When your business is twins - or triplets - owning more than one business

Nation's Business, Nov, 1996 by Michael Barrier

If you want to know whet it's like to own more than one business, James B. Conn says, maybe you should ask his wife. His implication is that she finds the demands on his time a bit much. "It taxes you," Conn himself admits. "I feel sometimes like I'm stretched." He worries about whether he has thought of everything he should consider.

Conn's father founded Calvert City (Ky.) Lumber Co. in 1951. When Conn went to work for the lumber yard after graduating from college in 1980, the business was just beginning to offer metal doors and architectural hardware.

In 1989, four years after he had bought control of the family firm from his parents, Conn incorporated Commercial Door & Hardware as a separate company He bought a former shirt-factory building in Paducah, Ky., 25 miles away, and moved the door company there in 1991.

He now has 24 employees in the door business, which distributes and fabricates metal doors, frames, and architectural hardware, and about as many in the original lumber business.

But that's not ale Conn's businesses are multiplying He started another division of Calvert City Lumber, called Commercial Plumbing Supply, about five years ago. Seven of Calvert City Lumber's employees now work for that division, and its sales in 1996 have been running almost double last year's.

Around the same time, Conn started a division within Commercial Door called Atlas Door of Paducah to install and service overhead doors. That division now employs four. Conn has other interests, too, including a residential subdivision he has developed with a partner.

While no one actually counts the number of small-business owners who own more than one company, multiple ownership certainly isn't rare. Like Conn, many such owners add new companies that are extensions of existing businesses. In the Detroit area, for instance, R.J. "Ric" Gonzales heads a conglomeration of seven companies with around 900 employees. "The main company," he says, is Gonzales Design Engineering, based in Madison Heights, Mich.; Gonzales and his father founded that company in 1975, two years before the senior Gonzales' death. Gonzales Design Engineering designs tooling and automation for automobile companies--"basically, the equipment they use to put automobiles together," Gonzales says.

In the late 70s and early '80s, as the Big Three automakers began to downsize, Gonzales expanded into process engineering, which involves designing not just the machinery but the processes by which cars are made. That led in turn to creation of a graphic-arts division, which has since become a separate company called Gonzales Graphics & Communications. The automakers' downsizing meant that the Big Three still needed to staff up with temporary personnel for peak periods; Gonzales filled that need by creating a company called Gonzales Contract Services.

For multiple owners like Gonzales and Conn, there are some specific advantages that flow from managing businesses that offer related products or services. Cross-marketing is perhaps the most important benefit.

"They complement each other," Conn says of his businesses. For example, he explains, the lumber yard will refer homeowners to Commercial Door's Atlas Door division when they need overhead garage doors.

Ric Gonzales says that the advantages of owning multiple businesses can go far beyond that. "It gives people in your employ more of an ability to career-track," he says. "If we have an opening in one of our other companies or other divisions, we advertise it internally first, throughout all the organizations, before we go outside."

Having multiple companies gives him the flexibility to deal with changes in the market, Gonzales says. It enables him to look into "different ways of doing things, maybe creative ways of pricing things, that can give you a competitive advantage."

On the other hand, having more than one business can exacerbate the strains that accompany the growth of almost every small business, as the owner tries to decide how to juggle multiple time demands and reduce personal involvement in day-to-day operations.

At Commercial Door, Conn says, "we've grown so fast that it's hard to find qualified people, so I find myself jumping back into the daily chores of ordering materials and doing the drawings." He's "the guy who fills in the gaps," he says, because he understands all the businesses--everyone knows they can call on him when they need help.

It's the same at Calvert Lumber, he says. Even though he's pleased with his managers there, he says, "I know how I like things done, and if I'm not there, it doesn't always get done the way I dike it done." Conn feels like a parent whose children may be able to get off to school if he's not hovering over them--but may go out the door with their shoes untied.

Conn knows less about the plumbing business than about the door company or the lumber yard, and as a result, he says, delegating comes easier there: "I leave it up to the fellow who's in charge of the plumbing company to make a lot of decisions, and he's been very successful at it."