Opening Credits

Charged Up! podcast: What makes a one-person business thrive


Financial journalist and author Elaine Pofeldt describes the difference between a $1 million, one-person business and one that is just getting by

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Finance writer, author and columnist Elaine Pofeldt has interviewed dozens of successful entrepreneurs who aren’t just getting by in their businesses, but making more than $1 million in the process. They’re not growing their company with employees, but rather growing their reach through smart moves that allow them to earn big bucks while still working from home. In this episode, Pofeldt breaks down the findings in her new book, “The Million-Dollar, One-Person Business.”

So, let’s get Charged Up! about learning how to run a successful one-person business!


JennyHoff:  Elaine, thanks so much for doing our podcast today. It’s fun to actually get to talk to you on the phone and instead of just via email.

ElainePofeldt:  Oh, it’s fantastic. I’m really honored to be on Charged Up. Thank you so much, Jenny.

Hoff:  So I’m excited to talk about your book. And I want to start off though first with your background and why did you decide to write this book?

Pofeldt:  Sure, I’m a business journalist who has been writing about entrepreneurship and careers for many years, and I came across some interesting statistics from the U.S. Census Bureau a few years ago. They showed that there were entrepreneurs who are breaking $1 million in revenue in businesses that employed no one but the owners.

Hoff:  Wow.

Pofeldt:  Yeah, it’s incredible, because I know the statistics on other one person businesses and it was quite a bit higher. And I got curious so I started poking around in the stats and it broke them down by industry, so things like retail, manufacturing, etcetera.

And I posted a blog about them, and got a huge response. I had a lot of people writing to me saying, “What exactly are they doing? I know you said that they’re in retail, well, what are they doing in retail?” So I was not able to get that data from the census bureau because they like to protect people’s identity, understandably.

So I wrote to people through the blog, and I said, “If you’re one of these entrepreneurs, well, people are curious. What are you doing? How are you doing it?” And they started writing to me and that was about three years ago.

Hoff:  Oh, wow.

Pofeldt:  And I started doing a series of articles on them. And ultimately that led to the book. And it’s published by Random House, and it’s called “The Million-Dollar One-Person Business.”

Hoff:  Yeah, and I want to talk about there, in the book you used the term ultralean business a lot. And I guess this is this one person business. What is a business like that look like?

Pofeldt:  Well, one of the interesting things about nonemployer businesses are they are not somebody locked away in a garret by themselves. There is one person who is doing the full-time work in the business, but they may be working with contractors, they may be outsourcing certain things, they may be using automation. So it’s not a lonely pursuit, it’s just a business where it doesn’t have formal W-2 employees.

And the million-dollar ultralean businesses are the ones where the owners are extending what one person can traditionally do. So when you look at the typical one person business, if they really max out the output of the owner they can probably get to maybe $250,000 to $400,000 if they’re successful, depending on the industry, there are different outliers, different industries.

But it’s hard to go beyond that, and when you see business growth programs to encourage business to scale they focus often on this sweet spot of businesses with the potential to grow. Though million-dollar one-person businesses have gone beyond that, and they’re not using the traditional methods of scaling which entail hiring W-2 employees. They’re using other methods to extend their budget and to extend their reach, often using the best of the digital tools that are out there today.

Hoff:  And I definitely want to about that, because I was thinking a lot of times how I’ve talked to financial experts and I’ve talked to business people, and when you’re doing a one-person show and you don’t show up, you’re sick or something has happened in the family, there’s no money coming in. And they’ve often said that you’re limited to how many hours there are in a day. But to get to that $1 million mark, it really can’t be your hourly work output, and it has to be something more.

So I want to go into this in this conversation about how these people took it from making $200,000 or $250,000 to making $1 million. And is it through creating new products that create passive income? Is it through outsourcing it, hiring people in other countries, or hiring freelancers? How did they get to that next level?

Pofeldt:  That’s a really great question, Jenny. I think it’s the one that people wonder the most. They are not trading their time for dollars. The one exception would be I have come across people like business coaches and consultancies where they do charge a day rate for instance, but they charge a very high day rate and they are able to back it up with results.

