Afford Anything - The Million-Dollar, One-Person Business, with Elaine Pofeldt

Episode Date: March 1, 2019

#180: Nearly two decades ago, Stacy Berman, a personal trainer, launched a fitness bootcamp in New York City. She called it Stacy’s Bootcamp. She invited her clients to join her for 5:30 am outdoor workout classes in Central Park. At first, only three or four people showed up. Then the group grew to 10 people. Then 20 people. Then demand grew beyond a capacity she could reasonably accommodate. She hired personal trainers as independent contractors who led additional classes. She limited class size to 20 people who paid $30 to $37 per class, depending on the package they purchased. Her business expanded to Manhattan’s Battery Park and Brooklyn’s Prospect Park. After six years, Stacy’s Bootcamp grossed more than $1 million. The company had zero employees; the other teachers were contractors. Stacy is one of the many entrepreneurs profiled by Elaine Pofeldt, author of the book The Million Dollar, One Person Business. In today's episode, we talk about solopreneurs who make a million without any employees. For more information, visit the show notes at https://affordanything.com/episode180  Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. It applies to your time, your focus, your energy, anything in your life that's a limited resource. You need to figure out how to manage this limited resource. What's the best use of it? And that really leads to two questions.

Number one, what do you prioritize the most? And number two, how do you act in accordance? Answering these two questions is a lifetime practice and that's what this podcast is here to explore. My name is Paula Pant. I'm the host of the Afford Anything podcast. And today, we are going deep into a conversation with the journalist who covers the fascinating niche of one person million dollar businesses. Now, what do I mean by that?

First, when I say million dollar business, what I mean is a company that does gross revenues of one million dollars per year or more. And in this upcoming interview, we're going to talk about what that means for the actual bottom line net profits. And when I say one person, I'm referring to companies that have no employees. Many of these companies are literally just run by one person. Some of them are husband and wife teams or partners. But they are companies with zero employees, lots of contractors, as you'll hear, but no actual employees that gross a million a year or more. This is a small but rapidly growing segment of the entrepreneurial population, the solopreneur population.

What differentiates these companies? What are they doing that has gotten them to this level of success? How do they stand out? And what lessons can all of us learn from this regardless of whether we're full-time entrepreneurs or we have a side hustle or we're W-2 employees? What can we learn from the people who are just blowing? it out of the water. We're going to find out right now. Here's Elaine Poveld. She is a former senior writer for Fortune Small Business Magazine and she is the author of a book called The Million Dollar

One Person Business. Hi, Elaine. Hi, Paula. Elaine, you wrote a book about the million dollar one person business. So these are businesses that have just one full-time employee who is the founder of the business and create at least $1 million in gross revenue per year. How common are these businesses? They're not very common, Paula, these are the Olympic athletes of the one-person business world. The definition that the Census Bureau is the one that I use, so they're non-employer businesses.

They may be partners as well as one-person businesses, so it might be a husband and wife team, two buddies who started a business, et cetera. out of about 25 million one-person businesses in the country, there are about 36,000 that are breaking one million in revenue. So it's not a huge number, but we can all learn from them. That's what I find so fascinating is many of the methods that they use to get there are applicable to almost every one-person business. I'm going to ask about those methods in just a second, but first, you mentioned there's

36,000 businesses, one-person businesses. with gross revenues of over a million. Is that number steadily increasing, staying steady? Is it declining? What are the trends around it? It's been going up quite a bit. It's up about 33% since 2011. The reason it has been going up, I believe, is technology. It's become much more possible for a one-person business to extend their reach to a level that we never dreamed of a few years back. I mean, I remember When I first started my business 11 years ago, I had a web content client, and he asked me to get quotes for his website. He had about a 10-person company. And the quotes, the cheapest quote for building his website, which had some e-commerce capabilities, was $50,000, right?

And we laugh now because that sounds ridiculous. It would be ridiculous today. But certain things have come down in price. There are a zillion things we can do on our smartphones. Think about a credit card processing, for instance. We can do a Facebook live to promote our events. Whatever we happen to be doing, our phone is probably augmenting it. There are so many low-cost technologies now available to the average person who is not a techie

that I think this trend will only accelerate. You identified six primary types of businesses that were one-person, million-dollar businesses, e-commerce being one of them. Can you talk about all six of those types of businesses? Sure. Well, e-commerce is a very popular one. That's one where there is a fair amount of overhead. You had mentioned gross revenue, and I know you're a business owner because of that, right? Because for the sake of folks who might not be exposed to running a small business, revenue and profits are not one and the same. The profits are what you take home after all the expenses. So I'm putting that very simply,

but that's basically it. So you could have a million dollar one person business and be making zero in profits if you spend all your money on Facebook ads, for instance. Ecommerce is one of those areas where people can build pretty high revenue as solo entrepreneurs, but they have inventory costs. They do have advertising costs sometimes even within a platform like Amazon. So the trick with these is not just finding a great product and building up the sales, but also figuring out a way to do it profitably.

And I focus my research on the folks that are able to do it profitably because I feel like we have the most to learn from them. The ones that are burning through money on Facebook ads might not be here tomorrow because they're running in the red. So that's just something to keep in mind. They sometimes have the highest numbers but also the highest overhead. What type of profit margins did you see among either specifically the e-commerce people or broadly all of the $1 million, one-person business? Well, it would really depend on the business. And one thing to keep in mind is when people are bringing in high profits, a lot of times they have good accountants who will advise them on profit reducing strategies, basically. So they're not paying more than their share of taxes. So profits are meaningful to a certain extent, but they vary. And it has to do sometimes with strategies that people use to manage the business. For instance, one common strategy that might be used would be if someone has a non-working spouse, they might employ them as an employee in the business, right? And then that would reduce the profits because of the salary.

