When I was in high school in the mid-60s, the New York City school system had three tracks: academic (for those planning to go to college), commercial (for those planning to become secretaries and bookkeepers), and general (for everyone else; those planning to go into the trades or automotive, or join the military).
I think there are three tracks for startups as well: lifestyle businesses, scalable businesses, and businesses that change the world. Let me explain what these are and why it’s important to know this at the outset:
Lifestyle businesses comprise the vast majority of businesses in the U.S. (The term was coined in 1987 by William Wetzel, a director emeritus of the Center for Venture Research at the University of New Hampshire.) Lifestyle businesses are set up and run to essentially provide a paycheck for owners and enable them to support their families. They are the mom-and-pop dry cleaners, pizzerias, landscapers, and boutiques; consultants, freelancers, and independent contractors; and most other closely-held businesses. Sure, these businesses hope to grow from year to year, but their goal is primarily the owners’ own support; they don’t have large expectations.
Many owners of lifestyle businesses ‘DIY’ for most or all of their business tasks, including marketing, HR, and government compliance. They want to know what they need to know so they can run their business well and stay out of trouble.
Books I like:
- Become Your Own Boss in 12 Months, 2nd Ed., by Melinda Emerson
- E-Myth Revisited by Michael Gerber
My book, J.K. Lasser’s Small Business Taxes 2015, is also suitable for business owners who want to know how to factor tax results into their business planning.
These are companies that can grow, often duplicating themselves for multiple locations or becoming franchises. They’re also referred to as growth businesses. Can you say Subway? For these businesses, the sky’s the limit; some may even go public and provide tremendous wealth for owners. They don’t necessarily have a core idea that’s radical; they simply do something better than their competitors.
Owners of scalable businesses want to know how to grow dramatically. Owners must learn to delegate responsibilities in order to achieve their goals.
Books I like:
- Let Go to Grow by Doug and Polly White
- Grow to Greatness: How to Build a World Class Franchise System Faster by Steve Olson
These are companies that are game changers, such as Apple, Facebook, and Uber. Ultimately, if they succeed, they become big businesses (even though all obviously start out as small businesses).
Owners of these businesses need to understand venture capital, which is essential for their growth.
Books I like:
- The Creator’s Code by Amy Wilkinson (pub. date is February 17, 2015)
- Venture Deals, 2nd Ed., by Brad Feld
Like students in my high school, those on one track could pursue another life course than the one dictated by their track (e.g., many college graduates in the 60s went to Katherine Gibbs for job skills; many of those who went into the military ultimately finished college).
A lifestyle business could expand and become scalable (my cousins transformed their parents’ local art supply store into a national retail and online art supply company). But an owner who knows his or her track can pursue the tools and information to help with success.