When did we become obsessed with the Start-Up?
It must be at some point after Apple, and maybe even after Amazon that everyone glorified the incredibly rare unicorn company built out of a garage. We bought the story and have been chasing it ever since.
Despite the stories being astonishingly rare, if doing something doesn’t come with the sexy story of the Series A, the 10x growth, or “the Exit,” we, collectively, can’t seem to help ourselves from giving off the subtle impression that there’s something to be ashamed of if you simply enjoy doing a thing and getting paid for it by the hour. Today, it is far more acceptable to be a wannabe Zuckerberg, talking about disruption in a hoodie and sandals than it is to be a booked solid freelancer who enjoys their work. Its not big enough or ambitious enough…apparently.
If you don’t know what I’m talking about, look at our media. Look at our obsession with raising money, nailing the big pitch, or growth (profitability. numbers not included, social good not included). Go to a local startup networking group and you’ll see how much we focus on growth and user acquisition. Everything has to get bigger and bigger.
But, what’s really wrong with freelancing? Why exactly does everyone need to be the CEO of a startup?
I think we chase the dream for two reasons.
1. We’re scared of being called a failure or looked down upon. With all of these stories of startup success, will anyone be impressed with my little rinky-dink operation?
2. We’re scared for our future. Will I be able to afford retirement or healthcare? We may we posture like it’s a desire for luxury cars, yachts, or property, but underneath that, the bigger fear is not having enough, and in this country, you can never have enough.
This is America. Fend for yourself.
I started my agency True Voice Media in March 2011. In December 2017, I signed the papers agreeing to be acquired by a larger agency. Then, in July 2019, I left the agency.
It was time.
When I left, I knew that I wanted to do something very different. I knew I wanted my life to feel different. I knew that some things had to change.
For one, I’d been working WAY too many hours for WAY too long. I was constantly burned out and overwhelmed. On top of that, I’d been feeling a lack of purpose in my work for some time…though I still enjoyed many aspects of my work, most notably the leadership parts. Compounding matters, my wife and I had just moved into a new house and were planning to start our family. In short, everything was simultaneously falling into place and being displaced at the same time.
All of that led me on a path of self-discovery. I needed to figure out who I wanted to be in my career.
I talked with many brilliant people and let them pick me apart. That was a great decision. My therapist was also a critical piece in getting my thoughts in order.
Why do we work for ourselves?
Everyone has a different reason for making the jump.
- Some people are just tired of having bad bosses.
- Others grow weary of office politics or various work culture issues.
- Some people just want to have the freedom to set their own schedule.
For me, and I’m sure many others, it’s a combination of all of those things. However, underneath all of those reasons, it is because of my desire to change something in the world.
I have never felt comfortable in an environment where I need to run my ideas past someone before making a difference. It’s just not in my DNA, I was neither born with, nor have I learned along the way, the patience to wait to take advantage of my dreams. Quite frankly, I hope I never learn THAT lesson.
Today’s post is for…
Today’s post is for those who have been feeling the itch to start something but maybe don’t know where to start. It’s for people trying to figure out what type of business they should start and wonder what the first step is. If you have been thinking about working for yourself, for whatever reason, I want to make sure you have the tools to do it. So, I’m going to tell you how to start a business like mine, a company of one.
But, before I tell you EXACTLY how to start a business like mine, and give you the full step-by-step instructions on how to do it in 7 days, I need fill in some additional context as to why and when I think starting your own solo practice makes sense.
We’re going to start with some basic concepts in business and economics.
To conduct “smart business” in our society requires one to understand some fundamental truths about how our economic system is structured.
Our system is setup, our incentives are aligned, and our culture rewards the maximization of profits. The premise of how to do this is simple. You must increase your revenue and decrease your expenses, both to the fullest extent that is possible. That is the formula for profit maximization.
As an owner, your job is to limit expenses—including depressing wages—as much as you can without causing your business to lose the resources and talent necessary to compete. This also means that you should maximize your income by selling your products, your own labor, and reselling the labor of your employees at the highest price customers will bear.
This results in the business creating a margin between what it pays out and what it takes in. This margin is known as Profit.
The owners—or capitalists—pay for labor out of the income or initial investment, and are then entitled to all of the remaining profits. It is explained that they are entitled to these spoils in exchange for having taken the risk of investing in the business.
Trust The Market
As legend goes, when everyone participates in the market and engages in competition, this mythical, intangible thing called “the invisible hand”—created by everyone acting in their own self-interest—will maximize efficiency yielding maximum economic and social benefits for everyone.
In this market, wages are (supposedly) set by supply and demand.
In the market, if someone else will pay your people a little more than you will, or offer some other benefit that increases their quality of life, you risk losing them. This is a case of the demand for talent pushing market wages up to adjust for the limited supply of talent. The supposed result is that the employee’s quality of life improves, and the competing company acquires better talent at a fair market price—which is still the business paying the lowest wages they can get away with.
It is considered inefficient to pay your people too much. The market supposedly optimizes for efficiency. Paying too much will make you less competitive in your market. Cutting into your “margin” to pay more produces several consequences.
- You reducing your working capital which potentially inhibits your ability to reinvest in your company.
