In part I of this two part series, I discussed why there is a motivation for Professionals and Professional Individual Contributors to strike out on their own. There are so many reasons and as a class PIC’s tend to have the ability and drive to be successful. Sadly this isn’t the case. Of those that try, there is very limited success. Many who jump in 100% have to go back and get a ‘real job’ a year or two later. Why is this?
A society based on regular payments.
I’m not a fan of debt, of regular payments, but that’s not how our society is structured. Debt is the norm, regular monthly payments are exactly what is expected by the institutions that provide for the modern necessities of life. Mortgages or Rent, car payments, lease payments on equipment, etc… In America you are required to have healthcare or there will be a penalty, healthcare that is tremendously expensive monthly. You hear the term ‘under capitalized’ when we hear of many small business shutting down. There is a real correlation between the reality of the amount of time it takes to build a business of any sort and the ability of people to sustain those regular payments needed for life during that time. Theoretically it’s possible to save up a substantial amount of money or live like a pauper to try and weather the ramp up, but life is very expensive, and starting a business can also be tremendously expensive. Unless you are very lucky or in a highly unique situation there is very little chance that you will have every bit of time you need to maintain a lifestyle comes with traditional employment while you ramp up your business.
Need ≠ Demand
I have a friend who wants to be a life coach. She loves to talk to people, she loves to share motivational stories and to focus on positive thinking and aspirational visions. She drives people to be more than they are. She also works with the lowest functioning elements of our society. The people who struggle with personal demons day in and day out. Lack of education, addictions, and people with all manner of emotional blockades. There are always behavioral patterns of extreme disfunction in her target market.
Her market desperately needs her services, and they have no ability to pay. The organizations who are chartered to help this population (government, school systems, nonprofits) tend to either be inefficient or have limited financial resources, in many cases both. Yes, there is supply, and there is ostensibly a huge need, but need isn’t demand. The real demand, the demand that can actually pay for her services, that simply doesn’t exist. Sadly this is a mis-calculation that can be made by even the most savvy of individuals. This is because the nuances of the environment can be very different from the service provider with an organization vs. the independent business. Going back to my friend, she can get every assurance in the world from the Judge that if she goes out on her own he will require her services, yet there may be some arcane regulation the judge doesn’t know about. The Community college HRD department chair may be tremendously excited that they have another resource to use for this population, yet there may be some budget or regulatory limitation requiring a state employee to do the job. The board of the non-profit who promised her the work may decide to go in a different direction. In every case there is a hidden reason the need isn’t being met and no matter how intelligent or experienced my friend is, she won’t get the business.
Industrialized process designed around maximizing profit on partners.
We’ve talked about the companies that use ‘partners’ to drive their business growth. This can be a franchise model or it can be the role of the independent consultant. The speciality products distributor who requires a certain amount of inventory, beyond what is really needed. The reseller who only pays decent commissions on the top producers for their product. But how do you become a top producer? There is always the looming specter of chargebacks when there is a commission paid up front for a contract. There really is no such thing as the guaranteed business from a large organizations. The bottom line is the bottom line with larger organizations. The organizations became large because they have systematically drive every single bit of risk and cost onto the small business person away from the corporation. In these types of agreements the deck is stacked against the budding entrepreneur before they ever get started. You burin out, well no big deal, they are on to the next person with their false promises of easy profits and strong channel partnerships.
The Labor Model doesn’t work for professionals
If you have a pool, you probably have a pool guy. Maybe you have a lawn person, or when their are mud spots on the gravel driveway you call the grading company. If you have a shed, an electrician most likely came out to do the wiring. Most of these types of blue collar labor intensive people who do a good job are the labor specialists. They include technicians, driveway guy, electrician, contractor, the people whose product is their own labor backed up by a credential. The labor is the real product, and it’s calculated by the hour.
But professionals can do that too. It’s called consulting. The challenge is that not that many people need consulting… Actually, let me go back to the Need ≠ demand section. We know, for many of the reasons that we went into business for ourselves that there is a huge need, but there may not be a demand. When a professional sells consulting services they are hamstrung by the fact that if a business is surviving or profiting without the services, even if they have a pain point in the professional’s speciality area, there is limited need for the service. Plus everyone can be a consultant in the information age. This leads budding consultants to try to sell a knowledge product in an environment that includes tremendous push back from managers who are way more concerned with the monthly numbers than they are the long term viability of the organization and by the ‘let’s just google it mentality to circumvent the true professional.
It’s a very good bet that every single person who ever reads this article knows someone who has made the jump successfully from their professional gig to a profitable self-business. I also personally know a few people who have won over a million dollars in the lottery. Is it possible to do it? Yes, but you have to be overly aggressive, plan well and you still have to be very lucky. At least with the lotto, you only have to be lucky. Maybe we should all just PIC our numbers, eh?