4 mistakes to avoid to build a better 1-person business
Not all businesses are good choices for solo-founders. Some are almost impossible to grow when you're a business of one. But how can you find a business that you can easily grow as a solo-founder or small team?
Understanding the types of business that are most suited to being a solo-founder can save years of frustration. Understanding the markets that are suited to small self-funded businesses, will shorten your road to success from years to months.
Unfortunately I spent a decade learning this the hard way. Every day I see people making the same mistakes, mainly because we naturally copy what big companies do.
Don't think big. Think small
We're unconsciously influenced by companies that we use ourselves. Think Netflix, Notion, Twitter, Gmail. These companies all have a few things in common:
- They require scale (lots of customers)
- They target consumers for a major part of their business
- They charge a low price (or are free)
- They exist in large markets
- They have a lot of money to spend
But don't worry. As a small business, we can craft an offering that avoids all these points and is much more likely to succeed.
Here's how to do it, step by step:
1. Avoid businesses that require scale
As a solo-founder or small bootstrapped business, any type of product/service that requires a massive number of users is best to avoid.
I discovered this the hard way with one of my early startup attempts. The idea was a wedding directory that I was positioning as "TripAdvisor for weddings" (this was in TripAdvisor's heyday). It was a 2-sided marketplace and targeted the entire UK wedding market. The market I chose was too big. The business required network effects on a massive scale to work, and trying to attract engaged couples and wedding vendors on this scale, with no budget, was basically impossible. As a result, I was forced to keep changing the focus of the business, making it constantly more niche, in an attempt to have a small enough market where the network effects could take over. Ultimately I couldn't build those effects quick enough, in such a transient market as weddings. I shut it down. It failed. It's very hard to create network effects when you're the only one working on it. You don't have the time or money to make it work.
Have a think about other businesses that require network effects. For example, social networks. All the major social networks were funded early and were typically unprofitable for a long time before they reached scale that allowed them to monetize effectively. As a small-business, you can't compete against the spending, or sustain losses for a prolonged period.
2. Don't charge low prices
The other thing to avoid is charging low prices. Why? Because getting customers is hard! Sales and marketing are both major time drains and you can't spend all your time doing them. Again, if you have low prices, you need to reach hundreds or thousands of customers (that scale problem again).
I see a lot of people starting a subscription business and charging "Netflix style" prices. e.g $10/month. We are so conditioned to these types of pricing, that we naturally want to replicate them. But converting consumers to a $10 month subscription is much more difficult than you might imagine. If you work really hard and get up to 100 users, you're still only at $1k per month and that doesn't take into account running costs and users cancelling. You need to constantly bring on more users to replace those who leave.
On the flip-side, you could just have 1 single B2B client paying $10k per month for a service and make 10x the amount, with lower running costs and no churn. 1 sale vs 100. 10x revenue vs 1x.
3. Target businesses. Not consumers
The easiest way to avoid the challenges of scale and low prices is to target businesses, rather than consumers. Not only does it allow you to sell at higher prices (so you don't need scale), it 's also a much easier sell. Here are a few reasons why:
Businesses are happy to spend money on things that help them grow. It increases revenue.
Business expenses reduce profits and therefore taxes on those profits. The expense is offset against future taxes.
Businesses allocate money for training, marketing etc. They are literally looking to spend the money.
It's often part of somebody's job description to spend that money, so you can find out what role within the company spends the money and sell to them directly.
This is not true in the consumer world. Consumers are very cautious with spending. A $49 subscription to a consumer is a lot, whereas a business wouldn't bat an eyelid.
Here are a couple of examples of the difference between consumer and business mentality with spending:
Twitter Blue caused outrage in the Twitter community when they started charging £6 per month. They charge organizations £1,140 a month, for that same tick in a different color and Organizations are happy to pay.
Gmail is one of the most popular email tools ever created. If they started charging $1 a month, they would lose 90+% of their users to a free alternative. Meanwhile, Superhuman email launched a couple of years ago and targeted business users exclusively. They shook the market by charging $30 per month for an email client. This is a service we are conditioned to expect to be free. But the product was great and helped business users save time on emails, and therefore allocate their time elsewhere and make more money. It grew like wildfire.
If you're a solo-founder, you need to minimize your time spent on attracting customers (because it's just you) and maximize your product price. Selling B2B solves both of these problems.
4. Don’t choose a large market
The larger the market, the bigger the competition. If you were a goldfish, would you rather live in an ocean, or a garden pond? Probably the pond. In the ocean, you are competing with millions of other fish, most of whom are much bigger than you, and will ultimately eat you. In a pond, you might be the biggest fish. This is exactly how you want to think about your business. Choose a market where you can be the biggest fish. If you decide to start a sports shoe brand, you'll be competing with Nike, Adidas and countless others. Niche that down and make it a Pickleball shoe brand and suddenly you're the only player in the market. You're the biggest fish. You can hone in specifically on that customer's needs and take the entire pickle ball shoe market.
