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You are equating growth with head count, which is a common fallacy, but still a fallacy. Our measure of growth and success is profit and growth in profit. For t

by dhh 17y ago

You are equating growth with head count, which is a common fallacy, but still a fallacy. Our measure of growth and success is profit and growth in profit. For the past many years now, we've had spectacular yearly growth and we've yet managed to avoid destroying the lifestyle we're enjoying. Preferably we wouldn't hire another person for the next 10 years, but still dramatically increase our profits. To me, there's no growth in just adding to the head count without increasing profits. That's just deadweight.

axod 17y ago
Without a head count growth though, you're just supporting a lifestyle. Surely. That's great, and it depends on your priorities. But as far as I see it, that's the definition of a lifestyle business - sacrificing growth of the business (In terms of head count), for 'lifestyle'. With a very small team, that profit seems quite risky to me. (I would also say plentyoffish is a lifestyle business at the moment from what I know about it). From what I've read, there's a very small team, not growing in head count, making a lot of money. >> To me, there's no growth in just adding to the head count without increasing profits. That's just deadweight. I think it's a good thing to employ more people, if it's going to work in the long term. Sacrificing 'lifestyle' now, to build a big company. You can either take the profit, or you can reinvest it in people for the long term, and build something big. >> "Our measure of growth and success is profit and growth in profit." Which is more risky? 1 person earning $10m a year, or 10 people earning $1m each a year within the same company?
- comatose_kid 17y ago
  "Without a head count growth though, you're just supporting a lifestyle. " I don't understand how you can come to that conclusion. Business success is defined by profits, not ever-increasing headcount.
  - nonrecursive 17y ago
    The definition axod gave reads, "Lifestyle Businesses typically have limited scalability and potential for growth because such growth would destroy the very lifestyle for which their owner-managers set them up." So I can see what you're saying comatose_kid, but if we're talking about lifestyle businesses it makes sense to talk about organizational growth rather than profit growth. How would making more money destroy your lifestyle? And why would a lifestyle business's owners be afraid of making more money?
- dhh 17y ago
  I'm on board with the term "lifestyle business" if we make it imply "very profitable business that continues to grow revenues without adding additional cost". I would think that's the nirvana description of any business, though. "Which is more risky? 1 person earning $10m a year, or 10 people earning $1m each a year within the same company?", that simply doesn't compute. If all those 10 guys are making their $1 million each from selling web ads where as the 1 guy is making his $10 million selling subscription software, I know who I'd want to place my money with right now.
  - axod 17y ago
    I'd place mine firmly with the web ads ;) I agree @ keep costs low, but I still think the definition of a lifestyle business is one that isn't growing in terms of the business. If you liken it to a house rental. You could have the best house in the world, and be able to rent it out for $5m a year. That'd give you a great lifestyle, but even if you can manage to rent it out for $6m the next year, that's not business growth. business growth would be renting out 2 properties, 3, etc etc. Reinvesting the profit into the business in order to provide sustainable long term growth. >> "I would think that's the nirvana description of any business, though." So I'd disagree with this. Not every business wants profits over future growth.
    - gills 17y ago
      I know you're not just trolling, because you contribute many insightful comments on HN, but I just don't see why you are so focused on headcount as the measure of business growth. The low marginal cost of additional customers in a subscription software business makes your argument an apples-to-oranges comparison. You might need to hire additional staff to manage and maintain a growing portfolio of rental properties, but with subscription software you only have to improve your CRM tools and development processes to maintain a growing customer base with near-constant headcount. If better CRM tools happens to be what you are selling anyway, there's a pretty obvious multiplier for growing profits with very low headcount growth.
      - axod 17y ago

by dhh 17y ago

axod 17y ago

Without a head count growth though, you're just supporting a lifestyle. Surely. That's great, and it depends on your priorities. But as far as I see it, that's the definition of a lifestyle business - sacrificing growth of the business (In terms of head count), for 'lifestyle'. With a very small team, that profit seems quite risky to me. (I would also say plentyoffish is a lifestyle business at the moment from what I know about it). From what I've read, there's a very small team, not growing in head count, making a lot of money. >> To me, there's no growth in just adding to the head count without increasing profits. That's just deadweight. I think it's a good thing to employ more people, if it's going to work in the long term. Sacrificing 'lifestyle' now, to build a big company. You can either take the profit, or you can reinvest it in people for the long term, and build something big. >> "Our measure of growth and success is profit and growth in profit." Which is more risky? 1 person earning $10m a year, or 10 people earning $1m each a year within the same company?

comatose_kid 17y ago
"Without a head count growth though, you're just supporting a lifestyle. " I don't understand how you can come to that conclusion. Business success is defined by profits, not ever-increasing headcount.
- nonrecursive 17y ago
  The definition axod gave reads, "Lifestyle Businesses typically have limited scalability and potential for growth because such growth would destroy the very lifestyle for which their owner-managers set them up." So I can see what you're saying comatose_kid, but if we're talking about lifestyle businesses it makes sense to talk about organizational growth rather than profit growth. How would making more money destroy your lifestyle? And why would a lifestyle business's owners be afraid of making more money?
dhh 17y ago
I'm on board with the term "lifestyle business" if we make it imply "very profitable business that continues to grow revenues without adding additional cost". I would think that's the nirvana description of any business, though. "Which is more risky? 1 person earning $10m a year, or 10 people earning $1m each a year within the same company?", that simply doesn't compute. If all those 10 guys are making their $1 million each from selling web ads where as the 1 guy is making his $10 million selling subscription software, I know who I'd want to place my money with right now.
- axod 17y ago
  I'd place mine firmly with the web ads ;) I agree @ keep costs low, but I still think the definition of a lifestyle business is one that isn't growing in terms of the business. If you liken it to a house rental. You could have the best house in the world, and be able to rent it out for $5m a year. That'd give you a great lifestyle, but even if you can manage to rent it out for $6m the next year, that's not business growth. business growth would be renting out 2 properties, 3, etc etc. Reinvesting the profit into the business in order to provide sustainable long term growth. >> "I would think that's the nirvana description of any business, though." So I'd disagree with this. Not every business wants profits over future growth.
  - gills 17y ago
    I know you're not just trolling, because you contribute many insightful comments on HN, but I just don't see why you are so focused on headcount as the measure of business growth. The low marginal cost of additional customers in a subscription software business makes your argument an apples-to-oranges comparison. You might need to hire additional staff to manage and maintain a growing portfolio of rental properties, but with subscription software you only have to improve your CRM tools and development processes to maintain a growing customer base with near-constant headcount. If better CRM tools happens to be what you are selling anyway, there's a pretty obvious multiplier for growing profits with very low headcount growth.
    - axod 17y ago