I think personally I would start the PhD but use that to shoehorn my way into the university's innovation support, spinout funding, etc, take part in university entrepreneurship clubs, business plan competitions, so on. Really milk the level of support and encouragement there is within academic institutions for new enterprise.

(Conditional on the business being pretty much at the 'idea' stage and some easy way to ensure the university doesn't grab all the IP etc. If he has a fully developed, tested product and it's just a matter of executing, well, why is he even considering a PhD ;))

It is possible to do both, I know of several PhD students here running or starting up businesses. It's not easy to excel at both and sooner or later there would be a decision point: continue with a PhD with some sunk time and research, or continue with the business which is starting to take off? It should be clear which is the better route by then. Meanwhile the 'kudos' of being a PhD student at $university will help lend credibility to the business.

(note that this is sort of what I did, happy to answer further questions.)