founder of a company in Rome, Georgia. He had created a tax preparation software company focused on a narrow market segment. They sold the company to Intuit for a ridiculous amount of money and walked away multimillionaires.
He listened as we told him our proposed new vertical market expansion strategy. He asked us about these verticals and what we knew about them. We told him all about the vertical markets, relying on the research we had done. And we told him we had no experience in these markets.
He sat back, thought a minute and said, “Stick to what you know and where you are successful. If you stay focused on sales tax for telecom companies, you will always be worth something to someone.”
We left there, and I was convinced he was right. Several months later the topic of single market dependence hit the board of directors planning agenda. Can you guess what happened? Put smart people in a room and, just like that, you have a new market initiative.
For the next three years we spent time, effort and money trying to crack other vertical markets. No success. Our expansion strategy did not work. It cost us. Dumas and Sanders started a business serving telecom. In the end, that’s where our value was. In 2006 we had a successful exit.
Friend and fellow angel investor, Greg Smith, often reminds me, “Wisdom is what you get when you don’t get what you want.”
We sought advice.
Then ignored it.
I learned a huge lesson: Keep doing what you are really good at and you’ll always build a valuable business.