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That’s not what a lifestyle business is. Unless your lifestyle is eating ramen

that_guy_iain 2y ago
Enough money to keep going doesn't mean just enough money to cover the costs. It means being able to continue paying yourself and all your employees their salaries, meet costs and make a small minimum profit.
- normie3000 2y ago
  Aren't salaries considered to be part of the costs?
  - oefrha 2y ago
    Employee salary is definitely cost. Founder/owner salary is more complicated.
  - that_guy_iain 2y ago
    Yea, I meant more pay all the other bills like AWS, etc. But yea, salaries are defo costs.
- CPLX 2y ago
  You have to add “and return initial capital” to that list. That’s usually what’s at issue here.
  - that_guy_iain 2y ago
    The reason that is the issue is because that is not something they actually need to do. It's something the investors want but not generally required as they expect an exit of some sort.
smallerfish 2y ago
Sure it is. If your business nets 3 million a year, it takes 5 people to run it, and your customer base is steady, that's lifestyle. Sucks for investors, pretty nice for you if you can keep it running.
- jbverschoor 2y ago
  Just enough to keep going is different from a lifestyle business. Ramen/support low margins != a good lifestyle
- YetAnotherNick 2y ago
  3 million a year for 5 person is something like 400k/person after corporate tax. Which is pretty high and low at the same time(unless it is just freelancing). High in the sense that there would be competition and the other company will have more budget to reduce the price and make the entire segment unprofitable till you die. Low in the sense that you would likely make the same or higher in corporate if you are that skilled to net 3 million/year.
  - smallerfish 2y ago
    Once the competition has initially shaken out in a new category, minority players can hang on for years. Their product could be perfect for their customers in ways that the big guns don't accommodate.
- idlewords 2y ago
  In other sectors that's just called a "small business" and celebrated as the fullest expression of the American dream. I've always found it funny that tech treats the idea of a going concern with such distaste.
  - aprilthird2021 2y ago
    Specifically investors, not "all of tech". And to be fair to them, if a company doesn't grow, your investment is wasted in that company, right? No shade to good small businesses, but they may not be worth investing in?
julianeon 2y ago
The thing I don't like about the term "lifestyle business" is that it imprecisely mixes 2 very different things. It's like grouping students who were accepted at Harvard and chose not to go, with students who flunked out of school, as "not Harvard." Imagine if you were presented with a group that was 50/50 for example and had to draw conclusions about it. Really those are just two dissimilar groups that were lumped together, that shouldn't be bucketed together. In the case of "lifestyle business," it includes businesses that tried their best to expand but hit a ceiling. They failed, basically, to return their investment in any meaningful way. Or to put it even more simply, they failed. At the same time, "lifestyle business" includes businesses that are tremendously strong and could be 10 or even 100x bigger, but aren't due to owner's choice. It mixes together businesses that are capable of being Fortune 500 with those that are almost the inverse. In that sense it's confusing and unhelpful.

Enough money to keep going doesn't mean just enough money to cover the costs. It means being able to continue paying yourself and all your employees their salaries, meet costs and make a small minimum profit.

normie3000 2y ago
Aren't salaries considered to be part of the costs?
- oefrha 2y ago
  Employee salary is definitely cost. Founder/owner salary is more complicated.
- that_guy_iain 2y ago
  Yea, I meant more pay all the other bills like AWS, etc. But yea, salaries are defo costs.
CPLX 2y ago
You have to add “and return initial capital” to that list. That’s usually what’s at issue here.
- that_guy_iain 2y ago
  The reason that is the issue is because that is not something they actually need to do. It's something the investors want but not generally required as they expect an exit of some sort.

smallerfish 2y ago

Sure it is. If your business nets 3 million a year, it takes 5 people to run it, and your customer base is steady, that's lifestyle. Sucks for investors, pretty nice for you if you can keep it running.

jbverschoor 2y ago
Just enough to keep going is different from a lifestyle business. Ramen/support low margins != a good lifestyle
YetAnotherNick 2y ago
3 million a year for 5 person is something like 400k/person after corporate tax. Which is pretty high and low at the same time(unless it is just freelancing). High in the sense that there would be competition and the other company will have more budget to reduce the price and make the entire segment unprofitable till you die. Low in the sense that you would likely make the same or higher in corporate if you are that skilled to net 3 million/year.
- smallerfish 2y ago
  Once the competition has initially shaken out in a new category, minority players can hang on for years. Their product could be perfect for their customers in ways that the big guns don't accommodate.
idlewords 2y ago
In other sectors that's just called a "small business" and celebrated as the fullest expression of the American dream. I've always found it funny that tech treats the idea of a going concern with such distaste.
- aprilthird2021 2y ago
  Specifically investors, not "all of tech". And to be fair to them, if a company doesn't grow, your investment is wasted in that company, right? No shade to good small businesses, but they may not be worth investing in?

julianeon 2y ago

The thing I don't like about the term "lifestyle business" is that it imprecisely mixes 2 very different things. It's like grouping students who were accepted at Harvard and chose not to go, with students who flunked out of school, as "not Harvard." Imagine if you were presented with a group that was 50/50 for example and had to draw conclusions about it. Really those are just two dissimilar groups that were lumped together, that shouldn't be bucketed together. In the case of "lifestyle business," it includes businesses that tried their best to expand but hit a ceiling. They failed, basically, to return their investment in any meaningful way. Or to put it even more simply, they failed. At the same time, "lifestyle business" includes businesses that are tremendously strong and could be 10 or even 100x bigger, but aren't due to owner's choice. It mixes together businesses that are capable of being Fortune 500 with those that are almost the inverse. In that sense it's confusing and unhelpful.