The popularization of startups that are really a lifestyle business
The idea of starting a business, raising millions of dollars and then selling out has become more and more popularized over the last five to ten years. This stems from the amount of media coverage the startup industry is currently getting. Not to mention the way reality shows tend to portray the startup life as one of fame and fortune.
Because of this, plenty of would-be entrepreneurs get convinced that their idea is right for the startup industry. When it is really just a lifestyle business.
Alex is one of those entrepreneurs.
I first met Alex through Twitter, where he reached out to me for help getting his startup idea off the ground. He was eager to learn about the startup industry and was almost desperate to put his stamp on the world. However, like many enthusiastic first-time entrepreneurs, the resources Alex had available to work with were limited. Things like access to capital and access to talented co-founders seemed to escape him.
The other challenge Alex had was that he kept aiming high above his own experience level. Many of his startup ideas revolved around things like AI (artificial intelligence) and other highly technical subjects. Subjects which Alex only had a very rudimentary understanding of. His belief was that he would be able to recruit more experienced entrepreneurs to support his endeavor.
After many emails and Twitter exchanges, I suggested Alex try another path forward - start a lifestyle business.
The difference between a lifestyle business and a startup
I define a lifestyle business as one that is designed to provide a certain income level for the founder(s) and/or support the founder(s) particular way of living. Whereas, I think of a startup as a quickly growing venture that solves a pain point in the marketplace.
The case for starting small
There is a reason I suggest most entrepreneurs start their business journey small or with a lifestyle business. In fact, there are many reasons. Not the least of which is that I began my entrepreneurial journey with a lifestyle business long before I founded my first startup.
Let’s take a look at some of the more important reasons to consider starting a lifestyle business before you jump into the startup industry. These reasons will also demonstrate some the differences between starting a lifestyle business versus a startup.
An opportunity to learn
First-time or new entrepreneurs have a steep learning curve ahead of them. Not only do they need to understand their own business and how it operates, but they also need to understand the myriad of other subjects that come with running a business. Those can be subjects like Accounting and Marketing.
Starting a lifestyle business is a great way to learn about all of those subjects without the added pressure of the things that come with typical startups. Things like lofty growth goals, investor relations and more.
Fewer resources required
Lifestyle businesses, by their very nature, tend to require fewer resources to get started and grow. Whereas, startups often rapidly consume resources such as money.
An article by the Small Business Administration, originally published in 2009 and updated in September of 2016, quoted the Kauffman Foundation as pegging the average cost of starting a business at around $30,000. That same article pointed out that there are plenty of franchises a person can start for less than $5,000.
In my experience, it doesn’t even take that much to start a lifestyle business. In fact, I’ve started consulting practices for the cost of a website and some marketing materials which all told cost me less than $350.
Starting any business is risky. Especially with the rate of failure being so high. If you are running a startup that risk is inherently higher for some of the reasons mentioned above.
Many startups, but not all of them, need to raise capital. While the founders might have injected some of that capital, with a startup you are often “playing” with other people’s money. That being your investors.
There is something else to think about when it comes to risk. While startups are expected to have some unique aspect to their solution, lifestyle businesses don’t really have such a requirement.
It’s ok to be normal
It turns out, to date, Alex has yet to take my advice. Apparently, the idea of “going big” is too alluring to him.
Really, that is a shame. Because there is nothing wrong with being a “normal” entrepreneur and creating a business that will either provide a nice return as a side hustle or turn into a full-blown lifestyle business one day.
In fact, if I am going to be honest, my lifestyle businesses continue to provide a better return for me than any of my startups ever have.
So, get out there and build something. It’s ok if it becomes “just” a lifestyle business. It’s ok to be a “normal" entrepreneur.
Now, it’s your turn. Have you started a lifestyle business? If so, do you feel that the lessons you have learned along the way have been valuable? Or, did you go the startup route first and how did that turn out for you?