Lifestyle Businesses

 As a society, we should make room for the little, delightful things.

As a society, we should make room for the little, delightful things.

As of today, if I were to start a new business again I'll make sure that it doesn’t scale. And by that I don’t mean it in a Paul Graham’s way. I mean it in a it’s ok if it always stays the same size way.

Don’t get me wrong, I have deep admiration for businesses that are cleverly reaping the scale of software and the Internet, it’s just that I have the feeling that I’m not up for the ride, again.

When I started iomando, I did it driven by the joy of building great products and putting them in the hands of people. That's why I founded the company, because I deeply cared about what I was building. It meant the world to me.

I didn’t plan for what happened afterwards. My scope was extremely limited to the product side and one could argue that I had no idea of what I was doing, because it was true. The implications of committing to a venture backed business that scales are, literally, bigger than you. And while I don't regret any step of the way, it is true that nobody warned us of where we were headed.

Without even noticing, I realized that we were growing. We raised money to hire people, expand the business and always stay one step in front of our competitors. In less than a year we had a radically different business. Then something curious happened: it didn’t happen all at once, but I felt gently pushed away from the product and unwittingly closer to the business side.

My areas of concern dramatically changed from the craftsmanship, the actual building of the product, to endless discussions about growth and revenue. Despite I deeply value growth and revenue, because they are all tangentially connected to the product, my point is that I felt disconnected from what I loved the most without even being asked for it.

The common wisdom says that the founder, the one with the vision and the commitment to make it happen, is the one who has to decidedly lead the company. Which makes sense. My working theory, though, is that this is a direct consequence of scale.

 Uber marketing material - like most startups, growth businesses are intentionally designed to reap the benefits of scale.

Uber marketing material - like most startups, growth businesses are intentionally designed to reap the benefits of scale.

If we are over simplistic we can argue that there two kinds of businesses, the ones that scale and the ones that don’t. Obviously all the businesses are able to grow, but note the word scale in the sentence. Scale is how you go from serving 1, 10, 100...  and there are some businesses their own nature implies that they have to scale in order to succeed.

Businesses That Don't Scale

A restaurant[1] is the paradigm for a business that doesn’t have to scale[2]. You have settled for a location for your shop. You have a fixed amount of square meters in your shop. There you can fit a limited amount of desks. Therefore, there’s a physical limitation on the number of people you can serve every day. Precisely, this physical limitation is what handicaps the revenue, but it is also the driving force that allows you to focus exclusively on the product.

The core experience is isolated from the business development. If you had already done the math and planned for your margins, set prices accordingly etc. Then the health of the business will only depend on you delivering a great core experience. If you deeply care about the “product” you will be able to get customers in front the door and make a decent living out of it[3].

This idea of simplicity, but at the same time, never ending refining, I found fascinating. In lifestyle businesses, the more things you perfect, the more things stay the same.

The good news for lifestyle businesses[4] is that for the most part, the job to be done is already known. Because you are not the first to do it, the problem you are solving for is well understood. I'm not saying that there's no room for innovation in lifestyle businesses, it's just that maybe the core experience has already been mastered by thousands of others before you.

 In a restaurant, the physical limitation is what handicaps the revenue, but it is also the driving force that allows you to focus exclusively on the product.

In a restaurant, the physical limitation is what handicaps the revenue, but it is also the driving force that allows you to focus exclusively on the product.

The bad news, though, is that competition is huge and differentiation is hard. But to me, this is yet another reason why the "core experience" matters the most in lifestyle businesses. We are used to hear the the best product doesn't always win. I'd argue that within the lifestyle business realm, the best product does win. Because few market dynamics play out in there, therefore, the single and most important power you have to win over your market is product.

Businesses That Scale

From a societal point of view, though, we tend to reward the people behind the businesses that get bigger. Growth businesses, like most startups, are intentionally designed to reap the benefits of scale. Software and the Internet let you scale almost for free, because creating additional units of capacity comes at no marginal cost. Because of this underlying principle, they are born to leverage these capabilities and grow fast. If they don’t, another will do it, and when you are playing growth, the market dynamics are defined by winner-takes-all environments. 

As a society we tend to reward the people behind growth business, and they absolutely deserve it. At the end of the day, they are the ones that are pushing humanity forward, making everybody's lives easier because of their creations. 

Don’t misunderstand me, by any means I’m saying that these companies don’t place importance on the product side. On the contrary, most of them are product driven companies, that emphasize product above all. But as a founder of such a company, if you want to succeed, your focus must be placed on growth rather than craftsmanship.

Unlike lifestyle businesses, the customer experience is directly affected, and thus it gets better, by the sole fact that more people are using it. When more usage of the product by any user increases the product’s value for other users, your only motivation should be placed on growth.

OK, so what?

I'm not saying that one is better than the other, I'm just stating the obvious. It's all about personal motivations and incentives.

And I don't know why, but I deeply enjoy the sensation of closeness that lifestyle businesses radiate. It might be the craftsmanship, that you can control from end to end, that you can see, you can literally touch. This idea of simplicity, but at the same time, never ending refining, I found it fascinating. The more things you perfect, the more things stay the same.

On the other hand, in a growth business, expectations outgrow you, the scope is almost infinite and the ambition of the project is insatiable. You'll feel like you are never doing enough, this is an exhausting feeling, I can tell.

As a society we tend to reward the people behind growth business, and they absolutely deserve it. At the end of the day, they are the ones that are pushing humanity forward, making everybody's lives easier because of their creations. 

But we should also make room for the little, delightful things. We should not be worried about the size of our passion, what matters is being passionate about something and stick to it. For this reason, if some day I found myself in the situation of starting a new venture, I'll make sure that it doesn't scale, so I can primarily focus on delivering the best possible experience.


[1] I just went with a restaurant for simplicity, but the same apply to other businesses as well.

[2] Of course a restaurant can grow. This is why we have restaurant chains all over the place. My point is that the restaurant in order to thrive, what makes it unique and valuable, is not tied to scalability issues. By its own nature, the restaurant doesn't benefit from scale (except for better deals with suppliers I suppose) in a way that their customers would get direct value from it.

[3] The "human" thing to do if the business is going well is to invest the benefits into a second restaurant, leveraging the brand you have created for yourself. But this is, again, the first step to decouple yourself from the core experience.

[4] For the sake of the argument, let's call "lifestyle business" the ones that don't scale, and "growth business" the ones that do.