lifestyle business
Holly Magister, CPA
Latest posts by Holly Magister, CPA (see all)

A lifestyle business is created and typically operated by its founder to serve the purpose of sustaining a particular level of income, and no more. Often founded by an individual, lifestyle businesses creates a foundation for enjoying a particular lifestyle, bringing in just enough revenue to meet the owner’s personal needs.

Today, lifestyle businesses are becoming more popular, as individuals strive to find a better work-life balance. The ultimate goal of a lifestyle business is to be lucrative enough to allow the owner the lifestyle he or she desires, without having to sacrifice personal life.

Many of these types of businesses are created on the basis of personal interest, so that the owner not only has complete control over his or her work life balance and income, but also enjoys the time spent working.


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Examples of a lifestyle business

A lifestyle business is often (but not always) a hobby that has become a source of reliable income. Some examples include blogging, photography, writing, teaching, cooking, or training. It’s possible to create a lifestyle business from any hobby or talent, and once that hobby or talent becomes profitable enough to sustain a particular lifestyle, the founder has created a lifestyle business.

The long-term goal is not necessarily to grow the business but rather to maintain the current lifestyle.

How is a lifestyle business different than a startup?

A lifestyle business requires less investment than a startup, is designed to generate profits from day one, and tends to be less risky – however, they also offer little or no growth opportunity or upside. Startups are built from the ground-up, and require time and investment to mature. Over time, a successful startup will grow into a larger, significantly more profitable business, and will offer more upside opportunity than a lifestyle business.

In stark contrast to a lifestyle business, startups generally require a large amount time and attention from its founders, especially in the early years. Often, early stage startups don’t offer the work-life balance that’s common in a lifestyle business.

Another distinction between a startup and a lifestyle business is the notion of value creation. Startups are created with the ultimate intention of creating financial gain for its founders and investors. Whereas the investment of time and resources over time by the startup founders ultimately creates enterprise value.  And that enterprise with its increased value, ultimately may be sold or transferred to new owners.

On the other hand, a lifestyle business rarely is built with the intention of creating enterprise value. Methodologies are not refined or scaled. Few employees are trained in systematic ways, and growing the business is not a priority. For these, and many other reasons, a lifestyle business has little-to-no value to an outside party and in most cases may not be sold.

In simple terms, a startup defines success by generating enough revenue and growth to provide an attractive return to its investors, while a lifestyle business defines success as providing the financial means to support the owner’s family while allowing for an ideal work-life balance.

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  • Hi Holly,
    Of course many people try to turn their hobbies into businesses; the catch is usually that their expenses far exceed their income and eventually they give it up or have the IRS recategorize the business for them. So…how is the Lifestyle Business different?

    • Good morning Amy,
      I agree, if a taxpayer attempts to disguise a hobby as a business enterprise, the IRS may (and likely will) disallow tax losses.
      I believe all businesses, whether they are being built with a goal of going public or being built to serve its owners a nice lifestyle, should be profitable for its founders, shareholders and investors.

  • Martin Lindeskog says:

    Holly: My goal is to develop a lifestyle business over time. Do you have any examples of successful lifestyle businesses at the moment?

    • Good morning Martin,
      Well, you are not alone in your goal to have a lifestyle business!
      Lifestyle businesses normally involve fewer employees, lower overhead and less complexity than traditional businesses. Many also do not require its owner to be physically present in a specific location to work. At least those are my observations.
      A few good examples would be an e-commerce business or website which has been monetized; a consulting practice; digital marketing services including: social media / writing / editing / blogging services; and businesses related to your individual interests or talents.

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