In Summary
- Swap scale for small and charge higher prices to businesses.
- Instead of a social network, build a niche professional community
- Instead of an AI blog, write an AI image-generation newsletter for social media managers
- Instead of a general web-design agency, start a web agency targeting Logistics companies in the UK
- Think smaller markets with bigger budgets. The opportunities are endless.
I hope this guide was helpful. I'm sharing guides like these on building 6-figure 1-person businesses every week on Substack. Check those out here
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I absolutely agree with you. That being said where would you start to get your first b2b sale ?
I feel like targeting customers as a B2C is pretty straight forward:
but when it comes to b2b, I feel like the only way to get a sale is by manually getting in touch with each business, making cold calls and demo's for the client which is extremely time consuming (and might be a complete waste of time overall if you are bad at selling stuff to people)
I agree. Sales is normally the best approach here. In saying this, you likely only need a few customers if the price is high so it's not something you need to do long term consistently. more like a sporadic activity. I'm also not naturally good at selling but do 90% of my revenue through direct sales. I created a course on this very subject called Sales for Introverts and people who don't like selling.
You need to find a business with a need and a budget, via your network.
Ask family and friends if they know anyone who is a manager in a reasonable sized business. Arrange a phone call with that person. Ask them about the workflow they manage. Ask what is their biggest pain point. Ask them what they would pay to have that solved.
Listen, don't talk. You are trying to get information. You are not trying to sell anything.
Most importantly, at the end of the interview, ask them if they have any friends who might be interested in being interviewed. If they say yes, they will most likely not give you the contact detail until they have asked the friend, so follow up on that too.
b2b is a bitch... I am working for a b2b startup and getting sales is a very slow process, and more than often you need to either 1. have connections in the industry to get some doors open or 2. word of mouth from client to client (which requires a dose of 1. to get this one going).
Yep - in B2B you are typically looking at 3-6 month sales cycle.
Expect this to increase if you do not have Product Market Fit.
How did you land your first 10k paying customer?
I read another article a while ago that said the exact opposite, target consumers not businesses.
Business sales require much more work and have longer times to close.
A business can take forever to decide on a product, will often go for a more established player, and could put a purchase off until the next financial year when it gets a new budget.
Businesses are nervous of 1 person operations, understandably, as it is risky for a business to rely on a single person vendor.
I also don´t think that there is a general recommendation as to whether B2B or B2C is better. The choice depends on your skills, your product (idea), and your target audience, competition, product complexity... In summary, the choice between B2B and B2C should be a carefully considered decision based on a combination of factors, and it may require flexibility and adaptation as your business evolves.
One can also consider to go hybrid at some level.
That's probably the best approach. If you're already in an industry that you have a lot of domain knowledge of, and you're familiar with the players and have contacts then it makes sense to pursue a B2B strategy. It all comes down to your own situation.
This was a good read, and I took note of few points for future reference.
Reflecting about pricing: charge high prices for a product/subscription is not simple, cause the product should justify its costs (in terms of complexity, etc. ) and this is hard to get especially as solo founder.
Glad it was useful Bruno.
Good point about justifying the costs, although I would argue that it's more important that the cost is justifiable in terms of the value it brings to the customer, rather than the complexity involved in the development.
Yes, absolutely, but if you could sell a product that is simple to build (also for a small team) at high price, you should expect to have many competitors (that is a factor that lowers the price).
I agree. It would be better if I read this article 2 years ago! I made all the mistakes from this article on my first product last year.
Mistake: Neglecting marketing and branding efforts because the business is small.
Am I effectively communicating my business’s value to potential customers?
How to Avoid: Invest in a quality website, utilize social media platforms, and consider other marketing strategies. Consistent and professional branding will help establish credibility and attract customers.
Here are 4 mistakes to avoid to build a better 1-person business:
As a solo founder or small bootstrapped business, any type of product/service that requires a massive number of users is best to avoid. This includes businesses with high network effects, such as social media platforms or marketplaces. It also includes businesses that target consumers, as they typically have low margins and require a lot of marketing to acquire new customers.
The other thing to avoid is charging low prices. Why? Because getting customers is hard! Sales and marketing are both major time drains, and you can't spend all your time doing them. If you're charging low prices, you'll need to attract a lot of customers to make a decent living. Instead, focus on offering a high-value product or service that you can charge a premium for.
Businesses are typically better customers than consumers. They have larger budgets, and they're more likely to value your expertise and experience. They're also more likely to be repeat customers. So, if possible, try to target businesses with your product or service.
Large markets are tempting, but they're also very competitive. It's much easier to stand out in a niche market. So, when you're starting out, choose a market that's small enough for you to become the go-to expert.
Here are some additional tips for building a better 1-person business:
Focus on one thing and do it really well. Don't try to be a jack-of-all-trades. Instead, focus on one thing that you're passionate about and that you're really good at.
Automate as much as possible. This will free up your time so that you can focus on the most important things, like sales and marketing.