- It increases the amount of revenue you’re required to generate in order to sustain operations.
- You risk ceding a possible market advantage to your competition.
At the same time, as the owner, if you aren’t making enough revenue to cover all of your expenses, you have to do one of the following:
- Not pay yourself so you can pay your labor costs
- Layoff, Fire, or otherwise reduce the size of your payroll
- Take on debt to sustain operations
- Shut down the company
Also, it’s worth noting that you’re also incentivized and encouraged to minimize your tax exposure so that you keep more money for yourself and less in the hands of Uncle Sam (hooray civic participation!).
The net result of all of this is that you seek to increase your market power by taking actions that maximize profit. Doing this gives you greater flexibility for investments to continue growing and competing.
Wages are not tied to the value of our labor but rather the wages that the market dictates and if you remember what I told you before, these wages are allegedly the product of the market delivering the best social and economic benefits.
This is the myth.
We don’t live in a vacuum despite the fact that so many people can’t breathe in this environment.
The myth of the invisible hand of the market never told us about market power and manipulation.
The reality is, we all have to eat. The reality is we largely have no social safety net. This means that it is incumbent upon all of us to maximize the amount of money that we earn and set aside to provide our own safety net. As a result, we’ve created a culture where the best option is to continually seek to earn more and more and more. No amount of money is technically enough in this system to guarantee your safety. The system is dependent upon growth and you need to grow with it to keep up. There is no ceiling, there is no floor. Poverty is punished, and wealth is celebrated.
In a system predicated on competition and growth, where no amount of money is enough, and where the owners in the system reap the largest rewards by extracting the marginal value on someone else’s labor, the players in the market are incentivized to maximize revenue and pay the lowest wages possible, not find efficiency. Prices go up, wages stay flat or decrease. There is no maximum benefit in this market. There is only maximum benefit for a few at the expense of many.
Back to reality…
The reality of running your own company requires…
- You must make at least enough money to sustain operations
- You should try to make as much money as you can to cover all of your living necessities and create some sort of safety net for yourself to prepare for aging, potential health issues, and other planned or unforeseen financial obligations
- If you have employees, you must pay them. You decide what to pay them. It is in your own best interest to pay them as little as possible, for your own benefit and the financial sustainability of your business
If you want to stand a chance in this environment: pay out as little as you can get away with, and bring in as much as you can so as to maximize how much you keep to fund your life and provide some sense of safety.
This is the macro lens of how business fits in the world and what it means to run a successful business.
No matter what, if you live in this country, you must participate in this system. And while I absolutely hate that this is the best we’ve come up with for society, there are still have options in this reality, that do not require buying into the myth.
Growth vs Lifestyle
While I concede the point that paying my team members as little as possible so that I can keep the largest possible margin by reselling their labor is good business, I also think it’s immoral. If their labor has a certain value, they should be paid for it, not me. If I kept it, I’d be exploiting their labor for my gain, and I’m just not comfortable with that as my gain requires their loss.
You don’t have to agree with me, but that’s how I feel and adhering to that let’s me sleep like a baby at night.
But, here’s an even more practical reason for going solo that should be totally uncontroversial…having labor costs means that I would need to generate even more clients to cover costs or be stuck with the aforementioned options of not getting paid, firing people, taking on debt, or closing the business. #IHaveBeenThere
After years of busting my ass to cover payroll, I had a startling realization: I can make a really good living and maintain a very nice lifestyle by maximizing my revenue and decreasing my expenses in another way…by working by myself, for myself. Instead of earning revenue from other people’s labor, I just increase the value of my own labor to maximize my income. Instead of decreasing expenses by depressing wages, I got rid of wages and run my business lean. While it doesn’t really afford the same path to scale and extraordinary wealth, that’s never been what motivates me anyway. Is that ok with you?
In January 2020, I launched my solo consulting, speaking and training practice (JGibbard LLC) and my solely owned and operated training and consulting business, The Superhero Institute.
- By freelancing, I have zero labor costs. When I work with a partner, I simply pass through those costs to the client without taking a margin. When I hire another freelancer to do something for me, I pay them the rate that they set.
- I work with clients 3 days per week even though “hustle culture” tells me I should work 11.
- I work from 10am-6pm even though “hustle culture” tells me I should be up at 4am, and put in a few hours every night after 7pm when the baby goes to sleep.
- I am selective about who I work with. If I weren’t, I could generate more revenue, more quickly.
Is any of this “smart business?”
According to conventional wisdom, probably not. But I don’t care because remember, I sleep like a baby, and I also make enough money to live a nice lifestyle…and I only work with clients 3 days per week.
How I do it
So to recap, here’s why to start a company of one.
- You keep more of what you make
- You don’t need as many clients
- Reduced operational complexity
- No labor exploitation
So now that we’ve covered why, we arrive at the crux of the post, how to do it.
Well, I’m sorry to disappoint you, but I won’t be showing you how in this post. That’s the bad news.
The good news, is that I’ve built an entire playbook on The Superhero Institute to show you how to build a business in just 7 days.
Even better news, the follow-up playbook will be how to become profitable in under 45 days.
If you’re still interested, go get the playbook here.