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Serial entrepreneurs profit from past mistakes Add to ...

Serial entrepreneurs have a huge advantage over newcomers to the startup game because they bring a potent combination of experience, reputation and contacts to the table.

“There are people who just love the game, and sometimes the game with one venture ends. It makes sense to sell or to leave or disband,” said Dr. Becky Reuber, a professor at the Rotman School of Management of the University of Toronto.

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But sometimes, selling your business for that dreamed-of big payoff isn’t enough. Some entrepreneurs find the moment they’re out, cheque in hand, they’re itching to get back in. And this time, they’re determined to avoid past mistakes.

Research confirms that serial entrepreneurs tend to perform better than others, said entrepreneurship professor Thomas Hellmann of the Sauder School of Business at the University of British Columbia. A joint 2007 study by Harvard University, the National Bureau of Economic Research and the Federal Reserve Bank of New York found that a venture capital-backed entrepreneur who succeeds once has a 30-per-cent chance of success in his next venture. By contrast, first-time entrepreneurs have only a 21-per-cent chance of succeeding.

“Success in the first venture creates success in the second venture, and that’s the key finding,” Dr. Hellmann said.

And while they tend to stay in the same industry, some take their hard-won skills in a completely new direction.

Peter Gustavson certainly did.

Although the Victoria-based president and chief executive officer of Gustavson Capital sold Custom House Currency, the foreign-exchange business he founded in 1992, to Western Union last year for $370-million (U.S.), he has not slowed down.

Mr. Gustavson, 54, gets new pitches every week from people eager to have him invest in their ventures. But his latest investment is with a company that originally came to him for his entrepreneurial knowledge, not his money – and in an industry he knew almost nothing about.

Earlier this year, Marv Holland Apparel, an Edmonton-based work uniform company, asked Mr. Gustavson to join their advisory board. He quickly recognized a bigger opportunity.

“I looked at it and thought to myself, ‘I’ve been here before,’” Mr. Gustavson said. “Marv Apparel is essentially where Custom House was 10 to 12 years ago. How often do you get to do it again, learning from past mistakes? It was just too good of an opportunity to pass up,” he said.

“The more I looked at it, the more excited I got. I asked them instead of being an adviser, could I be an investor? Marv [Holland, the founder]and I hit it off real well and I ended up buying 51 per cent of the company.”

Mr. Holland, 84 – who started his company 62 years ago – was essential for his knowledge of the industry, Mr. Gustavson said. “What I brought was more of the transition from entrepreneurship to ensuring that it is professionally managed.”

With 75 employees and $11-million in sales, Marv Holland Apparel was considered a leader in Canada in business uniforms and safety attire. But over the years the company’s progress had “started to stagnate,” said Mr. Gustavson, who realized he’d dealt with many of the same challenges at Custom House. Among them: The sales team setup wasn’t working, the IT system wasn’t a good fit for the company, and there was no professional management team.

“I recognized Marv Holland didn’t have a sales culture. I talked to the young people taking orders and asked them how they could get more orders and I’d get a blank stare,” he said.

He tackled all of those problems and more. Marv Holland Apparel is now looking for acquisitions and new contracts, even exploring new sectors. “They started to think beyond Alberta and Canada ... why not sell the product into Texas, into Louisiana?” Mr. Gustavson said.

It’s been a rapid learning curve, given that he knew little about apparel or even fabric six months ago. “I enjoy being able to move between industries,” Mr. Gustavson said. “There are things you need to learn ... but customer service is customer service. Whether you’re selling a widget or foreign exchange, the customer wants to have a positive experience, have value, and have it delivered on time.”

“It’s all very exciting,” he said. “It’s got a great future and I’m honoured to come in and be part of that.”

Rotman’s Dr. Reuber described Mr. Gustavson’s approach as fairly typical of a serial entrepreneur.

“The experience aspect ... is huge. It’s not only that they learn from their business, it’s also the reputation they glean, the capital, the contacts from the business community that they can leverage the next time,” she said.

Dr. Reuber said they tend to stay in the same industry but that doesn’t mean they have to. They can certainly leverage their industry-specific skills more if they do.

“When you are in an industry and you have lots of experience in that industry, you will see lots of opportunities,” she said. “You may see ways to diversify product lines or client bases that aren’t being served or ways to expand geographically.”

She added that the combination of Mr. Gustavson’s experience in running a successful business and Mr. Holland’s mentorship makes a lot of sense.

“[Mr. Gustavson]would leverage his knowledge about how to build value among a network of players in the industry, and he would leverage his ways to use creative business models,” she said. “He brings a different perspective. It’s his previous successes that will make stakeholders stay with him.”

While serial entrepreneurs bring a wealth of knowledge to a start-up in the same industry, their business skills are applicable across a range of endeavours.

“I enjoy being able to move between industries,” said Mr. Gustavson. “There are things you need to learn about specific industries but customer service is customer service. Whether you’re selling a widget or foreign exchange, the customer wants to have a positive experience, have value, and have it delivered on time.”

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