The advent of private equity and flourishing junior markets with great tax advantages such as AIM has changed the public’s view of lifestyle businesses. It’s led to the perception that they are run by people who lack ambition, owner-managers content just to drift along.
That may change after proposals by Chancellor Alistair Darling to axe taper relief. Indeed, some entrepreneurs speculate that gearing a business for sale has now lost its lustre; so why not run a business purely for personal pleasure?
Different times
If you go back 20 years, most businesses were private and the idea of outside shareholders, be they Joe Public or venture capitalists, was just not considered a viable option. Companies were affectionately described as either PEGs (potential for explosive growth), or NLOs (nice living for the owners).
Lifestyle businesses don’t have to be lacking in ambition or unsuccessful, but they are different from companies with outside shareholders or growth businesses where all cash flow is used for expansion.
If a company requires large capital expenditure, operates in markets where overseas competition is rife or requires scale to remain competitive, then it’s not in the right space for owners to be running a lifestyle business.
So, which companies lend themselves to a lifestyle approach? How can you be successful, rich, happy and have a life (i.e. take real time off)? In other words, can you really have it all?
How much do you want?
First and foremost, the answer depends on your level of aspiration. For example, if you suddenly decide to sell up, valuations for lifestyle businesses are much less as they tend to have lower levels of growth.
The trick is to find a niche market in which local domain knowledge is key, customer relations essential and the technology requirement low.
Having said that, the most obvious lifestyle businesses are service-based operations, such as law firms, estate agents, consultants and the like. In theory, you work as much or as little as you want. In practice, you don’t. You’re forever at the beck and call of clients and, as you probably started by working all hours under the sun, you’re used to it – and your clients are too.
On the other hand, you might be escaping the corporate treadmill with the intention of taking a different direction entirely. I remember an acquaintance from a City law firm establishing a day care nursery in Oxfordshire after realising he’d had enough of the rat race.
The Damascene moment arrived after working straight for the best part of three days. ‘I didn’t realise I’d lost track of time,’ he said.
If you are seeking a bit of “me time”, here are some tips on how to try and have it all in a lifestyle business:
• Make sure you have a really well-paid and motivated team around you. This is essential if you’re going to delegate with peace of mind (and delegate you must to enjoy your new-found lifestyle or time off during the week)
• Make the business as simple as possible by not chasing turnover
• Avoid entering new market areas. Instead, concentrate on managing the existing business better and getting more out of your customer base. Remember, selling to existing clients is much more efficient and generates higher margins than trying to attract new custom
• If a good offer comes along for the business, accept it. If you can see the business declining, sell quickly
• Try to keep your children mean and hungry if they are coming into the business, or fat and happy if you want them to stay out of it
• Find a role that is fun and adds real value. In other words, don’t get involved in the day to day so you can’t see the wood for the trees. You’ll be surprised how big a difference this makes, particularly if you’ve been working intensely. So, for example, go and spend real time with customers and suppliers
• When you are there, work really hard – just don’t be there too often
• If you can possibly afford it, don’t be afraid to have a (silent!) chauffeur. Driving yourself is stressful and an incredibly bad use of your time and mental energy. Those stress-free, totally quiet moments are key for real thought and lifestyle control.
Good luck!
