Congratulations, you’re an Entrepreneur! Is your business strategy working for you?
- Xartis Wealth Advisors
- Apr 8
- 4 min read
Part 1 – Lifestyle v Enterprise
Author: Jeff Cismoski CFP®, CPWA®, CEPA® | April 8th, 2025
Xartis Wealth Advisors
Embarking on the entrepreneurial journey is an exciting adventure, filled with highs and lows, learning experiences, growth, and challenges along the way. Here’s a rundown of the key stages you'll encounter:
Ideation: This is the creative phase where you brainstorm and come up with your innovative business idea. Think of this as the spark that ignites your entrepreneurial spirit.
Research and Planning: Once you have your idea, it's time to dive into research. Analyze the market, understand your competition, and identify your target audience. Craft a solid business plan that outlines your strategy, goals, and financial projections.
Funding: With your plan in hand, you'll need to secure funding. Various methods could be utilized, personal savings, loans, grants, investments from venture capitalists or angel investors. It's about finding the resources to turn your idea into reality.
Execution: This is the action phase where you launch your business. Build your product or service, set up your operations, and start marketing to attract customers. It's all about bringing your vision to life.
Growth and Scaling: As your business gains traction, focus on scaling operations to meet growing demand. This might involve expanding your team, increasing production, or entering new markets.
Maturity: At this stage, your business is well-established. Continue to innovate, manage resources efficiently, and maintain a competitive edge to ensure long-term success.
Exit Strategy: Eventually, you'll need to think about an exit strategy. This could involve selling your business, merging with another company, or passing it on to a successor. Plan for a smooth transition to maximize the return on your investment.
Every entrepreneur's journey is unique, but these stages provide a roadmap to guide you through the exciting path of building and growing a successful business.
When reflecting on the stages of the entrepreneurial journey, it's clear that Stages 5-7 are in constant iteration. Through my own experiences, as well as those I’ve worked with, an immensely beneficial mindset to ground yourself in is this: Is this a Lifestyle business or an Enterprise business? Being clear on that one simple idea will be your “compass heading” throughout your path forward for your business.
I have worked with many individuals who focused on both types of businesses, and while both yield productive outcomes for the owner, it is unequivocally true that a business cannot be both Lifestyle and Enterprise.
What Type of Business Do I Have?
The idea of Lifestyle businesses always brings me back to a client situation that epitomized the value and challenges associated with them. Let me introduce you to Ted, a client who was a quintessential example of a successful Lifestyle business owner.
Ted ran a manufacturing business that had been flourishing for quite some time. He had grown the business to employ over 15 people, generating substantial revenue. Ted loved interacting with customers and being the face of his company. He enjoyed the significant salary and profits that his business afforded him, leading to a lifestyle commensurate with such wealth.
When we began working together, Ted aspired to eventually transition out of his business, but he saw this as something to handle "when he was ready." He continued running his business successfully, without making any immediate changes.
Fast forward a few years, and Ted was ready. He had grown tired of the rat race and wanted to monetize his efforts by selling the business. However, being financially successful doesn't mean a business is transaction-ready. Ted faced challenges in attracting buyers and maximizing the value of his business because it was still a Lifestyle business.
Characteristics of Lifestyle Businesses
Lifestyle businesses have common characteristics:
The owner is the sole or significant source of business/revenue.
The financials of the business are managed to maintain the business, with all free cash flow supporting the owner and family.
Personal/family members may benefit from the business, further detracting from free cash flow.
Very little diversification away from the owner’s involvement is considered or encouraged.
The owner’s lifestyle often adjusts to match the income supporting the family, resulting in few alternative sources of wealth outside the business.
While there's nothing wrong with running a business this way, it alters the risk spectrum when trying to sell the business for value. Potential buyers may lack confidence in the business's success without the owner, and the owner might not have the flexibility to wait for the right buyer or achieve the desired lifestyle post-sale.
Ted’s Transition Challenges
When it came time for Ted to transition his company, he was still the primary producer and heavily involved in the quoting process. This limited his pool of potential buyers to those already in his space who didn’t need him as a sales generator or those willing to take the risk of growing into the new 'Ted' but requiring Ted to stay on for multiple years.
Additionally, Ted's financial systems were outdated. They served his basic needs and tax reporting well but did little to position the company for efficient financial assessment by potential buyers.
These challenges are common for Lifestyle business owners. Transitioning such businesses is more difficult, they tend to have lower valuations, and the lead time to sell is often longer.
The Enterprise Business Mindset
On the other hand, an Enterprise business, even as a start-up where the owner is the sole source of everything, operates with a different mindset. The goal is to grow the business through various stages into an Enterprise business, rather than just something to pay the bills.
Enterprise businesses in general will have more future value with potentially less profitability in the short term – think investment spending v driving profits to the owner. As the Enterprise business matures, more profit may be free to be harvested and increased business value will result.
If you’d like to discuss more about how to best position your business for future value or find ways to harvest profitability to bring more flexibility to your financial situation outside of your business, reach me at jcismoski@xartiswealth.com and I’m happy to find time to meet.
Jeff Cismoski, Principal and Founder of Xartis Wealth Advisory is more than a financial expert — he's a seasoned business leader with a diverse background that uniquely positions him to guide business owners toward realizing their financial goals and strategizing their Path Forward.
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