Lifestyle Small Business
Some people prefer lifestyle to money, and choose the vehicle of a small business to get them there. For example, someone might want to live in a picturesque location and choose a venture that permits them this lifestyle choice, such as owning and operating a small hotel in a hamlet near the ocean. Essentially, the New Venture Template illustrates the venture characteristics of such businesses.
As shown, the prototype Lifestyle small business depends upon Purchase Frequency and Product Longevity (e.g. the need for a bed and breakfast in a scenic location) for its viability.
As also shown, some sacrifices are required in all other areas, trading money for lifestyle. Especially important to the Lifestyle small business, however, is the opportunity to vary the level of Innovation and the level of Imitability.
Figure 1: "B/K" Diagram
ADVICE:
If you want a Lifestyle small business that produces a bit of extra money too, then it may pay to give attention to Innovation and Imitability in the product/ service. Protectable innovations are the sure way to distinguish your business, and justify higher Volumes, better Margins, etc.
Figure 2: Target "Bulls-eye" Diagram
Venture Example:
This case was prepared by Team Lynx as an entrepreneurship project at the University of Victoria. It is designed to illustrate the venture archetypes used in the New Venture Template through story and case description. Though the case is based on a true story and actual businesses, its name and likeness has been altered. The case is quite brief, so you should be able to read it quickly
Michelle Rowen had a vision during a trip to the San Juan Islands in Washington State when she was 17 years old. She pictured herself living right by the ocean, operating a first-class bed and breakfast, with an atmosphere that drew people back and left them with wonderful memories of their visit. Michelle pictured an elegant house in Friday Harbor, with several beautifully decorated rooms, exquisite meals, and fresh-cut flowers everywhere. Romantic couples would come to Michelle's to get engaged, to get away from the hustle of their daily lives, and to enjoy the coast on their own terms in luxury and comfort beyond their expectations.
Her frequent weekend departures to the island from Seattle helped develop contacts in the industry, and magnified the vision in her mind. She researched prominent bed and breakfasts in the region adding things she liked to her vision, and noting areas she would rather avoid. Everything was to be first class, fulfilling her vision for creating a lifestyle that became ever more vivid with each fact-finding trip. She would name the establishment 'Michelle's' as and added final touch of class.
Michelle completed her university degree and left Seattle in to take a job in Chicago. She tried to save money for start-up capital, but her job couldn't provide her with enough cash after all her expenses to save for the business. She estimated that it would take $750,000 to purchase the house, convert, furnish, and open the doors. After several disappointments that prevented her from putting away any seed capital, she decided to move back to Seattle and continue pursuing her dream. Recognizing her lack of business experience, she enrolled in the MBA program at the university. Whenever appropriate, she took the opportunity to work on her business. Marketing, finance, and co-op assignments were centered on the Bed and Breakfast industry and the development of her business plan.
To fulfill her vision, she concluded that rooms would have to go for a premium. She estimated that to ensure adequate cash flow, and to allow her the lifestyle she envisioned for herself, she would need to charge somewhere between $250 and $400 per night. Michelle's would not take in children. She had a very specific clientele in mind, and every decision would be subverted to providing an extraordinarily comfortable, romantic experience. This focus was due less to market forces than to her own personal preferences.
Michelle planned to market her Bed and Breakfast through channels that matched the commitment and customer service she envisioned for her venture. Like everything else in her business, the promotional message and the vehicles she used to deliver it would have to match her high standards. However, she anticipated that her business would rely primarily upon word of mouth to grow quickly, a prospect that suited her plans just fine.
Michelle worked for several years in a number of Bed and Breakfasts while pursuing her MBA. During that time she decided that she would not take the venture capital route; having someone else with a significant stake in her vision might pollute the end product. Michelle had the experience, training, and vision, and she wasn't interested in having to answer to investors. A large mortgage and debt financing were also less-than-ideal alternatives. Everything about her Bed and Breakfast would be well timed, and completed to her satisfaction. Significant outside financing just wasn't in the big picture. She wasn't interested in anything that would compromise her dream.
Upon completing her MBA, Michelle took an administration position in Seattle. The vision of Michelle's Bed and Breakfast remained prominent in her mind. She kept her network of contacts in the industry, and remained up to date on developments in the area. She had been presented with a number of opportunities to enter the business, but had turned them down due to financial constraints, and her own personal objectives for the business. Michelle felt that the best way to enter the industry would be to redevelop an existing bed and breakfast, rather than going to the expense and trouble of constructing an entirely new building, or renovating an existing house.
The ideal opportunity came when an older couple, who owned a Bed and Breakfast where Michelle had worked for two years, had a major health crisis necessitating an immediate move to Arizona. Facing either a distress sale, or eventual foreclosure, they contacted Michelle, knowing of her long-time dream. Michelle was able to negotiate attractive terms, and accepted financial help from family in order to finance renovations--in exchange for the occasional stay, or the periodic entertaining of clients (at cost).
Financial analyses and her own personal experience had shown her that a viable operation required a minimum number of 10 rooms per night. Volume would have to be capped at 25 though, in the interests of service and quality. Insurance was a primary consideration. Complete coverage would be taken to fully-protect her business. This personal stance added to the costs, but served to protect her interests and lifestyle over the long term.
