In the pandemic, millions of people took the leap to be their own boss.
Applications to start new businesses hit 5.4 million in 2021, a new record, surpassing the 2020 record of 4.4 million, according to the U.S. Census Bureau.
Many people don’t realize what tiny businesses are accomplishing, according to Elaine Pofeldt, a former senior editor at Fortune Small Business magazine, and author of the new book “Tiny Business, Big Money: Strategies for Creating a High-Revenue Microbusiness.”
“If you look at the average revenue for firms with five to nine employees, it’s $1.2 million,” she told Yahoo Money. “I believe that, as more people become aware of the income potential from very small businesses, we’re going to see a lot more jumping on this trend.”
Pofeldt, who interviewed the owners of fifty-plus microbusinesses for her book, offered more insights and advice in a conversation with Yahoo Money. Here are the highlights of that conversation:
How do you define a microbusiness?
These are basically businesses with 10 employees or less.
How does it differ from the solo entrepreneur?
The main difference is microbusiness owners either run an employee payroll or have an extended team of contractors that function like employees. One-person business owners can be free spirits and do their thing without really having to communicate other than to the clients. Now they must lead a team, even if it's a team of two or three people, and it changes what the experience is like.
What is the microbusiness mindset to succeed?
You need to leave behind the employee mindset where you're putting your trust in someone else to guide your career. You have to trust your instincts, and transition to being your own boss, owning your own career. You have to accept that there are some risks that come with it, like the risk that you might not be able to drum up business and pay your bills and build your life accordingly. It means building yourself some runway, maybe starting as a side hustle, so you can pay those bills.
Why did you write this book now?
I found that a lot of the folks I had profiled in my book, “The Million Dollar One-Person Business” were now making the transition to the next stage of business. And they were finding it a little challenging. Some of them were digital nomads traveling all over the world, or they were mompreneurs who had a lot of flexibility with their business. Now they had this added responsibility of managing people, and they were trying to learn best practices for doing that without losing their freedom.
Another reason was that we had the COVID pandemic and many people during the Great Resignation were reexamining their careers and exploring a new business. There's been a big increase in new business registrations. Some of them might be side hustles. Some might be full time. That’s not so clear, but people are more open to this.
What’s the best strategy for creating a microbusiness?
There's a lot of talk in entrepreneurship circles about not trading your time for dollars, because when you charge by the hour, there's a ceiling on how much you can make. I encourage people to look for add-ons where you can productize your knowledge.
One example of a tiny souped-up personal service business entrepreneur is Jenna Kutcher who started as a wedding photographer, then began creating online courses for other people who want to be better photographers. She launched The Goal Digger Podcast, where she covers topics that include email-list building and social media strategies.
Where she really took it to the next level was when she became an Instagram influencer. In 2015, she started to post her family-life type photos with a little personal vignette as a caption. Now she has 915,000 followers and gets paid almost $10,000 for every sponsored post.
She might still shoot the occasional wedding, but she doesn’t make her living doing that anymore. Her business brings in $6 million in sales annually. When I last spoke to her, she had five full-time employees and five contractors.
What were the start-up costs on average for these tiny businesses?
Most of the business owners I interviewed for the book started their microbusiness with under $5,000.
You refer to “streetfighter” tips throughout the book. Where did that concept come from?
Street fighting is basically being prepared for the unexpected. One of my mother-daughter activities for years– I have three daughters and one son–is doing martial arts, Taekwondo. I think that the mindset is very relevant to small businesses.
There's a lot of joy to running a small business. But a lot of times things like the pandemic come out of nowhere, and the ones who are prepared to respond to the unexpected are the ones who survive. They don’t get blindsided and frozen. Sometimes they're in a business that they love, but they don't get to have the joy of continuing it because they're not trained to be resilient enough.
I offer tips that help people to stay prepared, stay on their toes, not be in a constant state of hypervigilance, but just be ready for all the unexpected things that happen when you run a business.
Do you have a favorite tip among them?
Look at your business as a practice. Martial arts is a practice. You show up every day, say, you're trying to learn the spinning back kick, and you're falling down doing it. Then one day you’re doing it. If you don't show up for the business regularly, you'll never get to that level of mastery. For the businesses I researched they often hit that at the four-year mark. There’s a consistency of effort. They had a great idea, and they started working on it a little bit every week and chipped away at it.
Any common strategies among the tiny businesses that succeed?
They tend to use automation in some form. It's not elaborate. Sometimes it might be as simple as using a scheduling app. Other times it's some industry specific, say, upgrading from a newsletter to a customer relationship management software that maybe can target certain groups of customers and not others with a certain promotion.
Using contractors is another thing they have in common. And they outsource what they can. They might use third-party services like an Amazon fulfillment center that handles the logistics, rather than packing all the products themselves and shipping each order, so that they're not bogged down in the minutia of the business.
They also exercise a lot. I thought this was very interesting–80% of them exercise. When you're in a small business, you're like a food truck. If the food truck is in the shop, it's not selling burritos. So, if you let yourself get run down, which is an occupational hazard, eventually you're going to burn out, or you're going to get sick. And so, they prioritize wellness. I was happy to see yoga was the number one exercise followed by strength training. There are a lot of people that go walking.
We want to hear from you! Tell us your entrepreneurship questions or concerns by emailing firstname.lastname@example.org
Don't be afraid to just learn as you go along. A lot of people feel like they need to have a PhD in business before they can start a business. But what I saw with all these entrepreneurs is that was not the case they dove in, and they learned one step at a time and that's totally okay.
Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter @kerryhannon