The Million-Dollar, One-Person Business

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FOREWORD

By Verne Harnish, Founder,

Entrepreneurs’ Organization

 

Running a business is ultimately about freedom and independence—and there has never been a better time to go after that dream. New technologies have made it easier and more affordable to start a business than ever before. In a global marketplace, even tiny, home-based businesses can reach a vast, international audience of customers. The challenge for many small business owners is scaling their revenues and profits in an ultra-lean operation. The vast majority of small businesses in the United States are one-person firms. In many cases, the owners struggle to build a sustainable business that can support them and their families. They don’t have anything left over to invest in growth. That is because of a knowledge gap. Many owners have never learned how to create a high-revenue, high-profit business without adding a lot of overhead. It’s not something you’ll learn in school or even from other business owners. The Million-Dollar, One-Person Business closes that gap. It offers a road map to creating a seven-figure, ultra-lean firm by sharing the strategies of entrepreneurs who have approached and hit $1 million in revenue before adding employees. From their experiences, you’ll learn how to come up with the right business idea, how to develop concrete strategies you can use to turn your vision into reality, and how to scale your revenues and profits once they start rolling in. Once you know how to create a million-dollar, one-person business, you’ll have many possibilities in front of you. Some owners choose to keep their businesses small, building them around a lifestyle they love. Others decide to follow the path outlined in my book, Scaling Up (Rockefeller Habits 2.0), and create fast-growing, job-creating firms. No matter which route you choose, you’ll have exciting options.

 

 

INTRODUCTION

 

Click on almost any headline about the gig economy, and you’ll come across a fierce debate. Supporters of the traditional job see the world of free agents as one where capitalism has run amok, leaving hapless workers to fight each other for scraps of work—as they cling to the slippery rock of middle-class life. Champions of what author Dan Pink called the Free Agent Nation see a very different reality, in which former wage slaves can ditch their cramped cubicles in hermetically sealed offices for a life in which they control their schedule, destiny, and income.

The truth is, we don’t know yet what a world of increasingly independent work will mean. We’ve never had as many free agents as we do today. As of 2010, the United States Government Accountability Office says that 40% of US workers have “alternative” work arrangements in their main jobs, meaning they are freelancers, temps, contractors, contract company workers or part-timers.1 That is unprecedented—and it’s a change that’s happening in industrialized nations around the world.

Many people worry that these workers will struggle without giant employers helping them to run their work lives and keep their paychecks steady. That’s a valid concern. But another equally important point is what this growing army of free agents can accomplish on their own. Armed with the right knowledge and mindset, could they create something even better for themselves than the traditional “secure” job? Will they be better off without powerful gatekeepers deciding the fate of their careers? Will they have a greater chance of reaching their true potential and attaining a higher income in a world where they drive their own careers and a boss can’t subtly penalize them for being too young, too old, a mom, a member of a minority group, a person with a disability, a caregiver, a committed Little League coach, someone who wants to work from home, or any of the other reasons people get slow-tracked at work, regardless of their talents and contributions? I am a former senior editor at Fortune Small Business magazine and have contributed to Fortune, Money, CNBC, Forbes, Inc., and many other publications. Based on my experience interviewing hundreds of entrepreneurs every year, I believe the vast majority of self-employed people have barely begun to unlock their potential in making the most of their businesses.

That potential may be even greater than we imagine. Not long ago I spoke with Eric Scott, a partner at SciFi VC, a venture capital firm in San Francisco, founded by Max Levchin, cofounder of PayPal. Scott told me he and his colleagues have been asking themselves how much longer it will be until a one-person firm gets acquired for $1 billion. As we figure out where it is possible to take a one-person business, the question is how to help free agents make a great living. Most of today’s free agents have been thrust into running a one-person business without any preparation. Universities have a vested interest in selling the idea that all of their graduates will be working as high-paying, full-time employees at well-known companies.

Outside of entrepreneurship programs, they rarely broach the possibility that their students may end up working for themselves nor do they teach skills that will help them thrive in self-employment. It’s easy to see why schools don’t want to talk about this. How many parents would willingly pay the huge annual tuition bills if they knew their children might essentially be signing up for Freelancing 101 and a life of scrambling for projects? And how many students would be willing to take out tens of thousands of dollars in student loans if the promise after graduation was not, in fact, a cool job at Google but a part-time position at a little-known company where the pay is so low they will have to drive for Uber on the side? In reality, many graduates are patching together their income this way, as the world of employment rapidly changes, but have yet to master how to thrive in self-employment.

