Monday, September 21, 2009

Lifestyle Company versus Growth Company

Gerhard Gschwandtner's post on the premium oyster farm whose motto is "that's enough for me" reminds me of an unfinished post I had written about lifestyle companies versus growth companies. I don't have it with me but it went something like this:

Starting Nobscot Corporation I found to be a relatively easy and fun challenge. We were creating a technology (WebExit) that we knew there was a need for and we had a clear vision of what we wanted the company to be and do. The only times that I had any doubt at all were on the few occasions that I encountered those connected with the venture capital community. Sometimes it would be an attorney, other times a local networking group. The discussion would inevitably turn to the dreaded lifestyle company versus growth company discussion. Lifestyle company would be said with a condescending tone even when the words around it were seemingly positive. "It's OK if you want to be JUST a lifestyle company" . Maybe it wasn't them. Maybe it was me. Maybe I was feeling guilty for not wanting venture capitalists to have a part of my business and wondering if I was making a mistake?

Fast forward 9 years later. Today I can without guilt extol the virtues of a lifestyle company. We run Nobscot the way we want to. We grow based on our earnings. We have lots of money in the bank. We have no stress. We make great HR technology with the design philosophy of simple but powerful; no more and no less than what is needed. We have amazing, truly amazing clients. We help some of the best HR departments in the world. We have tremendous colleagues that are like family. We provide fun, challenging opportunities to our staff and they provide our clients with more service than they ever expect (or pay for). We barely noticed the recession. We live in paradise. Not a bad lifestyle.

Would we have been happier if we had gone the Growth Company route? If we had started with $10,000,000 in the bank instead of $10,000? It's possible but hard to imagine. My guess is that we would have butted heads with money people very early on. Likely if we had even become at all successful, Bruce (co-founder) and I would have been booted out. The company would have gone off target and be gone. More likely is that it never would have become successful at all. We would not have been able to focus with such laser sharpness on continuous improvement of products to meet the customers many wants, desires and needs. There is something to be said for small and scrappy.

Lifestyle company or growth company? For the entrepreneurs out there, don't let anyone turn their noses up when you choose the path less travelled. There is a pot of gold at the end of the lifestyle rainbow and perhaps more importantly the rainbow itself is a pretty great (and profitable!) path to follow.


Anonymous Sharlyn Lauby said...

Very nice post! We've had the same discussions about lifestyle versus growth. We are clearly a lifestyle company and it suits us just fine. And, it's a distinction we promote to our clients.

8:39 AM, September 21, 2009  
Blogger Beth N. Carvin said...

That's great, Sharlyn. I hate the implication that some make that the lifestyle company is for losers.

It's not as if choosing the lifestyle route means you are choosing against growth. I like to think of it as controlled growth versus chaotic growth.

Built to last, Baby!

10:44 AM, September 21, 2009  
Blogger Steve Boese said...

Excellent post Beth! I think it is a fantastic success story most of all because it is on your own terms.

2:57 PM, September 21, 2009  
Blogger Beth N. Carvin said...

Thanks, Steve. When I read about entrepreneurs who have gone the growth route, it never sounds like any fun at all.

I remember reading Charles Ferguson's book High Stakes, No Prisoners where he chronicles the growth and eventual sale to Microsoft of his start-up Vermeer, the original developers of FrontPage.

The whole journey sounded incredibly miserable.

Some people enjoy the after-effects of completing a challenging goal even if the pursuit is dreadful. Not me. I'm way too selfish for that.

5:34 PM, September 21, 2009  
Blogger Jonathan Goodman said...

Wow, I think our founder could copy and paste this post on our blog and nearly every word would be just a true.

We love growth, but it's a "brick by brick" approach at our firm too.

12:28 PM, September 23, 2009  
Blogger Unknown said...

This is so funny Beth. Jonathan Goodman just forwarded this post to me saying I'd enjoy it.

That I did.

I received a call from a Venture Capitalist -- although he likes to call his company a "private equity" firm -- just two days ago who has been hounding me for nearly two years to take his money. When I turned him down again his exact words were "I understand. Some business owners want to run their businesses as a lifestyle company...".

Beth, while you and I seemingly shared the same disdain for the phrase "lifestyle" company I had a different take than you.

I live in Santa Cruz, CA. I know a lot of surfers who run their own sole proprietorship's and when the surf is good, they choose not to work - even at the expense of additional revenue or upset customers. To me, that is a true lifestyle business. They sacrifice the growth of their business for their personal life. Nothing wrong with that.

But I don't believe Nobscott or HRmarkerer are lifestyle businesses.

And considering most VC's couldn't run a lemonade stand profitably I take their use of "lifestyle business" with a grain of salt.

Speaking for myself, HRmarketer was founded nearly ten years ago and has become the largest marketing services and software firm in the human resource marketplace - through a LOT of hard work and sacrifices. Many of our staff work 50+ hour work weeks. We make tremendous sacrifices to please our customers and develop our products. We have very ambitious goals for our growth - we just launched a similar product for senior care. And I want and expect our business to be around many years after I am gone.

This is not a "lifestyle" business.

Just because we love what we do, have limited stress, live in paradise and refuse to let a VC inside our family does not mean we are not a real business.

And just because a business wants to stay private and refuses to raise outside money does not mean it is a lifestyle business. I know several billion dollar businesses that fit this criteria - are they lifestyle businesses?

You can see I'm passionate about this stuff. I guess VC's just rub me the wrong way.

Anyway, thanks for the post - this was fun. Now I must get back to work - or maybe I'll go surfing.

1:05 PM, September 23, 2009  
Anonymous Steve Schaffer said...

Thanks for the post and comments.

I don't think it is a choice of a VC or Lifestyle business. To me a Lifestyle business is about making a living (which could be a really good one) and not trying to build something for the long term. We started as a lifestyle business and clearly are not anymore. If we were I would not be working so hard :-)

1:57 AM, September 24, 2009  

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