Businesses That Last - Planters Development Bank

selling widgets to stores nationwide.
Along the way there, the company
managed to put up a killer sales
force. The problem is that your sales
force is idle half the time.
You realize that you can make a
little extra income by hiring out your
sales force to those in need of a
crack sales team. This means a whole
new set of books, however, as your
sales force will now start giving you
income rather than just being an
expense.
Pulling them out into a new corporate
entity, Company D, is one way to keep
things clean and orderly. Whether or
not Company D’s management is the
same as that of Company C (assuming
compensation won’t be an issue),
what’s important is that Company D
now is its own entity on paper, with
its expenses cleanly separated, and
can be a wholly owned business of
Company C.
Holding company
Imagine that you’re a serial
entrepreneur and you’ve now
managed to find yourself with
quite a number of businesses that
you yourself are running. Good
luck letting go. History shows that
oftentimes, these kinds of setups
lead to businesses that don’t last
once the owner retires.
What you need to do is to let go of
the reins so that someone else can
run it for you. But maybe you don’t
want to let go completely. Maybe
you want to let go of only a couple
of businesses or so. However you
want to do it, it helps if you slowly
transform your business into the
structure of a holding company.
A holding company is essentially
an investment company, where
each individual business is now
considered as an “investment”
that is being run by someone
else. The simple way to set up a
holding company: First, create
your parent corporation. Next,
spin off each business (when
you’re ready) into its own
corporate entity, owned by the
parent corporation and run by a
seasoned professional.
The good thing about this setup:
you can run the spinoff company
from a distance, simply giving
your seasoned professional a
target for the year that the pro
has to achieve or else. Then
you can sit back and relax (or
at least have a less stressful
existence).
The other bonus of this structure:
it is easier to sell off a specific
business unit because, if it is
its own separate entity and it’s
organized well enough, it becomes
a modular business that can easily
be let go of.
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