Go in with eyes open, and you'll be much happier during and after.
When you think about the types of businesses you could start, you probably think in terms of industry and offerings. You could start a restaurant or a massage therapy practice or teach piano or open a retail store. Your piano teaching business is in the music industry and offers lessons. Pretty straightforward.
But another way to categorize your potential business is as either a lifestyle business or a growth business. This isn’t a common way to categorize businesses, so let’s define our terms. A lifestyle business is a business that the owner starts less with the intention of building some huge empire and more so with the intention of generating enough income to support his or her lifestyle through an activity that he or she finds truly enjoyable that still offers the desired degree of flexibility with the owner’s personal life.
For our purposes here, we’re defining a growth business as basically anything else. In other words, a business that you’re trying to grow to the maximum extent possible. You want your revenue to grow like a beanstalk to the sky while you slash operating expenses to expand your margins as you grind your competitors into dust before you exit for the biggest price possible and make speeches like this to the board of directors of Teldar Paper.
Okay, we’re exaggerating to make the point, but you get the idea: A growth business is what we typically think of when we talk about starting a new business, however small it may be initially. You want to grow it every year until you exit and make bank.
You can see how someone who was kind of a jerk--Gordon Gekko, we’re looking at you--might look down his or her nose at a lifestyle business. In fact, some people often refer derisively to startups that fail to take off and become huge unicorns as lifestyle businesses, and it’s 100% not a good look when they do it. They’re insulting two groups of business owners at the same time when both are entitled to respect for their efforts.
We’ll have more to say about setting up both lifestyle businesses and growth businesses in future posts, but let’s get this out of the way up front: There’s absolutely nothing wrong with starting a lifestyle business, and, on the contrary, if yours succeeds, then you just won the flippin’ lottery. Seriously. You’ve found a way to do something that you truly enjoy that also affords you the income you need to fully enjoy your short time on this Earth. Consider yourself fortunate and try not to gloat when you run into that overbearing, underappreciated, overmedicated, underenthused, overstressed, underperforming, overworked, life-hating Wall Streeter!
For now, though, just keep in mind that it’s important to decide up front whether you want to start a lifestyle business or a growth business. These types of businesses are different in a number of ways, each of which involves a tradeoff. For example, if you’re trying to grow a business, then you may have to give up equity in exchange for financing or to attract the best employees, and that means less control. But you may have an easier time exiting the business for a nice selling price. On the other hand, if you’re setting up a lifestyle business, then you personally may be integral to the success of the business, so it may be harder to sell the business at all, and when you’re done, you may just have to shut it down.
Whatever you want is fine, but go in with eyes open. If you know what you want to get out of the business before you get into the business, then you’ll be much happier running the business and much happier with how you exit the business.