Maybe they wouldn't have hired that person if they didn't want to reduce their tax bill. So as far as profits go, I would say when I saw the e-commerce businesses, a good number would be about 200,000 maybe. It would really depend, though, a lot on how much their ad spend was. sometimes it could be 400,000. Not all of them shared with me the exact numbers, but they did tell me whether they were profitable or not. But I would say a good number for a lot of these businesses would be they would be taking home between two and 400,000. Out of about a million in revenue? Out of about a million in revenue. I mean, sometimes out of more than a million in revenue because sometimes they really do spend quite a bit on advertising. But when you think about what is the median U.S. income, I think it's about 58,000. A lot of people would be. happy with 200,000 and take-home income. And that's why the tagline for the book has to do, on Amazon, has to do with bringing home a six-figure income because realistically you're not taking home the whole million. But if you don't hit a million, you're not going to have that take-home income unless you're running a much smaller business very, very profitably. Right. So for some

of them we're talking about at best profit margins of somewhere between 20 to 40 percent, for some lower, but for the ones who are doing really spectacularly, somewhere between 20 to 40%. It depends. You know, it really is sort of a moving target with them because they're constantly doing things, you know, to trying new things to spread the word or they're launching a new product. So it sort of is a moving number. But yes, I would say that sounds about right, you know, with some exceptions. And what are those exceptions? And what drives those exceptions? It would be the ones that didn't make it into the book. that we're spending way more than that, you know, more than the average on advertising.

But you can really, Facebook advertising, if you don't know what you're doing, can really, really add up. And that's very important with e-commerce products. So what happens sometimes with e-commerce companies is they wind up having to hire an agency because they kind of set things on autopilot. And then all of a sudden, they've spent a ton of money. And they realize, even though they didn't want to spend the money to outsource, it's actually better to get an expert in and manage that for them. They actually save money. So those would be the exception. Sometimes with inventory, there might be a requirement. Sometimes they get into brick and mortar and they might have to order a lot of inventory for a brick and mortar retailer. And that could cut it into

their profits, depending on a lot of things in terms of how they obtain the inventory. Tell me about some of the other types. There were six types of Solopreneur, a million-dollar businesses that you profiled, e-commerce was one of those six. Real estate was another one. Yeah, real estate is a fun one, and it's accessible really to everyone who has some savings. There was one fellow that I interviewed Corey Binsfield, who is from Duluth, Minnesota, and he's a financial planner. What he did was he started out when he was much younger purchasing a duplex in a college town and rented out one of the apartments. And then he used the money from that to buy the next property and so on and so on. And now he owns over 100 properties. And they're all

sort of modest investments. But together, they have become his million dollar one person business. And he's been able to keep it very lean. He uses the same office that he was using for the financial planning business for this also. He uses very good handymen and that sort of thing to make sure he's not there fixing the roof if it's leaking and that, you know, he can run the other business too. something that is very accessible to people. Tell me about some of the other industries that you profiled. Sure. Well, one I think that is a big relief to a lot of people is professional services. These are accounting firms, architecture firms, law firms, where people have gone out on their own,

often with corporate experience. And a lot of times they are highly compensated to begin with. And when they go out, maybe they have a network of clients. And instead of, making their money through a big company, they make it on their own. Nowadays, they can work virtually. There are a lot of accountants, for instance, on Upwork, a freelance platform. So they could be working with people anywhere in the world. They also have the benefit of using Skype, which we're using now, right, to do, or Zoom or other tools like that to meet with clients virtually. So they don't have the travel costs they once. Those can be very good businesses for people that are already in them. I think you do need experience.

If you're an entry level attorney, it will be harder to get to one million than if you're 50 years old and you've been doing it for years and you have contact. But you can build up and you can also team up. You could maybe have a partner and still be a non-employer business if that is what you want or you could choose to scale up later and hire employees. But this is an area where your professional skills can really pay off. The other related area is personal services. These would be people like fitness trainers, nutritionists, the wellness area in general.

One woman, Megan Telpner is a nutritionist, and what she did was she started blogging about topics that she was very passionate about. She had been ill with Crohn's disease early on in her 20s and was working in advertising at the time. And it was a very stressful career. So she wanted to do something where she could heal, went back to school, studied nutrition and then started sharing what she knew in the blog about healthy eating, healthy cooking. She started out with this $10 product, the three-day green smoothie fast. It was literally a PDF file. This was like 11 years ago, so we didn't have as many digital products. And she sold it to her email list, which was like the people in her email.

Basically, it wasn't even a CRM. And then when it did well, she started selling it to more people. And then that led to other types of digital products like courses. Then she started the Academy of Culinary Nutrition, which was a school for the people that wanted to learn her cooking methods. And now she does business coaching as well. And she scaled a little bit. I think she currently has one or two employees, but she did get to one million on her own. And that's another point I should make, which is I'm not against hiring employees. Sometimes people, when I was fact checking the book, they'd say, Elaine, I'm so sorry.

I don't want to ruin the book. I hired an employee. And I think that's because the point of this is, these are lifestyle businesses. And the point is to bring in enough income to have a great life and to have time, too. And if the way you need to bring on someone to do that is as an employee, then more power to you, you're creating a job. It's awesome. I'm not against it.

But the reality is many one person businesses don't have the cash flow to support an employee. So what do you do then? I mean, you cannot just take on somebody as an employee and then fire them in two weeks because your client didn't pay you. It's just not right. Not to mention the paperwork involved with creating a job and all that stuff. So usually what happens is these businesses use contractors. Maybe you don't need your bookkeeper all the time. You just need them for four hours a month or your web designer.

You need once a year to do your website. And then you don't talk to him or her for the rest of the year because you don't have any design work. that's often how they extend what one person can do. And it's quite easy and accessible nowadays because of the platforms like freelancer.com and people per hour and upwork and hire my mom. There's a whole bunch of them. Sometimes they're very specialized. And that enables them to manage their cash flow so that they are creating work for other people.

But they're also not overextending themselves. And then they have money to invest in growing the business. There's also informational marketing, which is sort of ancillary to these other two. So this area would be things like e-books, webinars, courses, teachable courses, are an area where people are doing quite well. There's a lot of competition, of course, right? You have to have a really good course.

But there are people, I often find teachers are very good at designing them because they know about curriculum design. So they bring that with a knowledge of business. And sometimes those courses do quite well. Within the realm of professional services and personal services, what strikes me about those as compared with something like a course or an e-commerce site or rental real estate is that one-on-one personal services are not scalable. Like that's a perfect example of working in the business rather than working on it. How can a person in a business like that grow their revenue and continue to scale? even when the crux of the business is them being the person who provides X, Y, Z service?

