Connect with us

B2B Marketing

Pros and Cons of Running Multiple Businesses [2022 Update]

Published

on

Pros and Cons of Running Multiple Businesses [2022 Update]


A lot of people dream of owning their own business and being their own boss.

Well, at one point I was directly involved in running nine businesses – eight SaaS companies and a marketing agency – with monthly recurring revenues ranging from $10,000 to $800,000.

These are all six to seven-figure businesses. And honestly, doing nine of them simultaneously is a lot.

Plenty of thought leaders talk about the importance of deep focus, concentrating on one thing at a time. If I was a smarter human being, and if I was only looking at things from the perspective of building massive amounts of wealth, I’d say I should only have done one company.

But I definitely don’t regret running multiple businesses. In fact, if I had to do this over again, I’d probably do the same thing.

Why?

Because growing a business without VC funding or outside capital is slow. Building a product is slow. Collecting data to make informed decisions is slow.

During those waiting periods, I’d go work at something different, because that ability to switch gears between roles and priorities is part of my skill set. It’s just what I do.

I’m definitely not saying having multiple businesses is the best way to maximize revenue growth, but it’s what makes me happy.

So my approach might not be right for you. It might be completely wrong for you. But here’s what I’ve learned along the way – what’s good about it, and what’s not so good:

What’s Good? The Pros of Running Multiple Businesses

1. Shared Learning

Because all my businesses are in a similar space, we tend to come across the same types of problems pretty consistently.

So the great thing is that when we figure out how to do something once, we can generally apply that learning across the board, which saves us a bunch of time and headaches

2. Informed Decision-Making

When you have multiple businesses, you have an opportunity to test a lot of stuff at the same time, which is a massive boost to decision-making.

But there’s another benefit here, too.

As long as you’re able to hire a strong leadership team or individual contributors, you’ll find that running multiple companies doesn’t necessarily take that long. 

Your role pivots from making all the decisions yourself, to removing roadblocks and helping smart people reach their own decisions.

3. Diversified Income

This one’s pretty obvious – and it’s never been more relevant than during a pandemic that’s had a massive impact on the global economy.

If you’ve got multiple businesses, then even if one goes down, you’re still in a position to make good money.

4. Harnessing My Skill Set

This is a personal point – it might not apply to you. But like I said earlier, running multiple businesses is just the best use of my own strengths.

To me, it’s easier to build ten $10 million businesses than it is to build one $100 million business.

My skill set lies in building businesses from zero to $10 million. Personally, I’ve not founded a company greater than that. So all I’m doing is focusing on replicating that multiple times.

5. Buy Companies for Growth

It’s not like I literally built all nine of those businesses from the ground up. Some of them I did, but others I acquired along the way.

Actually, I was pretty early to doing this – it’s much more of a trend now. I was able to buy companies for great deals and do things that would be much, much harder and more costly today.

6. Big Problems Don’t Seem So Big Anymore

The fact is, if you run multiple businesses, you’re going to deal with a lot of shit coming your way.

That might sound like a negative – I guess in some ways it is! But it’s also a positive, because it helps you develop a thick skin.

Let me give you an example. One day in 2019, Google accidentally shut down Mailshake. They literally told us we couldn’t use their API anymore. Turned out to be an error on their part but that was one of roughest 72 hours in my life. It didn’t help that it landed on my wife and I wedding anniversary and I just purchased a 911 GT3RS ($200k race car) the week before.

Any other problem besides Google accidentally killing your company just seems like peanuts. And the cool thing is, literally within 48 hours we solved the problem and were up and running with a backup solution.

So if anything ever happens to my businesses today, it just doesn’t seem like a big deal, which means I can get straight to work on figuring out how to fix it.

7. You’re Less Emotionally Involved

When you’ve got one business, it’s inevitable that you’re going to be deeply personally invested.

But I’ve found that’s just not the case with multiple businesses. Obviously I care about their success and making sure we do the right thing for our customers, but I’m not emotionally tied to any of them. They’re not my babies.

I am passionate, but I’m not emotional about it. There’s a difference.

When it’s not personal, I find that people in general make better decisions.

8. Cross Promotion

When you have multiple businesses, you can get them to work synergistically. 

For instance, Right Inbox and MailShake are two different products. However, I can cross promote MailShake in a blog post on RightInbox.com and vice versa.

And the beautiful thing about this promotion is that I don’t have to pay another company for advertising or guest posts.

Having digital real estate is important. The more you have, the more attention your companies receive. A spike in traffic for one of my businesses could actually equate to growth for my other companies, since I own them.

But it goes beyond simply mentioning one of my business ideas on another of my businesesse’s websites. Cross selling is a great opportunity as well.

A company that uses email heavily for their sales outreach may find that mailshake is a great fit for that. After using the software and seeing how powerful it is, I’ve built trust.

Using some simple customer surveys, phone calls, or follow up techniques, I can uncover additional needs that their business has. Maybe they need a tool to help with managing their emails with scheduling, notes, remindres, and other features.

In that case, recommending Right Inbox would be a natural fit.

9. Trend Spotting

I already mentioned how having multiple businesses helps with diversification. And that’s true, having multiple income sources is a huge benefit.

But there is also more to it than that. A more general type of diversification occurs when you run multiple businesses. You have your hands in multiple markets.

Every market or segment of that market has unique needs, problems, and preferences. Therefore, the more companies you have, the more of these insights you uncover.

I can determine some pretty accurate trends by looking at behavior from customers across my portfolio of companies.

