A lifestyle business, like most other types of business, is driven by profit. However what makes a lifestyle business different from other business model types, is that its founders are predominantly concerned with sustaining their current level of income, without much thought to future growth or potential saleability. Because of this, not all business models can be applied to, and work well for, a lifestyle company. However there is one method which has such far reaching applications that it can often provide substantial benefits for lifestyle business owners.
What Is the Business Scorecard Model?
Metric-Driven Incentives are those aspects of a business which relate to finances. Most MDIs promise to improve financial performance by either improving profits or reducing costs and, up until relatively recently, it was a given that these goals could only be achieved by making sacrifices in other areas, e.g. staff or product quality. To evolve past this, Robert Kaplan and David Norton introduced the concept of the Balanced Scorecard.
The Balanced Scorecard is a method of translating strategy into practice. By taking a holistic view of a company and co-ordinating MDIs so that efficiency is experienced across the entire organisation, financial performance can be improved without sacrificing efficiency or quality. It’s implemented firstly by analysing four areas in a business:
- Learning and Development
- Internal Business Processes
After analysis has determined deficient areas, metrics can be set up which adhere to the SMART template. Measures can then be implemented which will allow the company to realise its strategic objectives in accordance with these metrics, without the need to make sacrifices in individual departments. Unlike the early metric based incentives, the Business Scorecard is not driven by purely financial concerns. Over the years, the Balanced Scorecard model has been rethought and redesigned to fit any number of needs, but remains – at its core – a unified theory.
Benefits of the Business Scorecard for Lifestyle Businesses
Because a lifestyle business are not designed for growth, the Business Scorecard model is not immediately applicable. But because the Business Scorecard can be adapted to suit a variety of purposes, there are some merits to applying this model to a lifestyle business.
For example, maintaining profit without sacrificing individual benefits to staff is of vital importance to a lifestyle business owner, who often has a personal involvement with the company and therefore needs to be able to perpetuate a sustainable model which fits in with his or her personal goals. In addition, because the Business Scorecard is not purely driven by financial metrics, it can provide substantial value to lifestyle business owners who have no interest in growing the financial potential of their company. And since many lifestyle companies are vision-oriented and owned by individuals, or families, the cohesively strategic nature of the Business Scorecard fits well with this type.
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