There are a lot of different ways to do it. One example is Stacey Berman, who maybe 15 years ago in New York City, started a boot camp. I think it was called Stacey's Boot Camp. She's been on some panel events. She is a personal trainer, and she taught the boot camp herself through all kinds of weather, no matter how cold it was, they would show up. And it was this really tough. This is before the whole boot camp fitness craze kicked in and there was a lot of competition. Eventually, she was getting tired of teaching all the classes herself, as you could imagine, and the elements in New York City, it's cold in the winter. So she brought on some contractors, and that was how she scaled. And then eventually, you know, she's doing a different business now where she's selling a drink. It's like a protein drink, but it only contains the powder, not the liquid. And you end. the water so it's more portable. So she handed over the business to one of those contractors who's now running it and is the

owner of it. So that's one way. Another way is you can increase your prices. If you can justify premium prices, then you can scale the business without a lot of other people. So if you're the best personal trainer in your city and you're that good and you have clients that are weaving about you, maybe. you charge $500 an hour.

It's hard to do, but there are some people, I saw this with coaching and consulting. If you can show results and quantify them and you have candid supporters, sometimes that's accessible. That's much harder to do than what Stacey did. Another thing that I see people doing is they try to scale the sharing of what they know. So, for instance, if you're a yoga teacher, there's only so many yoga classes you can teach. Even if you charge $500 for a private lesson, there's a limit to how much time you have. So what are you doing in that situation?

You might create an informational product that shares your knowledge with the wider audience. So you could create a private video course for your students that they can access when they're traveling, for instance, or the people in other cities can access and charge for it. It could be a software as a service model where they pay a certain amount every month. sometimes people will do an Instagram blog and they become influencers and the influencers will get paid sometimes for mentions in their Instagram feed. You could do it that way. I know I get offers. I don't accept them, but for Twitter, sometimes people apparently get paid for mentions in Twitter. So there are different ways that you can do this if you're an influencer

and you're a thought leader in what you do. But the thing is you have to have something to differentiate yourself. So this isn't accessible if you're maybe brand new to the field. You're just learning your way. It would be very hard to do. You have to have some following. You have to excel and what you're doing. And that can take a few years to get to. But it's something that you can aspire to as you grow the business. So one of the things that I'm hearing within your answer is that not all of these businesses can be neatly fit into a category like this is an informational product business or this is an e-commerce business or this is a personal services business. It sounds as though a lot of them are hybrids between those various categories. They are. Yeah, Paula, that's a great

observation and no one has ever pointed that out. But that's one thing I've always noticed is that these are very creative thinkers and they're really not limited by how their type of business has been defined in the past. And partly technology is enabling that, right? Because you could be an accountant specializing in a very niche area of accounting and then do a webinar and greatly expand your revenue. I had to attend something. I write for credit cards.com where a very detailed area of credit card law had changed. And they asked me to attend a webinar. And I believe what I paid for that to attend was $200 to learn about this new law. There were 600 people on this webinar. It was two attorneys, and they kept on re-airing it and charging the $200 every time the people came on.

So they were making a lot of money from their knowledge, and they weren't TV personalities or anything. They were just regular attorneys. So that's the type of thing that if you're a creative professional is accessible, you do have to learn about it or you have to hire somebody who knows about it. Maybe you hire a webinar company and that might cut into some of the profits from doing it, but it doesn't mean you wouldn't make any money from it. And when you think about it, you could be sitting down with one client for that one hour it took to record the webinar and charging, say even they charge $600 an hour, which I know some accountants do in New York City.

I'm in the New York City area. You only made $600 and then you have your overhead, right? But if you're in that hour, you have a whole bunch of people on that webinar, you're making. a lot more from sharing that same knowledge, plus your impact is greater. We'll come back to this episode after this word from our sponsors. Do you know what company is America's largest independent natural product company? It's a company where not a single product or ingredient has been tested on animals, and they're planting a million trees by the end of 2020.

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to be represented among one-person million-dollar businesses. Those are e-commerce, informational content companies, personal services, professional services, and real estate. What's the sixth category? Manufacturing is another category where one-person businesses are breaking $1 million in revenue. This is a really interesting area. Sometimes people come up with a food product in their home and then learn that because of food safety rules and that sort of thing. You can't make applesauce in your home and then sell it on the shelves of Walmart or somewhere like that.

So what they do is they turn to a copacker. And a co-packer is a factory that produces it properly, puts a labels on so that it can sell in a big retail store, et cetera. You can do this in a lot of areas. There's one company that sells honey, tropical traders, specialty foods that use a co-packer. Birch Bender's a pancake maker, they use a co-packer as well. And I found out about a new one that isn't in the book, but I've written about booby bars. The woman who runs it is a nurse. She's a neonatal intensive care nurse, and she was running a lactation group for new moms,

and she realized they needed a nutrition bar to keep up their energy and milk supply. And so she started baking them in her home and selling them informally to the women in the group because she was getting so many orders. And people were saying to her, you should manufacture these. And she took them seriously. But how is she going to do this in her home? She had no business experience whatsoever. She went out and got a copacker.

And she actually got them on the shelves of Walmart. And my kids always tease me because they say, shouldn't say the name of that company on the air, but then I think, well, Walmart is pretty conservative and they carry the product. So it was not too direct for Walmart. It's not too direct for me. But she's doing great with that business as well. So that's an area that is very accessible. Now, there's a site called Makers Row where you can find resources if you would like to manufacture. And that's something that I see a lot more businesses using. There's also Alibaba. Alibaba is a very big site. So sometimes it's a little harder to navigate for somebody who's

new to the business world. But it's definitely out there. And there are also many consultants. So if you need a, say you need to manufacture in China, you could hire a consultant to check out the manufacturer to make sure that everything is as it seems and have more confidence in building the business. And we'll link in the show notes to all of these resources that you're mentioning. One of the things I really enjoyed about reading your book was finding out about all of these resources, because several of the things that you mentioned, I was already familiar with. But there were other resources that you mentioned, like Makers Row, that I never knew existed. That was a new one to me, too. In doing the interviews, I really dug into that because I find these keep coming up by the day because of all the growth in the tech space.

