As a business owner, you may feel a never-ending pressure to keep growing and keep generating more revenue.
But bigger isn’t always better—especially when you’re running a “lifestyle business.”
A lifestyle business is one that is optimized for the most pleasurable lifestyle, not necessarily for the most growth.
“Why would I ever NOT prioritize growth?” you might ask.
Because in most cases, the bigger a company gets the more complex it becomes. The business then takes more time and energy from the owner, and that’s not the experience that every entrepreneur is after.
A lifestyle business, on the other hand, prioritizes intangible benefits like flexibility and enjoyment just as much as profits.
So in today’s post, let’s talk about something that came up on my recent Mastermind call: what is the idea level of revenue and profitability for a lifestyle business?
When looking for this sweet spot, we want to consider:
- Income: Generating enough money to live the life you want
- Time: Retaining enough freedom to enjoy your family, travel, hobbies, etc.
- Stress: Keeping your work pleasurable so you don’t resent it
But first, you need to ask yourself…
What Kind of Lifestyle Do You Want?
Everyone has different lifestyle goals, and the kind of life you want will impact your income needs.
Someone who wants a simple life in the country will need a lot less money than someone who wants to live in a penthouse suite downtown.
With that in mind, here are 2 examples of what we would consider successful lifestyle business owners:
Business A generates around $1–$1.5 million at a 20% margin, allowing the owner to pull out $200k–$300k per year. They earn enough money to be financially comfortable. Just as importantly, they live a low-stress, high-freedom lifestyle.
Business B generates $15–$18 million, and the owner pours 40% of their money back into ads to keep growing. They spend a lot of time flying around the world, working from beautiful places like Bali.
That second example may not sound like your ideal lifestyle business (for many people it isn’t) but there are some people who would love it — the people who enjoy the challenge and the satisfaction of pouring themselves into their work.
Neither is right or wrong. All that matters is what’s right for you, and the kind of life you want.
The Perfect Size for a Lifestyle Business
My preferences fall somewhere between example A and example B. I want low-stress and high-freedom, but I also enjoy nice things and have a big family I need to take care of.
So in my experience, the perfect lifestyle business would:
- Earn $8–$12 million in revenue
- At a 20% EBITDA margin (earnings before interest, taxes, depreciation, and amortization).
Why?
At $8–$12 million, your business is extremely successful but not so complex that it’s a nightmare to manage. And if you’re taking home around $2 million/year, the profit is enough to fully take care of you in any way you could possibly want.
Obviously, you can’t just choose your business’s revenue and profit levels—you have to actually achieve them. So don’t get too hung up over these numbers, because you’ll never have complete control over them.
But there is one thing you DO have control over: what you do with the profit you earn. And on that subject, here’s one last piece of advice I want to give you based on my own personal experience.
Why You Should Diversify Your Profits
In my early days, I made the mistake of putting everything I earned back into my business or other ventures.
What’s the problem with that approach?
Everything I owned was on the Internet, which meant that if ecommerce had a bad year then I was in deep trouble.
The point here is this: don’t put all your eggs in 1 basket. Instead of pouring all your profits back into paid ads, put some of it into real estate, or investments in other verticals. This can help grow your wealth while providing peace of mind in the event of a downturn.
That’s it for this post — I hope it was helpful!
