High Achiever

High Achiever
Young Achiever: Charlie Musick
Charlie Musick, 16, a sophomore at Latrobe High School and this week's Young Achiever, speaks Thai, is involved with Boy Scouts, and participates in his school's key club, ski club, quiz league and Spanish club.
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Your first business is humming along, and you've got an idea for a new enterprise. You can start from scratch, or you can kick-start your new company by using as much of your existing infrastructure-computers, office furnishings, communications equipment, even staffing-as possible.

If your current business owns equipment and resources you need for the new operation, it doesn't make sense to spend the money duplicating what you already have," says JK Harris, author of Flashpoint: Seven Core Strategies for Rapid-Fire Business Growth and founder and CEO of JK Harris & Company. "Instead, invest your capital in marketing, manufacturing or doing whatever the new business needs to succeed."

But even though it's possible and practical for more than one company to share an infrastructure, Harris says that it's important to remember that they are separate entities and should be treated as such. There are some things businesses can't share, and the two most important are the books and bank accounts. Make sure each business has a separate set of books and its own bank accounts, and don't do any commingling.

With the separate identities established, how do you then share an infrastructure? The easiest way is for the second business to pay a management fee to the first for use of facilities, equipment, and staff time.

You can't deduct the same expense twice, and it isn't practical to split depreciation between two companies. Instead, make a fair and reasonable estimate of how much of the resources the second company is using, and have it reimburse the first company. You can do that by measuring the share of physical space the new operation takes, tracking the equipment usage and labor, and calculate the amount the new business should pay the existing one.

he approach of using the infrastructure of one business to support the launch of another works best with the companies are related in some way. Before you start the second business, take a careful look at what you have and figure out how much you can use for the new operation.

While sharing resources can help you get the second business started, recognize that there may come a time when the companies need to separate. When it becomes evident that one company is interfering with the other, or that the shared resources are not sufficient to support both operations, you'll need to establish separate infrastructures.

Jacquelyn Lynn is the editor of Flashpoints newsletter. Flashpoints is a comprehensive information resource for business owners and managers who want to take their operation to the Flashpoint. Visit http://www.theflashpoints.com to sign up for a free subscription to Flashpoints newsletter plus an extra free gift: The Mindset of High Achievers by JK Harris and Jacquelyn Lynn.

In addition, Jacquelyn Lynn is the author of more than 20 books, including Entrepreneur's Almanac; Online Shopper's Survival Guide; Make Big Profits on eBay (with Charlene Davis); In Search of the Five-Cent Nickel (with Don Abbott); and 11 titles in Entrepreneur Media's StartUp Guide series. She is also the host and executive producer of Doing It Right Radio® (http://www.doingitrightradio.com).

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