Meanwhile, midcareer workers find themselves increasingly insecure, as their companies look to cut costs by outsourcing overseas, automating work once done by people, and replacing full-timers with contractors. Recently, I attended a presentation by a coworking space provider that usually caters to freelancers and startups. One growth area, its executives said, is the renting out of entire floors and even whole buildings to companies employing traditional workers. These clients want to be free to expand and contract their workforce more often than a standard lease allows. Even if the employees who sit in the coworking space view their jobs as permanent, clearly the employers don’t see things the same way. At the same time, many companies are increasingly candid about the fact that their plans for traditional staffing are built around “junior” talent. That’s good news when you’re looking for your first job, but it means that with each birthday, promotion, and salary bump, employees in these firms are a little closer to getting squeezed out of their jobs.

Many workers might do better running a solo business than climbing the shaky career ladder, if they have the know-how to do so very successfully. Theoretically, there are plenty of places outside of school to learn how to run a business. But if you turn to the experts in your local startup ecosystem, you’ll very likely hear that to succeed, you’ve got to “scale” a business into a job-creating machine—and if you don’t want to, you’re not ambitious enough.

 “The thinking is that it’s better to invest in ten people who are going to grow their businesses to a very large size than in one hundred people who are going to run single-person businesses,” says Donna Kelley, a professor of entrepreneurship at Babson College. Many programs run by government and financial services firms that serve small business also view one-person firms as duds—run by people who failed to become job creators because they think too small. Their emphasis is on reprogramming solo entrepreneurs out of mindsets—like not delegating enough—that keep them from hiring people. But consider this: Out of more than twenty-eight million small businesses in the United States, twenty-three million are “nonemployers,” meaning no one has a job there except the owners.2 I believe most have actively opted out of hiring employees for a simple reason: they don’t want to.

 And there is nothing wrong with that. There is something wonderful and exciting in the fact that millions of independent spirits in the United States have taken the initiative to create jobs for themselves, doing exactly what they want to do. Not everyone wants to be Elon Musk, dreaming up the next Tesla, nor is everyone cut out to be a boss. Many people start businesses to gain control over their time and enjoy independence—a freedom that can slip away as an organization grows. And this is a conscious choice. “They are doing it because they prefer to, not because they have to,” says Kelley, who has studied businesses around the world as leader of the US research team for the sweeping Global Entrepreneurship Monitor study.3 “As society becomes more advanced, people are more likely to do the jobs and work they want.” Nonetheless, the lives of many free agents are more difficult than they need to be, often because they don’t know how to make a great living. They need to make good money because they have no safety net.

The system just isn’t set up for them. Industrial economies are built around the idea that workers will be employees with traditional jobs. Though solo business owners pay taxes like everyone else, they typically don’t get access to programs like unemployment if their work dries up. In the United States, health care is generally very expensive to buy on your own—and efforts to reform the system have been very contentious. Transactions like buying a house can also be very difficult if you earn your income from freelance jobs, rather than a traditional one, because of banks’ requirements that you prove your income. These hassles and extra costs can start to wear on freelancers. I can attest to this, having lived for about a decade as part of a two-freelancer couple with four kids. Before my husband very recently accepted an in-house position with a client, we bought our family’s health insurance through a broker or directly through an insurance company—and the premiums were akin to mortgage payments. Does it have to be this way? I’ve often wondered why no one in national politics pays serious attention to the millions of workers who earn their living outside of traditional jobs. Through my reporting, I have met some independent entrepreneurs whose stories persuaded me that maybe we don’t have to wait for the system to recognize and value the independently employed.

By building their one-person businesses and partnerships to $1 million in annual revenue or more (or, in a few cases, very close), these workers generate enough income after taxes and expenses to insulate themselves from the hassles that many free agents face and to multiply the freedoms and rewards exponentially. What are they doing to make a living? All kinds of things that tap into their personal passions—selling organic honey, teaching online classes, marketing ebooks, investing in real estate, and even running traditional businesses in fields like consulting. In the pages ahead, you’ll learn how these owners have grown their revenue in ultra-lean businesses, so you can apply their ideas to starting or growing a business of your own. Some have become devoted to the idea of remaining a one-person business for the long term. Others have found that creating an ultra-lean, high-revenue startup opened up exciting opportunities they had not expected—including scaling up in the traditional way when they were ready for it. That’s why you’ll see, in some of their stories, that they did eventually become employers—when it made good sense for them and for the business to do so. In some cases, they had to consider labor laws when making decisions about how to grow. (If you need hourly shift workers, for instance, they generally can’t be hired as contractors.) If you aspire to creating your own million-dollar, one-person business, view this book as the crash course you never got in school. Even if you never hit $1 million—or don’t aspire to—understanding the smart and creative ways these owners run their businesses will help you achieve your personal goals and realize your potential a lot more quickly, so you have more time and energy to do the things you love. You’ll have the knowledge to consider a brand-new career option you might have never realized was available to you. There’s no reason to wing it on your own when you have guides like these amazing entrepreneurs to show you the way.

