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, Facebook Share, LinkedIn Share or other type of social share (handy buttons provided) would be greatly appreciated. Thank you!
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Author: Eric_Rudolf (76 Articles)
Eric Rudolf is Director of Marketing for one of the fastest-growing professional development and training companies in the world, as well as a featured small business writer for LegalZoom.com and RainToday.com—a major marketing and sales portal operated by the Wellesley Hills Group. Eric can be followed on LinkedIn or Twitter.
May 25th, 2010 at 2:08 pm
Hi Eric
WOW – that couldn’t have come at a more apt time! The challenge I have is that my business is offering consultancy services to others – however, at the same time, I practice what I preach via my own business ventures – of which there are now 2. And I’m involved in 2 other really great projects with other partners that I feel could really fly – IF and this is the big word, IF there is resource focused on them. The overwhelming feeling I have at the moment is of juggling too many entities – and you’re right – each one needs focus. There’s the counter argument of course, that would say, hedge your bets – get your fingers in a number of pies – however, I can’t disagree with any of the 5 reasons you set out. Great article – very poignant and thought provoking – made me definitely stop and think!
May 25th, 2010 at 2:27 pm
Hi Michelle:
It’s great to hear when an article actually makes someone stop and think . . . thank you very much for leaving your feedback! And it takes a great deal of courage to admit that as an entrepreneur, you might be juggling too many things. You deserve significant credit for that. Good luck to you in whichever direction you decide to go!
- Eric -
May 25th, 2010 at 3:00 pm
Eric, I think your points are correct and well made. Many times the owner short-changes the organization that provides for themselves and their team in order to pursue something else.
But why do they do that? Could it be that their existing organization doesn’t have a bold or great enough purpose to continue to excite them? We all need a “why” that energizes us. But it is sad when the leader has people working toward a goal that no longer energizes them.
Mike…
May 25th, 2010 at 3:46 pm
Hi Mike:
Thank you for your candid comments, and let me ask you this: if the person who started (and owns) the company gets bored, do you think he or she has an obligation to let their employees know? Or to put it another way . . . do you think it’s fair for an owner to pursue other things and let the original business die without giving their employees a heads-up? I understand an owner’s right to be “excited” about a new venture, but I do NOT endorse the thought process that an owner is absolved from the responsibility of taking care of employees simply because they are “bored.”
Thanks again for writing, and good luck to you!
- Eric -
May 25th, 2010 at 5:35 pm
Another reason #7: It generally looks bad to your existing clients or prospective clients of your original business. No one wants to work with someone who’s focus is elsewhere. Clients want to believe that you are also giving 100%.
May 25th, 2010 at 6:21 pm
Hi Kammy:
Absolutely 100% correct! This is one I definitely should have included. This is especially true when small companies are working with (or attempting to work with) big clients. If a Fortune 500 firm is going to take a risk and hire a small firm, they expect the full attention of EVERYONE–especially the owner and CEO.
Thank you VERY MUCH for writing!
- Eric -
May 26th, 2010 at 6:27 pm
Hi Eric,
BRAVO!!!! Standing ovation!!! Brilliant! You just nailed the ethical dilemma of small business owners. When greed replaces passion, everyone loses. Your stellar examples further illustrate how this behavior plays out in the real world. The employees who helped make the small business owner successful (and vice versa) are out of luck. This is no different than large corporations suddenly eliminating jobs, yet are top heavy and executives still receive bonuses. I think it’s easier to “forgive” the small business owner, yet the behaviors are the same.
I agree with Mike Henry’s point that if you lose your passion for your business, it may suffer either way. Your response adds to that dialog by asking some critical questions addressing the obligations the business owner has to his/her employees.
Thought provoking!
Cheers,
Jen
May 26th, 2010 at 7:03 pm
Hi Jen:
Good to see you here, and thanks for the great comment! I believe in most cases where an owner gets distracted, that’s exactly what happens–the business owner simply loses interest. And you nailed the main issue . . . the “ethical dilemma.”
Thanks again for writing, and I hope to see you again!
- Eric -
May 26th, 2010 at 9:48 pm
I agree with both Mike and Eric. I see them as two separate issues. On the one hand, employers should always take care of their most valuable assets – those being their employee. On the other hand, if a business owner wants to move on to more exciting pastures, as long as he doesn’t leave his business to fend for itself, I don’t think there is anything wrong with someone following their passion. What would be wrong with a situation where a business owner puts another competent, eager individual in charge of one business while he pursues another avenue? But I definitely agree with you that if one spreads oneself too thin they are likely to lose focus which would not be good for any of the businesses one is involved in. And if a business owner decides to just move on to greener pastures leaving his/her company in the position of a sinking ship, this is definitely not right.