So people are not going to pay $10,000 a day if you’re a run-of-the-mill business consultant. But if you can demonstrate that with all your other clients you help them double their revenue in one year or something like that, then you have a pretty good selling proposition because your services will pay for themselves. So that’s the one exception.

But I would say for most of the businesses that can do this, if they’re in a service business they will productize the service business. So they might have some sort of informational product that they sell, it might be something like an e-book or they do webinars or something where they’re selling their expertise. They have to put the leg work in upfront to create the product, which takes time, and there might be an investment of money. But then once it’s done they market it and they’re reselling the same thing over and over again.

They could also do a sort of recurring revenue model where they have a subscription. So for instance if say you are a business coach and you have a following, maybe you have a coaching call with a certain number of people every month and they pay a subscription fee to be part of that.

There are so many variations on the theme, but they’re not saying, “I will give you one hour of work for a hundred dollars.” That’s not how they think, and that’s really the difference.

To your other point which is a very good one, that is the challenge of the one-person business is you kind of are the business and you may have all your contractors and team and systems in place, but if you are very sick for instance you do have to plan ahead for that, because there really is not much of a social safety net for freelancers in this country unfortunately. And that was actually one of the main impetuses for the book.

I’ve been a freelancer for 10 years, and I saw freelancers put into the tax system but they don’t get unemployment. And when you think about this – what if someone is a contractor and they work for only one company most of the time and that dries up? Their whole income is gone; they’re hurting just as badly as someone who lost their job. But there’s no one there to help them out. They don’t get severance.

So they have to build their own social safety net by earning more. And I think this is the gap in a lot of small-business owners’ thinking. And just for the sake of round numbers, well, say they made $100,000 in their job. They think they need to make $100,000  in their business to live the same way. They don’t. They really need to make about $140,000 because I looked this up the other day, the cost of replacing your benefits averages about 30 percent.

And then you also need to build some cash reserves because your clients may not pay you on time, you might have to buy your own health insurance unless you get it from a spouse, which many people do but not everybody does, and it’s really, really expensive.

So you have to build a little bit of a wall around yourself, and that’s why I’m trying to help people through this book to think a little bit more carefully than many of us are inclined about our finances. The cash flow of the business and are we making enough revenue to really live the way that we want?

It doesn’t mean being greedy and I have to make a million dollars, because if you make a million dollars in revenue, depending on what state you live in and your tax bracket and if you’re married and your spouse has income, you might be bringing home $300,000 or $400,000, which is great, it’s way above the median income in the country, but it’s not a million dollars.

So the point is to just build some security for yourself so you’re not worried about retirement, you’re not worried if your child has to go to the dentist and it costs a couple of thousand dollars. These things are not crushing burdens that you have to worry about.

Hoff:  Absolutely, and I think that’s why your book is very interesting because you do really have to get up there in the higher figures of revenue to still have a good quality of life. It’s not like you’re going to, like you said make a hundred thousand dollars, OK, now I’m great. You have to pay taxes on that, you have to pay for your benefits, you have to pay for any kind of overhead that there may be, whether you’re hiring freelancers or maintaining a webpage or whatever that is.

So what would you say in your research were the kind of more successful types of businesses, like what field were they in? Was it consulting, was it retail, was it creating a product? What was it that seemed to be able to scale up to a million dollars quicker than others?

Pofeldt:  Well, there were six categories that I identified after interviewing a lot of entrepreneurs and really drilling down into the census data. The six categories were e-commerce, manufacturing, and look, I know manufacturing sounds counterintuitive, so we’ll get to that later. Informational content creation, that would be things like self-publishing books, webinars, that sort of thing. Professional services and creative businesses such as marketing, public speaking businesses, consultancy. Personal services firms is another one. They offer things like fitness coaching.

And then the sixth one is real estate. There are people that are investors in rental properties for instance that can do quite well. We had one entrepreneur in the book who he over many years purchased 116 rental properties in Duluth, Minnesota, starting with just one, and he built a nice business for himself doing that. And he actually is a skateboard; he skateboards around his community looking for properties to buy. He calls it skateboarding for dollars.

And which one will scale the most quickly really depends on where you have professional experiences, where your interests lie. Whether you have money to invest, because for instance e-commerce you might need to buy inventory for that, you probably do.

