It was a weekday, early September, 2010.
A pleasant time of year in Maryland. The sky was blue with just a few clouds, the temperature was in the low 70s, with a brisk breeze reminding me autumn was coming.
As usual, I drove in to the small engineering services company where I worked. I pulled into a parking spot, walked in, sat at my desk, and started up my laptop.
What happened next wasn’t routine.
Dennis, the CTO, called me into his office.
“Have a seat, Opher,” he said.
He came straight to the point, “We’re going to have to let you go. You have until the end of the month.”
I understood. It was the right move for the company. Their efforts to market me in recent months had been unsuccessful, and the only reason to keep someone on staff long term is to bring in money. Given that the same had happened to a colleague a few months earlier, it was no shock.
Still, for me, with a mortgage, auto loan, and now $18k/year COBRA health insurance to pay, the news was devastating.
It meant I had a major decision to make — do I look for another job, or start my own solo business?
A Challenging Conversation Leads to an Uneasy Decision
My wife and I sat down to talk it through.
My dad had been career military, who then transitioned into the corporate world. My mom had been an admin assistant and librarian.
Not exactly the kind of background that would naturally lead you to starting your own business.
Luckily, my wife’s parents had been entrepreneurs for decades, having set up and sold multiple small businesses. She did have the background to at least not freak out at the idea.
The main (if not only) reason to be an employee is job security, where you can count on your employer to do the marketing needed to bring in paying work, letting you focus on simply doing your job well.
However, I had just received an object lesson in how that job security is often a myth.
With more than a little trepidation, we decided. I would start my own solo consulting practice.
Some Definitions and Statistics About Small (and Solo) Businesses
If you’re anything like me, you like to understand the terms of a topic you read about and gain some context. If that’s you, here are some definitions and stats.
If you couldn’t care less about these and want to just get to the point of the article, feel free to skip ahead…
What’s a Small Business?
According to the Small Business Administration (SBA), that’s defined by number of employees being less than an industry-specific number varying between 100 and 1500, by average annual receipts being under industry-specific limits varying between $1 million and $41.5 million, or for financial businesses (e.g., banks, credit card issuers, etc.) assets under $600 million.
Somewhat differently, the U.S. Small Business Administration Office of Advocacy defines a small business as “an independent business with fewer than 500 employees.”
How Many Small Businesses in the US?
As of 2020, that was 31.7 million small businesses.
How Important are Small Businesses for the US Economy?
Small businesses employ more than 60.6 million private-sector workers in the US (47.1%), and account for 40.3% of private-sector payroll.
From 2000 to 2019, small businesses created 10.5 million new jobs, accounting for over 65% of job creation in our economy. The reason the fraction of jobs created by small businesses is higher than the fraction of small-business employees is that as small businesses hire more people, they start graduating out of the ranks of small businesses.
Small businesses account for nearly 1/3 of known exports, at $473 billion.
How Many Solo Businesses in the US?
That’s a lot of small businesses, but how many of those are just one person working for him- or herself?
The answer — 25.7 million, or 81% of small businesses.
How Many Home-Based Small Businesses?
Do all these small (or solo) businesses have to rent office space?
15.8 million, or about 50% of all businesses, operate out of the owner’s home.
What Are the Odds of a New Small Business Surviving?
Data are from 1994–2018 show:
- 67.6% of new employer establishments survived at least 2 years.
- The 5-year survival rate was 48.8%
- The 10-year survival rate was 33.6%
- The 15-year survival rate was 25.7%.
How Do Owners Starting a New Business Finance It?
The most common sources of capital to start a business are:
- Personal and family savings (64.4% of small employer firms)
- Business loan from a bank or financial institution (16.5%)
- Personal credit cards (9.1%)
- Personal family assets other than savings of the owner (8.7%)
And Now to the 7 Opportunities and Advantages of Starting a New Professional Business…
Real Job Security (if successful)
Remember my story?
