Mumbai : Earlier in 2020, Vusi Thembekwayo, A South African venture capitalist, entrepreneur, keynote speaker and an inspirational leader in a YouTube video of one of his interactions mentioned, “ “It’s rude to make your wife pay for your girlfriend.” – A analogy to diverting funds from a well-established profitable business into a new venture. 

This rudeness comes at the expense of the business that guaranteed one their bread & butter. At the cost of dismantling a well oiled process, organised people and consistent profits. It is only prudent to look at new ventures and businesses as a startup and raise or invest capital either on individual financing capacity or through other sources like family, friends, banks or VC’s. 

Entrepreneurs assume, forward or backward integration to their existing services or products is an expansion strategy, however it is pertinent to acknowledge that it demands time & attention, new money, people and its own processes. Such expansions thus need a dedicated head, who is the entrepreneur himself or bring in an experienced pair of hands to run it. New ventures and expansions need hand holding, nurturing and care to raise it to be on its own and start offering the fruits of labour. 

More often than not, entrepreneurs make the cardinal mistake of trying to handle multiple ventures by themselves, only to negatively impact smooth running profitable businesses. As Guy Kawasaki would say, “Better to fail doing the right thing than to succeed at doing the wrong thing”

How to expand business and what are the options?

Ensure the existing business is in good hands. If the entrepreneur plans to focus on the new business/vertical, the existing business should be given in able hands to continue business as usual. Just like new processes, new ventures require establishing a strong foundation which in turn demands authority, responsibility, finance and employees. It is a full time job.

Invest personally or get funded for the new venture. Diversion of funds from existing business wills not only negatively impact operations but also the people associated with it. Imagine, taking away from the team that has built a successful pipeline to feed the new love of your life. Secondly, if the risk cut off is not etched in stone and the new venture is not making profits, its hunger and dependency on funds will only keep eating away from the profitable business. In the hope that the new venture will help and symbiotically grow, it may boomerang like a parasite and impact a well-established enterprise.

Thus it is important to calculate your risks. The risk appetite has to be strictly adhered to. Emotional pressure may lead to pushing financial boundaries. Once the boundaries are breached, chances of financial distress are likely. 

Important to treat expansions as new ventures and treat it just like a startup; ideate, validate, conceptualize, fund and scale up. Just like your first venture, with all the love and attention.

Profile of Author-

A passionate leader with first class communication skills and a long track record of successful management. Prashant Vaddadi Rao (PVR) comes with about two decades experience of being actively involved with startups. He has gradually scaled up to varied job roles. An inspiring and motivational C- Level executive with first-rate interpersonal skills and the ability and passion to develop the vision of any company he manages. He is able to push performance improvement whilst at the same time delivering growth. Possessing vast Strategic Leadership experience he will always ensure that clear objectives and expectations are delivered and maintained. 

As a key strategist he oversees Business Development, Client Acquisition & retention, building workable and scalable models. He is known to be a leader who believes in “People Enabling” over People Management.

by sachin murdeshwar