Once an entrepreneur makes a success of one business, there’s a dangerous tendency to think he can duplicate his efforts in another business, and then another, and another. Spreading yourself and your resources over a number of ventures can impair your ability to deal with financial and other challenges. Aside from stretching finances, getting pulled in too many directions can deplete a business owner’s time and energy, making it difficult to maintain the core business that brought about the initial success.
The key to avoiding this killer is to know your abilities and be sure to keep enough energy, cash and focus to maintain your core business. When you’re tempted to spread your wings and become a raving capitalist, the first question to ask yourself is how much time, energy and money you can afford to invest.
- Assess Your Current Situation. The time to consider branching out to own different ventures is after you’ve made your core business successful and honed your time management to the point that you have time to invest in other things. A starting point to investing is to take a close look at where you’re at with regard to the core business. Is it running smoothly? Where is it at in the growth cycle? How much of your time is needed currently to run the business? Will it require more of your time and energy in the future?
- Time. Following the current situation assessment in #1 above, if you have time to apply yourself to another venture, now assess how much time the new venture is likely to need.
- Energy. Everyone will have a certain amount of energy to devote to dipping fingers into different pies.
- Money. Determine where you’re at financially and how much you can afford to sink into a new venture.
- Due Diligence. Assess the risk, from every angle. Each new venture one gets involved in introduces a new set of risks. If you don’t have time to assess the risks, you probably don’t have time to get involved or run the business.
- Develop a Business Plan. Whether or not the acquisition currently has a business plan, you will need yours to know where you’re going.
- Assign Responsibility. If you’re buying into a partnership situation, be clear about all the aspects of the partnership, who is responsible for what, how much money does each partner expect to earn, how much equity, how much time working in or on the business, and what is the exit strategy?
- Inspect What You Ask To Be Done. Once you’ve covered all of the points above and cut the deal, develop a schedule of times you will check on how things are progressing. A part of your business planning will be setting goals and action plans. Build these into your calendar and plan to check in regularly to ensure things are going according to plan, or if not, to make adjustments.
Small businesses succeed because somebody accepts the risks and the responsibility to make them successful. Nobody succeeds while sitting still. If you find yourself drawn to own more than one business, know that a few people are suited to the rigors of multiple business ownership, while most have their hands full just keeping pace with one business.