Don’t Dabble. Do, or Do Not.

Yes, I came very close to quoting Yoda in the title; however, I’m obviously not referring to sci-fi.  Rather, I’m referring to the phenomenon of successful business owners that have great success in one business and therefore assume they can do just as well in another business without putting in the same effort.  More often than not, it doesn’t work out the way we planned. 

I fell prey to this myself earlier in my career.  My company was doing well, and I had an idea for another business.  Was it somewhat related?  Yes.  Was it less related than I thought?  Also, a definite yes.  The other business idea looked very rational.  It was born from brainstorming on ways to better serve the community overall, and it was even fleshed out with a business coach at the time.  It all looked good, until many thousands of dollars later.  Probably about two hundred thousand dollars in fact. 

My thought was that I could create a business that was similar to my recruiting company, but that serviced a different segment of the market.  It would be more of a DIY solution and be practically 100% automated. It had many "bells and whistles".  I was excited.  Was it true excitement for the possibilities, or just excitement for a new project?  I’m not sure, but I would suspect the latter.  I had a new business idea to work on, and all entrepreneurs love that.  

As I built out the website and backend systems, the investment started to increase.  New issues would arise, which were fixable... for a price.  I rationalized it thinking that the idea was so awesome that the returns would justify the investment.  It would just take longer to recoup.  Another issue that arose was that it wouldn’t be as hands-off as I anticipated.  It would be an e-commerce solution, but there would need to be workers in the background making critical functions like marketing happen.  Something I also had not anticipated.  Once again, I rationalized that I had the time, and the additional investment needed, to make it happen.  I pushed on. 

The project finally launched, late of course, and I was excited.  And then it happened: crickets.  No one was biting.  The launch was like a party that no one attended.  I hustled, and a few customers appeared, but nowhere near enough to gain traction.  Months went on, different ideas were tried, I continued to financially support the new business from my existing business, and still nothing happened.  Eventually I succumbed to reality, rolled the few beneficial parts of the new business into my existing business, and called it a day.  Or rather, I called it a loss.  A loss to the tune of about $200,000.  Honestly, I’m really not sure how much because I originally decided the limit was $100K, and then when I had invested (translation: lost) over $150K, I stopped counting.  Two hundred is my best guess. 

Why do I tell this story today?  It’s because I’ve heard many stories in the last year that have been similar.  I realized after this experience that among my many mistakes in this new business were two important ones:  

1. I over-anticipated how similar and simple the new business would be, and  

2. I greatly underestimated how much investment had been required to launch similar businesses in the marketplace previously.   

   
   

I have seen this several times recently with other companies as well.  From trade-related companies feeling they could simply hire an experienced person in a different trade and they suddenly would have a new division, to professional services companies doing the same thing - hiring an experienced employee but neglecting to back them up with the appropriate infrastructure that's required to be successful. Merely throwing money at a new idea doesn’t make for a successful launch.  Just like my e-commerce story above, it takes more than an investment.  It takes time, dedication, and passion for the new business, which is difficult to obtain when you are operating another business already.  

Are new business endeavors possible?  Yes, but the new area has to have its own thought leader and its own infrastructure investment.  Simply hiring a worker or two, no matter how experienced, doesn’t cut it.  As business owners, we either need to hire an executive-level thought leader for the new business or become that person ourselves.  Being that person ourselves is only possible if we no longer are the thought leader in our old business.   

I’m open to being corrected, but I truly believe that you can only be the visionary in one business, even with tremendous integrators or ‘second-in-commands.  A famous book says, “Where there is no vision, the people perish,” and, “No one can serve two masters.”  When a visionary leader tries to lead in two different directions, it’s inevitable that one will suffer.  Once again, I’m happy to be corrected and see some examples of successes.  I just haven’t seen any recently and my own experience is to the contrary. 

I write this in hopes that other business owners with great ideas for second businesses won’t have to lose money like I did to learn the hard lesson.  Is it OK to open a second business?  Yes, of course.  Is it wise to do without fully understanding the complete investment?  Definitely not.  My argument is that even when we think we understand the investment needed, we frequently have underestimated it and should take some time to reconsider.  Shiny new objects tend not to stay shiny for long without the proper amount of investment and attention. 

If you would like to discuss a new business venture and the strategic planning necessary to make it happen, please reach out to me on our Contact Page. 

As always, I wish you the best in all your endeavors. 

Mark Goldman