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319 W. 2nd St., Owensboro, KY 42303

Phone: 270-903-4330

A Failed Business Venture

April 24, 2018

A few years ago, our janitorial company created a totally separate division we were sure was going to make money. The company was doing well financially, I now had some free time on my hands, and I wanted to add value by creating a new revenue stream for the company. But it was a total failure! While we did make money the first year, we lost money in the second year and the stress level was more that I wanted. Making matters worse, it detracted us from the core janitorial business, which was a big mistake. Let me explain what happened.

 

My company is co-owned by my parents and myself. In 2015, the company was going strong and our leadership team was solid. In fact, the leadership team was so solid that the company was running very smoothly with little effort required on my part. Due to this situation, and being the entrepreneurial-minded person that I am, I decided that a new business venture would be a good way to spend my time. My dad grew up in the construction industry and was a very skilled carpenter. My college degree was in Civil Engineering and I had experience in estimating and managing large construction projects. So in my mind, creating a construction division was an obvious choice.

 

To justify my decision, I assumed that we could use this service to add value to our existing clients. Why not offer them construction services in addition to janitorial? It seemed so obvious. We had the skill set, the finances, and the time to do it. So why not?

 

While getting work for existing clients was my goal, it quickly became apparent that in our smaller city residential work was going to be the only way we could get this new division off the ground. So with a minimum job size in mind, we took off selling and picking up new clients. I was excited and getting jobs was not a problem. During our first fiscal year, we did nearly $750,000 in revenue. However, as we began to grow, challenges began to surface and life got stressful. The grind to pick up new business was constant, wrangling subs to get work done was exhausting, and keeping good workers was challenging.

 

Of course this is nothing new to the construction industry, but what I didn’t foresee was how much this new venture pulled me away from my janitorial business. What began as a mission to add value to our company turned into an all-consuming venture that detached me from the very thing that made the new division possible.

 

The construction division did not add value to our janitorial business, and if anything, it diluted what we had, as it pulled key leaders away from our bread and butter. As stress mounted and profits eroded in year two, we realized the mistake we had made. Our focused drifted and we did not give our core business the attention it deserved. I’m not sure there were any immediate consequences to the janitorial business, but one thing is sure. I wasted time away from the business that could have been used pouring into the people at our janitorial company. The grass looked greener and I fell for the allure of something new.

 

Lessons Learned

So what can you learn from my mistake? I would not say that all new business ventures or add-on divisions are bad idea. But before you dive off into a new venture, ask yourself these key questions.

 

  1. Will this new division truly add value to my core customers? Is it a service they value and would pay a premium for me to provide?

  2. Does this new division add to or subtract from my perceived value? If you perform poorly in the new division, this could ruin the image of my current core business.

  3. Does this new venture create synergies with my core business? For instance, adding a carpet cleaning crew certainly adds synergy and can easily tuck into a janitorial operation. However, a construction division like mine did not create such synergies. If synergies are not realized, the new venture is not a division but rather akin to starting a brand new company in a brand new industry.

  4. Is your time best spent pouring into your existing business, cultivating for future success? Or is you time best spend outside the business?

 

I write this article not to scare or deter you from trying new things, but to warn you that shiny stuff syndrome has damaged many, many businesses. Don’t invest in other fields while your own is being taken over by weeds.

 

 

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