May 27th, 2010 at 11:25 am
Hi Julie:
Great points, and you are absolutely correct when you say that putting a competent, eager replacement in charge is by far the best thing to do. That said, unfortunately most business owners simply don’t follow your advice.
Thanks for commenting, and I hope to see you back here soon!
- Eric -
May 27th, 2010 at 1:15 pm
You really have me thinking here Eric. What are the inherent promises the owner of a business really makes to it’s employees? It used to be “job security”. What is the employee-employer “contract” today? Is it different for a small business vs. a large one?
I get your point that moonlighting at the expense of a business you have built and that others have both helped to build and counted on for their livelihood is a walk on the “dark side” in so many ways.
Yet unless a business is run in such a way that it is no longer dependent on the owner for it’s success, I don’t think you have really built a successful business, but rather a successful identity for the owner. As an employee you will always be vulnerable, whether the owner chooses to moonlight or gets taken out by an accident. As an employee, now more than ever, we must pay attention to the health and well being of the company we work for. Too much dependence on any one individual is clear sign of risk for everyone and it behooves us to proceed with our eyes, and perhaps our options, wide open.
May 27th, 2010 at 1:33 pm
Hi Susan:
Thanks for the great comments and thoughts! You make a wonderful point about a small business having too much dependence on one person (the owner), and also about the employee’s responsibility to truly understand the type of situation they are in. This is excellent advice.
Thanks again for writing!
- Eric -
October 16th, 2010 at 2:53 pm
I think they are dynamic individuals that are simply bored. The company is running, things are working, now it’s the humdrum of running the business and that can be tedious at times with employees wanting days off and scheduling meetings and just adhering to the business model. I was very bored in my business after 14 years…..actually more like after 5…..but I kept going not realizing that I was becoming stale. Turning over the business to be run by a competent manager with clear goals, etc. would be a better idea than trying to spread yourself too thin like some people do….and then their family life suffers too. Some of the people you described doing the speaking engagements probably feel excited again to be asked to speak on a subject they consider themselves to be an authority on. There – now the ego gets stroked again and that is kind of a “high” for them. Let’s face it…..there are lots of risks in starting a business – you have to have some sort of ego. It’s a shame that they do not recognize how much they are taking away from their initial business. If they surround themselves with good managers, one of them should step up and say “let me run the show while you pursue something else” – this way at least one business remains steady ! my 2 cents for today! jan
October 17th, 2010 at 5:23 pm
Great comments, Jan—directly on point. I couldn’t possibly add anything else of value, except for a “Thanks for taking the time to comment!”
December 31st, 2010 at 11:19 pm
Here’s an alternate take, from the t&d world. So long as I conceived of my business as a training and development business, I did ok, but a) grew bored and b) had fairly limited growth.
As soon as I reconceptualized the role and mission of the company to focus on providing learning solutions, the business actually changed to encompass speaking engagements, book authoring, product development and publishing, etc.
These things were not moonlighting, but rethinking, so I wonder in your experience whether those you allude to were expanding the meanings of their businesses rather than moonlighting?
January 1st, 2011 at 7:58 pm
Hi Robert:
I see your point, but it’s not the situation I was talking about. I think we can both agree that expanding a small business by going into related areas (and leveraging the existing company’s strengths) is a good thing. But I’m not talking about rethinking or repositioning here. What I’m talking about is company owners getting distracted from the core business—and eventually hurting it—by pursuing interests that might be related to them PERSONALLY, but are not related to the COMPANY they are in the process of running. Example . . . the successful owner and CEO of an IT training company decides she wants to leverage her success in the business world to be a paid motivational business speaker. She takes significant time from her company’s Marketing Department to develop her brand, create her presentations, find speaking events, and coordinate them. The $10,000 appearance fees she receives in exchange for her speaking go directly into her own pocket, and are not re-invested in her core business. The problems here are obvious. First, valuable marketing resources are being funneled away from the core business and into the personal pursuits of the owner. Second, the owner (who is also the CEO) quickly loses interest in actually running her business, but doesn’t take the opportunity to put someone else in charge. With these two problems alone, the core business will eventually cease to grow, and may even cease to exist.
Great points, and thanks for writing!