The evolution of the lifestyle business
When it comes to the idea of a lifestyle business, an image of corporate decadence springs to mind. Perhaps company owners who use business funds (read: hard-earned shareholder dollars) to fuel an opulent lifestyle of yacht purchases, Vanuatu beach-lounging, and champagne business lunches.
At the core of this old-school cliché is the suggestion that a lifestyle business is one which is geared towards supporting the owners’ income and personal requirements rather than maximising revenue.
The term itself can also be patronising. It tends to be used by big businesses and investors to describe business owners who aren’t willing to pursue growth, at the expense of their products or services or the happiness of their employees.
But if the shifting implications of the term is anything to go by, this is a tired and limiting way to frame the modern lifestyle business.
Taking a different approach
More pragmatically, the lifestyle business could simply be seen as one where founders or owners live off cash flow rather than trying to increase equity value for themselves and investors, while keeping an eye on an eventual exit.
The guiding principle? To create and sustain a particular level of income for its owners. Nothing more.
And while there’s nothing inherently wrong with this, it could explain why the lifestyle business is frequently regarded with condescension, especially in the investment space.
One blogger looks at the term from the perspective of venture capitalists, who often use “lifestyle business” as a derogatory catchall to dismiss entrepreneurs who aren’t on track to generate big enough exit returns to warrant investment.
Lifestyle businesses also tend to be self-limiting in their ability to expand. Dave Clarke, co-founder of startup funding resource, FundingSage, maintains that lifestyle businesses “tend to be focused on one or more key persons, the loss of whom will stop the company in its tracks”.
While this is also true of most startup companies in their infancy, Clarke claims a lifestyle company never overcomes that limitation. Generally, this means that such companies have a difficult time surviving their original owners. As such, they are often not scalable.
But what if we shifted the focus to the concerns and interests of the entrepreneur themselves?
On the rise is a particular breed of lifestyle business where the owner’s primary objective is the fulfilment of a non-financial personal passion – or, rather, where this passion supersedes a desire to accumulate personal wealth.
From this central idea emerges an increasingly visible culture of “lifestyle entrepreneurs”.
The ‘lifestyle entrepreneur’, or How I learned to stop worrying and love my job
The term “lifestyle entrepreneur” seems to have been coined in 1987 by William Wetzel, a director emeritus of the Centre for Venture Research at the University of New Hampshire.
Wetzel used it then to describe ventures unlikely to generate economic returns sufficiently hefty to interest outside investors, which isn’t dissimilar to the definition explored earlier that makes the idea so unappealing to venture capitalists.
“In financial jargon, there’s no upside potential for creating wealth,” he said.
But today, the lifestyle entrepreneur can be seen more as a business owner who is neither a financially independent hobbyist nor a wealth-seeking empire-builder. Rather, for Wetzel, “Lifestyle ventures are usually ventures that are run by people who like being their own bosses. But they’re in it for the income as well.”
Thus, the lifestyle entrepreneur has a different understanding of success than those predominantly chasing wealth.
When capital is not enough
For this kind of lifestyle entrepreneur, a business that generates only capital isn’t enough – the owner wants things like freedom from corporate bureaucracy and the ability to make decisions autonomously.
Rather than simply being self-employed, a lifestyle entrepreneur is all about working in a way that sustains the lifestyle they want. This might mean being able to travel the world or have more time to spend with family.
Also appealing to the lifestyle entrepreneur is geographic flexibility; the ability to live and work in a chosen location whether it’s a cottage in the country, a cafe, or from home.
There are also the benefits of avoiding the grind of daily commuting, or more flexible schedules, and the possibility of being able to do something you feel strongly about. Although these bonuses don’t always apply, they certainly become more possible.
What’s most interesting about the lifestyle entrepreneur is the fact that their passions and interests are leveraged and monetised to create income. This new breed of business owner is emerging at a time when society is rethinking work/life balance.
Perhaps society is now catching up with what these entrepreneurs already know, as we fundamentally revise the relationship between work and play, and adopt an increasingly dim view of the 9-5 productivity metric.