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If you were to talk to my grandparents or great-grandparents, there's no such thing as a lifestyle business.
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This is the first time ever where a small business can punch well above its weight.
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Thanks to social media and software and all of those things,
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this is the first time you can run a business from anywhere, have customers anywhere,
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have technology doing most of the work, and really get to enjoy the fruits of your labor.
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A performance business, on the other hand, it's a bigger business.
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It typically has 30 or 40 people plus.
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It's got some debt. It's got some investors.
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It's built to sell from the start.
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It focuses on things like proprietary asset building.
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It focuses on recurring revenues.
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It's really data-driven.
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It's got performance dashboards.
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It's got an amazing executive team.
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It's got all of those grown-up things.
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It has all of those grown-up meetings.
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If you get this right, you'll never have to work again after you've sold your performance business.
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Let's get into it.
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Which one are you going to choose?
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I want you by the end of this video to have made a choice so you know what you're building in the next three years.
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so in order to make this decision between lifestyle and performance we need to have a look at the
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total picture of the entrepreneurial journey we need to start at the beginning and show you all
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the different places that you could get to along the way so day one is startup so the first thing
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that you need to do in startup is create what's called founder opportunity fit this is where you
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discover the right thing for you it's based on your backstory where you figure out what are the
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things you've done in the past that have led you to where you are today and it's based on your
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future? What are you inspired to create? What are you hoping to achieve? What are the types of things
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you want to see happen in the world? What frustrations do you have today that you would love to be
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involved in solving? Now, all of that goes into founder opportunity fit where you've identified
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the opportunity, not that's great for the whole world, not just great for somebody else, but that's
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great for you. The key here is that you feel a great sense of alignment to beginning this
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entrepreneurial journey because it's going to get tough. In fact, almost immediately, you're going
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to enter phase two, which is called the wilderness. The wilderness is where your ideas meet reality
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for the first time. This is a tough time because not everything works out straight away. Many of
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you are already in the wilderness. You've launched something. It was exciting at the beginning,
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but as soon as you started talking to customers, they didn't behave the way you thought. Maybe the
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price they were willing to pay was less than you thought. Maybe those big, exciting clients already
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had supplies that they were tied into contracts with. Maybe you couldn't get the staff that you
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needed. Maybe the technology was too hard, right? But in the wilderness, this is where we start
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figuring out the realities of the business. The fastest way through the wilderness is that we have
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to do something called MVP testing, minimum viable product testing. These are fast, cheap experiments
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to figure out who's the right customer, how much are they willing to pay? What are some of the
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things that are going to be hard? What are some of the problems that we're going to have to solve?
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All of that happens when we do minimum viable product testing. Once we've done minimum viable
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product testing we do something called product market fit Product market fit is where we take all the information that we learned from the MVP testing And what we do is we roll that up into the perfect product We figure out just how customers want to experience it what price point what communication strategy what goes into the offer how do we guarantee it Do we have pricing
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plans? All of that is covered in product market fit. It's basically where you come up with your
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winning offer that your customers respond well to. And the next phase is typically where you've
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got a little bit of a team. This is where you're going to build a team that has between four and
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12 people, the four to 12 person boutique. Now in this phase, there are two categories. Category one
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is called a struggling boutique. A struggling boutique is where this just doesn't have the
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unit economics that you thought it did. You try as hard as you possibly can, but you just cannot
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seem to get this thing to make money. It's normally the case that you're doing something very
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commoditized. You don't have a key person of influence. You don't have a brand. You're not
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reaching people through digital. You're not scaling through software. You're not using social media.
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you're not building a big enough brand, and as a result, you end up as a struggling boutique.
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Think restaurant, cafe, hair salon that doesn't have a key person of influence involved.
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Unfortunately, it's just paying wages, and if anything goes wrong, that business is going to
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be in serious trouble. So that's a struggling boutique. Most businesses, that's where they end
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up. But just on top of that is what we call the lifestyle business or the lifestyle boutique.
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now a lifestyle boutique has four to twelve people but it's making lots of money this is a business
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that can pay everybody a healthy wage and a profit on top this is a business that is not
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geographically pinned down you don't have to turn up to any particular location at any particular
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time in order for this business to work it's typically online marketing and online delivery
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it's a business that leverages software and social media it definitely is a business that has a key
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person of influence. The founder of this business, probably you, has built a personal brand. They've
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got people who know who they are. Their names come up in conversation. They get more done because of
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that personal brand. In many cases, the founder of a lifestyle boutique has written a book. They
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have a social media profile. They speak on stages around the world. They have maybe a YouTube channel.
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All of those things are fueling people to discover the lifestyle business and buy from the lifestyle
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business. Now, this is just awesome. The reason that we like this business is because at four to
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12 people, it's self-organizing. You can run this business in a WhatsApp group. You can use Zoom.
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You can use off-the-shelf software. It's an easy business to run. It's fun to run. And because you
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can keep low overheads, you can charge a reasonable price and still make a really healthy profit.
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You don't have offices. You don't have bureaucracy. And all of that, that just goes straight to the
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bottom line. That's your lifestyle business, fun, freedom, flexibility. It's heaven. However,
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you're going to mess it up. You're going to ruin it and you're going to ruin it by hiring the 13th
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person So what happens when you hire the 13th person Unfortunately you entered the next phase which we call the desert And the desert is where you too big to be small and too small to be big As you get 13 14 15 16 people the business becomes difficult to manage
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What you're going to discover is the sales people are making decisions on their own.