So you need to have the money for that, whereas some of these other things like professional services you could start by putting up a profile on a platform like Upwork, Freelancer, People Per Hour, and start getting business and then build from that. And you don’t have to invest a tremendous amount other than say a computer and a phone and any software you need for that business.

Hoff:  Speaking about investing in your business and you write for as well, and you talk a lot about advice for people who own businesses and how to avoid getting into bad situations with their credit cards or what’s the best process for taking credit cards, etcetera. What would you say are the most six ways to fund your business in the beginning? And is it using credit cards, and if it is using credit cards what kind of credit card should they be looking for in order to do this.

Pofeldt:  That’s a great question because people really do run into trouble with this if they don’t understand the realities of being in business the first and second year. It’s very, very hard for people to just quit their job and start a business and live on what they make. People have done it. I’m sure you can find thousands of examples of people who lost their job and had to do something; they somehow started a business and did fine.

But it’s kind of a stressful way to start out, a lot of people that get into that situation wind up running out of cash and they panic. I don’t recommend starting a business using credit cards if you don’t have other financing available. So say maybe you have a working spouse or you’ve saved a lot of money and you can probably cover three to six months of living expenses with what you have as well as your business expenses.

But you need to invest in a piece of equipment for your business and you want to finance it. That makes sense to use a credit card for, but I would not try to finance the whole thing on a credit card. Like if you wanted to start an e-commerce, I would not recommend charging up your credit card and ordering inventory you don’t know if you can sell and not know how to pay that back.

If you have the money to pay it back and you say, “OK, I’m investing in this business. If I lose this $20,000 I have the money to pay for it. It’s not going to prevent my family from eating dinner.” Then that’s OK. But sometimes people will ask me like, “Should I invest with this amount in the business,” and it’s their only money in reserve. I don’t think that’s a good idea.

And I think in that situation when you really don’t have other money, I don’t think it’s a good idea to charge up your cards either, the reason being that you will still owe the money if the business fails. People think that because it’s a business credit card that they can somehow get out of paying the bill if the business fails, they cannot. Because usually when you take out a small business credit card you must personally guarantee the debt.

And in fact you know this because you’re my editor at, one of our most popular questions is how can I get a credit card without personally guaranteeing the debt or without giving my Social Security number.

The reason that the credit card issuers don’t want to give cards under those circumstances is they want to be paid back. And in many small businesses the owner and the business are one and the same. Most businesses in the United States are one-person businesses, and who are they going to go after? They don’t want to lose that money they loaned to you.

And it’s a debt, when you borrow money you’re promising to pay it back. So you have to go into it with that spirit that you’re giving your word and you’re going to pay it back. When things can come up in life, you can come ill and then you’ll have to find a solution to that. But you really are responsible legally for this debt.

So you have to think in that way. And I don’t think that everybody does, because there are a lot of myths about things that have to do with business and credit. So I’m really glad you asked that.

If you don’t have credit and you need a little bit for business, sometimes very young people who just have a no-track record with credit cards, they’re in that situation they want to do a startup. You can get a secured card, that’s sometimes a good option. If you can get any card at all though, then if you use it very responsibly pretty soon as you generate revenue in the business and you start showing for the last 12 months or two years you’ve been really responsible with the card, you’ll start getting offers and you’ll be able to get the credit you need.

But the one thing that will really derail you really you is if you ruin your credit by charging up your cards and you can’t pay them back, because then maybe the business will be going along well and you actually need the money to reinvest and grow and you won’t be able to get the credit. And that’s a bad position to be in, so you have to be sort of a credit card nerd in the beginning.

And just be really scrupulous because that’s an asset, your credit is really an asset. And one of the interesting things I found with this book is even though these people are running businesses that are breaking $1 million, a lot of them bootstrap, which means they financed the business out of cash flow and they are very averse to borrowing money. And I think it’s because of experience, they’ve just learned you don’t want to be in debt over your head.

Even if it’s for a good cause, I mean it’s wonderful to pursue your dream to start a business, but you have to be patient too. And these things don’t happen overnight, I’ve had some cases where people wrote to me and they did it in a year. But then other people are like the ten-year overnight success story.

