Don’t be so quick to discount “lifestyle business”

<- On the lake shore last night

It wasn’t until a banker sneeringly said to me,

“So, you’re a lifestyle business.”

That I realized lifestyle business was not, as I had mistakenly thought, people who called themselves “life coaches” , Mary Kay consultants, personal trainers, financial consultants or other businesses that are telling you what life style to have.

No, it turns out that a lifestyle business is what we referred to back when I started in the consulting business in 1985 as a “small business”. You provide a service. People pay you. You pay bills. You pay taxes. At the end, if there is money left in the bank, you are still in business. If there is enough money, you get trips to the Bahamas, private schools for the kids, 401(k) for retirement and dinner at Chinois on Main.You work hard, deliver the goods for your customers and live in the style to which you want to be accustomed. Like either Romy or Michelle (I forgot which) in Romy and Michelle’s High School Reunion, I always thought we were happy and had a good life.

According to the banker, and the self-appointed “serial entrepreneurs”, I was wrong. The point of business, is to have an “exit strategy”. My original exit strategy was to have one of my kids take over the business. All of them have worked for me at some point, entering data, editing grants, writing articles for newsletters. They started out at the entry level and by the time they got to senior research associate, they bailed, telling me,

“You work too hard.”

Also, they had their own interests. Fair enough.So, I am working, running a business and I guess when I get bored of it I will wind things down and spend my remaining days on a beach on some Caribbean island, being visited regularly by my children and grandchildren.

That is WRONG, the banker tells me. My exit strategy is supposed to be to have all of the work done by people in other countries working for less than minimum wage, or, at least, far less than the prevailing wage in America, and then sell out for lots of money. My goal is supposed to be to become the next Sergey Brin, Bill Gates, Mark Zuckerberg or whoever made millions this week. According to the banker, I am a failure at business.

According to Luke Johnson of the Financial Times, though, maybe not so much. Dave Winer wrote a blog post a while back where he pointed out very rightly that if you’re making over a million dollars a year a good bit of it is “windfall”. In an interesting article with the title, “Zuckerberg wannabes squander careers” Johnson points out that getting huge amounts of capital without much more than a business plan is akin to winning the lottery. What Johnson points out is that those businesses that don’t get the windfall go out of business.

I remember driving by eToys when they were going bankrupt and seeing movers taking everything out of the building. And they were one of the companies that actually sold stuff. Many more companies I hear about that are disruptively innovative amazingly great and yet I never see a product or service come out of them and I never hear of them again after their exit. Some people, like eToys, Pets.com or Webvan , I think sincerely intended to develop a business and it did not work out. I respect those people and I certainly understand them. Not every product line or service we ever tried made us money and I have nothing bad to say about people who take risks and fail. That’s just the way it is. We may be in that situation in the next few years, where we either make a lot of money on our new product we’re developing or we make less than we had hoped. Having learned from some examples of people who ramped up too quickly, I think it unlikely we’ll go bankrupt or out of business, but it’s possible sales will be disappointing.

On the other hand, it seems like a lot of businesses are just another version of the Madoff scheme where money changes hands and everyone is getting high returns – until they aren’t because there is no real product, just an idea. I remember seeing a prospectus years ago, for the Reusable Pie Crust company. Their marketing pointed out that since no one eats the pie crust anyway, it could be replaced by a reusable pie crust and no one would know. The location of the company headquarters was listed as “In Mr. Andrews’ hat”, the members of the Board of Directors all had the last name of Andrews, etc. It was obviously a joke. Perhaps it is my old crankiness but some of the start-ups I have seen sold make me think of the Reusable Pie Crust, Co.

Years ago, I worked for a large corporation that had been a successful start-up and sold out. I had a nice office, a nice salary and a comfortable 401k. I downloaded a lot of photos from webshots on my computer screen, and even ordered a couple of posters for my office walls.

Last night, I had finished the business I had to do in North Dakota and spent the night at the Woodland Resort. On my way to the airport, I was driving along a country road and it occurred to me that I get to work in those places that other people use as their screensavers.

So, I would advise against being too quick to discount those “lifestyle businesses” and I think I’ll keep with my small bank that has the same idea. Last time I drove up to make a deposit, they didn’t make any derogatory comment about my business. Instead, two bankers came out and cleaned off my windshield and gave me a hot dog (I’m not kidding and I still haven’t the faintest idea what that was all about).