Doug Richard: Why do people hate lifestyle businesses?

Doug Richard: Why do people hate lifestyle businesses?Wednesday, July 14, 2010 by Sophie

Doug Richard is an entrepreneur and investor, former star of Dragons' Den and founder of School for Startups.

I have never understood the antipathy that otherwise rational people have for the so-called 'lifestyle business'. Quite recently I heard someone in a position of responsibility in the small business community disparage lifestyle businesses. They weren't real businesses, he said. They only enriched the owner, he said. What the f**k, I thought to myself?

Even more puzzling was the unthinking regard that everyone holds for the externally-funded business. 'Get angel funding', 'get venture capital', 'get debt from a bank' is what I hear people encouraging new entrepreneurs - as though the ability to raise money equates to the ability to make money. It doesn't. Just as measuring your business success by the number of people you employ is vanity, not sanity.

The heart of the issue is this question: what constitutes business success? In an age of growing awareness of carbon footprint, in a time when the fastest-growing businesses are social enterprises, at a point in the economic cycle when we need to drive entrepreneurs to help solve social issues, we no longer have time for these false dichotomies.

A business success can be measured on the bottom line. A business success is not measured on its top line. I have heard celebrity entrepreneurs brag about their businesses calling out their total revenue as though the sheer volume of cash that their business touched was somehow meaningful. I picture them skinny dipping in all that cash as it washes by, cackling irrationally, not realising that the flow of cash is not the same as the stickiness of profit. The reality was that they made a skinny 1% profit on all that cash. A business with one tenth the revenue that makes 10% on its money is precisely as successful. Revenue is just not profit.

It is not measured by the number of people it employs. Over and over I hear people talk about the size of their organisations. All I hear is the cost of their payroll. Is this just a man thing? Are we really comparing size still as adults? Get over it. In business size doesn't matter.

One of the most progressive entrepreneurs I know, Emma Jones of Enterprise Nation who advocates for home-based businesses, makes the point that many modern start-ups intentionally work with contractors rather than taking on the cost of a full-time employee. They are more resilient businesses. They are more flexible businesses. They employ less people. Their success is inversely proportional to the number of people they have employed. And they offer the collateral benefit to society of supporting other small businesses.

But I digress. Let's return to the blowhard who caused me to reflect on the initial question: what do people have against lifestyle businesses? A lifestyle business is simply one where the owner seeks to make the business successful not only in terms of profitability but also in terms of its ability to make his or her life more successful. It is this intentional inclusion of other measures of success that also define a social enterprise. It is exactly this awareness of the impact on the environment that defines the green enterprise.

In short it is the insight that there are other stakeholders in a business that makes a business ethical at all. So where in hell does my un-named blowhard get off dissing lifestyle businesses?

I believe that people should build businesses around their passions and around their lives. I believe that some businesses deserve to grow to fully express themselves or contribute to society. But other businesses should remain small and focussed. And who is he to tell anyone what they aspire to or to grade the result on such a myopically narrow measure. Personally, I run a lifestyle business and he can f**k off.