I had this question from my friend Ben this week in response to my weekly email.
“WPMaster seems fairly close to freelancing, with you doing the work, and you’ve only mentioned team as a backup. I’ve noticed some people being judgemental of others’ businesses, like “it’s not a business, it’s a job”. Would love to hear your thoughts on this. :)”.
It got me thinking.
I’m currently looking for businesses to buy, so I’ve started thinking about what I’d like in a lifestyle business.
When most people think of a lifestyle business, they think of a business that can generate passive income to enable them to do whatever they enjoy doing outside of work – surfing perhaps.
This isn’t what I’m after. Passive income has never been particularly appealing to me because if it’s passive, it probably means you aren’t providing much value to anyone. Think about a drop shipping site, or a white labeled service that you just charge your customer more for. Making money is cool, but a business where I don’t have to work, is not the lifestyle I want.
I like surfing, but maybe for 45 minutes, a few times a week, not all day every day. It’s what I do for the rest of the day that defines how suitable a business is for me. My kids are at school, my partner is at work, I want work to do. I want people to rely on me for something. I want to help people achieve something, or achieve something for myself. A purely passive income doesn’t give me this. All it gives me is more idle time which I don’t want. I’ve had enough situations in my life where I haven’t had much to do and I don’t like it.
A lifestyle business suitable for me has to have 4 things.
- Work that needs to be done, that I enjoy doing, and a limit to work that I don’t enjoy doing. It’s important that there is work that needs to be done, it gives me purpose.
- Low in financial stress and other major stressors and risks that I don’t want to have without the possibility of a large return. For a lifestyle business the choice is focus on lower stress, lower risk by sacrificing the ability to have a big exit. A big stressor for me is financial stress, so the business being either highly predictable or ideally a high % in recurring revenue is a must.
- A focus on profit over turnover – it needs to provide a wage that enables me to live my life and achieve my financial goals. The turnover or size or impact of the business doesn’t matter.
- Flexibility – It has to provide me with flexibility in my work because that’s how I like to work and how I like to structure my lifestyle. To me it’s not important that I surf all day, but it is important that I can go check the surf whenever I feel like it.
To come back the original question, the main difference between something like WP Master and freelancing is the flexibility and the recurring revenue.
Freelancing doesn’t tick all the boxes of being a suitable lifestyle business for me. It’s inherently project based which means you never really know when your income is coming in the door. And project based means quoting on projects, chasing up invoices etc all work I don’t want to do and find stressful. So it fails test 1 and test 2.
But because it’s high in financial stress, you end up doing work whenever it comes in so it’s not flexible, failing test 4. Or worse, you end up taking on projects doing work you don’t want to do, again further failing test 1.
The risk with a lifestyle business that requires you to actually work is you stop enjoying the work and if that happens you have to hire people. Hiring people when you don’t have recurring revenue is very stressful. I’ve done it in the past and I don’t want that stress again. Having a recurring revenue business means that down the track if I decide that’s what I want to do, I can hire people to help with a bit of confidence I’ll be able to pay them without introducing more financial stress. So in a sense it doesn’t rule out building something more than a lifestyle business down the track, if that’s what I want at that point in my life.