> 10 houses per shop
Broadly speaking, that sounds super low, and it also doesn't echo the business density I typically observe. I think even for lifestyle businesses you need hundreds of homes actively using your services, maybe thousands total. Suppose you really could live off just 10 houses; you'd need something like $2400/yr/person in revenue at 100% cash operating margins to turn it into a reasonable income (which, given your risk exposure via rent, capital, etc, I don't think most people would start a business with the intent of the owner making less than $60k/yr in income, perhaps scaled down in much smaller, cheaper towns). There aren't many kinds of businesses where I spend that much money, and those definitely don't have anywhere near 100% margins. Just right off the bat, 100 or 1000 feels closer to correct than 10.
Most small businesses have fairly low margins. Even when you factor the cost of owner labor at zero (common for "lifestyle" businesses -- splitting it out this way so that we can look at COGS and then compare to a single family's income), you might see 10-20% cash operating margins for various shops, cafes, restaurants, 5-10% at groceries and pharmacies, 20-40% at bike shops and gyms, and 50%+ at barbers (details, especially for higher-margin industries like barbershops, depend a lot on the exact terms of rent and local tax laws, but this is a halfway decent ballpark).
Let's run some numbers.
The average person waits 2 months between hair cuts. Let's assume a moderately expensive cut at $40. The owner keeps $120/yr/person, or $300/yr/house. In the sort of town likely to have $40 be a reasonable baseline haircut price, $60k/yr is probably the bare minimum you'd want the owner to make to call this endeavor successful, especially when you factor in the increased financial risk they're taking on, so you need 200 homes actively frequenting your establishment in particular.
The average grocery bill for a single person is $300/mo, or $750/mo per household, of which the grocery store owner keeps $37.50-$75/mo, or $450-$900/yr. You need 66-133 homes frequenting that establishment in particular to keep its lights on, but I'd argue $60k/yr, while low for a barber or hair salon, is extremely low for a capital-intensive business.
Suppose you have a local cafe or bakery you visit every weekday on the way to work, or maybe every weekend on your morning walks. You spend $10 on a couple nice croissants, a single stuffed croissant, or something to that effect -- averaging the two customer types together, you spend $5/day, $1825/yr, $4562.50/yr/house, and the bakery keeps $456.25-$912.5/yr/house. You need 65-132 homes actively supporting that business. If you have customers like me who basically only stop in to the bakery when extended family is in town (preferring to cook my own), I might slightly bolster the grocer's margins (not a ton if I'm just buying flour, yeast, butter, and salt), but you need 1249-2500 homes like mine to support the bakery.
Retail shops (bookstores, local artwork, etc) have a pretty dismal outlook too. Used books are dirt cheap, I don't read as much as I used to (picked up other hobbies like playing the piano), and I do a lot of my reading online nowadays anyway. I spend maybe $100-$200/yr on books. I think that's above average, though I don't really know. The bookstore owner keeps $10-$40/yr though after rent and other expenses and needs 600-2400 homes filled with people like me (and who also don't share their books) for its support structure.
Instead of looking at rough estimates based on profit margins and usage, you can look at towns you understand reasonably well. One county I know of, for example, which does all of its business in a single, central town, has around 15k people, or 6k households (or if we're just counting the town population itself for some reason, 1200 households, but I think that's a significant underestimate). It has two grocery stores, two hardware stores, two music stores (instruments, lessons, etc, and another store outside of town), 15 restaurants (and another 5-10 in the rest of the county), and three pharmacies. Depending on how you slice and dice the numbers, it takes 400-3000 households to support most of those businesses, and 48-400 to support various kinds of restaurants. When factoring in just the county population, it's 2000-3000 households for normal businesses and 240 for a restaurant.