The vast majority of entrepreneurial firms are 1 person businesses. A former Fortune journalist, Elaine Pofeldt has built her career writing about them including in her book, The Million-Dollar One-Person Business which has turned into a bible for aspiring entrepreneurs. Elaine shares her observations in this episode – essential lessons for everyone curious about entrepreneurship or engaged in the entrepreneurial hustle themselves.
Sam [00:00:02] When you look at the universe of small businesses in the country, there are about twenty eight million. Eighty one percent are one person businesses.
Elaine Pofeldt is an independent journalist and speaker who specializes in careers and entrepreneurship. She’s the author of the new book, The Million Dollar One Person Business, where she looks at how entrepreneurs are scaling to a million dollars in revenue prior to hiring any employees. She used to be a senior editor at Fortune Small Business and was twice nominated for a national magazine award. She’s also a freelance journalist for a number of different publications. Elaine, welcome to the show.
Elaine Pofeldt [00:01:03] Oh, thank you, Sam. It’s great to be here.
Sam [00:01:05] So, Elaine, you cottoned on to the trend that one million dollar one person businesses were on the rise. Tell us how you came to understand this and then why you decided to write your book about it.
Elaine Pofeldt [00:01:20] Sure. Well, it was a complete accident, Sam. Like a lot of writers, I tend to wait until just before deadline to write my stories. And I write five blogs a month for Forbes. I was down to blog number five and was scrolling around the Internet for some ideas on what I might write about.
And I came across these seemingly boring statistics on the non employer business, which is the government’s name for businesses that have no payroll. They have no employees other than the owners.
Sam: That’s a terrible name.
Elaine Pofeldt: It’s a terrible name. Well, I think it’s a name that defines people by what they’re not. Right. And you say you’re a non something. What does that say about how you’re valued? But hopefully that will change. And I noticed that there was a pocket of these businesses that was breaking one million in revenue. And I know a lot of freelance creatives because of my work and I didn’t know any who were breaking one million in revenue.
So I started poking around. And what I noticed was they were in many different industries, not any one. There was a greater representation in finance and in niches like that, but they were really across the board, manufacturing, professional services, consulting, you name it. And they were going up. Their numbers were going up. This was back in about 2012. I posted about it and the post went viral.
But I didn’t know who any of the businesses were. And I couldn’t find out from the Census Bureau because, with good reason, they don’t give out the information from individual census takers right to the public.
So I wrote to the readers of Forbes and I said, if you’re one of these businesses, readers are very interested in who you are, what you’re doing. Please write to me. So over the course of a year, a handful of them wrote to me, maybe five.
And I posted another story about a year later about who they were that went even more viral. So I realized people were very, very curious about it. And I started to make sense to me, because when you look at the universe of small businesses in the country, they’re about 28 million. 81% are 1 person businesses, non-employer.
Some of them are maybe a husband and wife team, two friends who are partners, but the vast majority are solo. And I started writing about these entrepreneurs every time I found one. And often the posts would go viral.
So I realized there was a real hunger for this information. And then eventually an agent saw all these posts and contacted me. Thought it might make a great book. And I was off writing the book.
Sam [00:03:56] So for those of our listeners who don’t understand exactly what we mean when we say 1 person businesses, tell us how you define that. I mean, 81% of 28 million small businesses being 1 person businesses is an incredible statistic.
Elaine Pofeldt 00:04:15] It’s a very large percentage. Well, I quote by the government’s definition for the non employer business. So it would be any business that doesn’t have W-2 employees, so they could have 1099 contractors and some of them have quite a few.
They might have a web designer, they might have someone who edits their podcast, they might have an accountant, they might have a bookkeeper. Those are all contractors, but they’re not employees on payroll. So that’s how I define it, because if you look at any business, there would be some outside people that help out occasionally, but aren’t staff.
Elaine Pofeldt: And that’s one of the biggest trends right now. It’s so much easier to find these people thanks to different freelance platforms. Just the explosion of the internet. We take it for granted. But we didn’t have this 20 years ago. And it’s really helping the 1 person business to grow.
