The Myth of the Successful One-Person Business
(This post originally appeared on Entrepreneur)
There was once a time when it was just me. I was providing computer services. I was working a lot of hours. But I wasn’t making any money at it.
Today, I’m making money. Why? Because I’m supervising 10 people who are providing computer services for me. I’m making money off of them.
Want to quit your job and be a freelancer, a one-person shop? I have bad news for you, and you need to hear it now, before it’s too late. You won’t be able to make a lot of money if you’re running a one-person business. Maybe, just maybe you might make a living. But that’s all. Why?
First, let’s do the math. There are only so many hours in a week. If you’re a single person and you charge even as much as $100 an hour, you could earn up to $5,000 in a 50-hour week. That means $20,000 per month or $240,000 per year. Ka-Ching! But this is not reality.
For starters, there’s no way you’ll be able to charge for 50 hours per week. Because you are alone, you will need to spend time doing paperwork, administrative tasks, and, most importantly, looking for more work when the current job runs out (and they always run out). You will easily spend half of your time doing that.
This means that you may be able to make about $120,000 per year, which isn’t bad. Except you’ll have expenses, like rent, transportation, repairs, supplies, computers and whatever else. Your expenses will probably run a few thousand a month, so let’s assume after expenses you’re netting about $80,000. Then there’s taxes, and not just federal. There will be state, local, real estate, school, tolls, export, import, duties and those hard-to-understand fees on your cable bill. So lop about 30 percent off that $80K and you’re down to a net living of $56,000.
Those are the hard, hard numbers. Still want to do this?
Well, if you do, then you can’t do it alone. You will need people.
And not salespeople. You are the salesperson. You say you’re not a good salesperson? Tough. Because you’re the only one credible enough to talk to a customer.
It’s your business, your craft, your specialty, your expertise. In the end a customer is not buying from your business. They’re really just hiring you. You’re the product. So you’ve got to be the one to sell. If you don’t like selling, don’t start your own freelancing business.
Business owners that succeed are at their core good salespeople. Bill Gates is a programmer at heart. But to build Microsoft he sold Windows. You can’t afford to hire a salesperson. And no salesperson will work for you on just commission.
What you will need is a partner, or two or three. You can’t do everything. So you have to find others that do things that complement your craft. You’re an independent software trainer so you partner with a few independent IT professionals. Or you’re a lone CPA who specializes in taxes so you partner with an estate lawyer. Maybe you’re a roofer so you partner with a masonry guy.
Everyone has their specialty. Maybe you refer work back and forth. Or maybe you do the work together as a team. Maybe you decide someday to actually go into business together. You pool your resources and your talent, and together you can offer more.
You will need people working for you, just like I learned years ago. This is not easy. You’ll have to stop providing the services yourself and rely on others to do it for you.
At first you will hate this. You will think that no one can do as good a job as you. You will have a difficult time letting go. You will want to always be “busy,” and to you being “busy” meant doing the actual work. But gradually you will learn that it’s more important to keep other people busy while you find more work.
When something needs to be done you will eventually stop thinking to yourself, “how will I do this?” and instead start thinking, “who will I get to do this for me?” Your clients, at first, will resist. They will want you because they love you. But they’ll get used to it. You’ll figure out how to transition them.
As new clients come on board, this problem will eventually go away. At some point you’ll admit that the people you’ve hired to provide services are actually doing a better job than you. Hiring people smarter than you is how you will make money. They are good at what they do, and you will be good at finding them more stuff to do so clients will pay you for their services.
So go ahead. Quit your job. Be your own boss. You may make a comfortable living. But if you really, really want to succeed and make some real money, you’ll find that you won’t be able to do it by yourself.