And the things that were relevant before, like SurveyMonkey, still are relevant, but there's even more new stuff that's coming out. And if you ask around, you'll find out about some great things. One of my favorite ones that is kind of an everyday thing that I use is Globify. And it's a conference bridge. And a lot of people use free conference call.com. Why this one is good is it has phone numbers for each country. So if you, like you're speaking with someone in the UK and you're in the U.S., they dial in from a U.K. phone number, you dial in from a U.S. number, and you need,

on the bridge. And so no one has to make a pricey long distance call. So it saves a lot of money. Sometimes you don't want to use Skype because of connectivity or that sort of thing. So that's something I found out about from a startup that was using it. And I thought, wow, this is awesome. And I really converted over to using it for international calls. I love these type of things. So if readers come across them, or I should say listeners come across them, please write to me on LinkedIn and let me know because I love these things. The appendix has a lot of them, but there's always more to add, and I like to know about the best ones. Absolutely. And in the show notes, we'll link to a lot of these, because as I was reading, I was taking notes of, oh, that's a cool resource that I didn't

know existed. Oh, that's another cool one that kept coming out in the stories. They were really generous about sharing what worked for them. I found these entrepreneurs. A lot of times when I've reported on corporate businesses, they're so close to the vest about their secret sauce, but no one really covers the one person businesses. So they seemed really happy to be able to talk about what was working for them. And I think they also realize there's only so much that you can do as one person. So why not share the knowledge and be part of the community? And that was really nice and refreshing.

I really enjoyed that aspect of the research. Oftentimes when I talk to people about business, people will use the question, how many employees does your business have as a proxy for how well is your business doing? did you find that there was a bit of ego damage to the fact that a business is one person even when it's hyper profitable? It's funny. I think because of the lean movement that's going away, I definitely know as a journalist who's covered entrepreneurship for many years is a bias in favor of employer businesses. It's hard to pitch a business that doesn't have employees because that is one of the things that is a proxy. And sometimes businesses don't

want to say what their revenue is. So they'll say, well, I don't want to share my revenue, but we have 15 employees. And then you can sort of mentally do the math of would it cost have 15 employees in that business and come up with a rough guesstimate in your mind of what they might be making. And often business publications will allow you to go with that. But I think more and more people are proud of being lean. And they're proud of their lifestyle. So they are proud that they don't buy into the mentality that you have to have sort of the old school brick and mortar type business. There is a little bit of a stigma, I think, about using contractors sometimes because of some of the abuses in the gig economy. There's a lot of pride people have in hiring traditional employees.

But realistically, I think a lot of these solo entrepreneurs know that they wouldn't have the cash flow in the early years of their business to hire an employee. and they're happy to contribute to the freelance economy. Right, absolutely. And that's another economy that is also growing. How long did it take on average for a business to start and then grow to the point where it was making $1 million in revenue? That's such an interesting question because they were all over the map. Paula, there were some that were like 10-year overnight success stories. And then there were some that wrote to me and got there in one year.

and I think it really depends on a few things. One is how much time you have to put into the business. An example, Laslo Nadler is a dad. He started tools for wisdom planners on Amazon, and he started it on the side while working as a project manager at Bank of America. His wife was an at-home mom with two little kids at the time, and so he couldn't just throw everything into the business because he had a lot of financial responsibility,

plus he had demands on his time. So he started the business very, very small. small on the side. I think he said the first year, I know he made less than $15,000 from it, but he was testing and refining his products. He grew it to the point that it brought in six-figure revenue, and then he felt comfortable leaving his job and going full-time. If you're a parent with kids, independence, and a mortgage, it might take you longer. There were others in the book, Camille and Ben Arnerberg, our young couple, newlyweds, They didn't have children.

They grew their store, Willow and Everett. It's an Amazon store very quickly and wrote to me that they had met the mark within a year. And I think that's because they had a lot of time to put into it. So I wouldn't beat yourself up if it doesn't happen in a year because people have lives. And the point is not really the million dollars, right? Profits are very important. But also your lifestyle is if you're working a zillion hours a week to get to a a million and you can't see anybody or have fun or exercise or do anything, then what's the point?

So I would take it slow and build a sustainable business gradually and then you'll have something every year that you can rely on. That actually segues perfectly into the next thing that I wanted to talk to you about, which is advice for people who want to start their own one person business and gradually scale it up until the point that it makes its first 10,000 in revenue, and then it's first 100,000, and then it's first million. You offered a handful of tips in the book, one of which was to start it as a side hustle when you're not working at your day job. I think that's a really important thing to do because when you look at statistics, many Americans cannot save $400, right? They're not making enough to really save. So how do you start a business

if you really are just breaking even with your personal expenses? You really have to do it on the I'd say you have some cash flow because you need some runway with the business. If you give yourself like one month for a business to survive and it doesn't take off, then you'll have to give up on your idea prematurely. So you're better off taking a kind of conservative approach to it and chipping away at it. And then as you see that the idea catches on, then you can employ more resources towards it in terms of time and money and decide how far you want to take it. The other thing is you need to test the product market fit or the service market fit, and that takes time. And you might not get it right the first time. Maybe the product is right, but your marketing is wrong. And you need a

little room to experiment. And when you have a job, then you'll be able to do that without too much risk. If you have a spouse or a life partner who has money coming in, you might be able to just quit and work on it. Everybody has such different lives that does not one blanket rule. But I would recognize, you never cut off your other sources of financial security because it might take a year for it to take off. And it would be so sad if you really had a great idea and you have to cut it short because you ran out of money. Absolutely. So what would be step one? Let's say you're listening to this podcast and you're thinking, I really want to start a business and make, heck, let's just say make my first 10,000 this year. Where do you begin? Well, you need something to sell, right? So it would be a

product or service, and then you start trying to sell it, basically. I know that sounds hard, but the essence of running a business is selling something. And if you're not selling something, then it's still a hobby, right? So what I did with my business, I'll tell you, on the first day, I called all the people I knew who were freelance writers. And I said, I'm starting a freelance writing business, even though I've been an editor and have employed freelancers for years, I don't actually know how to run a freelance writing business. What would you do? They suggested reaching out to certain contacts who might need freelance work. One of them actually didn't want to do an assignment that was given to him and referred me to his editor. And they kind of got me set up just by giving me advice.

