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Serialized businesses are usually born on the back of entrepreneurs’ creative impulse to build businesses, but not necessarily run them and this is where the dangers can lie (Arkadi Bojaráinov/Getty Images/iStockphoto)
Serialized businesses are usually born on the back of entrepreneurs’ creative impulse to build businesses, but not necessarily run them and this is where the dangers can lie (Arkadi Bojaráinov/Getty Images/iStockphoto)

Commentary

The dangers of being a serial entrepreneur Add to ...

I define a serial entrepreneur as someone who starts and leads one business after another or, multiple businesses at the same time. This is opposed to an entrepreneur who starts a single business and runs the day-to-day operations of that business until exit or retirement.

There are several high profile examples of serial entrepreneurs; take for example Steve Jobs (Apple, NeXT, Pixar, Apple) or Elon Musk (Zip2, PayPal, SpaceX, Tesla, SolarCity). What Jobs and Musk also have in common is that they both ran some of these businesses simultaneously, as opposed to one after the other.

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That is where the dangers can lie. When a business owner becomes more concerned with giving birth to a business and less on nurturing it into sustainable growth, it can mean failure for all the ventures involved. The cause of death of these entities is rarely the original business case or opportunity, but more likely due to the lack of committed follow through on behalf of the entrepreneur.

That being said, serial entrepreneurialism is alive and well in the small business world. Sometimes, small business owners build complimentary startups to allow for vertical integration. A building contractor may also own an electrical contracting company or a landscape architect firm, for example. This type of arrangement is often beneficial to the owner because he feeds his existing business by owning both the vendor and the customer.

But things can get precarious when small business owners engage in unrelated opportunities and spread themselves, and their influence, too thinly among disparate industries. It would be like a building contractor starting a fashion design house or a night club.

Serialized businesses are usually born on the back of entrepreneurs’ creative impulse to build businesses, but not necessarily run them. They like the thrill of the chase of the startup dream, but get turned off by the daily challenges of the sustainable growth.

In the case of Jobs and Musk, they both focused on building incredible companies before they went “serial.” At that point, they had both the experience of managing operating companies to great success, as well as the financial wherewithal to diversify and hire professionals to see their future startup visions through.

The downfall of many serial entrepreneurs is that they fail to recognize the one business that needs their full time guidance to succeed. Instead, they hedge their bets by juggling multiple businesses at once. In these cases, usually all the businesses suffer by way of an absentee entrepreneur and a lack of resources due to available cash being siphoned off from one company to another.

Not only have I seen examples of this; at times, I have lived it. Luckily, in my case, my first business was well managed by others and had a profitable track record before I added a second, third and fourth business to my portfolio. With that said, they weren’t all equally successful, and I often wonder what would have been different if I can just dug my heels in and put all my eggs into one basket.

So while I admire small business owners that have a knack for multiple startups, I often advise them to watch their timing carefully or back away completely. Unless the new business is so complimentary or vertically integrated it can live off of the infrastructure and business you already have, I would hold off.

Wait until your first venture is a well-oiled machine and can live without you. At that point, you’ll be in a position to consider selling the first business so you can jump into your next dream with both feet and all your attention and passion.

Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.

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