
The Rise Of The Million Dollar, One-Person Business - josephby
http://www.forbes.com/sites/elainepofeldt/2013/06/29/the-rise-of-the-million-dollar-one-person-business/
======
OldSchool
In our industry, it's pretty safe to count the one-person cases as outliers
(hit app, etc), however I can attest to a number of people consistently
pulling down 7-figure NET incomes from privately-owned small businesses
without ever involving VC's or other investors.

If it's a sustainable pace and you don't become so visible as to be a patent
or other legal target you can quietly live very well on that or half that,
etc.

Bottom line, there are an infinite number of places to end up between being
nobody and being a Zuckerberg/Gates/Jobs and really, most of them can provide
a good quality of life.

~~~
da02
Are they mostly B2B? Or do they sell directly to retail consumers?

~~~
hkarthik
Most of the people I know doing this are involved heavily in local commerce.
Think real estate, insurance, construction, and skilled labor companies
(plumbing, A/C repair, landscaping).

~~~
joonix
You aren't going to pull down 7 figures on a one-man AC repair business. In
that type of business, you are just renting out your time, and nobody is
paying $1,000/hr for an AC repairman's time. You can scale it, definitely, and
have an army of repairmen working under you and then make tons of money, but
then you're no longer talking about a one-man business.

~~~
larrys
I don't think grandparent comment was meant to imply 1 person business. (You
are correct in your math assumptions). I just think they mean "small business
funded organically or built from the ground up". Besides "1 person" can also
mean "1 person and subcontractors" so where do you draw the line at "1 person"
anyway?

The only thing I would add though is that many of these businesses were not
started by the person running them they were passed to a family member who got
something that they could expand upon where the risk had already been taken.

~~~
hkarthik
Correct, I didn't mean to imply these were 1 person businesses with a single
A/C repair person doing all the work.

To reach $1 mil or more in revenue, these businesses use 1099 contractors or
corp-to-corp sub-contracts to meet their labor demands.

------
tunesmith
I think about this a lot - I made the jump from salaried worker to self-
employed programmer/freelancer/contractor/consultant (depending on how you
look at it). But I'm doing enterprise-level architectural programming. It's
not very amenable to productizing, so I'm basically stuck being paid for my
time.

What that means is that if I want to have a long-term high-security
relationship with a couple of key clients, I basically hit a ceiling in hourly
rate (a good rate, but slightly below what your general multi-person agency
will charge) and I've been at that ceiling for a couple of years now - nowhere
close to $250k .

It appears the way to transition out is to bump the rate up significantly so
it doesn't appear you're trying to compete with agencies - maybe around
$200/hour or 6k-8k/week. But the problem with that is that the long-term
relationships can go out the window. They only want to bring you in for
shorter periods of time, and you have to hustle more. So the marginal benefit
isn't awesome. And I really like my clients and I hate hustling, so I stick
with where I'm at. This higher rate I've had for the last 2-3 years is nice
and all, but practically what it means is that I'm projected to be able to
retire at age 65 instead of age 75. It's not a dramatic difference in
lifestyle.

So instead, I've just been trying to amass a larger emergency fund outside of
maxing my retirement savings every year. And then I'll do something with it...
what, I don't know.

I know, first-world problems, but it seems that now that I finally have a bit
of a nest egg, the income-maximizing move would be to use it to invest in one
of these other careers the forbes article mentions. But what? Nest egg money
isn't really the limiting factor behind a retail operation, it's the actual
retail product idea, and I don't really think that way. What's left is real
estate, but I'm regularly told I shouldn't even bother if I'm not a fix-it
handyman sort, which I'm not. So I'm sort of in this state of perpetual
mulling. I wonder if I could just find a talented-but-poor subcontractor, get
my own general contractor license, and handle all the business and project
management parts (which I love) despite knowing nothing about construction.

~~~
reeses
First of all, f### "first-world problems" when it comes to something like
this. It's personal and it's your life. You only get to perceive one run at
this one.

