"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.
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.
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.
Because that's the commonly held definition of "Not a lifestyle business" :/
As a rephrase of the statement I was originally going to put:
Why do you not seem to believe that headcount is merely a side-effect of business growth?
* Company grows profits
* Company decides to spend profit on head count
* Profit goes down
I'd say it's more usually
* Company makes profit
* Company invests in more people
* Profits rise, company grows.1. Company makes profit. 2. Company invests in more people. 3. Profits rise, company grows.
Step 2 is not a prerequisite for step 3.
And what you state is my hypothesis is not what I'm saying either.
How about this: 1 - Company makes profit. 2 - Company figures out how to grow profits, regardless of increase or decrease of headcount. 3 - Profits rise.
What, do you work in HR or something? (jk)
Heh no. I'm a single founder with a 'lifestyle business', making money off it currently. But I plan to grow the business (head count+diversify) when I can.
I don't understand how you can come to that conclusion. Business success is defined by profits, not ever-increasing headcount.
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?
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?