One of them said you should read this newsletter called freelance success. So I subscribe to that. It was $99 a year. And it was interviews with editors who needed work and I did get some work from that. I also spent three hours a day because I didn't have that much work the first few months on marketing. So I fleshed out my LinkedIn profile. I put up a simple website. I put up a profile on Media Bistro, which was a marketplace for my type of work. There are different marketplaces for different industries or I would have coffee with somebody to do sort of an informational interview or find out about work that they had available. And I consider that marketing because it was. And some of these things you would do would lead nowhere

and then other things would lead somewhere. And you never really, I never really knew until I tried them. That's why I say it's good to have some income coming in while you're doing these things. But that's what I would say marketing is really important. People need to know you're in business. but you also need to have something to sell. So if it's a product like Laslo Nadler, he needed the planners to sell first. So he had to do the product development with a service. I already knew how to do the service that I was doing.

And a lot of these people already did. If they were a fitness trainer, for instance, you still have to tell people that you're doing it. Which is hard, by the way, a lot of people are not used to selling, right? Because they work in corporate America and there are silos, and there's a team that does the selling. and they're very insulated from the selling unless they happen to be a salesperson.

So you can feel a little awkward doing this. But if you go into it thinking of yourself as a resource, think about how can I help people? What am I really good at? What are their challenges in their life or in their business? And how can I do better than anyone else at solving them? And how can I make them feel really good about working with me and just happier that day from having had contact with me? If you kind of go into it with that attitude, then work will start flowing to you. And the other thing I would say is even if you get the tiniest project, it can lead to more.

Usually people will test you out with a small project. They don't want to do a $50,000 engagement if they haven't done a $600 mini project, right? Because they really don't know you. So don't look at those tiny projects as being beneath you or too small. I'll knock it out of the park on every single one, no matter how prestigious the client is, make them feel really good about working with you, be easy to reach. I mean, just the business basics, but people sometimes are a little lost when they start a business and they don't think about all of these aspects because there might have been support people doing some of this stuff.

So that stuff is important too. With something like freelance writing, there isn't very much initial overhead. The overhead comes in the form of time rather than equipment or product. But with some other businesses like Tools for Wisdom planners, physical planners that get mailed to people where they fill out their calendar with paper and pen, there are some real upfront costs there. How do you make a decision about how much to spend, particularly at the beginning? Well, I think you should do small tests. That's what I found with most of the e-commerce merchants. In Laslo Nadler's case, he did print on demand. So he experimented with several printers, but if you do print on demand for a printed product,

it will reduce how much you have to spend. In the case of other types of products, like say you're ordering seven products from a manufacturer in China that you're going to sell on Amazon, maybe you order 100 items of each and then test them out to see which ones are selling. And then you could, if some of them are not selling, try reducing the price to clear out your inventory and then reinvest that into the other products. You have to decide what is your budget. Like maybe in the case of Camille and Ben Arneberg at Willow and Everett, I believe it was $5,000 for their initial budget. And they rationalized that they had been to college recently. That's what a college course costs. And they would learn at least as much as a college course. But they also had saved the money. So they could afford to lose it. they decide this wasn't money they needed for groceries or their rent and they could afford to risk it because there is an element of risk in a business. Sometimes I have people who come to me with businesses that would have very, very low overhead, for instance, a videography business and they think they have to raise capital for it.

But you do have to put some of your money into a business in order to raise capital. And you probably wouldn't be able to raise capital for the amount that a video camera would cost in any case, but they don't realize that you do have to risk some of your own money. I mean, that's why entrepreneurship is not for everybody. You have to have some risk tolerance. Not everybody does. Or maybe your risk-loving side is in some other area of life and not your financial life. Maybe it's in athletics or something like that.

It doesn't mean you're a boring person if you don't want to be an entrepreneur. But you do have to go into that realizing you're going to make mistakes. Sometimes they're going to cost you money. You do have to put in money up front, and you shouldn't really try it until you're at that mental point where you can do that and still sleep at night. So it sounds like start with small bets and don't invest more than you're willing to lose. Exactly. And the bets can be very small sometimes. Maybe you don't even have to order 100 items in some cases.

The other thing is you can try, if it's a brick and mortar business that you want to start, say you wanted to start a restaurant. you should never first just start a restaurant to first test that and see whether people other than your family like your food, right? Do a small catering service or do an internship in a local restaurant offer to come in and work for free for a couple of weeks on your vacation and see if you like what it's like. And if your skills are up to snuff, because you really have to market test things before you spend two or $300,000 on that type of a business to get started. the idea is to really reduce the risk as much as possible by getting data on how the market is responding to what you offer. It could be that there's something through no fault of your own that you didn't think about. Like maybe there's too much competition in this space. You know, maybe you're a great yoga teacher, but there's already 15 yoga studios in your city and

there isn't really room for another one. So you need to sort of know that, but that's the kind of thing you could find out by maybe working as a contractor in other yoga studios for while and seeing what the landscape is. We'll come back to the show in just a second, but first, by now, I'm sure you've heard of meal kit delivery services. These are companies that do the meal planning and the shopping and the prepping. They send you exact ingredients and step-by-step recipes so that that way you can cook meals from home without having to do the time-consuming meal planning and grocery shopping. So you're probably familiar with this concept, but maybe you haven't tried them out yet because

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Listeners get three months free when they run their first payroll. Try a demo and see for yourself at Gusto, dot com slash paula that's gusto gusto.com slash paula p a ulla in all of the interviews that you conducted what was the 80-20 of what these entrepreneurs did what really drove results because we've talked about a lot of different tactics but where did that power come from i would say they focused on different things in their business but what they did do a lot of them did seem to have sort of a mono focus like this is today's number one priority. And they did have a strategy.

A lot of times I see one person businesses do not have much of a strategy. They're sort of scrambling from project to project or sale to sale without ever stepping back and saying, hey, where is this business going? Where do I want it to go? Sometimes you don't know, but without really giving that any thought. And these folks are very strategic. That's one thing I found was different about them than the average one person business. they often have coaches.

They invest in their own education as the business grows. Some of them join masterminds. And to be honest with you, when I heard about masterminds, I thought it sounded kind of scammy or something. But from what I've heard from those who participated in them, they actually get a lot out of them. And they really raved about them. And a lot of them said that they got great insights that helped them to grow their revenue, not just in this book, but other entrepreneurs I've interviewed. So that's something to consider.