I posted a few things in Patrick's thread that I won't repeat here[1]
regarding the move from a simple hourly rate to the ~$1m+ range.

The thing I would work on in your case are your basic assumptions. I would try
to get past the "long-term high-security relationship."

It's good to have long term relationships but they are never going to be
highly secure. Instead, work on maximizing your value and adjust your income
accordingly. If you do think of relationships, think of it in terms of your
reputation and your network. If you went to a decent school, use the alumni
network. If you worked at a company that has a "former employees" network, use
that. Keep in touch with people you've worked well with, even if it's just
watching them on LinkedIn and congratulating them on a move or helping them
find a new job/gig/whatever.

It's something that can be tough to crack the first time, but you're in a good
position already. "Enterprise-level architectural programming" is nerdalinga
for "Enterprise Architect," "Consulting CTO," etc.

Getting the first big "gig" is usually a matter of timing your availability
with opportunities (i.e., what unlucky people call "luck"). Reach out through
your network and have people recommend you. The first strategic position you
take will probably be similar to what you have now, but at least you can put
your shingle out as "Consulting Enterprise Architect".

Then you should work on getting a couple marquee clients to put on your NASCAR
slide. They don't have to be massive, but they should be respected companies.
I targeted the top of the Internet Retailer 500 and established build, launch,
replatforming, infrastructure, scaling, and security relationships with enough
> $1b/year sites that new clients ask about what "leaders" do in the industry.
Enterprise work is mostly about minimizing perceived risk.

It's good if you can build partnerships with platform vendors. For example,
Oracle PS don't really like to touch projects below a certain size, so I get a
lot of semi-qualified leads in the ~$1m range that I can knock out in about
four months with a few fellow consultants/friends. If you bring in the vendor
to one of your clients, they'll usually keep in touch and mention prospective
clients even if they're not going to go out on a limb and drop your name on
the desk. I wouldn't knock myself out on this, though – just make sure you are
the one making the introduction and are present at the pitch meeting.

Also, you'll need to be solid when talking at the C-level. Get your
presentation skills down, have a suit or ten made ( _cough_ go to Anderson &
Sheppard once and Shanghai soon after), and gain confidence that you know what
you're doing.

You're going to have to get out of your comfort zone a little bit. I actually
loved interviewing (both sides) so the sales process (which is generally just
letting someone validate claims made by a referring member of the network) is
not unpleasant.

I'll also tell you the biggest secret of "consulting": find out what people
are complaining about. Write that down on slide one. Find out (or know) how
people resolved the top three problems on that slide and put them on slide
two. Make those slides beautiful and extremely succinct, so you're conversing,
making eye contact, and reading body language. Make it look easy.

One last thing: You should become aware of the product market in this area.
EAI is a massive opportunity and even if you just build a toolset leveraging
Mule/Camel/ActiveMQ/etc., that's a product you can license to clients. I don't
often advise this, but saying there's no productization opportunity leads me
to recommend one of the Enterprise Integration Patterns books.

[1]
[https://news.ycombinator.com/item?id=5963096](https://news.ycombinator.com/item?id=5963096)

[https://news.ycombinator.com/item?id=5963169](https://news.ycombinator.com/item?id=5963169)

[https://news.ycombinator.com/item?id=5963135](https://news.ycombinator.com/item?id=5963135)

[https://news.ycombinator.com/item?id=5963113](https://news.ycombinator.com/item?id=5963113)

~~~
tunesmith
Damn, this is really good advice. I find that as I get more senior, I have
less immediate peers that set an example of what sort of next steps are
possible, so these are good bits of advice to read.

Yes, the last year has included a lot of prototype experimentation with stuff
like EIP (spring integration), amqp (rabbit), jax-ws (cxf mostly), Drools. I
can see how pulling the thread on these could eventually turn into a product,
but in the meantime it's really just been more about making the recommendation
and then doing the implementation. I feel like I'd need a handful of more
successful implementations before I can call myself the Consulting Enterprise
Architect, but it's getting there.

------
yogo
> _Many institutions in our society are still structured in such a way that W2
> employees are considered the norm, and it is hard for even well-off people
> who are self employed to, for instance, get a mortgage without intense
> paperwork hassles._

It was refreshing to read that. Even for an apartment it's almost foreign to
most building managers when you say you are self-employed (they might even
have an unwritten rule that this means unemployed lol). Even after showing a
good transaction history your chances are still pretty slim, it's almost as if
they have never heard about anything other than W2 and pay stubs.

