By Joshua D. Freeman
How you design your business will determine your experience doing business
Lifestyle Design; Control vs. Speed
Tim Ferriss, the author of 4 Hour Work Week fame, introduced me to the concept of "lifestyle design" as it relates to business planning. This concept drastically changed the way I thought about the design of my law firm and the businesses I have started. I began to think about the effect the type, structure, and plan of a business has on the life of the founder.
You can choose a lifestyle of control and autonomy or one of rapid growth accompanied by enormous risk and return. So before getting too far down the road of planning your business, I suggest you think carefully about what you value and what experience you are looking for. Does control and autonomy appeal to you, or are you looking for rapid growth and growing obligations to investors and stakeholders?
Control and Bootstrapping
If control and autonomy are your cup of tea, think closely about your product, your marketing plan, your sales channels, and growth benchmarks and plan how those can be reached without using outside investors and leverage.
Bootstrapping can require an enormous amount of patience, and work, along with suffering through frustrations of slow and methodical growth. It may take much longer to reach the same revenues as Investor-backed companies, but founders can also mitigate risk and pivot much more nimbly. These founders are ultimately responsible to themselves and their employees—not to a growing group of impatient investors wanting for an exit to free up their capital and move on to the next investment.
Rapid Growth and VC Financing
If the rush of a rapid growth and high-risk-high-return lifestyle is what you crave, get working on your pitch deck, assemble a team of co-founders and advisors who have raised funds an who have VC and investor relationships, understand your burn rate and growth benchmarks, and plan your exit.
The huge numbers and press that come with VC-backed companies can blind us from the lifestyle that results for the founders. While VC-backed companies receive a lot of hype and can rise the quickest from obscurity, they also tend to be those who fall the furthest the fastest. Once a founder signs on the dotted line, his destiny is determined by the desired exit of the VC or Angel with whom he signed, and so on through the next rounds investors and funding, until either the company's boom or bust. One of the big advantages with VC type funding, there can be mentorship opportunities and valuable networks that can only be tapped through VC and Angel type of investors.
I’m not trying to suggest that one is better than the other, but only that it is important to understand which you are and what you want to be. To be successful at either one requires different execution plans.
Other Business Experience Considerations
There are other considerations of business experience design that will impact the legal structuring beyond your funding strategy. Some of these considerations include the following:
Is it important to you to be location independent? Do you want to be able to work anywhere, and at any time?
Do you want to have a close-knit team environment that works in the same space, or do you want to work as part of a remote team? Do you need a physical office presence, or can you utilize a virtual office and meeting room?
Are you going to be product or service provider? (This decision will make an impact on your scalability and the size of a team you will need to scale)
Legal Implication of Experience Decision
Ultimately, the business and funding model you choose and how you plan your business operations will determine your experience and lifestyle as a founder. How you answer these questions will have significant implications on the legal planning of your entity. These answers will deeply influence, if not determine, the type of entity —LLC or corporation—and the type of taxation—S-corp, C-corp, or partnership— you choose. It will also inform and influence what types of contracts and capital structuring you will need for your company.