Is Yours a Lifestyle Business or Professionally Managed?

Written by Mike Marks on Tuesday, 25 August 2015. Posted in Business Strategy, Distribution

Many distributors have faced or are facing the challenge of deciding whether they want to transition from the classic lifestyle business management that evolved from the entrepreneurial roots of their companies to professional management.

How can you tell a lifestyle business from a professionally managed one?

Size is one factor, but it’s not the only one. Here are some of the other indicators:

  • In a lifestyle business most decision-making is vertical. Choices move up the organization for a CEO decision. In a professionally managed firm, most decision-making is made horizontally by CEO direct reports.
  • In a lifestyle business, the CEO is the final decision-maker. In a professionally managed firm, a board of directors has real responsibility and oversight, even if the firm is 100% owned by the CEO-entrepreneur.
  • In a lifestyle business, the CEO does most of the worrying about risks, the future, and how to grow the business. In a professionally managed business, the load is spread across and carried by the CEO’s direct reports.
  • In a lifestyle business, most growth is captured by reacting quickly and responsively to new opportunities. In a professionally managed business, most growth is intentional. It was researched, investments were made, and resources were applied to achieve the plan.
  • In a lifestyle business, staff and other expenses are only added when they become critical and the business can’t move forward without them. In a professionally managed business, some expenses are made in advance to prepare the business for growth.
  • In a lifestyle business there is a built-in bias to this is how we’ve always done it. In a professionally managed business, innovation and experimentation is budgeted, often by functional department rather than the CEO deciding.

Of course, these characteristics are gradations on a wide scale. Read more on Crossing the Chasm between lifestyle and professional management, as well as why it’s not always necessary, in this article from IRCG.

About the Author

Mike Marks

Mike Marks

Mike Marks co-founded IRCG in April 1987. He began his consulting practice after working in distribution management for more than 20 years. Over the years, his narrow focus in B2B channel-driven markets has created an extensive number of deep executive relationships within virtually every business vertical in construction, industrial, OEM, agricultural, and healthcare.

Mike has led project teams that improve market access by aligning resources to growth opportunities serving manufacturers, dealers, and distributors. Clients have ranged from small privately owned firms to many of the industry’s market share leaders. Ownership structures have included owner-operators, private equity, ESOPs, and publically traded firms. Mike is proud of the teams work and the confidence clients have shown with additional project work.

He has written extensively, and is frequently quoted on many industry issues. He has substantial board experience on both public and private distribution firms. His contributions to the field include serving multiple terms as a Research Fellow with the National Association of Wholesaler-Distributors, permanent faculty at Purdue University’s University of Industrial Distribution, eight years as Graduate Adjunct Faculty in the Industrial Distribution Program at Texas A & M University, and rendering several precedent-setting expert opinions in contract disputes between manufacturers and distributors.

Prior to forming IRCG, Mike held the position of Executive Vice President at Lex Electronics, an $800 million vertically integrated electronics distributor in Stamford, CT. Mike’s path to management in his early career was through increasing responsibilities in sales and sales management. He also completed a tour of duty as a manufacturer’s representative.

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