Sam [00:05:05] Absolutely.
Sam [00:05:07] In your book, you talk about a variety of entrepreneurs in several different industries. As you think about some of the reactions to the book and other cases you’ve since heard about, what are your thoughts on any particular industries that are well-suited to these 1 person businesses? Are there any patterns that you see?
Elaine Pofeldt [00:05:29] Well, there definitely are some. One area is: a lot of people are in professional services. There’s so many corporate professionals who have been told that they can’t start a business. They’re not entrepreneurial. And I think that’s a big myth. I think there are people in corporate jobs who have the perfect skill set for starting a business.
It’s just more of whether they’re willing to do it or not, because there is some risk involved. So you could be a very skillful attorney, accountant, whatever it may be, and go out there and get to 1,000,000 if you’re able to command high fees. And some people are, if they’re fairly advanced in their career, or you could build up to it if you’re more junior in your career.
There’s personal services – things like a fitness trainer, a nutritionist. These folks typically will have a platform where there’s informational marketing. So maybe they do a course or they do some type of an e-book or some sort of a way of spreading their message to people in groups rather than one at a time. So that’s a good area.
Manufacturing, as we were just chatting about, is an area you wouldn’t think there would be any one person businesses right, when you think of a factory. But now, thanks to co-packers, you can outsource all of the manufacturing to someone else in exchange for a cut of your sales.
The supply chain is so fundamentally changed, right? It’s so different. I mean, one of the businesses in the book, Tropical Trader’s Specialty Foods, is a husband and wife team, Rebecca Krones and Louis Zevallos there in California. And Rebecca’s dad is a beekeeper and he was selling the bees to commercial farms, but really not doing anything with the honey. Rebecca decided, why don’t we sell this? Honey – we know it’s unadulterated because people always have concerns about the origins of their honey. And they created a 1,000,000 dollar 1 person business.
They have young children. So it gives them a lot of work life balance. But they use a co-packer. And they had gone to their local small business development center, a free program run by the U.S. government, and gotten advice on how to do that. So that’s available to anyone anywhere around the country if you’d like to do it. There will be experts who can help you.
Sam [00:07:45] So you’ve said so much in there. 2 questions come to my mind. One, do you observe any generational differences between people in their late 30s and mid 40s on the one side and millennials on the other, in terms of their risk appetite and willingness to go down this path of starting up their own business?
Elaine Pofeldt [00:08:07] That’s a great question, Sam. I think that there are entrepreneurial people in every generation. When I’ve done events around the book, I have met people who are probably almost 80 years old and people who are in their 20s.
People across all generations are interested in starting businesses, but with differences. The financial responsibilities: if you were in your 20s, maybe you can still crash on your parents couch. You don’t have dependents necessarily. And maybe you don’t own a home.
If you’re further along in life, you might have more financial responsibility. So it would be hard to just start a business overnight.
You might have to put the pieces in place so you can scale back your commitment to your job. However, you’re earning a living now and need to make space in your life to do it. But there are many, many people who started these businesses on the side and then jumped in 100 percent once they got it going.
Sam [00:09:01] That makes total sense. So the second question I had was, in almost every example in your book, each entrepreneur talks about the importance of balance in their lives and how that quest for balance has driven some of their choices in starting their business.
And it feels like we’re almost living in a post-industrial time when people want to return to balance as a core value. It’s also obviously a post-crisis period since the last financial crisis. Do you have any observations on how the crisis may have shaped this trend, if at all?
Elaine Pofeldt [00:09:39] I think it definitely shaped this trend quite a bit because people realize that even if their employer was loyal to them, the job might not be permanent. And that’s a big mind shift. People sort of knew their jobs weren’t permanent, but then they would suspend disbelief and keep on going along as if it was never going to change. And then when you saw so many people getting laid off, I think it was like 10 or 11 percent unemployment.