My job was toast because my employer was unsuccessful at marketing me. That meant that my job security depended on somebody else’s doing their (marketing) job well.
Once I started my own solo business, if I did my job well (including marketing myself and executing client work), I prospered.
That’s what I call real job security.
The caveat is of course that you have to be successful at doing your job as a solo professional. The good news is that it appears 2 in 3 small businesses survive 2 or more years…
My consulting business is now in its 12th year of operations, so it seems I’m doing something right…
Opportunity to Handpick Who You Work With
As a solo professional, you get to pick who you work with (or for).
If a client misbehaves, you can fire him.
If you want to expand your business, you get to handpick who will be on your team, and can let them go if they don’t perform to your satisfaction.
Opportunity to Support Your Community
If you’re smart, you realize that you should fire yourself from most tasks as soon as possible.
This means you should concentrate your efforts on your best work.
That’s why I hired a local accounting firm to do my accounting and payroll. It’s why we pay a local company to clean our office suite. It’s why my wife contracted with a local HR consulting firm and a local employment attorney when she decided to hire associates. It’s why I hired a local property management company to manage the residential property we lease out.
You get the idea.
In general, we try to find local small businesses who can execute the tasks we can’t or don’t want to do ourselves. This saves our time and bandwidth for our best work.
It also supports our community, which makes us feel good.
Opportunity to Innovate
As an employee, when you have a great idea on how to do things better, you need to convince your supervisor, manager, and/or owner of the business you work for.
If you’ve gone solo, you get to simply try it out.
If it works — great! If it doesn’t — you switch back without any shame or blame from higher-ups.
Opportunity (and Responsibility) to Learn New Skills
When I started out, I already knew I should set up my practice as a sole-member LLC.
I didn’t know that I could (or should) ask the IRS to tax my practice as an S-corp rather than like a sole proprietorship. That saves me thousands of dollars in taxes each year.
Over time, I learned how to run things more efficiently by reading voraciously, and by talking with my accountants and other business owners.
When my consulting work slowed down significantly for a period, I learned the skills needed to be a freelance writer and editor, which helped keep us afloat.
Those skills later led to my getting a contract to support a NASA program, which work gradually expanded from 25% of full-time to 50%, to 75%, to 95%, to 100%.
Opportunity to Build a Personal Brand
There are few things as professionally satisfying as becoming known as the go-to guy (or gal) for the work you do. That’s one of the best opportunities in starting your own professional business.
When you do a great job, it’s your reputation and personal brand that benefit, not someone else’s.
Finally, Greater Agility
When something drastic happens (like a global pandemic…), many businesses find their services are no longer in demand.
Just ask the people who run airlines, convention centers, hotels, movie theaters, restaurants, etc. how the first year of Covid affected their businesses.
But they’re not the only ones who got hit.
When such a wide swath of businesses suffer, all the businesses who serve them suffer too.
Friends of ours built a distributorship for desserts and other foods, starting from scratch decades ago, and building an impressive operation with dozens of employees.
When Covid shut down the hospitality sector, their business dropped through the floor.
Being the innovative and agile thinkers they are, they quickly pivoted and put their fleet of trucks and temperature-controlled warehouse to good use, delivering groceries to people who couldn’t (or preferred not to) go to grocery stores.
With that averting total disaster, they continued innovating and expanding their offerings, until today they’re in better shape than they were pre-pandemic.
Larger businesses aren’t usually as agile. When they hit a wall, if the government doesn’t step in to save the day, they face bankruptcy.
The Bottom Line
Tens of millions of Americans run their own businesses already.
About a million new businesses start each year (though in honesty, about 900,000 cease operations, after an average of 4.5 years in business).
If the above advantages and opportunities resonate for you, it may be time to consider striking out on your own. With a bit of good fortune and good deal of grit, it could be the best professional decision you ever make.
This article is intended for informational purposes only, and should not be considered financial, business, or legal advice. You should consult a relevant professional before making any major decisions.