Test the startup lifestyle before jumping into it
A lifestyle entrepreneur is an individual who creates a business with the purpose of altering their personal lifestyle and not for the sole purpose of making profits. A lifestyle entrepreneur focuses more on the life rewards provided to people who enjoy and have a passion for what they are doing. By definition, a lifestyle entrepreneur truly enjoys the startup lifestyle.
Until the recent recession, market research (http://ecopreneurist.com/2008/08/14/operating-a-small-sustainable-business-resources-for-ecopreneurs/) indicated that as many as 90 percent of the roughly 20 million American small-business owners were motivated more by lifestyle than growth and money. Since 2008, the desire for profits has trumped passion in 54 percent of new startups according to a more recent study (http://www.symantec.com/about/news/release/article.jsp?prid=20120613_01). It seems that everyone wants to make a quick buck these days.
Being called a technical entrepreneur should be a compliment, not an insult. The term applies to anyone who places passion before profit and intends to combine personal interests and talent with the ability to earn a living. This usually means not taking money from equity investors, as investors want fast growth, high profits, and a public offering or sale strategy to allow investments to be recouped.
Of course, even lifestyle entrepreneurs want to be happy and want their business to be successful. According to William R. Cobb and M. L. Johnson, in their book, Business Alchemy: Turning Ideas Into Gold, these different success expectations are what separate a lifestyle entrepreneur from a growth entrepreneur:
The owner is the only one "in charge": Every lifestyle entrepreneur starts their business to be their own boss and follow their passion, so they don't even think about having investors, a board of directors, or going public. If you think corporate bosses are tough, wait till you start spending investor money or try satisfying Wall Street and stockholders.
Insist on being engaged at the transaction level: If you are living your passion, you want to interact with customers and "touch and feel" the product every day. Growth entrepreneurs find that this fun world quickly changes to managing personnel problems, tuning organizational structures, and dealing with testy investors.
The income generated is part of the owner's personal income: The legal structure of these startups is usually a sole proprietorship, a Limited Liability Corporation (LLC), or a subchapter "S" Corporation. Under all of these, net income flows easily into your personal income. Corporate versus personal growth really becomes a lifestyle decision.
Startup funding comes from personal savings and family: There is no free money from any source. Nonequity funding has to come from personal sources, government grants, or bank loans. This doesn't dilute the owner's equity, but it might well limit you to organic growth versus international rollouts and acquisition options. Grants have their own price in time and effort for complex applications.
Business model to maintain the lifestyle is the primary driver: The lifestyle entrepreneur chooses a business model to make a long-term, sustainable, and viable living, working in a field where they have a particular interest, passion, and talent. They operate the business to sustain a minimal level of cash flow necessary to support the lifestyle.
Maximizes the owner's personal tax privileges: This means that owners can look for every opportunity to get a personal tax advantage from the business, such as charging vehicle operating costs to the business, renting facilities from themselves, or managing business and personal travel.
Enjoy being visible and active in the local community: Lifestyle business owners usually benefit and enjoy being a part of the local Chamber of Commerce, Rotary, and other civic organizations. These can become part of balancing your lifestyle rather than part of the stress of business-driven networking.
No exit planned until retirement: A lifestyle business becomes an integral part of an entrepreneur's identity and their life. If, and when, the time should come to "exit" from the business, they will often seek to transfer it to a family member or simply close it down.
In my view, lifestyle entrepreneurship should be growing in popularity rather than shrinking, as technology provides startups with the cheap digital platforms needed to reach a large global market. Also, more women have been jumping into entrepreneurship, and they have long wanted to make their business and personal lives and aspirations work more in harmony.
Younger Gen-Y entrepreneurs also tend to be more passionate, idealistic, and not driven by money, so I would expect to see them trend up in lifestyle entrepreneurship. I'm told that Mark Zuckerberg of Facebook started out as a lifestyle entrepreneur. Obviously, he has now graduated to corporate executive status in a large public company. That's a totally different role, about as far away from the entrepreneur lifestyle as you can get. Except for the money, I suspect he liked the previous role better. What do you think?
