There's a new breed of entrepreneurs who are ruthlessly focused on delighting their customers while pursuing their ultimate goal of having freedom and generating 7 figure gross annual revenues without being tied down to managing full-time employees.
How do they do it?
What are their secrets?
What's the catch?
To find out, I have invited Elaine Pofeldt, the author of the new book, "The Million-Dollar, One-Person Business: Make Great Money, Work the Way You Like, Have the Life You Want," to my first live event in NYC at WeWork E57th St. on February 13th for my Meetup group, Growth-Driven Entrepreneurs Worldwide (add the link.)
With Elaine's help, I also was able to invite one of the entrepreneurs featured in her book, Laszlo Nadler, the founder of www.Tools4Wisdom.com as the special guest to share his own journey of growing his business to over a $2 Million gross revenue per year business without hiring full-time employees.
During my fireside chat conversation with Elaine and Laszlo, we covered a wide range of topic from a macro level (big picture scenarios) to a micro (strategy / tactics) level. In this post, I am breaking it down to 5 major takeaways that you can implement in your business right now.
Takeaway #1: Business Plan is a Thing of the Past – Proof of Concept Comes First.
When it comes to the topic of running a million-dollar operation owned by one person, a couple, or co-founders, many would ask, “How do we start?” For those who are currently running a business would ask, “How can I take my business to the next level to achieve this?”
What I learned from the conversation with Elaine and Laszlo is that there are 2 key points to consider. The first one is to get a proof of concept the right way. The second is to start small by continuously testing your idea.
No More Business Plan
Laszlo said, “If you ask any professors at business school how to start a business, they will tell you to write up a business plan and do market research using data from Census or conduct a survey. That might have been OK many years ago, but it doesn’t work anymore.”
So true. One of the major reasons many businesses fail is because entrepreneurs start their process backward without establishing a “proof of concept” also known as “validating your business idea.”
Many tend to make an assumption that what they sell is what people want without any data to back it up. So, they spend money and resources on what they want to sell instead of spending the same amount of money and resources actually talking to potential customers to get insights.
Elaine shared one of the stories in the book. “The couple who runs Brooklinen, which is no longer a couple-operated business now backed by VC funding & full-time employees now, we're starting very small.”
“Rich and Vicki Fulop (from Brooklinen) had no idea how to price their affordable high-quality sheets, frequently went to retail locations such as ABC Carpet & Home and Bed, Bath & Beyond to talk to customers shopping for sheets to learn how much they are willing to spend on high-quality sheets.”
You can read about their success story in the book, but they did not stop there. They even went to coffee shops with their surveys to talk to strangers before deciding on their pricing model.
The message is this, “Ditch business plan and start talking to real people about your business idea and learn how your idea would solve their issues.”
Laszlo certainly did.
How Laszlo started his business was scratching his own itch by creating a uniquely designed planner that helped him stay productive and organized in order to survive his high-pressure trading job at a bank. Then he shared his system (planner) to his friends, peers and family by printing them out at his home.
He gained valuable insights and concluded that, in his own words, “This might be something I can pursue.” After that, he gradually started selling his planner on the side while he was still employed at the bank.
To answer my question, “When did you know you can do this full time?” Laszlo replied, “I was sort of procrastinating on that. But, while I was having a series of conversations with my daughter (then 5-year-old, now 9) about how not wanting to regret about what I haven’t done, it came clear to me that I should just quit my day job.”
Takeaway #2: Avoid “Entrepreneurial Poverty”
“Here’s another ‘confession time.’ No one wants to talk about this, but this is so important. It’s like a dirty secret.”
What Laszlo is talking about is the fact of how many entrepreneurs get themselves into “entrepreneurial poverty.”
“You are hustling and cranking out sales throughout the year. But, by the time you file taxes, you look at your bank account and go, ‘Where did all the money go?’ There’s nothing left!”
Laszlo offered 2 suggestions to combat this “entrepreneurial poverty.”
First, he is currently implementing the “Profit First” method. It’s the framework created by Mike Michalowicz, the author of “Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine.” This is the method I implement with my business as well as my clients’ actively since I read his first edition of “Profit First” in 2013.
The beauty of this method is that the concept itself is not at all complicated. It is something you can start very easily by taking small steps. For more info on this method, check out the list of resources I put together at the end of this post with Elaine’s help.
Second, Laszlo encouraged the audience to find a CPA who understands the Profit First method and has hands-on experience in helping small business owners. More importantly, having an open dialog with your CPA throughout the year to manage finances is essential so that there are no surprises at the end of the year.
Takeaway #3: Delegate, Automate or Delete.
This may be a no-brainer, but if you want to build a business without hiring full-time employees, you need to put a system in place that can undertake tasks that full-time employees would otherwise work on.
From many entrepreneurs Elaine interviewed in her book, she found that they are actively incorporating the practice of “Delegate, Automate or Delete” in their businesses.
“When we talk about delegating tasks, we immediately think of hiring VA’s (virtual assistants), but there are many other ways to delegate depending on what type of business you are in,” said Elaine.
One example she shared was to outsource the entire back office functions such as accounting, product fulfillment/shipping and hiring. By doing so, it removes the headache that comes from managing multiple part-time VA’s as this is a job in itself.
Laszlo depicted the pain product sellers experience. “In the beginning stage of a business, many product sellers start fulfilling orders in their spare bedroom or living room. Soon they realize they can’t live and work by being buried under piled up boxes!”
