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A lack of strategic intent of recruitment agency owners to grow and build their businesses, or a lack of size, is the simplest definition of a Lifestyle Recruitment Agency.
There are thousands of recruitment agencies in Australia and New Zealand that fit this definition. Lifestyle businesses are operated for lifestyle and personal reasons. Using the definition of Michael E Gerber in his bestselling book The E-Myth, in many instances the owner has built a job not a business.
The main focus is often on sustaining the owners’ particular lifestyle. In many cases there are no other shareholders, leaving the owners to have more control in the operations of the business.
When the term "Lifestyle Business" is mentioned, it often brings to mind the idea of small, part-time, or home-based ventures. While this perception is accurate in some cases, it's important to note that certain larger enterprises have also been established with a deliberate decision not to pursue growth or attract investor buyouts. Instead, these businesses serve as a solid groundwork for the owners to achieve their personal goals and aspirations. The emphasis is on maintaining a balance between business operations and the desired lifestyle of the owners, without necessarily aiming for rapid expansion or external investment.
Building a lifestyle is a very valid business strategy. Indeed, my business HHMC Global can be classified as a Lifestyle Business. To repeat, this is a very valid business strategy BUT there are implications when discussing equity value.
When observed from an external perspective, the traits of a Lifestyle Business become readily apparent. Beyond size, the absence of substantial investment across the business and the strategic intent to foster growth are easily identified.
From an acquirer's perspective, the willingness to pay a premium for a business is tempered by the perceived risks associated with its potential to generate future profits. Such risks may encompass sustainability concerns, stemming from the very nature of a business primarily focused on personal lifestyle goals rather than robust expansion. Moreover, issues stemming from inadequate investment can manifest in an inability to adapt to shifts in the industry landscape or challenges linked to the business's scale. Consequently, the valuation and attractiveness of a Lifestyle Business to potential acquirers is linked to its capacity to mitigate these risks and demonstrate a sustainable future of profitability.
However, this Lifestyle business strategy is very valid, and for many owners is financially rewarding.
Qualities of a Lifestyle Business
- Can generate a good income for those involved.
- Allows founders to pursue passions and interests.
Advantages of a Lifestyle Business
The advantages to starting a Lifestyle Business include being able to control most aspects of the business, having a positive cash flow from early in the business’ growth, and being able to pursue personal goals with profits from the business. Most advantages revolve around a common theme of freedom.
- Time Freedom: having the freedom to choose when to work or when not to work.
- Financial Freedom: having an income level sufficient enough to support a desired lifestyle. Being able to pick up and go if you want.
- Location Freedom: having the ability to choose where to work.
Disadvantages of a Lifestyle Business
- “Always on” – there is usually limited opportunity to delegate to others, or to take time away from the business
- Limited funding sources.
- Difficulty recruiting top talent.
- Low chance of strong equity gains.
Owners of Lifestyle businesses are hopefully focused on generating wealth each year, as there is little equity value to be realized in the future. It is a valid and rewarding environment if planned and executed diligently.
HHMC Global operates within the staffing and recruitment industry on equity transactions, market valuations and business growth advisory. Contact us to discuss further.
