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Owning a Second Business

By Jacqueline Drew
START Marketing Inc.
www.startmarketing.com

A few years ago, I had a funny chat with a client of mine from Hong Kong, and we were talking about business cards. He said it was very common for people in his culture to print up a business card with the names of several businesses on one card. He said that in his culture, the more businesses one owned, the more status and prestige they would appear to have. That little conversation crossed my mind recently as I considered the unfortunate story of another client who decided to start a second business after he'd be doing well in his first.

The company he ran was an industrial equipment business. In his spare time, he was a great athlete – so when the opportunity came along to buy a small sporting goods business, he got some of his friends together to be his partners, and bought the company. Since one of his partners already had experience in sporting goods, the plan was that that partner would be the manager, and the rest of the fellows, who also owned other businesses, would be silent partners.

Well, it turned out that the sporting goods business was trickier than any of the partners ever conceived. Not only did they take money out of their successful companies to buy it in the first place, but at every turn there were more unexpected costs….new marketing materials, new location, new staff to replace the ones who'd quit. The first year, the business was much less profitable than anticipated, and the partners had to keep divesting in their own businesses to keep the new business alive.

That made the “silent” partner become “unsilent.” The managing partner was fired. And then more problems arose…none of the remaining partners could afford the time to manager the business. Over and over, they said, “This is killing my business – I can't afford this! My time isn't worth this hassle!”

In the end, they got out of it. They sold the business at a reasonable profit as compared to what they paid. And celebrated profusely when it was all over.

Yes, like my client from Hong Kong had told me, owning more than one business can seem alluring and presitigious…but remember, there's a lot more to it than status. If you really want to buy that second business – it's probably best to get out of the first one – because the cash you lay out to buy a business is nothing compared to the time it will demand. And in my opinion, sanity is priceless!