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The marketing team are doing things. The operations team, they're doing their thing.
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The product and the customer success people, they're doing their thing. No one's talking to
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each other. And all of a sudden it's a big mess. It's pulling in all directions. It's not aligned.
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it becomes poorly managed. So what do you need to do? You're going to have to hire an executive team.
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You're going to have to have managers and leaders who start syncing this up and turning it into a
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proper business. However, you're too small to afford those people. If you hire them, all the
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profit's going to disappear. So you get stuck and you think maybe we should go back to being a small
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business. Maybe we should push on to being a big business. But now you're in a risky game of trying
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not to run out of money before you hit that bigger scale. On the other side of the desert, we have a
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business that has 30 people. Once you hit 30 people, you've now hit a size and a scale where
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you can start behaving like a performance business. Four or five of those people can be the leaders
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and executives and managers who make the whole thing happen. And 25 of those people can be the
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team who make sure that the business is generating customers, looking after those customers,
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innovating new products and getting everything else done. On the other side of 30 people,
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we're going to have two types of businesses. We're going to have what's called a factory.
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and this is a business that has lots of people but it doesn't make much profit and we're going
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to have a performance business. This is typically a business that has 30 plus people but it's really
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profitable. It's got a dynamic executive team. It's developing unique intellectual property assets.
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It's scaling through software. It's utilizing AI. This is a business that bigger companies are
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calling disruptive. People are getting worried that this business is going to take over the
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industry. They're really up to something. They punch well above their weight. People can't
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believe that it's only 30, 40, 50 people. They think that it must be two, three, 400 people
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because of just how powerfully they're showing up. This performance business attracts the attention
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of a bigger company that wants to buy it. And when they come in and they see how profitable you are,
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how well you'll run and how scalable you could be, they get excited and they pay you a life
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changing amount of money to buy that business. And that is the benefit of having a performance
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business. So you've got two choices. Do you want to stay between four and 12 people and have a small
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dynamic lifestyle business? Or do you want to cross the desert and get 30 plus people and have
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a performance business that could be sold for a lot of money? Now, does that mean that your boutique
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lifestyle business could never be acquired? Well, the truth is probably not and probably not the way
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that you would think it would be. It can be acquired, but it's going to be what's called a
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long-term earn out. See, the problem is, is that with a lifestyle business where you're the face of
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you're the key person of influence and there's only a small team of four to 12 people. It's
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what's called founder dependent. And that founder dependency means that if you leave,
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half the team are probably going to want to leave with you Now what you can do to get around this if you sell your small lifestyle business not that you want to because it doing so well you could sell the business on a three earn out where you continue to be the face of the business But the truth is most
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people who get close to the deal-making table on that sort of a deal, they end up deciding to keep
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the business because it's giving them so much value and they don't want the headache of dealing
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with the acquirer. So it just doesn't seem to ever be worth it to sell that business. Even though you
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could sell it on a particular type of deal, it often seems better off just holding it and having
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fun. Does this mean that a performance business is not a lifestyle business? Absolutely not. Once you
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hit performance, you can have a lot of fun with that business. It's often the case that the people
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who build performance businesses really geek out on business. They love looking at executive
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dashboards. They love being part of high performance meetings, offsites and retreats where the whole
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team gets together and comes up with a new innovative approach. It's often the case that
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someone who has a lifestyle business, the majority of their focus is what they do for the customer
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as opposed to business itself. And for a performance business, there is a massive love
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of business as a craft, as well as what you do for the customer. So the performance business people,
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they read a lot of business books, they read up on a lot of management theory,
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and they also read up on the topic that relates to the industry that they're in.
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We talked about MVP, product market fit. In entrepreneur speak, a lifestyle business
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is focused on what we call go-to market, which is cranking the handle and making sales.
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A performance business is focused on scalability. And then finally, that business is then focused on
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exit. Now, it's important to know that exiting the business is a special skill all on its own.
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It's a special campaign. It's like any other marketing campaign. You're going to have to
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have special marketing materials to sell the business. You're going to have to have a special
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team in place, like a campaign team who are focused on exiting. You're going to go through a
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process that might last 12 to 18 months in order to exit the business. There's probably going to be
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about four people on your team who are dedicated just to that process and they're focused on that.
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You'll have some unique suppliers, some expensive suppliers who help you to exit the business.
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All of that comes down to this exit process here as well. So scaling up on its own can be a bit
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more stressful for the wrong sort of person. It can take a little bit longer. It's a bit more
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delayed gratification and it includes this extra step of being ready for exit as well.
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So the decision you've got to make is do you want to have your dream house, which is your
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lifestyle boutique, fund freedom, flexibility, run it from anywhere, earn great money, have a lot of
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fun with people that you love working with, or do you want to go through the process of crossing
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the desert and building a performance business? A lot more stress, but for a much bigger payday.
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So leave me a comment below, which would you choose, lifestyle or performance? Give the video
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a like, give the channel a subscribe and forward this on to an entrepreneur who you know is making
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a decision between lifestyle and performance. I hope you got value from this video and I look
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forward to seeing you again soon and I hope your business is doing really, really well.