Entrepreneurs love the thrill of the launch, but running multiple businesses isn't for everyone. Life becomes far more complicated as a parallel entrepreneur, so you've got to plan carefully and execute more slowly than you might like. Many business owners take the plunge out of excitement, missing critical planning points--and it always comes back to haunt them.
The following questions are often put off or go entirely unanswered by an entrepreneur who's eager to dabble in multiple ventures. If details aren't your strong suit, hire a coach or someone else who can walk you through the process. Trust me, I've seen the fallout of poor planning--this is a decision you don't want to rush.
Why do I want yet another company?
Examine your reasoning. Is this about the thrill of the launch or is it a solid business decision? Do you have a passion for your new offering and its market, or is it simply that you believe it's just what you should do? Your energies may be put to better use to expand on your current products or services.
Can my existing business run on (much) less of my time?
If you are currently working more than 40-hours a week, where will you find the time to nurture a second business? Do you have systems, processes, and people in place to run the current business without a constant demand on your time? If not, that's where your energy needs to go for the time being. Use the passion you have for the second business to fuel your commitment to building one turn-key business before starting another.
Have I taken everything into consideration in my projections?
Have you thought of everything to determine the profitability of your new venture? That is assuming you've done any projections. I think some entrepreneurs either don't want to be consumed by these details and/or are afraid of what the projections might reveal. Get back to the basics of a business plan and do it right; you've got too much to lose if you don't.
Where will the capital come from?
Hopefully, your primary business produces enough revenue to support itself, as well as your family. If one of your businesses drains your resources, you'll end up with an empty bank account.
How will the additional workload affect your team?
Typically, resources overlap, at least for a while, so you'll want to consider the additional strain on your team. Talk to them to get an accurate assessment of what, and how much, they can handle. How you will reward them financially? Please don't expect them to join you in this new venture without appropriate compensation. Raises and bonuses can be delayed if you must, but keep your team apprised of your plans and financial progress.
What legal structure makes the most sense?
This is where I see many assumptions being made. Lean on your small business accountant heavily during this time. There are times that operating multiple businesses under one LLC, either as a Doing Business As (DBA), or a holding company works well. Some CPA's recommend a new LLC or S corporation for each company, depending on your liability risks and future plans. Make this decision up front whenever possible.
What accounting structure will I use?
This can get so incredibly messy. It's likely that you're using current internal resources across both organizations, so how will you separate the expenses? I've seen too many entrepreneurs blur the lines (or erase them completely), only to be forced to spend a small fortune to separate the books at a later date. Additionally, these entrepreneurs usually have no idea if both companies are profitable. Again, meet with your accountant before you spend a dime past the initial research and development stages.
Can I leverage assets between organizations?
You already have an administrative umbrella in place. Hopefully, you have policies, procedures, the necessary equipment, vendors, and systems operating smoothly. How can you bring the two businesses together across these assets? Can you work out of the same office? Who will handle sales and marketing? Hopefully, your current vendor(s) can facilitate your payroll and accounting needs, check on pricing.
What additional resources will you need for the new business to fully function? Price out everything to make sure it's realistic.
How will I balance and track my time, as well as the time of my employees?
Tapping into your current staff, even a little, will complicate payroll. These are expenses that must be tracked, otherwise, your financials will be inaccurate. Use a time-tracker tool for your multiple businesses. Project management software is also a must. As always, I strongly recommend weekly meetings (with a strict agenda) to keep everyone on the same page and to track progress.
How will I achieve some semblance of life balance?
Is your family ready to make the sacrifice of losing you (at least for a while) to another business? Let your spouse or partner weigh in on this decision since it will have an impact on them as well.
Many years of working with entrepreneurs have taught me something important: If the entrepreneur is not taking care of themselves the business will suffer--perhaps even fail. Remember, you first, the business second. Yes, you'll have to make sacrifices, but balance them with time out for proper meals, exercise, family and friend time, and your personal care practices. There may be less time for these needs at first, but don't ignore them altogether.