Be a Rockstar, Not a Record Label: Build an Unscalable Business

A common piece of advice given to entrepreneurs is creating scalability. In the widely published book, Rich Dad, Poor Dad, Robert Kiyosaki recommends building a business that can run without you. This way, your assets generate money without you having to work. You can insert a fantasy about earning millions of dollars while you sip margaritas on a tropical beach.

I disagree. I think there are considerable advantages in creating a business that can’t run without you. It provides a competitive advantage that can’t be copied: you.

ScottHYoung.com, StevePavlina.com, ChrisGuillebeau.com

Both my birth certificate and this website address share the same name. That wasn’t a strategic move on my part. The rush to get started blogging overrode any branding decisions on my part.

After starting, I soon regretted my eponymous website title. Starting a website with my own name seemed to violate the spirit of scalability. If I tied my name to a website, then I would always be tied to this business. It would never become the fully automated, revenue generating, margarita-enabling asset all those entrepreneurship books had suggested was best.

Today, my views have completely reversed. Far from being a handicap, I think my unavoidable involvement in this website is one of its greatest strengths. It may limit me from infinite limits of scalability, but it has made being a full-time entrepreneur far easier to obtain.

The advantage doesn’t come from the website address. Leo Babauta is intrinsically tied to the success of Zen Habits, even though his blog doesn’t share his name. By tying himself to his business, all of his content is delivered with his voice, something no other website can do.

The Record Label Business Model

A record label has a traditionally large business model. It makes money from selling music created by other artists. The advantage of a record label business model is scale. There is no theoretical limit to the capacity of a record label. It can always sign more artists, hire more staff and sell more albums.

If you started a record label, it could run without you. That’s assuming you have hired the right talent to take your place, of course. But, as the creator of a record label there isn’t anything intrinsic you provide to your end customers that would be immediately noticed by your absence. A record label is the kind of business model suggested by Kiyosaki and other authors.

The Rockstar Business Model

A rockstar (or any artist for that matter) has a very different business model. She makes money from selling her music. Although she has scale in distributing her albums, she doesn’t have scale in producing them. She still has to write the songs and create the music herself.

A rockstar can never be completely separate from the business. You could get other artists to perform under your name. Robert Ludlum still has books being released under his name even though he died in 2001. But, even if you do, something is missing from the business when you remove the rockstar.

The main advantage of a rockstar business model is you have a monopoly on a key resource: you. When production becomes unscalable, that also means there is reduced competition. Competitors can only mimic you, they can never fully replace you. I can try to write articles like Leo, but I can never replace Zen Habits.

This is why rockstar entrepreneurs can scoff at the notion of competition. It’s because they have a monopoly on their creative voice. Unlike a record label business model, there is a core part of their business that can never be reproduced.

Rockstars Create Their Own Labels, Big Businesses Become Rockstars

I’m drawing a somewhat artificial line between big business and artists. Robert Kiyosaki created a business franchise based on his books that looks more like the work of a label than a rockstar. Similarly, big companies like Apple are trying to create a unique brand that can’t be replicated.

But at some point these efforts break down. I’d rather read a book written by Robert Ludlum than some unknown author using his storyline formulas. And companies like Apple don’t have a true monopoly on their voice when their human talent can be bought by another company.

Capitalism likes to centralize. So unless you have some distinction that can’t be merged into a conglomerate, its harder to compete against giant corporations with vast distribution networks and economies of scale. Rockstar businesses avoid some of the centralizing logic of capitalism by having such a distinction.

Know Why You Want to Start a Business

In retrospect, I’m glad I created a website that expresses my ideas, rather than a revenue-generating asset which can easily swap writers. First, it has made it easier for me to do this full time. Second, it has allowed me to create freely and connect more directly with readers, something I enjoy.

My goals for starting a business is to create an outlet to share my ideas without the intermediaries of a boss or freelance clients, and to earn an income doing that. Creating a lifestyle business that fits those goals means it will be harder for me to turn this into a massive revenue generator that is independent from myself.

Most people understand the difference between being a stock broker and a school teacher. One has security and time for family. The other has a huge income.

But I think fewer people are aware that the same approach applies to the type of business you plan on starting. If your goals don’t match the model you are using, you may make success harder for yourself.