~~~
crucialfelix
Even worse for me is that my clients have been in the US and I am in Germany.
The landlords here would rather give an apartment to somebody who is on
welfare. Seriously.

I'm considering incorporating and granting myself a EUR salary just so there
is a steady pay stub.

~~~
6cxs2hd6
From what I've heard about German employment law, wouldn't you need to form a
"work council" and fight with yourself? ;)

------
mililani
My dad started three small businesses on his own over the period of 20 years:
a restaurant, an upholstery business, and a long line commercial fishing boat.
First, let me just point out that sales (or revenue) does NOT equal profit.
I'm pretty sure everyone here knows that. If you count just sales, then the
upholstery business marked with inflation would probably be doing $150-200k a
year in sales/revenue for a single sole proprietorship. However, count in
rent, materials, utilities, etc... my family was probably making about 70k a
year in today's dollars. The fishing boat, though, is another story.

Although the fishing boat was incorporated as an S-corp with just my dad as
the sole owner and 100% owner of stock, he did employ a crew of people. I
mean, there was a boat captain, and at any given time, 7 to 8 guys on board.
We had fuel expenses, salaries (which were a portion of the catch), food
expenses. If you looked strictly at our sales, which I used to do the
bookkeeping for, we would easily net 500k to a million a year in today's
dollars. After all expenses were paid and done, my dad would make about
$100-120k a year on a decent year.

~~~
mercutio2
Since we're using accounting terms-of-art, you almost certainly don't mean
that you would "net 500k", you mean gross 500k, right?

The popular culture seems to use net to mean "total in the income category",
but in accounting it generally means EBITDA, i.e. your dad would gross $1m and
net $100k.

~~~
mililani
Oops, yes, my bad. I meant gross. Geez, even I can't get the terms straight.

~~~
jwhite
I think we can excuse you, given that the boat was _literally_ netting quite a
lot of money... in the form of fish :-)

------
mhartl
It's nice to see coverage of an exciting trend (of which I'm happy to be a
part), but it always cracks me up when financial publications classify
companies based on sales rather than profits. Defining a "million dollar
company" as a company with a million dollars in annual sales is absurd.

~~~
jsiarto
This. If your company clears one million in yearly sales and spends $980,000
to make that happen--you are running a $20,000 per year company. There is
nothing wrong with this, but I hate when these metrics get thrown around
without context. There are $1M companies that make less profit than a hot dog
cart (which subsequently, in the right location is a damn good business).

~~~
beat
On the other hand, low-margin businesses are often low-risk, stable
businesses. A grocery store has crappy margins, but excellent stability.

------
larrys
One thing I will add to the discussion of someone running a 1 man "type"
business (which would include both 1 man and 1 man plus some helpers part
time, sub contractors, 1099's whatever) is that while the upside is capped the
downside is also clipped.

If you have a 15 to 40 person business with lots of overhead and you have a
few bad years you can lose lots of money. Because of that overhead.

But if you are running a small operation out of a small office (or even your
house) you might not have a big top end potential but you also aren't going to
lose much either.

