An early founder who’s thinking about scaling his company asked for my thoughts. As we chatted, I zeroed in on something. What he ultimately wanted and what he planned to do weren’t aligned. I couldn’t tell if he wanted to build a lifestyle business or a high-growth company, so I asked him.
Building a high-growth lifestyle company sounds ideal, but it isn’t likely to happen. The main goal of a lifestyle company is just that—to provide for the lifestyle the owners want to live. Owners take distributions from the company to cover their personal expenses. The goal of a high-growth company, on the other hand, is—wait for it—growth. Growth is expensive. You’re hiring and making investments ahead of anticipated growth. Cash often stays in the company and is funneled toward growing the business.
The founder asked whether building a high-growth lifestyle company is feasible. I told him it’s unlikely. The core challenge is the conflicting constraints on the company’s cash. You can’t take all the money out to fund a cushy lifestyle and fund rapid growth. You have to pick one or the other.
In the end, this founder said he wants to build a high-growth company. I’m excited for him and can’t wait to hear more about his journey to turn this into reality!