[Editor's Note: In the last Issues for Growth, "Which do you have - a Lifestyle Business or an Equity Value Business"
we outlined the major differences between a lifestyle business and an
equity value business and why it was important to be clear about the
"purpose" or intent of your business because the way a business owners approaches building a business must be very different depending on how you will define success.
A number of you who have heard me speak about this issue asked me to
publish the matrix of attributes comparing a lifestyle vs equity value
business. So, here it is below. I hope you find it helpful. -
DPM]
Lifestyle Vs Equity Value Attributes Matrix
Attribute
|
Lifestyle
|
Equity Value
|
Focus
|
Short-term Lifestyle; Run for Owner's compensation
|
Long-term Equity Value; sacrifice short -term comp
|
| Pace |
Owner's pace
|
Dictated by desired outcome
|
Management style
|
Command & Control; Centralized
|
Decentralized; individual decision-making
|
Owner Management
|
Can tend to be viewed as inconsistent, capricious and changing
|
Consistent with overall strategy and core values
|
Expense Control/ Spending decisions
|
Tightly controlled at top
|
Managed through approved dept budgets and policies
|
Outside Capital
|
Debt; Investors not interested; Growth may be restricted due to availability of capital
|
Equity investors
|
Empowerment
|
Limited; Loyalty Rewarded; Small circle of trust
|
Expansive; Performance rewarded; Systems to enhance empowerment
|
Objectives
|
May change at owner whim
|
Clearly outlined; transparent
|
Employee Equity
|
No
|
Yes; equity awarded
|
Career Development
|
Limited upside
|
Significant upside
|
Employee Capability
|
"Steady Eddies" Thrive here
|
High performers thrive here
|
Sale of Business
|
Usually only to Employees or Family
|
To third-party Buyers (Strategic or Financial)
|
