Creating a Company within a Company
The two basic components of any business are the operational aspects and the financial considerations. Interestingly, prospective entrepreneurs often find the financial side of a new business more daunting than the operational side. Many new business owners have experienced managing people, job costing, purchasing and ensuring that the fundamentals of the business are sound, but become uneasy when dealing with balance sheets and income statements.
It is therefore worth exploring if these components can be harnessed together and departmentalized so that the employment experience can better simulate the entrepreneurial experience. It may be somewhat unconventional, but there may not be an exercise that will prove more valuable in the education of the potential entrepreneur.
Progressive business owners are always looking for ways to empower their employees with more responsibility and accountability within their job. In fact, many small businesses encourage profit center creation, where each department receives a separate financial statement which tracks departmental sales, cost of goods, wages, benefits and hard costs such as pro rating rent, utilities and benefits.
Among numerous industries, an example of such an arrangement might be found in the contracting business. Using a plumbing company for illustrative purposes, the separate divisions might include new construction, retrofit installations, service and retail. Distributors might be organized by product categories, professional services organized by individual disciplines and so forth. If the potential entrepreneur finds themselves in such a departmental supervisory position within a company, or feels such a position could be created without significant difficulty, the ideal situation for establishing a business within a business may be present.
Creating a business plan that outlines the vision, sales goals, plan of action, and addresses financial considerations will impress the business owner or manager with the seriousness of the initiative. It will also prove to be beneficial as a learning tool where mistakes or misstatements won’t carry the consequences that might occur when actually seeking financing or investment capital. Demonstrating to an owner or superior how empowering the division will benefit the company itself will also be an exceptionally instructive exercise.