What’s the secret to startup success for a lifestyle business?

 If you're at a crossroads in your life and thinking about a lifestyle business startup, then this post is for you. I want to catch you now before you start sinking money and time into your dream. If you can wrap your mind around what I'm about to share with you, it will change the course of your business and your life for the better. 

In this post, I'm going to share some lessons from the startup battlefield. After working with hundreds of lifestyle entrepreneurs, I have seen the pitfalls and the promise. Despite the struggles, I firmly believe that anyone who learns business fundamentals can build a business that exceeds their wildest expectations. 

But there is a secret to it—a way of seeing the journey that only comes after seeing the startup pattern hundreds of times. The secret lies in how you approach building your business in the first place. 

The first thing we need to understand is the startup journey itself. What exactly makes a startup a startup? Most people would answer that it is a new business and hasn't been in operation for very long. While this answer might seem commonsense, it's wrong. It's essential to understand that a startup is not time-bound. It has nothing to do with the "newness" of the business. It's about the set of conditions in which a business operates.  

Here is my version of a definition for a lifestyle startup:

A startup is a stage with a set of conditions that begins with the motivation to start a business and ends with a financially sustainable business (sufficient profit to continue operations over time).  

Let's unpack that.

You have to have strong enough reasons to do all the work of building and running your new business and sustain it over time. It's hard work, with emotional highs and lows. The lifespan of a business is years, decades even. If you are going to be doing something that long, you better know very clearly what you're trying to achieve. It's a rewarding journey but not an easy one. Understanding your motivation is essential. If you have a strong motivation, you're already on the path.  

A startup ceases to be a startup when it can financially sustain itself over time. That means that there is enough revenue coming in to cover all business expenses, owners' income, repairs, and maintenance, and cover the unexpected disaster and unexpected opportunities—no dipping into the personal bank account to pay bills. Financial sustainability is every startup's first business development milestone, regardless of whether it is a growth-oriented or lifestyle business.

If you start a business and it's not financially stable, it is still in the startup phase. The work of building a business isn't finished. There are no red flashing lights, warning signs, or other indicators that will jump out at you and tell you you're still a startup. You must understand that you haven't completed this phase until your business is financially sustainable. Most new entrepreneurs lack this understanding.  

And herein lies the secret to success: The primary goal of your startup is to build a financially sustainable business, and your business is still a startup until it does. 

A sustainable business can go on for as long as you want. A financially unsustainable business requires outside cash to sustain it. Until your business can financially support itself, it is still a startup. No matter how long you have been running it. 

Again, this might sound commonsense, but you would be amazed at how many financially unsustainable small businesses there are out there. 

A stable financial business is only part of the success definition, however. After all, this is a lifestyle business. That means that your lifestyle should be better off in some way because of your business. 

Think of your startup as shooting a bow and arrow. The objective is to get the arrow from where you are to where you want it to go - the bullseye. The target provides you instant feedback, either you hit, or you didn't. Hold the same kind of mentally when starting a business. You either hit your goals, or you didn't. 

Your startup is, by definition, a temporary business. A phase you go through. Where it is going depends on the goals, you set out for it. You define the goals for your business, and you alone determine if you have reached them. What are your goals for your business? Are they written down? What are you trying to bring into your life? 

For a lifestyle entrepreneur to succeed, the business needs to generate enough income to make these personal goals happen. The drive to generate income to fund their personal goals becomes one of the primary pursuits of the business owner. (See this article from Inc. for some good goal setting tips) 

Now that we understand the real objective of a lifestyle business, we have to build it. How? Most new entrepreneurs will look for funding first. Startup funding is probably one of the most-searched-for topics on the Internet. The emphasis on funding comes from the misguided belief (in my view) that money is the most important thing you need to start a business. It's not true. Not be a long shot. Money is essential, no question about it. But it is not the most critical part of building a business—more on that in a minute.

Finding startup funding can be a real challenge. What you have access to funding-wise depends on your available assets, creditworthiness, funding sources in your area, how much startup capital you need, and more. For lifestyle entrepreneurs, here are a few of the most common sources of startup capital: 

-Personal savings

-Credits cards

-Bartering

-Friends and family investors

-Home equity loans

-Business loans (see this page for a list of SBA loan programs)

-Government grants

-Crowdfunding platforms (Gofundme, Indiegogo, Kickstarter) 

There is a myth out there that the government has free money to give away. As someone who used to run small business grant and loan programs, I can tell you that they do indeed exist. They are never "free," however. You might not be asked to pay the money back in the case of a grant, but you have to jump a lot of hoops to get the cash in your account. 

