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The Rise Of The Million Dollar, One-Person Business

220 pointsby josephbyalmost 12 years ago

18 comments

OldSchoolalmost 12 years ago
In our industry, it&#x27;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&#x27;s or other investors.<p>If it&#x27;s a sustainable pace and you don&#x27;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.<p>Bottom line, there are an infinite number of places to end up between being nobody and being a Zuckerberg&#x2F;Gates&#x2F;Jobs and really, most of them can provide a good quality of life.
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tunesmithalmost 12 years ago
I think about this a lot - I made the jump from salaried worker to self-employed programmer&#x2F;freelancer&#x2F;contractor&#x2F;consultant (depending on how you look at it). But I&#x27;m doing enterprise-level architectural programming. It&#x27;s not very amenable to productizing, so I&#x27;m basically stuck being paid for my time.<p>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&#x27;ve been at that ceiling for a couple of years now - nowhere close to $250k .<p>It appears the way to transition out is to bump the rate up significantly so it doesn&#x27;t appear you&#x27;re trying to compete with agencies - maybe around $200&#x2F;hour or 6k-8k&#x2F;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&#x27;t awesome. And I really like my clients and I hate hustling, so I stick with where I&#x27;m at. This higher rate I&#x27;ve had for the last 2-3 years is nice and all, but practically what it means is that I&#x27;m projected to be able to retire at age 65 instead of age 75. It&#x27;s not a dramatic difference in lifestyle.<p>So instead, I&#x27;ve just been trying to amass a larger emergency fund outside of maxing my retirement savings every year. And then I&#x27;ll do something with it... what, I don&#x27;t know.<p>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&#x27;t really the limiting factor behind a retail operation, it&#x27;s the actual retail product idea, and I don&#x27;t really think that way. What&#x27;s left is real estate, but I&#x27;m regularly told I shouldn&#x27;t even bother if I&#x27;m not a fix-it handyman sort, which I&#x27;m not. So I&#x27;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.
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yogoalmost 12 years ago
&gt; <i>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.</i><p>It was refreshing to read that. Even for an apartment it&#x27;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&#x27;s almost as if they have never heard about anything other than W2 and pay stubs.
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mililanialmost 12 years ago
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&#x27;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&#x2F;revenue for a single sole proprietorship. However, count in rent, materials, utilities, etc... my family was probably making about 70k a year in today&#x27;s dollars. The fishing boat, though, is another story.<p>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&#x27;s dollars. After all expenses were paid and done, my dad would make about $100-120k a year on a decent year.
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mhartlalmost 12 years ago
It&#x27;s nice to see coverage of an exciting trend (of which I&#x27;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 &quot;million dollar company&quot; as a company with a million dollars in annual sales is absurd.
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larrysalmost 12 years ago
One thing I will add to the discussion of someone running a 1 man &quot;type&quot; business (which would include both 1 man and 1 man plus some helpers part time, sub contractors, 1099&#x27;s whatever) is that while the upside is capped the downside is also clipped.<p>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.<p>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&#x27;t going to lose much either.<p>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).
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skuealmost 12 years ago
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&#x27;s difficult to know whether that reflects a true rise without comparing against historical data.
josephbyalmost 12 years ago
It&#x27;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?
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jerealmost 12 years ago
&gt;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.<p>I have to agree, since I find it mind boggling that one-man construction firms are making millions.
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FollowSteph3almost 12 years ago
This is revenues and NOT profits&#x2F; so a real estate holding firm may have high revenues but not large profits because of the mortgage costs ;)
cityhallalmost 12 years ago
These numbers seem pretty misleading. What we&#x27;re interested in are businesses that are started from scratch and derive their income through their own brand identity. What we&#x27;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.
pageldalmost 12 years ago
There isn&#x27;t anything related to farming on there. Seems odd, especially when they&#x27;re just talking about revenue and with how much money is in that sector right now.<p>At 6.60 &#x2F; bushel corn @ 200 bushels per acre, it &quot;only&quot; takes 760 acres of corn to break the $1M revenue barrier. 760 acres isn&#x27;t necessarily a lot and can be definitely run by one person, especially with some contractor help.<p>It probably has something to do with what&#x27;s classified as a Non-Employer, but it just seems like it should be there.
shunteralmost 12 years ago
It&#x27;s interesting that technology businesses didn&#x27;t appear in any of the top grossing slots. I suspect this could be because they get lumped into professional &#x2F; scientific.
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antidailyalmost 12 years ago
<i>26,744 had sales between $1 million and $2.49 million (up from 24,945 in 2010)</i><p>That&#x27;s really not that many. And not that big of a rise considering the recovering economy.
csomaralmost 12 years ago
I see some flaws in this analysis.<p>- Point 1<p><i>26,744 had sales between $1 million and $2.49 million (up from 24,945 in 2010)</i><p>It&#x27;s a 7% rise, in a year. Those who are in the $100k-$250k range, rose by 6%; not much of a difference.<p>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.<p>- Point 2<p>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.
smrtinsertalmost 12 years ago
Real estate agents or brokers don&#x27;t have the double taxation that we do right? Meaning they wouldn&#x27;t have to pay corp&#x2F;llc and employee tax?
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frozenportalmost 12 years ago
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.
michaelochurchalmost 12 years ago
The details behind the article show a less appealing reality than what we might hope for. Yeoman capitalism hasn&#x27;t killed off VC-istan just yet. A lot of these $1M&#x2F;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&#x27;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&#x27;d be happy with a regular upper-middle-class income if freed from subordination and its attendant mind-rot.)<p>Let&#x27;s stop talking about revenues and figures of &quot;$1 million per year&quot; (because there are a variety of context factors-- geography, profit vs. revenue-- that make us question what that really means) and instead talk about <i>growth</i>. This is where it gets interesting. We can look at the growth&#x2F;risk spectrum between gambler&#x27;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.<p>If you want to push for 150-percent-annual-growth-or-sudden-death outcomes like a sociopath gambling with others&#x27; money, ambitions, careers and dreams, then there are VCs will fund you, your pathological gambling, and (in most cases) your shitty personality cult. (That&#x27;s the high-risk, high-growth route.)<p>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 <i>getting older</i> because you&#x27;re so disconnected from the real work that no one knows what you&#x27;re worth) then... good news, that is available too. (That&#x27;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&#x27;t make it.)<p>What no one is talking about is the mid-risk&#x2F;mid-growth range... 20 to 40 percent annual growth with <i>some</i> volatility, but not likely to ruin lives <i>en masse</i>. (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 <i>no one</i> is funding that region of the spectrum. But that&#x27;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.<p>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 &quot;equity&quot;) in the high-risk VC-istan space. No one seems to have any clue how to fund the mid-risk&#x2F;mid-growth space, but that&#x27;s where the future <i>actually</i> lives. See: <a href="http://michaelochurch.wordpress.com/2013/03/26/gervais-macleod-17-building-the-future-and-financing-lifestyle-businesses/" rel="nofollow">http:&#x2F;&#x2F;michaelochurch.wordpress.com&#x2F;2013&#x2F;03&#x2F;26&#x2F;gervais-macle...</a>
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