I have a well thought out idea for a new startup. The startup will be unrelated to my current small company that is doing quite well.
My basic options are to incubate the new startup within my existing company or launch the new startup completely separate from the existing business.
What are the pros and cons of each approach?
If it's totally un-related and your current customers are not necessarily a fit then it would probably make sense to make it it's own business. That would make it easier for you to bring on partners, investors or sell it down the road without it affecting your other income/business ventures.
Usually for something like this you would at least get a separate bank account, wouldn't be much more to file the paper work annually to make it it's own entity.
The answer really depends on your current startup structure, both from an ownership perspective and how it handles its financials. In the simple case where you own the current company completely, and you are not billing overhead on contracts to outside parties (like the Federal government), then incubating the new startup inside the existing company doesn't really have many downsides as long as you keep separate bank accounts and books. Watch out for snares like credit card processors though, they almost ALWAYS have something in their terms of service that prohibits you piggy-backing transactions for an unrelated company through the established merchant account.
So, here are some potential downside considerations:
Advantages to incubating:
It can be done, we have run 2 businesses here for 8+ years now, and it can work BUT you need to set it up so you fall into the pit of success (things I wish we had done earlier).
Questions to ask yourself first.