A bad year might mean breaking even or making very little but your probably
not going to lose your shirt (at least in 1 or 2 years if you have built up a
reserve).

~~~
Spooky23
Not necessarily.

Plenty of 1-man "professional services" businesses are functioning as
middlemen between big companies, or big companies and government. They have
low overhead, but usually have a fixed, immovable deadline for paying their
downstream companies. As long as the good times roll and the customers pay in
time, life is grand.

------
skue
Interesting breakdown, though the title is a bit misleading. The numbers do
show a 5% annual increase in single person companies making $1MM+ in 2011, but
it's difficult to know whether that reflects a true rise without comparing
against historical data.

------
josephby
It's interesting that many of these businesses are basically real estate
holding companies. I wonder how many of these businesses are just tax-
minimization or financing schemes used by larger companies for things like
deferred compensation?

~~~
trotsky
From what I understand the main purpose is liability shielding. Each property
is run as its own LLC, and management is done via a centralized management
company. If a person gets injured on the property, the liability effectively
gets capped at the liquidation value of the building.

------
jere
>I’m not sure that these are all truly one-person businesses. In my reporting,
I often come across firms with a regular team of 7 or 10 people, but only one
or two classified as W2 employees and the rest working as contractors.

I have to agree, since I find it mind boggling that one-man construction firms
are making millions.

~~~
patio11
_I have to agree, since I find it mind boggling that one-man construction
firms are making millions._

That's not that uncommon for a general contractor: you do project management
and client relations, sub-contractors hire the people who string wires and
swing hammers.

~~~
jamesjporter
Patrick is right, I know people who are essentially one person companies doing
exactly this and they do pretty well for themselves.

------
FollowSteph3
This is revenues and NOT profits/ so a real estate holding firm may have high
revenues but not large profits because of the mortgage costs ;)

------
cityhall
These numbers seem pretty misleading. What we're interested in are businesses
that are started from scratch and derive their income through their own brand
identity. What we're reading about are people who pass their consulting pay
through an LLC for accounting reasons, or people who own income generating
property through a holding company. This is more about how successful people
are structuring their finances than about how people are achieving high
incomes in the first place.

------
pageld
There isn't anything related to farming on there. Seems odd, especially when
they're just talking about revenue and with how much money is in that sector
right now.

At 6.60 / bushel corn @ 200 bushels per acre, it "only" takes 760 acres of
corn to break the $1M revenue barrier. 760 acres isn't necessarily a lot and
can be definitely run by one person, especially with some contractor help.

It probably has something to do with what's classified as a Non-Employer, but
it just seems like it should be there.

------
shunter
It's interesting that technology businesses didn't appear in any of the top
grossing slots. I suspect this could be because they get lumped into
professional / scientific.

~~~
snoonan
As a percentage of the US GDP, small tech businesses aren't much of a blip.
Just think of all of those real estate brokers and investors, day traders,
hair salon owners, construction contractors that churn through 1M annually in
revenue. Every small town across the US has a pile of millionaires like this.

------
antidaily
_26,744 had sales between $1 million and $2.49 million (up from 24,945 in
2010)_

That's really not that many. And not that big of a rise considering the
recovering economy.

------
csomar
I see some flaws in this analysis.

\- Point 1

 _26,744 had sales between $1 million and $2.49 million (up from 24,945 in
2010)_

It's a 7% rise, in a year. Those who are in the $100k-$250k range, rose by 6%;
not much of a difference.

When we talk (or at least from my perspective) about the rise of a group or
minority, it means their growth is much faster than the average and they are
probably doing some kind of disruption.

\- Point 2

The author talks about the revenue. The revenue means little. Some solo-
entrepreneur are selling their craft. A Software developer working remotely
has almost no costs. Some are trading stuff. So their revenues are high, but
not really their profit.

------
smrtinsert
Real estate agents or brokers don't have the double taxation that we do right?
Meaning they wouldn't have to pay corp/llc and employee tax?

~~~
encoderer
Neither do "we"?

I know the IRS 15-A rules have a carve out for "computer programmers, etc"
that limits how such employees can function as 1-person LLC's for the purpose
of 1099 employment with a corporation. (That is, the IRS says in such cases
we're employees and a 1-man business won't save you from that, so we should be
W2'd). But that doesn't affect double taxation?

