It's easy to understand why entrepreneurs start multiple businesses. Taking risks and innovating are in their blood. However, even the savviest entrepreneur is human, and we can only focus our energy and resources in so many directions before our cash flow takes a hit.
Let's explore some tips for getting promising new enterprises off the ground while keeping a watchful eye on the business that currently earns you money!
1. Manage your cash flow.
If you need to put aside money for a side business, it's important that you appropriately navigate cash flow in your main business.
Ensure that you have a cash-flow-management plan in place, and review all of your accounts at least once a month so that you can optimize your spending in real time.
It's risky to funnel main business funds into side businesses because if the main business experiences an emergency or setback, you'll need a parachute. You may want to consider using small business loans to help cushion your businesses.
2. Mind your working capital.
Working capital is the difference between a business' current assets (cash, accounts receivable and inventories) and its current liabilities (accounts payable). Your amount of working capital reflects your business' financial health and operational efficiencies.
Ideally, both your main business and side businesses should have strong working capital at all times. Work with a human professional as well as accounting software to gain an immediate, up-to-date and accurate picture of your working capital. If you need to infuse a side hustle with capital, plan for the fact that some sources—such as small business loans—take time.
Don't get so caught up in your side gig that you take your eye off the profitable ball that is your main business.
3. Build side gigs slowly.
In order to keep cash flow moving in the right direction, consider growing your side businesses conservatively.
By all means, be enthusiastic about your side gigs' potential, but don't overreach: Use business credit cards wisely, don't hire too many employees too quickly and don't expand before the side business proves itself.
Should things not go as planned, you don't want your main business to take the hit.
4. Know when to keep it a hobby.
Your main business has succeeded because it has effectively addressed a marketplace need. It's hard to admit that side gigs may not do the same. Business owners sometimes believe if they “do what they love, the money will follow." The trouble is, often the things we love don't pay anything.
When there isn't a market demand for a product or service derived from a hobby, the resulting business will be unprofitable. For instance, my friend paints beautifully, but she understands that starting a side gallery business would take too much time and money away from her thriving restaurant so she separates business and pleasure.
5. Protect yourself from burnout.
Managing multiple businesses can be challenging and very stressful. However, if you find yourself working way too much and neglecting your personal life, use time management strategies to scale back:
- learn to say no to tasks that don't align with your businesses' priorities,
- work on your businesses during times in your day when otherwise you'd just be standing around (in a doctor's waiting room or in a checkout line) and
- avoid a perfectionist mindset that has you spending extra time getting a deliverable from 99 percent to 100 percent.
6. Be fair to your businesses.
If your main business is doing well, chances are you must answer to constituents including financiers, customers, partners and vendors. Don't get so caught up in your side gig that you take your eye off the profitable ball that is your main business. Make sure you competently fulfill all your responsibilities as the owner, and try not to work on side gig tasks during time you've expressly set aside for your main business.
Owners who have built one viable business certainly have the chops to do it again. But finding the right balance takes effort and forethought. By managing your cash flow and working capital, growing side gigs slowly, knowing when a hobby should stay that way and guarding against overwork, you may well be on your way.