Sometimes they'll go to events that have a pre-selected audience of entrepreneurs who are about the same level in revenues so they can really learn from them or very industry-specific events like e-commerce. They're constantly learning about how to run their business better and they make time for that. They also make time to step away. There's a lot of meditators in this group and people that do a lot of mindful activities. And I think that's really important to step back and not just be at your laptop all the time. I'm working and really have some distance and say, you know, all right, this product is selling, but it's not profitable. Should I keep on selling it? Or should I try to introduce a more profitable product? They really do think that way. So one of the things that I hear you say as you give

that answer is that concept of essentialism. You pick that one metric or that one strategy that you're pursuing, that one goal that is supreme above all of the other things that your business could pursue. And that's where the focus goes for as long as. it's appropriate. Yeah, I think they tended to be very focused. People always talk about entrepreneurs having ADD and that sort of thing. But if any of these folks did, they were reining it in. Because think about what it really takes to get to one million in revenue. You really have to be focused on the business side to some extent. That was one thing. I did a panel at the 92nd Street Y in New York City, and we had several of the entrepreneurs speaking. And one thing that struck me

was their financial literacy. There was several that had business degrees, but even one of the panelists who did not, he was a big advocate of profit-first accounting, they really do think about the numbers. It's not that the numbers are the only important thing to them. They have a lot of passion for what they sell, but they do focus on that.

In addition to the core purpose of the business of creating a product people want or selling a product people want and getting it to the, customers. Do they tend to spend more time focusing on the top line or the bottom line? Profit. They're very focused on profit, but especially in a field like e-commerce, you need bigger numbers to have the profit. That's why sometimes I'll hear from people who might have a professional services business and they're in that zone of like $500 to $800,000. And they might have very high

profits. So they'll say, should I try to get to a million? They may not need to. to live the lifestyle they want, they might have such high profits that it's completely unnecessary. I mean, you may want to see how far you can take your business, but you have to balance that against the costs of your time and freedom and other things, too. So I would encourage listeners to think about how much you really need. You don't have to be a multimillionaire to be happy, but you do need some profits. It's not really worth running the business. Right.

And what strikes me about the notion of earning somewhere between 200 to 400,000 in net profit from a million in revenue is that that's up there with high, high corporate salaries. Exactly. It's a good alternative. For somebody that is really hardworking and focused, it's a very good alternative. Now, there are people that make those big corporate salaries that need a lot of structure in their life. They would never be able to set their own agenda in the way that these folks do. They just, they like being. part of a team. They're great leaders. They're great in their subject matter. They're great performers, but within that context. So it's an alternative for some, but not everybody. You really have to be self-motivated. And not everybody is. And it doesn't mean you're a bad professional if you're not. It's like, you know, some people will go running and train for a marathon on their own. Other people need to have a personal trainer come to their home. They're both going to get fit. But they need different ways of doing it to be successful.

What other takeaways would you want to emphasize for the audience, particularly for people who want to start their own solopreneur journey? I would think very hard about what gives you meaning in your life because your business will take up a lot of your time and your mental space. So just starting any business, even if it seems lucrative is not a good idea. You have to pick something you're passionate about it doesn't necessarily have to be your life's number one passion. In fact, you might not want to start a business around your number one passion. For instance, if you're a dancer, maybe you just want dance to be your art and you don't want it to be a business, that's fine. But maybe there's

something else that you're interested in that you would like to turn into a business. I would think along those lines, because if you don't find it meaningful every day, then you're going to regret it because you're going to have to be thinking about it all the time. It was kind of interesting to me. Alan Walton, who runs Spy Guy, a spy camera shop, really loves spy cameras, right? One thing he said to me at one point was, you have to think about what type of customer service calls you'll be handling, right? Like, do you want to answer calls about spy cameras? Some people who love spy cameras would. Me personally? No, I wouldn't because I'm not very technical. So it's important to think about that. Will you like talking about it with customers?

Will you feel good about selling what you're selling? Do you feel proud of what you're selling? All those things affect your life and your happiness. And the point of these businesses is to give you a better life. And it's not just money that matters. So it sounds like find the intersection between what you are interested in and what the market wants. Exactly. Yeah.

And that takes some experimenting. It doesn't mean you failed if you don't get it right on the first try. A number of these entrepreneurs tried. many things before they found their perfect business. And by the way, sometimes the perfect business changes over time. Market conditions change. So once you start it, even if it's going well, you have to really stay tuned into what's happening in your space

because things are changing very fast. You might find the perfect business for now is not the same one that you'll want to be running in two years. Maybe you're going to morph it a little bit into something different. I know in my own business, for instance, I'm a journalist primarily. In recent years, I've gotten more into ghost writing, which I found I really enjoy it. Just sort of came up when some people read my writing and they wanted to work with me. I hadn't really thought of myself as a ghost writer, but then I started doing it. And I thought,

wow, I really love getting inside the minds of these clients. They're really interesting and different from me. And I've been ramping that part of my business up. I never thought I would 11 years ago. I never thought I'd even be doing ghost writing. But I also saw what's happening in journalism, a lot of media organizations are troubled. So I could say, well, I'm only a journalist. I won't ever do anything else. But what if they're all gone, right? So you have to stay open to change.

And it sounds easy. It's not easy because sometimes your identity is tied to what you see as your professional work. I think to be in this sandbox with these high revenue solo entrepreneurs, you have to be a little bit flexible and stay open to new operations. opportunities and be willing to try things. I experiment with new things in my own business. They've inspired me to do it. And sometimes they just don't work out. You know, you try them and for whatever reason you don't have the interest or people don't want to buy that product or the market dries up. That doesn't mean failure. It just means you have more knowledge of your business. And if you have

an attitude of perpetual learning, you may come up with some new way to get to one million that someone else hasn't thought of. Some of these businesses, by the way, are so quirk. There was one entrepreneur. He's an auditor of the bills from ships that transport clothing to stores like JCPennings. Apparently there's a lot of errors in these bills. And they're very big errors, like $250,000 errors. So he created a business where he finds the errors and reports it to the company. And then he gets 50% of what's recovered.

And he's a one main fan. It's a brilliant model. It's similar to like a medical negotiation firm, but on a larger scale. That's something I had never heard of before. And there's probably very few people doing what he does, right? You know, so you may be in some sort of quirky niche that very few people have mastered. And what he's done is he was doing it all manually. These are, I guess the bills are public documents. But now he hired a developer to scan the documents more efficiently. So now his business is really scaling because the work goes a lot faster. So I would say, you know, stay open to your own unique and quirky and weird talents because there might be a really great market for them. He's really happy in his business. What I hear in that story is that the riches are in the niches. Yeah, it's true. The deeper you go into a niche, the more people will know you as being good in that niche, assuming you are good. You have to pick the right niche. But once you find it, the deeper you go, the more efficiently you can work too, right?