LLCs pass through the tax burden to the individual partner so whether that's
RE or software engineering, there won't be double taxation on the partnerships
profits.

Am I missing something else that affects this?

------
frozenport
In the 1980s we had a time when people in finance could bring their companies
millions of dollars without creating much palpable value. We certainly have a
new bread of Masters of the Universe.

------
michaelochurch
The details behind the article show a less appealing reality than what we
might hope for. Yeoman capitalism hasn't killed off VC-istan just yet. A lot
of these $1M/year businesses are for, say, independent real estate brokers.
Yes, there are people who get very rich in that game. There are others who
fail horribly. I think we're quite a way from a society where talented people
can find their way to, if not $1M per year, a reasonable approximation of
their actual worth to society. (Fuck, I'd be happy with a regular upper-
middle-class income if freed from subordination and its attendant mind-rot.)

Let's stop talking about revenues and figures of "$1 million per year"
(because there are a variety of context factors-- geography, profit vs.
revenue-- that make us question what that really means) and instead talk about
_growth_. This is where it gets interesting. We can look at the growth/risk
spectrum between gambler's ruin (take all nonnegative-expectancy risks; thus
take over the world economy or die) and non-participation (take no risks; no
growth above the risk-free rate-- minus management fees, of course). Most
business activity is between those two extremes, but the very middle of that
spectrum is underfunded and undersubscribed.

If you want to push for 150-percent-annual-growth-or-sudden-death outcomes
like a sociopath gambling with others' money, ambitions, careers and dreams,
then there are VCs will fund you, your pathological gambling, and (in most
cases) your shitty personality cult. (That's the high-risk, high-growth
route.)

If you want to work for some horrible, authoritarian corporation doing shit-
ass-boring mediocre work and growing your salary at 7% per year (mostly, a
reward for _getting older_ because you're so disconnected from the real work
that no one knows what you're worth) then... good news, that is available too.
(That's the low-risk, low-growth route... except the long-term existential
risks are pretty disgusting because a career of mediocrity, coupled with age,
makes one untouchable. See: what fucking academia does to those who don't make
it.)

What no one is talking about is the mid-risk/mid-growth range... 20 to 40
percent annual growth with _some_ volatility, but not likely to ruin lives _en
masse_. (You might have a thin year, but your average outcome is strong if you
work hard, have the talent, and do the right thing. You just need discipline
in your strong years.) The problem is that _no one_ is funding that region of
the spectrum. But that's the natural home for technology, research, science,
as well as the yeoman capitalism that most of us would find much more
rewarding (and scalable, and beneficial to society) than this VC-istan,
Hollywood-for-ugly-people, bullshit.

You can get jobs at stagnant corporations and jobs (probably not founder jobs,
unless you have the connections to partake in Stanford Welfare, but jobs with
"equity") in the high-risk VC-istan space. No one seems to have any clue how
to fund the mid-risk/mid-growth space, but that's where the future _actually_
lives. See: [http://michaelochurch.wordpress.com/2013/03/26/gervais-
macle...](http://michaelochurch.wordpress.com/2013/03/26/gervais-
macleod-17-building-the-future-and-financing-lifestyle-businesses/)

~~~
Retric
One of the key's to high incomes is personal spending habits. Spend 105% what
you make and your stuck on debts treadmill. Spend less than 70% of what you
make and not only do you have a cushion that lasts longer, but you can take a
significant pay cut without issue. Now let's say you have a great idea, if
your over 25 then scraping together 6 months living expenses pluss a little
working capital is easy, by 30 taking 2 years off is not that risky. After
that you can start looking into angle type investing. Granted, the risks are
still there but being able to take more of them greatly increases your long
term chances.

~~~
jacques_chester
Per Micawber's Principle:

 _Annual income twenty pounds, annual expenditure nineteen pounds nineteen and
six, result happiness. Annual income twenty pounds, annual expenditure twenty
pounds nought and six, result misery._

