Lifestyle businesses aren’t for everyone. If you’re the type of a person who wants to build an Amazon-esque empire, they probably aren’t for you. But if you prefer to work to live rather than live to work, and you prioritize your overall life satisfaction over becoming a gazillionaire, then a lifestyle business might very well be up your alley. Keep reading to learn everything you need to know to launch and run a successful lifestyle business.
What Is A Lifestyle Business?
A lifestyle business is a business whose purpose is to support the lifestyle of its owner(s). It’s often thought of as a business that focuses less on growth in favor of reaching a level of profitability that enables its owners to live comfortably. In exchange, lifestyle business owners have more control of their time and what they work on, at the price of not being as profitable as a high-growth startup.
Lifestyle businesses come from the need of people to avoid 9-to-5 jobs. Not everyone wants to climb the corporate ladder; some people, including you, may simply want a small business that adapts to their ideal lifestyle, and not the other way around.
Lifestyle businesses can take many forms, from freelancing to e-commerce to blogging. In fact, many lifestyle entrepreneurs run several businesses at the same time, grabbing the low-hanging fruit in one market before doing the same in another one. The key is to design your business as an income-producing asset that contributes at least as much in earnings as your lifestyle requires.
Many lifestyle businesses spin out of their owners’ hobbies, and one of the core motivations behind running them is to not be subjected to the same strenuous working hours as a regular job. If you can find a way to monetize your hobby without going overboard, you’re in prime lifestyle business territory.
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Are Lifestyle Businesses Better Than Startups?
A lifestyle business may not fulfil your wildest financial dreams, because the goal is to make ends meet without pushing yourself overboard. Here are the top pros and cons of lifestyle business owners as compared to growth-centric businesses like startups:
Pros
- Lifestyle businesses are cheap and easy to start
- Many lifestyle businesses (eg. e-commerce stores) can generate income from Day 1
- Many lifestyle businesses earn relatively passive income that requires little to no maintenance
- Lifestyle businesses are less risky as an investment of both resources and time
- Most lifestyle businesses do not have investors or shareholders applying pressure for aggressive growth
- Owners end up having a lot more free time on their hands, which can be used for leisure or pursuing other opportunities
- Owners enjoy more work-life balance
- You can scale the business up or down according to your needs and goals
- Lifestyle businesses are generally fully remote, freeing you up to work from anywhere in the world
- Growth-centric businesses usually thrive by building a brand, while lifestyle businesses can often survive without one
- With enough experience, anyone can run multiple lifestyle businesses at the same time.
Cons
- Lifestyle businesses often focus on a very specific niche, so they offer little to no growth opportunities beyond that audience
- They often aren’t as profitable as other businesses over the long run, and may just be tapping into a specific, short-term opportunity
- Lifestyle businesses are not as scalable over the long run
- Some lifestyle businesses are difficult to sell due to a lack of enterprise value
The Lifestyle Business Mindset
Here’s how to think about starting a lifestyle business from scratch:
Define How You Want To Live
Whether you want to be a digital nomad, spend more time with your family, or just have more free time, the first thing you need to do is get crystal clear about what your ideal lifestyle looks like. You’re the only person that truly knows how you want to live, and defining it will allow you to start developing a strategy for getting there.
Once you know what your ideal lifestyle looks like, put some thought into what a realistic monthly burn rate for that lifestyle will be. Then, when you know how much you need to live your ideal life, you can move on to thinking about what your business will be about.
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What Would You Like To Work On?
One of the primary benefits of running a lifestyle business is that you can create the business around a topic you love. Everyone’s an expert on something, so taking an inventory of your strengths and interests is a great way to come up with new business ideas.
There’s almost no limit to the types of lifestyle businesses you can build. If you’re a consultant, you could launch an online course sharing the knowledge you’ve built up over the years. If you work in personal finance, you could start an investment newsletter helping your subscribers manage their money. If you’re a yoga teacher or personal trainer, you could shoot videos of your classes and sell them passively while you sleep. Even if you don’t have any video skills, you can use a service like Biteable to create high-quality videos via drag and drop, reducing the friction you face in getting started. That’s the beauty of the lifestyle business: when you’re in charge, your passions take the front seat.
Build Your Business Into An Asset
Ideally, you want to build a business you can not only earn money from today, but also sell at some point in the future. To do this, you’ll have to have your SOPs (Standard Operating Procedures) in order and have a business that is largely automated.
One of the best examples of an automated business is a site monetized via affiliate marketing. There’s a seemingly endless number of affiliate programs out there, including many that are great for beginners. A good place to start is the Amazon Associates program, though there are plenty of higher-paying programs out there, especially after Amazon’s recent commission cuts.