The most popular fulfillment service is Amazon FBA (fulfillment by Amazon). But, there are many other companies out there who offer unique and competitive fulfillment options you can choose from based on your needs.
Since one-person business operators like Laszlo have no luxury of having full-time employees standing by, they perfect their time-saving hacks to stay super lean and efficient with the running of their businesses.
“What I learned from these entrepreneurs,” Elaine mentioned, “is that their clever use of multiple tech tools that are both free and paid.”
Even small tweaks you can make with your email inbox can save loads of time. In the book, Elaine shares Laszlo’s Gmail hack that can be easily implemented right now.
Also, from our conversations, I noticed that entrepreneurs who are wildly successful often combine and customize different tech tools to streamline their workflow to avoid letting multiple tools take over their lives. This requires constant monitoring on one’s performance to determine whether any of the tools being used make sense.
The pitfall I see with some entrepreneurs is to overload themselves with too many tools that do not talk to each other. In this case, tools become more like a series of disruptions instead of streamlining their workflow.
“We (entrepreneurs) have so many ideas!”
Laszlo continued on to say, “But, we can’t test and tweak all of our ideas all at once continuously. It’s important to consistently focus on what’s working. Once that is under control, you can move onto the next idea.”
Like many entrepreneurs like Laszlo are ruthless about what they say “no” to. They are very clear on what they should focus on and what they need to get rid of. They know very well the danger of endlessly chasing after multiple projects and saying yes to everything. Doing this will force you to work yourself to death, which would be the vicious cycle you were trying to get out of in the first place.
Takeaway #4: Consistently Make Improvements in Your Business to Stay Relevant and Diversified.
Being on a lookout for scaling without stretching themselves thin seems to play a key role in “the Million-Dollar, One-Person” business owners.
Laszlo explained. "4, 5 years ago, the market for planners and journals wasn't crowded. There was so much room (in the market.) But now, there are so many of them! If I start my business now, I had to do things differently."
Laszlo was not saying that it's too late to start a certain business. His message is to pay close attention to what's happening in your market as well as at a macroeconomic level. Having a keen eye to spot opportunities is a must for entrepreneurs.
Elaine covers a few examples in her book where some entrepreneurs who found ways to scale without doubling their workload or increasing their headcount.
So, how did they do it?
There are several different variations, but the gist of it is to "partner up" with other companies.
Any businesses at 7-figure annual gross revenues, buying another business isn't financially sound. You can certainly buy an online business for anywhere from $50K to $200K, but the amount of work involved to get that business unit going with the cost of purchase can be cumbersome and risky. This route can be suitable for high-end of multiple-7 figure businesses.
Whether participating in an affiliate or a straight up JV (joint venture) deal, you as a business owner can tap into a group of audience you don't have a direct access to without spending any additional money or resources.
Yes, in these business arrangements, you will have to split your revenues with partnering companies. (It ranges from 20% up to 75% depending on a deal.) But chances are, acquisition cost of new leads would most likely cost way more than what you are giving up from these deals.
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Takeaway #5: All Successful One-Person Entrepreneurs Regularly Step Away from Their Businesses.
I asked Elaine what kind of commonality she found in all the entrepreneurs she interviewed for her book.
Among many traits, one thing she pointed out that stood out in my mind was this takeaway #5.
Successful entrepreneurs know when to detach themselves from their businesses. They take breaks often by attending business-oriented retreats or by pre-scheduling a few days of getaway trips with their loved ones.
“Not everyone can participate in exotic retreats especially if they have a young family. But, in that case, they tend to schedule small breaks with their family,” said Elaine.
Not only does this prevent them from burning out, but they find answers to challenges they are facing in their business while they remove themselves from work and possibly spend some time with like-minded entrepreneurs who are only a few steps ahead of them.
I know for the fact that many entrepreneurs invest in mastermind groups or retreats that would easily cost $25K/yr. This goes to show that they are committed to learning and growing by investing in themselves because they understand that their ROI (return of investment) of buying access to a community of successful entrepreneurs would have a large impact on their business. In some cases, this helped some entrepreneurs to 2x, 3x their revenues.
[Bonus] The Biggest Secret of All…
Here is what I think the biggest secret to building a Million-Dollar, One-Person business.
They are crystal clear on how their business should function as well as how to serve their customers’ needs the best.
None of them seem to make any business decisions based on their emotional needs. In other words, they are passionate about taking care of their customers AND don’t seem to mind if they need to make changes in their businesses if that means their businesses stay relevant to their customers.
Have you ever watched the show “The Profit” by Marcus Lemonis on CNBC before? If the answer is yes, you must have seen many of business owners on the show crying and screaming, “But… but, my business is my baby! I know my business the best!” when Marcus suggests drastic changes in their business and they hate his idea (because they have to change their behaviors)?
Right. I just painted the opposite picture to make my point.
Successful one-person operators do not behave this way. They are always willing to learn new things and don’t hesitate to make changes for the sake of their customers. That is the secret.
The Links to The Resources We Discussed during the Event
Note: I participate in Amazon Associates Program. Any purchases made through these links may result in myself earning small commissions from Amazon. If you enjoyed this post (and the event if you attended), please know that this is another way to show your support.
Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine by Mike Michalowicz
Profit First Case Study:
Nuromarketing: Understanding the Buy Buttons in Your Customer’s Brain by Patrick Renvoise & Christopher Morin
The Business Model Canvas by 50minutes.com
Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Alexander Osterwalder & Yves Pigneur