So you have an idea for a business… or maybe you already have a “side hustle” that you’d like to turn into a full-time endeavor?
Are you thinking of growing a startup, or operating a solo lifestyle business? And what’s the difference… and why does it matter?
Keep reading about the pros and cons of each, and why it’s important to decide early in your business planning which route you want to take.
What’s the Difference Between a Startup and a Solo Business?
There’s really just one difference between planning a startup and planning a solo lifestyle business: how big do you want it to grow?
A startup is a small, recently-founded business that has a vision to grow to something much larger. Ultimately, startup founders want to grow the business as quickly as possible. The goal of a startup is to maximize valuation in order to attract investors and have a lucrative “exit” (an “exit” means the original investors get their money plus profits back, via selling the company, having an IPO, etc).
On the other hand, a lifestyle business is just that: a small business that supports the lifestyle goals of the owner(s). Certainly a lifestyle business will have financial goals (we all have bills to pay, after all). But the owner of a lifestyle business has other goals as well: flexibility, enjoying the work they do, following a passion, spending more time with family, spending time on hobbies or traveling, etc. They have a certain financial goal, but above that target their other goals are more important than continuing to grow the business.
Can’t a Business be Both a Startup and a Lifestyle Business?
Not really, unless the “lifestyle” you aspire to is to operate and run a large enterprise (lifestyle = work). That may be the case for some people (most self-made billionaires fall into this category, I think), but not for most of us.
This is why it’s so important to understand and acknowledge your personal needs before you start planning your business.
Deciding Between a Lifestyle Business or Startup
I often get asked “which one is better”? The answer is: Neither!
The type of business you start, and your personal goals, will determine whether you are running a startup or a solo/small lifestyle business.
Some types of business ideas can only be successful with the startup model: businesses that require large, ongoing investments in capital (beyond your personal means) and have a threshold before profitability, or businesses that depend on a network effect to succeed (eg, Facebook) are two types of business that cannot easily be run as small businesses that stay small.
Lifestyle businesses usually are built to serve a focused niche (a very targeted demographic with a specific need), have small up-front investments of time or money (such as a small e-commerce business), and/or are small, local businesses.
If a startup is your goal, it is important to know what you’re getting into: the excitement and opportunity for huge success, but also (more than likely) the possibility of a business that does not ultimately achieve your growth goals and either remains as a small business or fails. Founding a startup can be a fantastic learning experience, but you also need to be ready to put in the very long hours and hard work needed, possibly with little payoff.
There’s nothing wrong with not wanting to take on the stress of a startup, or grow your business into an enterprise with employees and investors. If you enjoy working on your business and just want to meet your financial needs doing something that you love, then a lifestyle business is probably your best choice.