The business world seems to be obsessed with startups. They dominate the news cycle, with regular stories about startups that are apparently ready to take over the world. In many cases, they are run by pimply-faced 18 year olds who have some innate gift for entrepreneurship.
In reality, many of these startups never achieve greatness. They struggle to raise capital, they invest a huge amount of money on marketing, and they often fail or are acquired for a small profit. It turns out that running a startup is really hard.
One increasingly popular alternative to running a startup is to create a lifestyle business. A lifestyle business is designed to generate enough income for the founders of the business to sustain their ideal lifestyle.
Understanding the differences between a startup and a lifestyle business can help you decide which option better suits your current situation.
What are the key differences between a startup and a lifestyle business?
The main difference between the two options is the purpose of the business. A startup is developed to grow large enough to provide a return to investors. A lifestyle business is designed to grow large enough to fund the lifestyle that the owners want to enjoy.
Most startups launch with a low probability of success. Typically, the founders will have an interesting idea for a product or service that they want to develop. To develop their idea, they must raise capital, invest in product development, brand their business, and so on. It’s a lot of hard work and it may take years before the business even makes any money.
The end goal of a startup is usually to sell the business or to list it on a stock exchange. The founders are working towards a magical pot of gold at the end of the rainbow. If the startup fails, they will usually be no better off than they were at the start of the venture. The pot of gold will never eventuate.
Many entrepreneurs who do have a successful startup will quickly jump into another startup. The grind starts again and they will begin working towards another pot of gold, which often takes years to achieve. While constantly developing startups can be quite rewarding — it is also involves a lot of hard work and doesn’t always allow for the founders to have a lifestyle where they can enjoy the fruits of their labour.
A lifestyle business has a very different definition for success. You don’t need to develop the business to the point where it is ready to list on the stock exchange and make millions of dollars. It only needs to be developed to the point where it continually makes enough money to support your lifestyle.
This doesn’t mean that the business will always be a small enterprise with a tiny turnover. Your ideal lifestyle might involve exotic cars and a large yacht. The business must generate enough profit to support whatever lifestyle you envisage for yourself.
Which option is best for you?
So, which kind of business should you run? Here are a few factors to consider:
What previous experiences have you had?
If you are an experienced business person, you may have already participated in multiple startups during your career. If they were positive experiences, you may be more likely to launch another startup. However, if your previous ventures involved a huge amount of work or the results were mixed, you may prefer to start a lifestyle business instead.
How old are you?
Startups are considered a younger person’s game, because they can fail and often take a lot of time to develop. If you are 65, do you really want to spend three or four years developing a startup to the point where it will be acquired by another company? Are you happy to invest a significant amount of capital in a project that may not work out? What about time — are you happy to work long periods or would you rather be enjoying your life?
If you are at a point in your life where you want to make the most of each day, you might prefer to launch a lifestyle business. This approach could give you more time to enjoy with your friends and family. On the other hand, successfully launching a new startup that is listed on the stock market or acquired by another company could set your family up for life and create a long-lasting legacy.
How soon do you want to turn a profit?
Startups often take years to actually achieve a significant profit, which may be a problem if you are interested in enjoying the fruits of your labour in the short term.
Where do you want to work?
Lifestyle businesses can be organised in a way that allows you to work remotely much of the time. You can spend more time sitting on a beach, travelling, or at home with your family. Typically, you will have less control over where you work when running a startup business. You will probably have obligations that mean you must work remotely to collaborate with others.
How do you handle stress?
Some people find the process of launching a startup to be exhilarating and fun. However, most entrepreneurs do find it quite stressful at times. Obtaining funding, overcoming challenges and dealing with uncertainty can cause a lot of stress. A lifestyle business is designed to minimise the stress that you experience. Every choice that you make will be about improving the the quality of your life and not about how much the business benefits other stakeholders.
How much time do you have?
Launching a startup can be a 9 to 5 job (or longer). You must make a significant time commitment to get the business established, raise funds, and make enough money to attract other investors. A lifestyle business is designed the other way around. Its primary goal is to make plenty of money without monopolising your time. If you are already constrained by time or have certain aspects of your life that you refuse to give up (friends, family, hobbies), a lifestyle business may be a better option.
Is your business startup or lifestyle or are you considering launching a business? For a free, no obligation discussion about the pros and cons of a startup versus a lifestyle business, please click here to schedule a call.