If you, like when I'm writing about small business, entrepreneurship, and careers, I write about those all the time. I do other types of reporting too, but then I have to do more research to get up to speed on the issues in that industry. And so it takes me longer. Therefore, the job is less profitable. It doesn't mean I don't want to learn that knowledge and add it to my repertoire. But in terms of pure efficiency, every time I write about what I already know, it's more

profitable because I just have that background knowledge. And that's true really for any field. Right. Final question. You started your freelance business about 11 years ago. Now, you have four children. And I know that you also work out sometimes up to twice a day. How do you run a business, have four kids, work out twice a day? Tonight you're going to a nice dinner with some couples, so you've got a social life. There seems like you're doing a lot. And there are a lot of people who, when you introduce the idea to them of starting a business, they will say, well, I can't because of X, and they will name all of the demands on their time. But you've been able to do that. What strategies would you share? I would say you have to really want to do it. I wanted to be able to work from home. When I started

the business, I had had my twins were premature and they needed certain therapies and that sort of thing. So I felt like it was important for me to work from home so I could be there. Then I really found I liked the lifestyle. So I actually worked out at work from home arrangement from my corporate job for the first four years. I had kids. I did work full time. Then I had a second child and they were very flexible and that was great. Then I started to feel like as my kids got bigger in my life was just all logistics and I was not enjoying my work as much and I wasn't enjoying my family life as much as I wanted to because there was so much coordination. And so I thought I need to do things differently.

And I really wasn't open to full-time freelancing mentally before that. But then I said, I'm going to make it work because I want this arrangement and I will do what I have to do. There were times when I had a new baby or whatever and I was waking up in the middle of the night or whatever. It was harder to do than other times. But as they got bigger and they were sleeping through the night, usually what would help me was getting up at 5 o'clock in morning. Now, if you're not a morning person, that might sound terrible. But for me, I thought, you know, I need to make a living. I want to be here for my kids. This is my number one priority. I'm going to make it happen, even if I have to drink three cups of coffee to do it. And now they're

bigger. I have two, my twins are, they just started high school. I have a 12-year-old and I have an eight-year-olds. I have kids in three different types of schools. They're a little more self-sufficient than they used to be. My son is still little. But I try to focus on what's most important. I think about every week, like, what do I really need to get done? What projects are the most important? How can I move them forward? What are things that are on my plate that I really regret taking on? You know, so I won't do them again. Sometimes you take on a project not really knowing where it's leading and then you think, oh, I'm going to deliver it as best I can, but my passion just wasn't there. Or it just took 10 times more legwork than I priced into the project or whatever it may be.

you just reevaluate. I try not to do a lot of things that I don't want to do. I've learned to say no. One benefit of having four children is people do understand. You know what I mean? I like to volunteer. Like I study taekwondo and here and there I'll help out teaching. There's a children's Taekwondo class when the main teacher is not available. I'll try to volunteer at things that my children are involved in. But there are moms in my community who are almost like full-time volunteers at the school and they do amazing work. I wish I were like them, but I don't have the time to do that. So I realize this is not my season for doing heavy volunteering. I do it sporadically when I can. I'm not a perfectionist about, you know, being Martha Stewart. I can live with a

little mess. You know, I know some people can't, but when you have four kids, you literally be cleaning every single second of the day. I try to be relaxed about the things that are not earth shattering. And then the other thing is with exercise, since you asked about that, one thing I've been doing this year that really helps is I put it into my calendar automatically, like every week I exercise at the same times. And so it appears there, and I use schedule once, which is an app for booking my schedule, and no one can book appointments during those times. So then I think, oh, you know, and I kept those times open, I better go to yoga or whatever. we just got as a Christmas present a Peloton bike. So today I had to do some paperwork and I couldn't

go to the gym or anything. So I just, I use that bike for the second time. And that's, I think that's going to be a nice thing to have. I had an elliptical trainer. I still have it. My home is under construction so I can't get to it that I bought at the time I had the twins. And that was a Godson for me in terms of being able to just do something when I had a lot of screaming babies all that was. So, I could at least jump on it for 20 minutes and then maybe later in the day do it do more. But I also try to combine things with my kids. So I take taekwendo with my daughters. I was driving them there and sitting there.

And then I noticed there was some parents in the class. And I thought, well, this isn't really my type of sport. But since I'm sitting here anyway, I might as well try it. And even if I'm terrible, I'll just do it for the exercise. And then I got hooked on it. And we all got our black belts together. And so now I really love it. But I would encourage them to,

you know, look for opportunities to fit things in where you can include your family so that you're not taking time away from them and feeling guilty. Not that you shouldn't have some alone time, but realistically, I almost never do have completely alone time unless I'm working out. So you have to work with what you have. But the core of it all is commitment. You have to want to. There's no obligation to want to have a business. But if you really want it, you're going to be creative and figure out how to do it. You'll be like sometimes I work on Saturdays because my kids have something during the week. Today my son had a school visitation day, right?

So I miss part of the morning and I didn't get something done. So I'm going to be getting up at 5 o'clock in the morning tomorrow on Saturday. Some people wouldn't do it. But for me, the big picture is I want to make a good living and I want to be there for my kids. And that's like my mantra. So you sort of need to know what you care about. It could be you have a pet that you want to spend a lot of time with. It could be you want to volunteer or you want to train for sports or whatever it is.

Once you have that core, why, it'll be much easier. That's perfect. Well, thank you so much, Elaine, for spending this time with us. Thank you, Paula. This was wonderful. You asked some of the best questions ever. Thank you, Elaine. What are some of the key takeaways that we got from this conversation?

Here are four. Number one, be proud of being lean. Many entrepreneurs and small business owners and people with society. hustle, think that they are not running a quote-unquote real or a legitimate business until they have the exterior trappings of a business, until they have an office space that they rent and employees, full-time employees who work there, preferably a lot of them. People often use these as indicators as a proxy for how well your business is doing. So the questions, how many employees do you have or where are your office is located?

Those questions are often proxies for, are you legit or not? But as Elaine describes, the people who run million-dollar one-person businesses are not embarrassed about the fact that they do. In fact, they're quite proud of the fact that they've been able to run a lean, successful startup. Sometimes businesses don't want to say what their revenue is.

