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Dealing with your side-business

It is 2 a.m. You are sitting at your desk and writing emails you don’t want to write about things you don’t really feel interested in. Each day after you come back home you feel obliged to take care of it. It’s a love hate relationship: it’s your side business.

The temptation of a side-business

When you started – you felt excited and was eager to pursue it. Everything was new, the opportunity was great and your best friend claimed he will help you no matter what. It was just a small investment to test the idea. The more time you invested in it, the more difficult that simple project became. The more money and time you invested, the less comfortable you feel about giving up.

You’ve built a cage around yourself. You have locked it and thrown the key out of sight. So now you are sitting up at night – yawning, tired, stressed. You know it would be better to be asleep. But it seems as if there is nothing you can do about it. You are trapped – it is difficult to live with it and difficult to leave it.

I meet many entrepreneurs who have got themselves in an uncomfortable position of being stuck in a side project that is not performing as well as they expected.

Doomed by my side-project

I was a guy like this myself. At some point my two friends and I decided to acquire a small coffee place from a friend who was relocating abroad and it seemed like a cool idea to have our own place, its financial results seemed promising and we considered the investment to be reasonable. How wrong we all were.

A coffee place is like a full stack production and distribution company using very complicated operating mechanisms on a small scale. It has a very limited growth potential (mostly limited by the size of the venue) unless you upscale to multiple locations and it also requires a huge effort to design simple processes for low qualified staff.

We ended up all being involved in daily operational problems from literally stocking up the fridge on weekends to negotiating with suppliers, we even served customers in order to understand better what brought them to our place and so much more. What seemed fun in the beginning ended up being a struggle and a test of our friendship.

Honestly – I believe it is almost impossible to run more than one business on an execution level unless it is big enough to have full time senior people in management positions. How to make sure you don’t fall into such a trap? Don’t follow your passion, validate opportunities and imagine yourself taking care of this business at 2 a.m. in the morning instead of getting the rest you deserve. Finally, if an opportunity arises? Take a deep breath and sleep on it before you invest.

Three strategies to help breakthrough

Some of you are probably already on the other side. You have made that investment. Your little side-project is running. It is too big to kill it and too small to really switch your full attention to it. What can you do to increase the growth opportunity, validate it once and for all and solve the problem?

Here I list a few solutions that I have experienced first hand in my career:

1. Sell it. One man’s trash is another man’s treasure. Your struggling venture may be the missing piece of someone else’s puzzle. I built an e-commerce platform It required huge investments in stock and traffic and provided quite low margins. At some point we realized that we can either close it or sell it. We found a perfect fit for a buyout. A distribution company that was one of our suppliers. We pitched to them an opportunity to build a B2C channel to have direct communication with buyers. They could use the stock they already had anyway and generate double the margin we had, which easily covered the operational costs. They agreed. We were happy that our work didn’t go to waste and we could focus on our main businesses. After 4 years the business now generates profit for the buyer and each of us are focused on our core business.

2. Simplify it. Think about the core value for the customer. Can you do less and keep the customer happy? Can you outsource most of the operations to other companies in the value chain? Can you productize the service or automate the sales and delivery process? An advertising agency can be a great example. Many owners tend to narrow their speciality and move towards a full-service agency. This turns the level of process complexity into a nightmare. Sometimes your job is to drop some clients and focus on the job that is simple. To focus on just one clear value proposition. A full service agency turned into a logo design company is brilliantly described in John Warrillow’s book “Built to Sell”.

3. Outsource it. You can hire an external company that will take the mixed role of a strategic developer and interim manager. For the last two years my team at Albrecht&Partners has been managing growth part time for a distribution company that was founded as a side project by an industry expert. This company has been in business for 15 years – managed part time by the owner (literally emailing people at 2 a.m.). When the market became more mature and competition got smarter it was impossible to compete with tools and processes that had been put in place a decade earlier. Our new look and energy to change has delivered respectively 14% and 22% Y/Y turnover growth in the last two years. The company turned from breaking even to running a 14% yearly profit.

These are the top three scenarios that I have seen at work. They can save you time and effort without having all you had built go to waste. Is it easy? Of course not. Is it worth saving your vital energy and regaining focus and clarity? In my opinion – absolutely!

Business on the side – for whom

Is it a bad idea to get involved in a side-business in the first place? Personally, I think it is the safest way to switch from an employee to an entrepreneur. It is actually the best way to validate your business idea without major risks.

However, if you work hard and don’t see the expected outcome for a long while then it is time to change course.


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