Hoff:  Yeah, exactly.

Pofeldt:  So you have to be willing for it to be either.

Hoff:  Yeah, and I think that’s a really good point. I also want to talk about it, because there’s a lot of people I know who are either stay at home moms or they have a job and they’re trying to start a side business. And for instance they’re in one of these companies where you can sell the company’s product but you have to buy that product upfront. And I know there’s a lot of warning signs out there about don’t buy, don’t get in over your head if especially if you don’t have a good network available to sell to.

But I know a lot of them do put those products on their credit card. So even in that case you would recommend just don’t do that – either have the cash up front, get it from your family, get it from your spouse if you have one, or save up the money. But don’t put that on a credit card thinking that you will then be able to sell to everybody on your Facebook group and recoup that money quickly.

Pofeldt:  I agree with you about that. I think it’s kind of like if you’re loaning money to a family member. You should never really loan more than you would be willing to gift to them, because they might not be able to pay you back. And you don’t have a grudge against them for the rest of your life. You almost have to think of it as a gift, and if they pay you back that’s nice.

And the business is kind of like that too. I would never really put more money into a business than you can afford to lose, and if you’re taking your last $2,000 to buy a multilevel marketing product for instance, that’s probably not a good thing to be doing because you might need that money for something else.

But if you’ve saved up for a while and you want to give it a try, and you have other savings and maybe you have one hundred thousand dollars in savings and you’re going to spend $2,000 and it’s not that make a big dent, then I think it could be a good idea.

There are so many things that stay at home moms and people that want to work part-time from home can do by the way besides those things. And I’m not an expert on those types of businesses, but you can do a small e-commerce business. There are a lot who do professional services and personal services like coaching and things like that around their family schedule.

So it’s really important to explore all the options and sort of even get out there if you can and get to some business events. Well, almost every community now has meet-ups for instance, and just seeing what other people are doing can really be eye opening. You’ll realize, “Wow, there’s so many ways to run a business or start a business that I didn’t even know about it.” So, I wouldn’t limit yourself to just one thing.

But I think you’re right, whatever the businesses in whatever industry I would not just charge up your cards and assume the best if you really can’t afford to lose that money. If you can afford to lose it, a couple of the entrepreneurs seem to have a similar pattern of thinking and I thought this was really interesting. They said they looked at it almost like they were paying for a course in college.

One of the couples Camille and Ben Arneberg, they run a very successful Amazon store, they’re both into home entertaining and they love home accessories like decanters and mugs and things like that. And so they’ve been quite successful with the store called Willow and Everett.

And when they first started they put $5,000 into it, and they said, “This would be like taking a course in school. And we’ll learn so much from it that even if we lose money we’ll have educated ourselves.” So if you can go in and truly feel that way, that it’s an investment in yourself, and whether it turns into a profit for you or not you’ll still have profited career-wise.

Hoff:  Yeah, absolutely.

Pofeldt:  And that’s a good outlook, but if you feel like, “Oh, that’s not going to be good, because I actually really need the profit, because we can’t buy groceries next month.” Then they don’t do it, because you’re not in a situation where you can’t keep your fulltime job or whatever source of income you have and work on it on the side and build it up, and then you can leave your business.

It’s a challenge for people who are breadwinners. I’ll give you an example, Laszlo Nadler who is mentioned early in the book also runs an Amazon store. And he has two children and a wife. He lives in New Jersey and he was working as a project manager in a big bank.

And he is one of these people that love time management and efficiency, etcetera, as you can imagine as a project manager. And he design these planners that were built around not just what your to-do list is but what are the most important things you want to accomplish in your life to achieve your dreams, and how do you move the needle every week toward those goals.

And it was his passion to create these planners, but he still had to support his family. So he did it on the side for a while and then when it got to six-figure income he felt he had enough stability with his income to quit his job and do it full time. And now his revenue range is around $2 million, and he’s still a solo entrepreneur. He has some contractors that work with him.

But he’s done great, but he gave himself the runway to do it successfully without the pressure of – oh, my family’s going to lose their house. It just it can creep up quickly because the cost of living is very high right now relative to what people earn. So you have to really think about it.

Hoff:  You have to be responsible. Yeah, absolutely.

