OK so first things first, when I say a lifestyle business I mean owning a business that generates around $3m in revenue per year while still allowing you to follow other passions like family, health, hobbies or maybe even another business. A business that is so well structured and brimming with capable people that you sometimes feel you don’t even need to be there. A business that others will seek out and will want to acquire. Sound good? Well let’s see how you build one.
Tip 1 You need to grow but when and how? - To get your business to the point where you’re generating around $3m per year in revenue it will need to have regular growth periods. It’s one of the most challenging periods of any business, measuring the risk of overextending with the reward of continued growth. The rule of thumb is you should be looking for your next growth strategy when you are at 50% capacity, that means you need to work out what your business should be producing if all your assets were at full capacity (for a professional services business this would be all delivery people fully booked or for a product business selling products faster than you can make them) then checking your revenue against this to see what you are actually doing. When you tick over the 50% consider hiring more people, reviewing your pricing model, doing a rebrand and marketing push or forming a new partnership.
Tip 2 Set the right structure - The whole point of a lifestyle business is in the future it needs to nourish, support and grow itself without you. Think of it as a tree, when it’s a sapling it needs you to water it, provide nutrients and tie it to a wooden stake in the ground for support. As it grows, it develops roots to find its own water and food and a thick trunk and branches to support the leaves. Similarly your business structure needs to have strong foundations with the right balance of strategy, business development, delivery and support. A good basis to grow your team in the right way is the rule of 4, for every 4 people in your business, 1 is the strategic leader/ business development, 2 are delivery and 1 is admin or support. Replicate this through your growth phases and over time you will have built a business with 12 people turning over $3m per annum.
Tip 3 Hire the right capability - In my view people are always a business’s greatest asset, especially in a small to medium business where there is no where to hide. Your view of capability needs to change as your business does, in the initial phases it will all be about great delivery people who can translate your client prospecting into great service. As you grow your focus needs to shift to people who are part of your succession planning, future leaders of your business who can contribute to the strategy, drive their own revenue and lead teams of delivery people. To create a lifestyle business you must find, nurture and reward these types of people.
Tip 4 Have a Succession Plan - All this is not going to happen by itself and it’s not going to happen overnight. To keep on track and stay the course you need a roadmap of what you are going to do and by when. Whether you are just starting your business or have been running for a while you should have the growth and exit strategy in mind. The “when” may be based on a length of time, a revenue milestone or a certain point in your life. What ever it is it’s important to have a target, if you aim at nothing you hit nothing. The “how” gets split into two parts 1) how do I build it which flows from the tips above and 2) in time, how do I transition out from the day to day running of the business. This may be via selling an equity stake to someone already within the business, selling an equity stake to form a new external partnership or it may be a complete acquisition.