So they'll say, well, I don't want to share my revenue, but we have 15 employees. And then you can sort of mentally do the map. of would it cost have 15 employees in that business and come up with a rough guesstimate in your mind of what they might be making? And often business publications will allow you to go with that. But I think more and more people are proud of being lean and they're proud of their lifestyle. So they are proud that they don't buy into the mentality that you have to have sort of the old school brick and mortar type business. So key takeaway number one is that if you are running a

business or a side hustle or if you think that you might want to at some point in the future, don't conflate what other people perceive as success with actual success. Actual success is what your balance sheet looks like in a financial sense. Of course, actual success is more than just that. It's what are you contributing to the world? What meaning are you bringing? How are you impacting people? But financial actual success in your business is shown in your P&L

statement and in your balance sheet, it is not shown in having a good answer to cocktail party conversation, an answer that might impress people even if your business is running on fumes. So that's key takeaway number one. Key takeaway number two. The purpose of building a million dollar business is not to make a million dollars or even to net $200,000 or $300,000 or $400,000. That's nice. When you build a business, because they'll a business is hard. You need a purpose that's bigger than that. And for a lot of the entrepreneurs who have built successful million-dollar one-person businesses, their purpose is grounded in something bigger. It's their lifestyle. It's their time. It's their freedom, their autonomy. It's what they

are able to do because they have this business that is working for them rather than them working for it. The point is not really the million dollars, right? Profits are very important. But also your lifestyle is if you're working a zillion hours a week to get to a million and you can't see anybody or have fun or exercise or do anything, then what's the point? Now, when we talk about lifestyle, I want to be clear, these are actively run businesses. These are not passive businesses. These entrepreneurs are working very, very hard. But fundamentally what they have are lifestyle businesses.

They're not trying to scale. They're not trying to get outside investors. They're not hoping to one-day IPO. they've built a lifestyle business, and that business exists to do good for their customers, for their contractors, and for themselves and their own families. Now, when I talk about not having ambitions to scale, to take on outside funding to IPO, I'm not talking about thinking small. On the surface, it might sound like that, but really there is no contradiction between leaning into your business and keeping your business lean. So that is key takeaway number two. Key takeaway number three.

For those of you who are listening, who work full time, and that is the majority of this audience, you are in the best position to start a business. Because when you have a job, when you are currently employed and you've got that steady paycheck coming in, you've got a safety net. Your business doesn't have to be profitable on day one or in month one. Because guess what? It's not going to be. So you get to test and iterate and try and go through all of those beginner learning curve iterations. You get to do that while you still have the security of a paycheck coming in. So if you try starting a business and the product isn't right or the marketing isn't right

or the service that you're offering just isn't resonating, cool. Try it for a few months and if it's not working, tweak the idea and try it again and try it again. And you can keep doing that without being stressed out about how to keep the lights on and keep groceries in the fridge because you have a job. And that's why while you're employed is such a good opportunity to get this thing going. The other thing is you need to test the product market fit or the service market fit. And that takes time. And you might not get it right the first time.

Maybe the product is right, but your marketing is wrong. And you need a little room to experiment. And when you have a job, then you'll be able to do that without too much risk. Your job, your day job, is an infinite runway for as long as you have that job. So if you're interested in building a side hustle and then seeing if you can scale it, if you're interested in becoming a solopreneur or developing a lifestyle business, give it a go now. During your time off, commit five hours a week just to get you going.

And yes, you're going to be busy. You're going to have to give up going out on Friday. nights, but that's the trade-off. And in exchange, you get to build something cool and exciting and something that's completely a creation of your own. Your business is an extension of you that you put out there in the world. So that's key takeaway number three. And then key takeaway number four, be strategic and be focused. If you have an entrepreneurial spirit, you most likely also have a little bit of shiny object syndrome where you see more opportunities. And this is a good thing. Being able to see opportunities is a huge blessing. But the way in which it can work against you is when you see so many opportunities that you don't know which one to take action on or you take action on one for a little while and then you switch to something else and then you switch to something else so that you can never make concentrated progress on just one thing. The differentiator of people who run one person million dollar businesses is that they're focused and they're strategic.

They do everything with intention. A lot of them did seem to have sort of a mono focus. Like this is today's number one priority. And they did have a strategy. A lot of times I see one person businesses do not have much of a strategy. They're sort of scrambling from project to project or sale to sale without ever stepping back and saying, hey, where is this business? going, where do I want it to go? Sometimes you don't know, but without really giving that any thought. And these folks are very strategic. That's one thing I found was different about them than the

average one-person business. They often have coaches. They invest in their own education as the business grows. Some of them join masterminds. And so that is key takeaway number four. Be deliberate, be intentional, be strategic, and stay focused. It's better to do one thing well than a zillion things half-heartedly. Thank you for tuning in. If you enjoyed today's episode, send this episode, send a link to this episode, to somebody who you know, who is a business owner or who is interested in entrepreneurship, soloprenorship, freelancing, side hustling.

Share this episode with them. You can get a link to the episode and the show notes at Afford Anything.com slash episode 180. That's Afford Anything.com slash episode 180. Also, don't forget to hit the subscribe button. in your favorite podcast playing app, whatever you're using to listen to podcasts, whether it's Spotify or Pandora or Stitcher or Apple Podcasts, hit that subscribe button so that you don't miss any of our upcoming episodes.

Speaking of which, what is coming up? I can tell you now what the next four interviews are going to be. I can finally say it because they're all recorded. So coming up on the show, we have Jill Schlesinger. She is an esteemed CBS News analyst, and she is going to talk about 13 dumb mistakes that smart people make with their money. We also have Todd Herman joining us on the show

to discuss the alter ego effect, how embracing an alter ego can allow us to improve our performance and get better results not just at work but also at home with our families. Best-selling author Daniel Pink is going to be on the show

discussing the scientific secrets to perfect timing. And a couple by the name of Mike and Lauren are coming on the show to talk about how they reached financial independence at an impressively early age. All of that is coming up on the Afford Anything podcast. So make sure that you hit subscribe in whatever app you're using to listen to podcasts. And while you're there, please leave us a review. Thank you so much for tuning in.

My name is Paula Pant. This is the Afford Anything podcast. I'll catch you on Monday.