What are people wanting in terms of B2B tools right now? What are my market’s primary concerns? Where is the industry headed? Where is business headed in general?

Even just pattern recognition of certain buzz words can clue me in to what’s coming around the corner. You typically hear chatter about a topic, trend, or tool before it gets really wide spread.

Being able to spot a trend and be a first mover is a huge advantage. You can already plan your marketing and product strategy before your competitors know they want to be in that space at all.

10. Economy of Scale

Most businesses have minimum costs to enter. In other words, you need to spend a certain amount of money to form the company, drive brand awareness, and ultimately get your business off the ground.

Beyond that, there are several business expenses — warehousing, web hosting, business software, accounting, legal counsel, customer service, and more.

Because of this phenomenon, it is actually more expensive, relatively, to own and operate just one business instead of several. You can add more revenue streams by having multiple companies, while sharing a lot of the expenses among the companies.

$1 million in expenses for one company with $10 million in revenue is 10% of total revenue. But if expenses increase only slightly with multiple businesses to $2 million, but I now have $60 million in revenue per year, that’s only 3.3% of total revenue.

Economy of scale is a powerful business force. When you play big and focus on top line revenue, you can afford more expenses because they’re actually a lower portion of your income.

It’s why Coca Cola doesn’t just bottle a few dozen drinks at a time, they produce millions. They’re already paying a minimum expense to bottle one Coke. Might as well scale operations up, especially when the ratio of expenses to revenue goes down.

What’s Not So Good? The Cons of Running Multiple Businesses

1. You’ll Waste a Lot of Time on Some Companies

You might assume that when you’re running nine businesses, you’ll naturally end up splitting your time pretty evenly between all of them.

But that’s just not the case. Some of these businesses maybe take up one hour a month; some take up literally zero time. Others require my attention 30 hours a week.

A couple years into doing this, winners and losers emerged. 

Some of those businesses – like Mailshake, Right Inbox, and Zoomshift – were clear winners thanks to their growth rate and market size.

Others just weren’t going to be major drivers of growth, so we either put them on autopilot, found people to operate them for us, sold them, or killed them off.

That second group weren’t exactly “losers.” For the most part, they were kind of middling. There was an opportunity for most of them to succeed, but there came a point where we looked at them and said, “If we were to triple the growth, would we go to dinner and celebrate?”

For some of them, it just wouldn’t have made a difference to our lives, so we decided to sell.

Like I’ve already said, I have no regrets about running multiple businesses. But if I were to do it all again, I probably wouldn’t do nine!

2. When Things Get Bad, They Get Really Bad

Look at LinkedIn and you’ll see a ton of founders and owners who are worried because their businesses imploded during Covid.

Well, I had that same thing five times. The pandemic had a massive impact on the revenues of all my businesses.

That is what hurts on an emotional level – I don’t mind admitting that Covid killed my dreams for a week or two. It left me pretty crushed.

But fortunately, because I’ve developed this thick skin, I came back with new dreams. I figured out ways to keep the businesses afloat.

So there’s a positive here, too. Everyone knows you learn most from your failures, right? Well, when you fail five times, you’re kind of learning at five times the rate of other people. You end up just getting smarter and evolving faster.

3. You Get Siloed as a Founder/Entrepreneur

When you’re running multiple businesses, you’re busy all the time.

That means you never get a moment to sit back and just think about the big picture, or to learn and develop.

Look at most successful businesses and you’ll see that they worked because someone came up with a fantastic plan, built it up, then hired a bunch of great people until they had a team capable of scaling things.

When you have nine businesses, it’s really, really hard to remove yourself from day-to-day involvement.

In fact, literally while I was working on this blog post, I was also answering an email to close a $2,000 deal. We don’t have a sales team for this particular business, so all of that stuff comes to me. I just wanted to work on my blog, but something always sucks me back in!

4. Higher Expenses

I mentioned that a few of the upsides of running multiple businesses were diversification and economy of scale. Those two things help you weather the storm when an economic downturn hits, such as the pandemic.

However, there’s no avoiding the fact that running several companies requires a lot of capital. If you have expenses on the book for a business that starts losing revenue, a lot of your cash is all of the sudden tied up.

You need to have the cash flow, plus reserves to keep paying expenses that you owe, such as payroll, machines, software plans, or other commitments that don’t magically go away just because revenue is in free fall.

It takes a lot of discipline to take money off the table and essentially put it on a shelf — neither making your bank account bigger nor being reinvested in the business.

And of course, you need to come up with that capital in the first place. That means selling a previous business, saving up for years, getting investors (thereby diluting your equity), or having the fortune of being born with money and connections.

5. SEO

A business that wants to grow online has to invest in SEO. And either way you cut it, that’s going to require a lotof time or money.

It’s also a waiting game. You might not see real results with SEO for 6 months, a year, or longer.

Luckily, there are some SEO skills that transfer from business to business. Knowing how to create a technically sound website with the right sitemap, crawling, tag structure, and other aspects is very repeatable.

But, each market requires its own keyword research and content planning. Then, you’ve got to have someone write or record all of that content. Then, you need to constantly track your results and update existing content to keep ranking higher.

It’s no coincidence that my most successful companies are fairly related in terms of the market they serve. Cross pollination helps you get backlinks and other organic growth.

Just keep in mind that if you want multiple businesses with totally different markets — tech, health, and food for instance — you’ll have to create an SEO strategy from scratch each time.

What do you think? Has this put you off running multiple businesses, or has it spurred you on? Let me know in the comments below!



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Copyright © 2022 Dogeared Digital News