How to Build Multiple Thriving Businesses
The things we regret are those that are left untried. How often have you thought about that business that is just screaming to be built? How often have you written it off because you just do not have the time for it? You can execute multiple businesses if you set yourself up for success using these four key elements:
- You need operational leverage in your primary business before allocating time to another one.
- You need to clarify how you will get from the startup phase to your operational leverage in the second business.
- What does your financing structure look like for the second business and what is the risk profile for the businesses, in combination?
- Who can you learn from to shorten your learning curve in the second business?
Operational leverage in your primary business
What do I mean by operational leverage? Operational leverage means that you have clear business processes and a team qualified to execute them without your direct participation. Think about the last problem that popped up for your business. Who did the firefighting? Was it you or someone on your team? If it was someone on your team, did they ask for permission before fighting the fire, or did they tell you how they resolved it after the fact? Better yet, did it show up on a report or dashboard for you to review later?
All businesses have problems, and those without clear systems have a lot more of them. If you are frequently pulled back into operations needs, you will have trouble keeping up with the needs of both businesses. Clear systems, processes and a team empowered to operate them give you time to allocate to other tasks. Without clearly defined systems and processes for your new business, keep the focus on your primary one, until they are there.
Operational leverage in the new business
This follows closely with our first key element and also applies to your new business. If your new business is a hobby or something you want to do purely for the enjoyment of it, great! Treat it as such, and make sure you have time for this hobby. If it is intended to truly be a business that is well run and generates owner benefit, you need to visualize how you get to operational leverage, where you can effectively own and oversee both businesses. This does not happen overnight, and getting it off the ground will take some extra time. Think about what processes and systems need to be built and who the people are who will operate those systems long term.
Financial structure
Are you taking on debt or raising funds for this business? Are you using personal funds? If so, how much are you willing to invest? When you are allocating to any investment, businesses included, understand your downside risks. How much debt are you guaranteeing? What about personal guarantees on real estate leases? Equipment purchases and leasing?
Each of these should be forecasted so you can see what the impact of a business failure or shutdown would be. Be sure to look at capital reserves and operating cash needs for the new pursuit and how that impacts your resources for your personal life and existing business.
Shorten your learning curve
If you have made it this far in your evaluation, it should mean that you have good operational leverage in your primary business, a clear vision for how you get there with the new venture and that your financial resources and risk level are in good shape. You now have the opportunity to apply the lessons you have learned with your primary business and to engage others who have already built businesses similar to the new venture. Ask yourself what communities, coaches or mentorship programs exist for the new idea? Can you retain someone to give you their playbook or help you build yours? Doing this can help drastically reduce your risk of business failure and get you to operational leverage even faster. Good programs or coaches are worth many times their cost.
The dream of building a second business or a portfolio of businesses is one shared by many entrepreneurs. A second business can allow you to introduce your skill set to fresh people. You can solve new problems for these people and, when done well, build significant wealth for your family. On the other hand, when implemented without proper planning and execution, a second business can weaken both undertakings and create burnout. Follow these key considerations, and your success rate goes up dramatically.
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DISCLOSURE: Jarrod Musick is an officer of Destiny Capital and Entrepreneur Aligned, a DBA of Destiny Capital. This article is for informational purposes only and should not be relied upon as a basis for your investment, business, or personal financial decisions. We recommend consulting with your wealth advisor, CPA/tax advisor and/or attorney, as applicable to your situation, prior to implementing any new tax, legal, or investment strategy. Advisory services provided by Destiny Capital Corporation, a Registered Investment Adviser.
ABOUT JARROD
Jarrod was born into financial planning and solving financial problems. With his financial advisor father Steve telling stories about finance around the dinner table from an early age, the idea that everyone has a different financial situation was always there. After an early professional career spent in nonprofit and government, Jarrod came back to his roots helping people plan and invest in 2011. Since then, he has worked with individual clients, led internal teams and ultimately became partner and the CEO of Destiny Capital in 2017. With a passion for helping entrepreneurs change the world, Jarrod ultimately oversaw the creation of Entrepreneur Aligned in 2020. With both Destiny Capital and Entrepreneur Aligned, Jarrod leads teams that help people live lives of abundance where money is simply a tool to let everyone be a positive force for the world around them. When he isn’t working with the talented teams for EA and DC you can find him chasing his twins, wily trout or a podium spot at an OCR race.