Pofeldt:  Yeah, and the other thing I would say is it’s hard to figure out cash flow in a business if you’ve never done it before. One of the best checks you can ever write would be to your accountant, if you’re starting a new business, just buy an hour of his or her time and sit down and figure out what kind of money you’re likely to bring in, what the cost really will be, how does your household economy factor into that?

Do you actually have the money to do this? And if not, how much do you need? It might be less than you think but you might just need a little bit more to do it without stress. And in one hour I think a good accountant can figure this out for you.

And then you’ll be operating from a position of strength. And if you can’t come up with the money to pay the accountant, then you definitely should not go into business, because it’s a few hundred dollars. But people feel that way, they’re do it yourself first. And sometimes you really you need that expert advice on the finance, unless you’re in a financial business already and you know this stuff.

I think most people; they haven’t had much education in this. I’m a writer and it’s something I’ve kind of learned as I’ve gone along. But it’s not natural to us to think that way. We think about what we like to do like, “Oh, I love writing.”

Hoff:  Right. And I wanted to actually jump into that because you do recommend in the book not to DIY it. And there’s a lot of people I know who do start a business and they have their business and they do everything themselves, mainly because they don’t really want to start paying other people to do things and have to worry about taxes and worry about all of that. So why do you suggest people do not do it all themselves?

Pofeldt:  In the beginning when you start a business you may have to use the DIY approach because you may not have the budget to hire anybody. So maybe you’re putting up your own website. There are a lot of good quality programs where you can put up a decent enough looking website on your own.

But there comes a point where you cannot think about the big picture in your business if you’re just lost in the weeds doing every single little thing in business. You will not have the distance to look at things from a growth perspective. So I would say after about a year it’s a good time to reassess and say, “Is there anything I can take off my plate? Do I have the cash flow to support one thing that I could offload?”

It doesn’t mean you have to hire a full time employee. I think a lot of the owners in this book and that I come across don’t have the budget to make payroll every month in the beginning, they have to get the cash flow going. And then as they grow the business and they have a sense of how much they can predict all 12 months of the year, because that might vary, their business might be a little seasonal, then they can have the confidence to hire an employee.

But one of the best ways to dip a toe in the water would be with something that you really dislike. So for instance for me personally I really don’t like doing my bookkeeping. And so I just never have liked it. I don’t like entering all that stuff. I’ve done it, but I would rather not do it. And I got a referral to a wonderful bookkeeper who I really enjoy working with and she loves that stuff. And it’s a good investment for me to do that, because I don’t fall behind.

Hoff:  And you’re not hiring her as an employee, you’re just paying for her services?

Pofeldt:  Yeah, exactly, because I only need her for a few hours a month. So I don’t need to come up with other work for her to do, I would never have enough to keep her busy. But she has other clients and so by providing work to her I help her business grow and she has the bandwidth to take on lots of other people. If you grow a business to scale you might need an in-house bookkeeper, but most small businesses are never going to be at that point because they don’t hire employees.

Hoff:  Sure. Yeah, and that’s probably a good way of in the way where you’re still a one person business but you’re DIYing it, it means you’re not DIYing it, it means that you’re looking for people that you can pay as freelancers to help you out here and there to get certain things done. And there’s a lot of websites online and in your book you provide some resources where people can go and they can get those things done.

I also want to talk about finding customers. And I think that’s probably the biggest roadblock to people. They have a lot of great ideas, they either have a product they want to get made or they have a service they can offer. But you’re competing with thousands and thousands of other people online who are possibly offering similar services or similar products, how do you find those customers and what kind of expertise do you need to have in marketing, in social media, in order to kind of stand out?

Pofeldt:  It really varies a lot by the business. So if for instance you’re going into a professional services type of business, like maybe you worked in web design in a company and now you’re putting on a shingle and you want to start your own business. You might know a lot of people just from your professional network who if you tell them that you’re now a freelancer will refer work to you.

And that’s what I did when I went freelance. I started telling people, we’d have coffee or something I’d say, “Hey, I just went freelance. You know anybody who needs a freelance writer?” And then a lot of work came to me because they had worked with me before, they knew what my work was like, and it just sort of grew organically.

