10 tips for owning multiple businesses

When you’re ready to take the next step in your entrepreneurial journey, you might consider opening another business. Having more than one business can provide additional streams of income and diversify your portfolio. But remember: Creating a new company takes careful planning to ensure it’s a fruitful venture. 

Whether you’re opening a side business in addition to your main company or creating a brand-new organization, here are some tips for how to own and manage multiple businesses successfully.

What you’ll learn:

• To successfully own multiple businesses, it may help to first consider the pros and cons, then develop a plan to find balance and synergy between your companies.

• Some ways to help you manage multiple companies are setting business goals, creating business processes and assembling a solid team.

• When juggling multiple companies, it’s important to carefully monitor your businesses’ cash flow and keep clean records.

• To help conserve resources across different companies, you might invest in tools to promote efficiency and outsource certain responsibilities.

Owning multiple businesses offers numerous benefits, but it can also increase complexity. Weighing both the advantages and drawbacks can help you make an informed decision before you create another business entity. Consider the following.

Some potential advantages of owning more than one business include:

• Diversified income and increased stability: Owning multiple businesses can reduce the need to rely on a single revenue source, which may help stabilize cash flow if one industry experiences a decline or another business is seasonal.

• Stronger resilience and improved efficiencies: Diversifying operations can help spread risk and allow for shared resources—from staff and technology to physical spaces—potentially resulting in cost savings and other efficiencies. 

• Greater reach and personal growth opportunities: Complementary businesses may help extend your reach through shared marketing, cross-selling to customers and new opportunities while also sharpening your processes, systems and leadership skills.

A few drawbacks of owning multiple companies are typically:

• Operational strain: Running multiple businesses can divide your time and focus while increasing management complexity—from overseeing employees and vendors to handling accounting, payroll, taxes and daily operations. 

• Financial and brand risk: Launching new ventures can strain cash flow, especially if you rely on one business to support another. At the same time, operating multiple brands may dilute your positioning and confuse customers or investors.

When you’re creating multiple businesses, review the various types of legal structures available to determine which works best for your companies. 

Here are some common ways to set up multiple companies.

If your companies are in different industries, you might consider separate LLCs, S corporations or C corporations. Because each company is its own entity under this structure, in most cases, each LLC or corporation must obtain its own Employer Identification Number (EIN) and file its own tax return. 

Separating your LLCs or corporations can be beneficial because they may not directly affect each other if legal action is taken against one entity. That means that if something were to happen to one business, the rest can often continue operating smoothly.

A DBA or “doing business as”—sometimes called a fictitious name or a trade name—allows a company to operate under a name different from its legal name. This structure allows a single LLC to operate under multiple DBAs without forming separate entities.

Owning multiple DBAs under one LLC can be faster than setting up separate business structures. Plus, you only need to file one tax return. However, if one DBA were to fail or face legal action, the entire LLC—including the other companies—could be at risk.

A holding company—also called an umbrella or parent company—is structured to purchase and hold a controlling interest in other companies, which are listed as subsidiaries. Holding companies are typically LLCs or C corporations. The other companies become assets, and the holding company is their owner.

This type of structure can have advantages because, in certain cases, you can use subsidiary losses to reduce the tax obligation of your other businesses. But because the assets are typically separate, if one of the subsidiaries were to fail, the others may not be affected. Keep in mind that this structure doesn’t work for all business types and industries, and it can be more complicated and costly to set up.

When you own multiple businesses, it’s important to set clear and actionable business goals. By creating and defining your business goals, you can set expectations, improve productivity, boost employee morale and better execute your overall strategy. There are different types of business goals you can set, depending on the outcomes you’re looking to achieve, such as:

• Financial goals: These goals focus on business elements such as profitability, revenue and sustainability. For example, you might aim to increase your second company’s revenue by a defined amount within one year. 

• Process goals: These goals emphasize internal business processes such as employee retention and satisfaction, productivity and company culture. For example, if one of your businesses has a strong company culture, you might focus on building and improving the culture in the other business to boost organizational engagement. 

• Customer goals: When setting goals for your businesses, you might focus on elements such as market share, brand awareness or customer satisfaction. For example, you could set a goal to increase brand awareness for your new business by tapping into resources within your current organization.

Running multiple businesses often requires robust organizational and time management skills. This is why it can be helpful to have processes in place to keep operations running smoothly across all your companies. When creating a business process, you can start by pinpointing your company’s goals and formulating a business plan. From there, you can develop a process map that outlines the steps needed to achieve your desired outcomes.

Once you have a plan in place, you can start delegating tasks to your team and testing your new process. You can measure effectiveness by using your business goals as benchmarks to track progress and performance.

You can’t be in two places at once. That’s why it can be important to build the right team of people to support your efforts when you own multiple companies. Having employees with experience and the proper skill set for each role you’re trying to fill allows you to focus your time and resources on each business’s main priorities. 

During the hiring process, look for prospective candidates who are adaptable and willing to grow with the business as it gets up to speed. Once you’ve hired and developed a solid team, finding ways to effectively lead and maintain a positive company culture across different businesses can help you successfully operate multiple companies.

Managing cash flow helps you keep track of resources, streamline operations and identify areas for financial improvement. Not only is it a good idea to review each of your companies’ cash flows, income statements and balance sheets independently, but you should also compare them to determine whether one needs more resources than the other.

Whether you’re starting a small business or creating a new company to add to your portfolio, look for tools that can help improve efficiency and productivity. Here are some examples you might consider:

• Task management tools: You can use these types of tools to help with organization and project planning across multiple businesses. 

• Communication tools: These tools—such as messaging apps and videoconferencing platforms—can help you stay in touch with internal teammates as well as external customers and clients.

• Design tools: Design and content creation tools help you and your teams work together and develop visual content as you expand your business. 

• Collaborative tools: Tools that facilitate file sharing, document editing and project collaboration can help teams collaborate across multiple businesses and departments.

• Accounts payable: Accounts payable tools can allow you to pay vendors with a credit card, even if that vendor doesn’t accept credit card payments.

When you’re overseeing multiple businesses, you might look for external help to keep things running smoothly. For example, you could hire a company to help promote your business or hire an accountant for additional tax support, allowing you to focus on the areas where you’re most needed.

To stay involved in multiple business ventures, sharing a workspace could be a smart option. While this might not work for all business models, it can help reduce commute time and allow you to observe both businesses on a day-to-day basis.

When managing more than one business, you’ll likely have multiple revenue streams and expenses. And depending on the structure, you could have separate tax obligations as well. That’s why keeping accurate financial records is important. To accomplish this, you might consider the following:

• Applying for a business credit card that offers benefits like purchase records and year-end summaries

• Documenting shared expenses

• Maintaining individual files for each entity

• Having separate business bank accounts

Having more than one business requires strong management skills and ample time spent planning. But having the right tools and processes in place can help all your companies thrive. 

If you’re considering opening a business credit card to support your growth, you might get pre-approval from Capital One—with no impact on your credit scores—to find a card that meets the unique needs of your companies.