Most founders I speak with are often inadvertently building a Lifestyle business when they think they are building a Value-Creation business. The way you approach your business will dictate your outcomes. Here are some of the common themes that will help you identify whether you are building a lifestyle business or an impact business.
Note: these are not moral or immoral, and there’s no “right or wrong” here – it’s all about being aware and intentional around what your goals are.
Lifestyle Lens:
-
Business is there to primarily serve the owner
-
Does not necessarily mean working less (some lifestyle entrepreneurs work 80 hours a week)
-
Taking risks or innovating are seen as needlessly unnecessary
-
Generally shorter time horizon on profit/loss – not typically willing to take a loss now even if it means gains later
-
Any expenses are viewed as expenses because they are coming out of owner profits
-
When a critical growth ceiling is reached, there’s no real incentive to grow through it and reach the other side
-
Scale-ability is not seen as important or valuable
-
Business cannot be sold or transferred as an asset with value beyond the founder’s involvement. Owner leaves, business closes.
-
Keys: Owner level of engagement, strong help & support staff
Value Creation Lens (Impact):
-
Business is there to serve a greater purpose and create value beyond the founder (customers, partners, team members, shareholders)
-
Investing in the business to grow, strengthen, or increase value is viewed as important and necessary so expenses are viewed as INVESTMENTS. The owner understands that taking less now will mean more later.
-
Taking calculated risks and innovating are seen as vital to building value long-term
-
Generally longer time horizon on profit/loss – willing to take a loss now for a gain later
-
When a critical growth ceiling is reached it becomes crucial to change the approach so that growth can continue
-
Scale-ability is seen as absolutely necessary for every function
-
The goal is for the business to become an Asset that can be sold, merged, or transferred and still retain value long after the founder is no longer involved
-
Keys: Product/Market Fit, strategy & focus, capable leadership, culture & people, organizational alignment, scaleable systems & processes
The lens through which you approach building your business will have everything to do with the outcomes you achieve.
Reference the Cash Flow Quadrant below, and how you can make the leap from S to B.
How do you view your business, primarily as “Lifestyle” or primarily as “Value Creation”?