How Are Lifestyle Businesses Valued?
There are many factors that impact the exact value of a lifestyle business, which is why Flippa designed an online business valuation tool to do exactly that. In line with that tool, here are some of the key questions you should be thinking about when valuing your business:
What Year Did You Start The Business?
As a general rule, older businesses are worth more than younger ones, for a handful of reasons. First, older businesses have stood the test of time: most businesses die within the first several years, so a business that doesn’t is clearly doing something right. Second, they’ve proven that they’re more than just a flash in the pan: many businesses capitalize on trends within their niche, but sustaining that success takes strong execution.
Most importantly, though, is that older businesses have more revenue data to show. If a business has earned $5,000/month for the past 5 years, that’s clearly more reliable than one that’s earned $5,000/month for just the last 6 months. That predictability is valuable, which is why the age of the business has an impact on its value.
What’s Your Business Model?
The business model you choose also influences the long-term value of your business. Naturally, a blog monetized with affiliate marketing can’t be valued in quite the same way as an eCommerce store, since the former requires a significant amount of time to get started, and the latter can pop up relatively quickly.
On top of that, your business model impacts the level of power you have in your overall value chain. Affiliate sites rely on Google for traffic and their affiliate partners for monetization, putting them in a relatively low-power position. On the other hand, e-commerce stores generally used paid ads for traffic source their own products, which means they hold a lot more power. That power translates into real value when it comes to your business.
How Many Hours Do You Work On Your Business Per Week?
Which is worth more: a business that requires 40 hours of work per week or one that requires just 4 hours? All else being equal, the latter is more valuable, of course. A business that needs less upkeep is more automated than one that isn’t, and makes selling it to a new owner a far easier process.
In addition, most lifestyle business owners don’t account for their own time when they calculate their expenses, which means there could be a big difference between the $0 they charge for their time and what they would pay an employee to do the same job. If you’re selling your lifestyle business and still work on it full-time, you may want to figure out ways to dial back your involvement before putting it up for sale.
Could Your Business Run Without You?
In keeping with the last point, you want your lifestyle business to be as scalable, efficient, and automated as possible. If a large part of the business’ value comes from your unique relationships or skills, it’s going to be hard to pass that off to somebody else, making it less valuable.
If you have a series of processes and SOPs in place, though, and there’s nothing you can’t hand off to someone else, your business will be valued much more highly than one where you can’t. Build to sell (your business) from day one and you’ll have a much easier time when the sale becomes a reality.
Source: Unsplash
Lifestyle Business Books
If you want to dive deeper into the thinking behind lifestyle businesses, these three books are a great place to start.
#1 The 4-Hour Workweek by Tim Ferriss
You can’t possibly write a list of the top books for lifestyle entrepreneurs without putting this one on it. Reading it has become a rite of passage for running a lifestyle business, both because Ferriss’ approach to building a company is so inspirational and so rational. If learning tango in Buenos Aires while passively running a six-figure business sounds like the good life, The 4-Hour Workweek is for you.
#2 How To Get Rich by Felix Dennis
Being an entrepreneur is not only about building passive assets on the web, but also about understanding the impact psychology and your unique entrepreneurial skill plays. How To Get Rich digs into your psychology, encouraging you to seek out opportunities you would otherwise overlook and eliminate the things that are holding you back. At the same time, it’s also very hands-on, giving you practical advice on difficult items like hiring your first employees, landing your first client, and ultimately selling your business.
#3 The 80/20 Principle by Richard Koch
If you want to build a lifestyle business, you’re going to need to find impactful points of leverage that allow your efforts to go a long way. That’s what this book is all about, and it does a brilliant job of explaining that the 80/20 principle is so valuable because of its counterintuitiveness: we believe all causes hold the same significance, but in reality they don’t at all. Expect to find countless insights within these pages.
Conclusion
Whether you already have a lifestyle business or you’re planning to start one, here are some points worth remembering:
- Lifestyle businesses exist to provide you with a great quality of life, not an extraordinary amount of money. If the latter is what you want, a lifestyle business is not for you.
- With a lifestyle business, you’ll have more free time to do the things you love. Before you start the business, it’s worth figuring those things out so you know how much you need to earn to support that lifestyle.
- Many lifestyle business owners start something in an area they’re passionate about. If you can find that niche, you’ll grow your business without feeling like you’re working at all.
- Always think of how you can make your business work for you, not the other way around.
- Your business is an asset that you should build to sell from the very beginning. Put your heart into it, but don’t get lazy by not building systems that can allow you to shift your attention to higher-value work.