At the worst point, people realized, well, I can’t really put all my emotional eggs in this job basket. I have other things in my life that bring me joy. And I think they look at jobs in a different way. It’s not that they don’t care about their jobs. I mean, some people are disengaged, but there are people that are very passionate about their jobs, but they also realize they have to value the other parts of their life.
I think that’s why we see the growth of these 1 person businesses. I think we also see that companies – they’re much leaner and post-recession you have maybe 1 person doing the job that was once done stunned by 2 or 3 people. So people in jobs are very overworked. And if they’re balancing that with a family or other responsibilities, it just doesn’t work. They just run out of energy. So they find they can manage their energy and enjoy life more in a business.
Sam [00:10:57] You’ve talked to a variety of different entrepreneurs across the country and now increasingly possibly in other parts of the world. Are there any common qualities or circumstances that you think are kind of generalizable or observable from these conversations that have been conducive to their success?
Elaine Pofeldt [00:11:18] Definitely, Sam. I think one thing they all have in common is they show up for the business. There are a lot of people who love talking about business ideas, but they don’t do. And the secret to excelling in a 1 person business is the same secret to excelling in fitness. Actually, it’s going to it the same way you go to your yoga class where you’ll get better results. The battle is getting there.
It really makes a difference. Just showing up. Sometimes you may show up and it doesn’t feel productive, but somehow you’re growing. And I think that’s the case with these businesses. I find these folks maybe don’t have an extraordinary amount of discipline compared to others. Some of them do.
Some of them bring in a coach or a peer accountability partner to keep them motivated, but they find a way to show up. And I think that’s the number one takeaway I have.
The other one is they don’t do everything themselves, even though they are 1 person businesses, they are willing to use outsourcing. So, for instance, if they’re an e-commerce business, maybe they use Amazon instead of having a big package of something shipped to their house and packing it in their living room, or they use freelancers.
They use automation too. They’re not techies necessarily. Some are, some aren’t. But they’re very open to using technology to make their lives easier, just things like using a scheduling app instead of just emailing back and forth to set up appointments. That’s a very basic one, but they often have maybe 10 of them that they use that saved them time.
Sam [00:12:51] Right. So interesting.
Sam [00:12:56] Apart from writing, Elaine, you’ve acted as an adviser to entrepreneurs who want to write about their experiences or want to write books, as well as a ghostwriter. And that’s a different lens on top entrepreneurs from the one that you bring to your book. Tell us a little bit about what you feel makes someone want to write a book about their experiences and share their learnings.
Elaine Pofeldt [00:13:33] They reach a point where they want to give back. They feel like they’ve learned so much often through mistakes that they want to help other people tap into what they’ve learned. And they also have space in their life to do it, because writing a book is like starting a business or having a baby or doing something really big in your life, because it’s going to take a lot of emotional space and a lot of movement.
So I usually tell people the timing has to be right. Even if you have a ghostwriter, that ghostwriter can write it for you in a smooth way. But you still have to think about it. And it’s not that easy, but it’s very exciting for them when they finally get their story out into the world and they start interacting with people who have read the book and see how much of an impact it’s had.
Sam [00:14:22] Right. Amazing. Elaine, based on what you’ve observed in your book and what you observed through the events that you put together around the country, is this a very fundamental shift in the nature of employment? And in the way that companies think about employees, but equally people think about their jobs, some of which might be due to technology? Some of that is due to the economic cycle.
Are there other factors, you think? And how do you see those two factors driving this entrepreneurial behavior? In a sense, the US has always been a very entrepreneurial economy. And at the same time, I think entrepreneurship is on the rise right, as you’ve observed.
Elaine Pofeldt [00:15:11] Well, I think employers don’t view employees as a long term partner as much as they once did. I mean, the days when you could even meet somebody who had worked for the same company their whole career are pretty much over.
I remember interviewing somebody who had worked for a company for 40 years and I realized he was the only person I’ve ever spoken with. Then all these years as a journalist that’s so rare.
A lot of them [companies] are keeping their options open by locating in flexible workspaces, they’re locating whole corporate departments there. Well, what does that mean when you’re in a flexible workspace with a team of permanent employees? It means maybe you’re going to let them go. Or maybe you’re going to scale up, but you’re definitely not viewing the situation as permanent.
