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The Most Alarming Trend in Small Business

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This post originally appeared on THEsmallCOMPANYBLOG.

As regular visitors to my blog know, I typically don’t give lectures or tell small company owners what to do.  Most of my articles are written under the assumption that a) good or bad, adults can make their own decisions, and b) small business people will almost always do what is best for their organizations.  But as of late, I have been witness to a trend among entrepreneurs—a trend so alarming, I have no choice but to grab them by the collars and scream directly into their greedy, oblivious little faces.  And what is the trend in question?

Successful small company owners “moonlighting” for
personal profit, at the expense of their existing businesses.

Now obviously this is going to require some explaining, so please allow me to clarify.  I’m not talking about the struggling coffee shop owner who does landscaping on the weekends, or the upstart web designer who works as a Realtor for extra income. The person I am referring to here is the entrepreneur who uses the resources, employees and reputation of their existing and profitable business to start a second venture “just for themselves.”

For example, in my industry alone (training and professional development) no less than three owners of privately-held competitors have all but abandoned their once-profitable firms to pursue individual careers as authors, speakers and consultants. I also have a very good friend who now gives more time to her multiple Board of Directors appointments than her growing IT services business.  And just last month, I spoke to the owner of a thriving marketing services firm who is working over 20 hours per week assembling a Social Media Marketing strategy for a friend’s company . . . at an hourly rate that would make an attorney jealous.  In each case, the small company owner in question is essentially “moonlighting” for personal profit—at the expense of their existing business.

For those of you still looking for reasons why taking a second job or starting a side business might negatively affect an existing business venture, I would like to offer the following six:

Reason #1: An owner losing focus on his or her core business is NEVER a good thing.

Reason #2: Spending time on a new business shows employees of the original firm that you are no longer interested.

Reason #3: Whether or not it is intentional, starting a new business venture will ALWAYS rob your existing business of investment capital—and less capital equals less long-term growth.

Reason #4: Key employees in your existing business will feel left out, left behind, or both.

Reason #5: It sets a bad example for employees, who will eventually come to the conclusion that it is OK to give less than 100%. Because you are.

Reason #6: No one REALLY does it alone. More often than not, the people you are leaving behind are the ones who made you successful in the first place.

After almost 20 years of working with small business owners, I have a relatively good understanding of how their minds work.  I realize entrepreneurs are some of the most driven, creative, and innovative people on the planet.  But that said, these same characteristics can often allow them to turn even the most profitable business into just another statistic on the “8 out of 10 small businesses fail” list.  Above all else, growing a company over time requires one thing: focus.  And without it, ANY entrepreneur—regardless of talent level—is dooming ALL of his or her businesses to failure.

Do you work for a business owner who is distracted by other ventures? Are you one? Please feel free to share your story below.  Otherwise a Retweet, Stumble, Digg or Facebook mention (buttons below) would be greatly appreciated.  Thank you!

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November 10th, 2010 at 7:46 am