By Pascale Hansen

In the world of entrepreneurship, the type of business you operate can significantly influence your goals, decisions, and overall satisfaction. Many business owners may often find themselves pondering, "Is my business simply a lifestyle choice, or could it be a valuable asset to sell in the future?" This blog post delves into key questions that discerning entrepreneurs must ask themselves to evaluate whether they're running a lifestyle business or a business with strong sellable potential.

Understanding the Distinction: Lifestyle Business vs. Sellable Asset

Before diving into the essential questions, let's clarify what I mean by a lifestyle business and a sellable asset. A lifestyle business primarily focuses on meeting the personal needs and lifestyle goals of the owner rather than maximizing profit or scalability. Common examples include small local cafes, consulting businesses, and freelance services.

On the other hand, a sellable asset is a business structured and designed for growth, profitability, and potential market interest. This could include scalable e-commerce platforms, franchise models, or any business with documented processes, clear value propositions, and growth trajectories that appeal to potential buyers.

Key Questions to Evaluate Your Business Type

What Are Your Objectives?

Consider what you want out of your business. Are you focused on acquiring wealth, creating passive income, or simply enjoying the day-to-day operations? If your primary goal revolves around supplementary income, your business may lean more toward a lifestyle approach. However, if you envision scaling and exiting profitably, you’re likely steering towards a sellable asset.

How Dependable Is Your Business on You?

Assess your level of involvement in day-to-day operations. If your business relies heavily on your input, expertise, and presence, it may be classified as a lifestyle business. Alternatively, a sellable business should have systems and processes that allow it to function independently of the owner's direct involvement.

What Is the Current Revenue Model?

Examine your revenue streams. Does your business have diversified income sources? A lifestyle business typically generates revenue through a limited number of channels, often directly tied to the owner’s actions (e.g., a local service provider). In contrast, a sellable business might have recurring revenue models, subscriptions, or multi-channel sales strategies that enhance its appeal to potential buyers.

Is There Room for Growth?

Evaluate your business’s growth potential. A sellable business typically demonstrates scalability through existing demand, market trends, or the potential for expansion. Lifestyle businesses may lack this growth trajectory, focusing instead on maintaining the current workload and lifestyle choices.

How Documented Are Your Processes?

Consider the extent to which you’ve documented your business operations. A sellable asset often features comprehensive operations manuals, standard operating procedures (SOPs), and a track record of results. In contrast, a lifestyle business might function entirely on informal practices and the owner’s personal know-how.

What Is Your Market Position?

Analyze where your business stands in relation to competitors. Do you have a unique value proposition or a loyal customer base? A strong market position would typically enhance the sellability of the business. Conversely, if your business is highly dependent on niche clientele with limited potential for expansion, it indicates a lifestyle orientation.

What Are the Growth Drivers?

Identify whether your business growth is driven by market demand, consumer behavior, or solely your personal efforts. A sellable business often benefits from external factors and trends that can be harnessed for growth, while a lifestyle business may rely primarily on the owner’s efforts and passion.

What Is Your Exit Strategy?

Consider whether you have an exit strategy in place. A well-defined exit can significantly enhance the sellability of a business. If your plan is to eventually sell or pass it on, your business design might lean toward creating a more robust and valuable asset, unlike a lifestyle business that may not have strategic exit procedures.

Determining whether your business is primarily a lifestyle venture or a sellable asset requires introspection and honest evaluation. By asking yourself the right questions regarding your objectives, processes, scalability, and market potential, you'll gain clarity on your business’s nature and the appropriate strategies to implement.

Whether you aim to enhance your lifestyle or create a marketable business, understanding this distinction is vital for setting the right goals and making informed decisions. Entrepreneurs who navigate their paths with this understanding will optimize their approaches, ensuring their businesses align with their personal aspirations and market opportunities.

Pascale Hansen is the Founder, CEO, and Financial Strategist at Zada.

#BusinessStrategy #LifestyleBusiness #SellableBusiness #EvaluateYourBusiness