So employees must pick up on that so they know it’s sort of temporary. And then I think it’s also just easier to become an entrepreneur. Resources are so inexpensive. I remember the days when you had to buy a server to start a lot of different types of businesses, and that was why you needed venture capital. And then when the cloud came, I remember interviewing venture capitalists who said that businesses didn’t need enough money to make it worthwhile to do a deal with them anymore.
So now the barriers are down. You could be starting in your home with one hundred dollars and get going with the business if you have a good enough idea and start bringing in money and then use that to fund the growth of the business.
In fact, Colin and Angie Raja, who I’ve written about for Forbes – they’re a couple from the New York City area. They both love fitness. And Colin is a boxer and he got Angie into it and into CrossFit. She felt like the gear for women was really ugly. It wasn’t an attractive color. So she said we should start a business around this coming up with the gear and more attractive colors. So they bought a whole bunch of water bottles in a dollar store, I think for $1. And they sold them on eBay for twenty dollars each.
Sam: That’s amazing.
Elaine Pofeldt: That was the start. It was a start. And they both had good jobs on Wall Street. So they just wanted to bootstrap it and then use that money to invest in hiring a private label manufacturer to make the boxing gear and the CrossFit gear. And now the last time I spoke with them, I think their business was at $2 million in revenue and they were starting to scale up with traditional employees.
But that’s the spirit of these businesses. You can go so lean. And in fact, I think it’s a good discipline to run a business that’s lean, because then when you scale up, you’re really using your resources in a smart way.
It’s almost the opposite of how businesses are encouraged to spend money if they get venture funding. I know a lot of entrepreneurs feel pressured like they’ve got to spend this huge amount of money to bring in a giant team that maybe they don’t even need. And I don’t know that that’s sustainable for the long term. Sometimes it is, sometimes it isn’t. But this is a very sustainable way to grow a business.
In fact, Bare Mattress, one of the stories in the book – it’s based in Hoboken, New Jersey. Scott Paladin’s is the founder. He was a 1,000,000 dollar 1 person business at the time I first met him. He just topped Crain’s New York Business Fast 50, the fastest growing company in New York City.
Yes, it’s incredible. I think he’s close. I think it was like $18.5 million in revenue he’s got. I went to his facility about a year and a half ago, and I think he was up to about 5 employees then. But he’s such a master of using his resources that he was able to grow to that point in just a few years. I think that’s what we can learn from these businesses. Some might stay at a boutique size because the owners prefer that, but some could be scale-ups and really contribute jobs. So they have a lot of value, huge value in the economy.
Sam [00:19:02] Elaine, what’s the one essential piece of advice that you feel you want to leave our listeners with?
Elaine Pofeldt [00:19:07] Well Sam, what I would say is don’t let others define your value. I find there’s so many people who feel kind of cast out by the economy for different reasons. Maybe they get pushed out in late career from a corporate job or they’re a mom who took time off to raise their children. And when they go to traditional employers, they get rejected sometimes because traditional employers don’t always recognize the value of their knowledge and experience.
But in the entrepreneurial world, there is no set of credentials that you have to have. You have to have confidence in yourself to start a business. But if you kind of tune out the people that say you don’t fit their criteria and really look honestly at yourself and what you have to offer, I think most people would really be amazed at how much they bring to the table and how valuable their own ideas are if they put them out in the world.
But that’s the key, is putting them out in the world, being willing to have people criticize things at times and just to find your own value for yourself. And when you do that, it’s just tremendously empowering.
Sam [00:20:13] I love that advice. Thank you.
Sam [00:20:16] It’s never been easier to start a business. And the trend of 1 person 1,000,000 dollar businesses continues to grow. Elaine is a keen observer of and has built a community around 1 person businesses through the events she’s done across the country. Elaine – thank you for joining us on the show today.
Elaine Pofeldt Thank you so much. Your questions were great.
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