 


 

CHAPTER 1 :   THE MILLION-DOLLAR, ONE-PERSON REVOLUTION

 

 

Laszlo Nadler, thirty-six when I spoke with him, lives a life many dream of: he is on track to bring in more than $2 million a year in a profitable business that is a one-man show. Nadler runs a five-year-old online store, Tools4Wisdom, from his home in New Jersey. The store sells inspirational weekly and monthly planners. Nadler outsources the printing, so most of his daily work consists of customer service, business development, and marketing. The business leaves plenty of time to get away for vacations with his wife and two young daughters. Nadler never planned to be an entrepreneur. He studied business management and technology and then built a career as a project manager for one of the top trading units at a multinational bank.

It was a good job that seemed to justify the college tuition his parents had paid and enabled him to support his young family. And yet, as Nadler was talking with his oldest daughter about the importance of doing what you love almost six years ago, his words sounded hollow. He realized he was not following his own advice. He liked his work well enough, but he was under constant pressure to meet deadlines and often in intense situations.

Parachuting from one trading crisis to the next at the bank was not what he truly loved. What did excite him—and had led to his career in project management—was improving his own productivity and helping the people around him do the same. Nadler decided it was time to actually follow the advice he had given his daughter and soon started a side business, designing and producing his own planners and selling them online. Unlike most daybooks, his planners are not built around making to-do lists. Instead, they focus you on the essential outcomes each week that will move you toward your primary goals.

His approach to time management is different, too, focusing on how much mental energy people have each day rather than on how many hours there are to squeeze activities into. “I realized after all of these years that it’s not time units we have, but attention units,” he says. “You may have three to four hours of true attention units per day.” Many people loved his idea and bought the planners. When his income from the planners hit six figures a little under two years ago, he quit his job to work on the business full-time.

Nadler is part of an exciting trend: the growth of ultra-lean, one-person businesses that are reaching and exceeding $1 million in revenue. According to recent statistics released by the US Census Bureau, in 2015 there were 35,584 “nonemployer” firms—that is, those that do not employ anyone other than the owners—that brought in $1 million to $2,499,999 in annual revenue. That’s up 5.8% from 2014, 18% from 2013, 21% from 2012 and 33% from 2011. Some elite nonemployer businesses are even exceeding these revenues. In 2015, 2,090 businesses had annual receipts of $2.5 million to $4.99 million, and 355 businesses brought in $5 million or more. While these numbers are still relatively small, many more of these tiny businesses are approaching the $1 million mark. Many have strong potential to break $1 million:

  • 258,148 firms brought in $500,000 to $999,999.
  • 584,586 generated $250,000 to $499,999 in revenue.
  • 1,861,656 businesses brought in $100,000 to $249,999.

 

 

What’s driving their growth? One factor is the internet, which has enabled individual entrepreneurs to plunge into a vast global marketplace cheaply and quickly. “It has provided a whole set of capabilities and tools these entrepreneurs can access,” says Andrew Karpie, who studies online platforms used in the labor sector as research director, services and labor procurement/supply chain, at Spend Matters Network, a research, analysis, and media firm focused on procurement of technology and innovation. The capabilities available to entrepreneurs in one-person operations are vast. It has become much easier to quickly set up a business’s legal structure, operations, and distribution, says venture capitalist Eric Scott.

 If entrepreneurs want to form a business entity, they can do so in under an hour through a host of online legal services providers. To put up a website, they can turn to free and inexpensive platforms like WordPress, Squarespace, and Weebly; find any design help they need on online platforms, such as 99designs; and locate any necessary writing or tech talent on a freelance marketplace, such as Upwork, Freelancer, or PeoplePerHour.

Thanks to cloud-based storage, buying expensive servers—once a huge barrier to entry for startups—is no longer mandatory. On top of this, relatively low-cost digital advertising on social platforms like Facebook and search engines like Google makes it easy to reach a huge audience quickly. And once entrepreneurs find customers, it is easy to process payments from any corner of the world online, through a fast-growing army of service providers, in some cases simply by clicking on an option that lets them accept ACH or credit card payments through their invoicing software. But solo business owners’ capacity to scale their efforts isn’t just about the growth of free and automated tools. It also reflects a shift in attitudes.

 Rather than adopt Henry Ford–era business models, in which scaling up depends on hiring legions of employees, these entrepreneurs choose to travel light. When they need to expand their individual capabilities, they often deliberately turn to contractors or firms that handle billing and other outsourceable functions. As Alex Hood, vice president of Intuit’s QuickBooks Online, explained at the Smart Hustle Small Business Conference, because of such trends, the average size of small businesses in America has shrunk from 6.5 employees in 2001 to 4 in 2014.

 

Author Elaine Pofeldt
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