Starting a business as a stand-alone new venture or starting a new business inside an existing business?
It’s not always possible to pick the second option (business within a business) but it is super-critical to consider that option whenever we are presented with a new business opportunity. Here’s why:
If you could start a new venture within an existing business, you would benefit by:
- The startup could just focus upon the PRODUCT/SERVICE – it can find its sweet spot in its markets so much faster.
- The startup entrepreneur can avoid spending time, money and energy on things that have nothing to do with the actual creation or delivery of the product or service.
- Functions such as reception, accounting, employment administration, facility maintenance, etc. are needed in any business, regardless of size. However, if a new business could piggy-back an existing business and use these areas, it’s a head start with resources applied to making the product/service even better.
Remember, business startups that find their niche the fastest and quickly figure out how customers become loyal, grow the fastest and most easily find investors.
How do we find a good match for this scenario?
It’s not hard to find another business that OPERATES in a manner that supports your product. For example, if your startup is a custom job-shop (e.g. custom cabinets, custom furniture), find another business that is also a custom job-shop. They don’t have to make similar products to operate in a SIMILAR manner.
Find a friend or family connection that is already in business. In a cohabitation scenario, these two aspects are certain: 1) The costs of the common expenses can be shared, 2) Support people that couldn’t be justified for one business can be justified for two (and the business benefits sooner with more talent around it), and 3) People are more fully utilized and less likely to be sitting around.
The three areas I would NOT share (staff these exclusively for yourself): Sales, Service, and Operations.
What can I offer an existing business to make this possible?
I would offer the owner of the existing business a monthly amount and a small share of profit. This isn’t forever. This is just long enough of an arrangement to PROVE that your business will make it on its own.
Thus, when does the startup go solo?
- When more than one of these symptoms can be seen in the startup business, it’s time to go solo:
- You are stretching the common resources (such as reception or accounting) beyond their capability and you are noticing that your work gets done second.
- The precision of the work you need from common resources cannot be reached. You need your own people to focus full-time on your business.
- Space has run out and it’s getting uncomfortable at times for you or the other business.
- You are profitable and have put at least 6 months of operating expenses away in savings (get moving when you reach this milestone).
So, think about the idea, the customer, and the niche! Don’t get bogged down with all the other stuff. The scenario I describe is possible if you look around and be warm, flexible, and passionate about what you are dreaming.
Sharing resources seems like a great idea for a startup business. I have never thought of that. There seems to be alot of possibilities in that idea.