Have you heard the term “lifestyle business?” I’ve heard this used a lot in the last few months.
At a conference, someone will ask how many have 2-10 employees, 11-20, 20 or more. Then, invariably, the speaker will say “Oh, how many have a lifestyle business? Nothing wrong with that.”
A lifestyle business is one designed to support the founder (or founders, if a couple) and generate enough money for that person (or couple) to live well, but never plan to “grow” in size.
Lifestyle businesses support the owner in a particular lifestyle and never plan to be 50- or 100-person companies, let alone mega global conglomerates.
So, it’s a nice fluffy term that gets used for people who are happy being one-person shops.
But the two are not the same. A Sole Proprietor or one-person shop is more likely to be struggling to get by than to be supporting a desired lifestyle.
Most of the one-person business owners I talk to fit a profile something like this:
– They work until 10 or 11 every night.
– They either work or are on call all weekend.
– They take client calls at home.
– They rarely take vacations.
– They can’t grow much because they’re afraid of what will happen when some thing goes wrong with more than one client at once.
– They don’t have time (or inclination) to take classes or tests for professional development.
– They want more money, but they are trading hours for dollars and there’s a limit to how much money they can make.
What kind of lifestyle is that? That’s the manic behavior of a 20-something that became a way of life. Now at 40-something or 50-something it’s hard work and getting harder to stay motivated.
If a sole proprietor makes, roughly, $100,000 profit in a year, that same S.P. should be buying a house and socking away at least $10,000 a year in savings.
This extremely simple formula (make your house payments, put money into investments) will invariably result in a high net worth and a comfortable retirement.
But when I talk to some people who are S.P.’s, they are barely getting by, spending every nickel they make, and doing nothing for their own future.
With luck, you’re in the first category and not the second.
But the next time you’re in a room full of business owners and the only category you fit into is “lifestyle business,” ask yourself if you’re leading the lifestyle you want.
And if you’re not, change it!