Another big challenge is knowing where to find these programs and how to access them. Understand that the federal government does not give out grants or loans directly to small businesses. The federal government uses what is called "intermediaries." Your state or local government entity might be one, and many nonprofits act as an intermediary. Contact your local economic development entity or Small Business Development Center (SBDC) or SCORE to see what's available in your area. 

As a lender, I used to tell my clients that "bankers like to give out umbrellas on sunny days." In other words, the best time to get a loan is when you don't need one. Startups need capital. You have to be careful when taking out any loan. If your new business doesn't throw off enough cash quickly, you have just made your financial position worse. You know have the bills of the business to cover and a loan payment too. Get to know the loan or grant program requirements in your area long before you ask for funds. If you know the goals of the program, loan/grant requirements, and who runs the program, you will have a good idea before you get started whether the odds are in your favor and this is the right choice. 

There are two things you must know clearly to navigate the startup funding maze: Exactly how much capital you need and how it will lead to a sustainable business. In calculating your startup costs, aim for the essentials you need to get the business started and get you to the breakeven point. No more, no less. To know exactly how much you need, you need to know your hard costs (equipment, space, materials, etc.), soft costs (legal expenses, marketing costs, professional services, etc.), and working capital (the amount needed to cover your costs until the business breaks even).  

The next thing you need is your plan and, most importantly, your marketing plan. The skill that will make or break your startup is your ability to sell your product or service. You must generate enough revenues to get to the breakeven point before your startup capital runs out. Plan this carefully. If you are writing a business plan, the riskiest part of the entire plan will be the revenue projection. 

Lastly, manage your exposure to risks whether you are using your funds or someone else's money. The unexpected happens. Count on it. A key question to ask yourself is: What happens to me if I lose all of my startup money? Are you betting the farm? Are you hoping that your business succeeds, or do you have a well-thought-out plan that puts the odds in your favor? Can you carry on without any serious consequences if the business fails? If you feel uncomfortable with the risk you are taking, reconsider the source, amount, the term (if there is one), and any fees or interest. Lower your ask, and you lower your risk. You want enough startup capital to reach financial sustainability, no more and no less.

As I mentioned above, funding is not the most critical challenge (surprise!). Think of funding as a match to a flame. The job of a match is to get the fire burning. It's the same thing with startup funding. The objective of startup funding is to kickstart the wheel of business operations, generate revenue, and reach the breakeven point. Read that sentence again. If you understand what it means, you likely realize everything you thought about startup funding was wrong. The essential part of building a business is creating one that can reach the business owner's goals. This requires learning business fundamentals. 

Every business has various functions like marketing, sales, finance, delivery, procurement, etc. Even the smallest of businesses have a number of these functions. You won't know they exist unless you have learned how a business works. Learn the fundamentals, and then apply them to your situation. 

Startup funding is a finite source, and it will run out quickly (we call this the burn rate). If the startup doesn't reach a sustainable level of sales to pay all business expenses (the breakeven point), the business will run out of cash and face closure (or be stuck living off of credit cards or personal savings). The biggest startup challenge is generating enough sales to surpass the breakeven point (revenues = expenses). This is why knowing business fundamentals is more important than funding. Focus on building a business that has all functional areas covered and achieves the goal of sustainability, and don't take your eyes off of it. 

Remember this: a business is a business, no matter how small it is. It is never just a "job." Ever. 

Also, keep in mind that your business must earn a premium. What do I mean by that? It means that you're doing more in a business than you do in a job. If you are a plumber, you should earn enough income just like you had a job. You should also earn a premium from the business. After all, you're doing a whole lot more work than a job. The business needs to pay a lot more than a job would.

Now you know that the main objective of a lifestyle startup is to reach financial sustainability, and we have to build a business capable of getting there. Does that mean that the business is a success when it gets to the breakeven point? Not quite.

A business generating a small or modest profit is financially sustainable, but that doesn't mean it meets the goals that the entrepreneur set out for themselves. Does the entrepreneur have autonomy in decision-making? Are they satisfied with the work that they are doing? Do they have a work-life balance in the way that they need it? The ultimate success of any new business is whether or not it is reaching the goals that the owner has set out for it. It's not a success until that time. 

So there you have it—hopefully a new perspective on how to think about building a successful lifestyle business. The secret is creating a business (not a job) and running it by practicing the business fundamentals. Learning business fundamentals enables you to create a business that can be financially stable and meet the goals you have set out for it.  

I genuinely believe that you can make this happen. But you have to have the right mindset going in. Yes, you need a good startup idea. Yes, you need funding. But these are only a few pieces of the startup puzzle. Your real goal is to build a financially sustainable business that meets your personal goals. Why settle for anything less?