Wednesday, March 6, 2013

The lifestyle entrepreneurs

These entrepreneurs are often known well in their local communities. They are normally recognised for their conspicuous consumption rather than their business acumen. They normally drive fast or flashy cars and have a range of “toys” ranging from motorbikes to cars, to beach houses and more.

They often have a man cave where they can hang out and act like men. It is an interesting observation that you find that most of the ostentatious entrepreneurs are often men. This should not surprise, as being an entrepreneur requires a big strong ego to be able to cope with the rigours of entrepreneurship.

So what is wrong with owning all the “toys”? Nothing really! There must be some reward for working hard as an entrepreneur and accepting and managing the attendant risk. The point of entrepreneurship is to create wealth, so buying real assets is completely aligned. While many of the “toys” are not really assets in the truest sense of the word, there is nothing inherently wrong in doing so.

The problem that arises with lifestyle entrepreneurs is that they often start to shorten their working week and before you know it they are only working 3 days a week.  Invariably they have hobbies, for example fishing, and that becomes their driving force. They start to run the business merely to fund their hobbies and the “toys”. They stop growing their business in order to enjoy the lifestyle, and manage the business accordingly.
This lifestyle management invariably puts the business on hold, and the world marches on by. The problem arises when the entrepreneur wants to sell because they want to retire, or they suddenly find the business is in trouble. What does the entrepreneur have to offer?  A stagnant business that shows no real growth after accounting for inflation!  A business that is no longer leading edge! A business that is worth nothing!! Quite often they will provide a long list of the income that they “steal” out of the business. The cash sales is an obvious one. But who is going to believe them?

So the lifestyle entrepreneur often presents as an excellent role model, especially once they are established and the lifestyle is established. However, later in life they often present as desperate people who have a bad business, no real pension, and no opportunities on the horizon, and the fear in their eyes makes them appear oh so pitiful as they confront their future.

Remember that I am generalising and you may well be someone, or know someone who has been able to avoid the traps and still be a lifestyle entrepreneur. However, I have also seen many people facing a very dark future.

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