To go beyond that I would say another good step would be fill out your LinkedIn profile, because you’d be surprised at how many people will find you on there. If they know what you’re doing they will refer work to you.

Now if you’re in something like e-commerce, like let’s say you run a food-related business, you’re making a food product then you may need to go to social media to build a presence. Instagram is very photo-oriented. You’ll want to choose which social media you can really focus on, because it’s hard to do them all at one time. Some of them are going to be ignored I think unless you have a person working on it full time, like you might put it social media for them on retainer, but to maintain all the pages every day is just too much.

So maybe say, “OK, well, for our business most of our customers tend to find us on Facebook and Instagram.” And focus on those, and maybe you maintain a lighter presence on some of the other ones just to be out there. That can be a good way.

The other thing might be to position yourself on a bigger site. So there are some tradeoffs financially and you would have to investigate this, but sometimes on a site like Amazon if you’re a very small business, you can get so much more exposure than you can ever get on your own. So that any costs associated with being on that platform have to be considered in light of what it would cost you to build an equivalent presence if you were paying for the marketing.

And you have to do a pretty complicated cost benefit analysis. There are also a number of groups you can find online that provide information to people in the area of e-commerce, like this one group called E-commerce Fuel that I know of that has a very robust membership. But there are others as well. And you could ask other people for their advice on your type of business. It really depends.

I think as the business grows you will find that a lot comes through word-of-mouth regardless of the type of business. So I think talking with other people in the field if you can find anybody, which is getting easier because of online forums. That can be a good starting point to figure out like where you put your time and money since it’s limited.

Hoff:  Absolutely. And our time is coming to a close unfortunately soon, but I wanted to talk about what somebody who’s listening to this could do if they have a small business themselves. They’ve already got it up and running. They’re making OK money, how do they get now to the next level where they want to be making a million dollars a year in revenue? What would you say were the three top steps of things that they could do kind of right now to get that ball rolling?

Pofeldt:  One thing they can do is set aside some time every week, an hour or more, where they think about strategy in the business and do not do any task-related work. The entrepreneurs in the book all spend time thinking about the big picture in their business.

Another thing that’s important is to network with other entrepreneurs and learn from them. It can be very hard to leave your house sometimes to go to a meeting when you’re busy, but you can do it online too. The entrepreneurs that I found who are most successful are great connectors with other people and they ask them what’s working and they share freely what’s working with them as well.

And then the third thing is to really be willing to push yourself out of your comfort zone. It’s not comfortable to run your business in a different way than you already are. So you have to understand that when you’re growing a business and you’re challenging yourself to think differently, there’s going to be a little bit of pain and resistance. And if you can find an accountability partner, in an ideal world that would be a business coach, but most of us don’t have one.

And so find a partner or someone else who is running a business who can keep you honest, and when you set a goal ask you if you’re actually working on finding the bookkeeper or whatever will move your business forward. I think that’s really important too, because it can be a little lonely in a business. We live in a world where corporate jobs are sort of the norm.

And you can feel like an outlier, but you really not, there are millions and millions of small-business owners across the country. And the more you connect with them and have partners kind of keeping you honest about where you are with your business and spurring you on, the better your business will do.

Hoff:  Absolutely, and finally our show is called Charged Up! What gets you charged up about helping people take their business to the next level?

Pofeldt:  I love hearing their stories. I’ve been reconnecting with a lot of the entrepreneurs in the book. And they’re constantly evolving their businesses; they just keep on thinking of new ways to improve them. And that gets me charged up and it inspires me to run my business in better ways.

And I hope that other people feel that way too when they read their stories, because it is so motivating when you see somebody who is just an Olympic athlete of the efficiency of a small business really working at their peak. That really does get me charged up, plus they’re genuinely very nice people and so generous in sharing what worked for them.

Hoff:  Absolutely, Elaine. Thank you. Fascinating conversation. I hope people check out your book. It’s a great read and it’s also very interesting to see, like you said what all these people have done to take their lives from kind of the workaday, everyday life to something that’s truly successful and they’ve built a company they can be proud of. Thank you for joining us.

Pofeldt:  Oh, thank you, Jenny. It was a pleasure.

See related: Charged Up! podcast: You are a badass at making money

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