So you want to start a creative business in order to start making money by doing what you love. You want to become an artrepreneur! But what kind of company do you want to create? The topic of growth and lifestyle companies has been critical in this blog, so let’s dive deeper into what each is and which is right for you.
Growth companies vs. Lifestyle companies?
Think: Disney vs. Your favorite local business
Think about how a company like Disney differs from a locally-based, small company. Their target market is bigger, operations are geographically spread, and costs to run the company are huge. The more people who watch their movies and go to their theme parks, the more money they make. However, a common misperception about these types of growth companies is that they are always super profitable, which isn’t the case. As a smaller company, your favorite local business has less costs to cover and more direct access to the local market. Which one is more profitable depends on how much revenue each business brings in, in comparison to the amount of money they spend.
For example: A growth company might make $100 million dollars in 2019, but perhaps they spent $150 million in the same year. This growth company is not profitable. On the other hand, a lifestyle company might make $500k dollars in 2019, and only spend $50k in the same year. This lifestyle company is wildly profitable.
In deciding if you should pursue a growth company or a lifestyle company, scalability is the most important consideration. Scalability refers to how big and widespread your company can potentially grow. If you’re a painter who provides super-large, high end murals to wealthy customers, you might only have 10 clients a year. And since you are your product, meaning that its your skillful art that is being paid for, you can’t hire just anyone to complete the client’s request. Your goal here isn’t scalability, its to make more money with every client as time progresses. Maybe you start with charging $10k for a mural, then $20k, then 40k, and so on until one day you are making $500k per mural. That’s the ideal kind of growth for a lifestyle company.
A growth company, on the other hand, often includes a product of some sort that can be duplicated and reproduced as many times as the number of customers wanting it. Think about Disney again. The more times people watch one of their movies, the more money they make. Or think about authors. The more copies that are sold of one book, the more money they and their partners make. These are examples of businesses that become ultra-successful based on scalability.
For example: If you’re starting a comic book company, your growth is going to come from numbers: how many copies or subscriptions can you sell? Unless you create custom comic books as gifts for hundreds of dollars… In that case, you want to scale up your paycheck, like the muralist we just discussed–you want to pursue a lifestyle company. Not surprisingly, this creative business is meant to support you, and your lifestyle.
NOTE: It’s important to understand that lifestyle companies can become growth companies in the future. In fact, you should always be thinking about opportunities to create a scalable aspect of your business. By doing this, your business can make money that’s not directly related to your amount of working hours. Now, your company can work even while you don’t, and can potentially transform into growth company.
For example: Imagine if, in addition to high-end custom murals, the muralist decided to create mural duplicates that could be applied to walls via adhesive by the customers themselves. The muralist could create 5 designs and then try to sell as many as possible via an online store or offline retailer. The more duplicates the muralist sells, the more money they make. This would be an interesting way to add scalability to their creative business.
So why is this so important? Because it’s going to set your expectations and help you understand how to create the appropriate business model for your future creative business.
Start thinking about lifestyle and growth companies, and try to decide which would be best for you and your artrepreneurial vision!
P.S. Follow Artrepreneurship – where ‘art’ and ‘entrepreneurship’ meet to make your artrepreneurial journey easier!