By Rieva Lesonsky
How’s business these days? Going well? Congratulations. Keeping your business profitable through the past two years wasn’t an easy task. In fact, if you managed to accomplish it, now might be the time to consider diversifying your business.
There are a couple of ways to diversify. One is to add new products or services to your existing business concept. The other—more ambitious—method is by launching a spinoff business. A spinoff business makes sense when the new concept, though related to your original business, is still different enough to warrant a separate operation with its own staff. For instance, you might have a restaurant that gets enough catering business that you decide to start a separate catering division. Or perhaps you’re doing well with a child-care company and you decide to expand into senior day-care as well.
If you think a spinoff business might make sense for you, here are some things to think about.
Capitalization. Launching a spinoff business requires you to have adequate financial resources. Especially today, when financing is hard to come by, it’s important to be certain you have enough money to get the new business off the ground without harming your original company.
Staffing. While your attention is diverted by getting the new company up and running, you’ll need capable managers at the original business to keep things on track. Make sure your key people are prepared to handle the additional responsibility and workload.
Succession plan. Running two businesses is challenging for an entrepreneur, so think realistically about how you’ll handle the new responsibilities without burnout. If you think you will want to continue focusing more on the new business and less on the old one, start now to plan who will take over and how that will work.
Business plan. You already started one business and you really know your industry. So spinning off a new company will be a breeze, right? Don’t get overconfident. You need to plan every step of your spinoff just as you would if you’d never launched a business before.
Market research. Don’t spin off your business without some proof the new concept will work. Do your market research just as you did when launching your original company.
Customer feedback. Undoubtedly some of your current customers are potential clients for your new business as well—so get their input on your ideas. Start an informal customer advisory board with a variety of your key customers. Ask subscribers to your company’s e-newsletter to take a quick survey. Or use an online survey tool to see what customers think of your new plans.
Image by Flickr user Mykl Roventine (Creative Commons)
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Tags: business success
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