The secrets of a “million-dollar, one-person” business
A million-dollar, one-person business… that sounds like the dream, right?
The financial freedom we’ve been promised without the burden of managing employes.
But especially for service-based business, I did wonder how the math worked to generate a million dollars in revenue with just one person!
So I read, The Million-Dollar, One-Person Business, Revised: Make Great Money. Work the Way You Like. Have the Life You Want by Elaine Pofeldt.
And here’s what I learned.
The business models span both product-based and service-or expertise based businesses
The “one-person” part of the title is misleading
While each business model can bring in a million dollars of revenue a year… the profit - and therefore the take home for YOU - is wildly different.
The Million-Dollar Business Models
The business models included:
Physical Product-Based Businesses, delivered through e-commerce. These are “one-person” businesses because they outsource their manufacturing to partners and/or use a third-party for distribution and shipping. They simply run the front end design, marketing, and order capture, and third parties make the product, ship to a final party for distribution to the end consumer. Amazon drop shipping is in this bucket.
Educational Content Creators for digital products and courses
Franchises and Licensee Models. This design is selling your intellectual property to be delivered by others (think Brené Brown receiving training and certification fees from her Dare to Lead facilitators, Geno Wickman franchising the EOS Integrator Model or Alex Hormozi selling his Gym Launch formula to gym owners)
Professional Coaching, Consulting or Agency Service Firms (Virtual Assistant agencies, Marketing firms, boutique consulting, high-end coaching)
Real Estate
What do all of the models have in common for them to be million-dollar, one-person businesses?
Automation: using systems and tools to run with lean staffing
Outsourcing: using specialized firms to handle operations normally done by an employee, such as manufacturing, packaging, or shipping… OR using contractors to deliver services (outsourced bookkeeping, graphic design/copywriting, virtual assistants, subcontractor consultants).
Capital: Most of these models discussed in the book relied on upfront capital for inventory, capital for advertising, or capital to onboard systems or partners.
But… you said it was a one-person business. Doesn’t having agency team members, or licensees, or other consultants count as more people?
This is what I consider the fatal flaw of the book.
This book talks about building a one-person business almost exclusively through outsourcing. Bringing on manufacturing/shipping partners or contractors to deliver services or help with marketing, instead of bringing on employees.
Which means it’s not a one-person business anymore, though technically it might be a one-employee business.
In some states, it’s illegal to have people delivering a majority of your services declared as contractors, especially if they are largely working full-time. So, let’s not dismiss our agency team members as “not people”, as is implied from the title. These are humans, not just assets for outsourcing in our business.
If you’re working with a shipping partner? I guarantee there’s a relationship that you’ll have to manage, so get ready to step up your leadership skills.
Working with franchise owners? You’re still going to have to review the ongoing performance of franchise owners to ensure the fundamental business is healthy.
The only models here that truly could be one-person businesses include very niche consulting/coaching (especially where you take a portion of revenue or project returns), digital products and licensee businesses (but let’s run the math there), or real estate.
There’s a couple of creators (like Justin Welsh and Dan Koe) who talk about growing million-dollar solopreneur businesses through digital products and courses. To make $1M selling courses that run ~$200 means selling to 5000 people PER YEAR. (And, Dan has over 300K followers on YouTube since he’s been doing this since 2017). Might be hard for a soloist with a list of a few hundred people.
Not all of these models are created equal.
The common thread in all of these business types is the million-dollar revenue per year.
But profit? Profit widely differs.
Because the cost to deliver in these business models is widely different, especially when you serve a good chunk to your outsourcing partners.
Let’s look at the e-commerce model.
An example in the book talks about journals, so let’s say you sell 40,000 journals at $25 per journal for $1M in revenue.
But then 50% of that sale is your product cost and manufacturing margin. And then you pay your shipping partner 25% of each sale to cover shipping cost and their own margin.
So after the $1M in revenue… you are left with a net of $250,000. Which still doesn’t include the costs you incur on marketing, the cost to run your website, your own business administration, or taxes. That $1M leaves maybe $75-100K in profit to pay yourself.
In contrast, let’s look at the licensing model.
In this model, you don’t have the same delivery cost, because you are selling productized knowledge versus a physical product or at a physical location. You have (outsourced) trainers for your certification programs and have software hosting your IP, but that might be 20% of your revenue. As long as you can find enough volume - so prepare to spend your money marketing - the profit percentage is much higher.