Outsource tasks that you're not good at. There are plenty of talented freelancers and contractors who can help you with tasks like web design, copywriting, and social media marketing.
Build relationships with other business owners. This is a great way to get referrals and learn from others.
Don't be afraid to fail. Failure is a part of the entrepreneurial journey. The important thing is to learn from your mistakes and keep moving forward.
Building a successful 1-person business is not easy, but it is possible. By avoiding the mistakes above and following the tips above, you can increase your chances of success.
Point 3: Target businesses. Not consumers
That is the most important.
Great points. I like these general rules - make a lot of sense. Here are some rule breakers (just for an interesting read):
REVENUE/MO
(i took the figures from starter story. some were reported in 2018-19, but point being these rule breakers are mad inspiring).
Joshua,
Yes, as a lean one person operation it is very tough to survive.
So niche down and get your pricing right.
"Instead of a general web-design agency, start a web agency targeting Logistics companies in the UK."
I loved this.
As an agency owner myself and having worked with few organisations in my region, I am still unable to get a reply from any overseas organisation. The medium of reaching out was cold emailing.
Do you mind sharing some tips for it?
This was thought provoking - "target businesses, rather than consumers." I've been reflecting on the difference between how I spend when I'm adding a tool to my stack when I'm managing a team (and spending the company's money) vs considerations when I'm adding a tool to my personal stack. A different pricing strategy is needed for each, for sure!
Great post. Trying the B2B space is also hard as you need warm intros to get in. Another option is to target consumers/ideal users who work in a B2B space. AWS does this really well by targeting developers and in turn get the business from the organisation by building a sticky service.
Great post.
In my own experience, if someone wants to serve direct consumers then I would suggest starting by fixing their own problems. Even if we think we're unique, there are many others facing the same issues. I totally agree with the author about setting the right price. I've made mistakes with this before and still learning.
Agreed, but I find it's a tough one if you're an indie-hacking techie. Lots of other techies have the same problem, so there is a flood of dev tool, project management and productivity apps because we know the pain and we can build them. Tough to find a (less crowded?) niche without that all-important deep domain expertise.
One clarifying point for folks pushing back on B2B Sales - the sweet spot is probably sole proprietors, small and medium sized businesses and individuals in larger companies (for things like superhuman).
Enterprise sales - aka 6 months - 1 year cycles with a top 50 company isn't the best place to start - super hard to iterate on anything other than your favorite flight route with almost 1 client for a year.
Here are the four key mistakes to avoid when building a one-person business:
Addressing these areas will help you build a stronger and more sustainable solo business.
I am building creativeblogtopic.com an automated seo research for business blog. I am doing that while having a day job which I believe many in the community is doing. So I would like to share my tips on doing starting one man business with time constraint.
No 1 thing in business is product market -fit. If you manage to get to product market fit thats mean you know where to sell your product to and people like the product. Achieving that means money: Key to Business Success: Finding Product-Market Fit
Whatever you do should aiming for that and you need to do it with speed because you got not much time to spend. Before achieving product product market fit it all about validating and pivoting. Think about it as glorified survey. You might need to build MVP for this "survey" but the objective of this MVP remain the same, which is to achieve product market fit. How to build a MVP: Focus on what user want
So b2b or b2c as long as you achieve product market fit and have strategy to achieve it as fast as possible you will have business
Your creativeblogtopic looks very handy, I'm going to try it out tomorrow when I get to my desk. I'll give some feedback after.
thanks let me know your suggestion
One thing you don't explicitly say is that some of what you say is more true if you plan to remain a one-person outfit all the way through. If the idea is eventually to grow into a company with multiple employees, then maybe the low price/many customers approach makes sense (though you probably need to take some venture capital at some point in that case).
For sure, the B2C route can still work but it's typically more costly, which is why I think B2B is best suited to 1-person businesses
Thank you for writing!
Finding a niche is so important. And finding the best way to repeatedly target that niche is also very important. The challenge when you're starting from scratch is that you have infinite possibilities to niche down, and each one has several options to target. It becomes a hard optimization problem, and your time is limited.
The only way to get over this hurdle is to enjoy the process, focus on providing value for someone, and trusting that eventually you might figure it out.
great read
Well written and agree with everything except for the last point on being the biggest fish in a pond - I feel as solopreneurs it is a challenge to create a new market - but a smaller niche in an existing market would be best if that I'd what you meant
Yes that's what I meant. If you choose a very small market, then you are a bigger fish in that market than you would be if you chose a large general market
Concise and a good read.
Good one ! Thanks
Great points! Thanks
Amazing post mate. Lots of insights. Every word is gold here, people know these things but still fail to execute them. Amazing
Thanks for the kind words! I'm glad it was useful
Great article. Price your product in terms of it’s value to the user not the costs to yourself.
Another point I’ll add (if building a software product) is to reduce as much complexity as possible. Use PaaS / BaaS tools like Firebase to reduce the amount of architectural overhead needed to get your product off the ground.
Totally agree here. I'll be covering this in a later post. I'm a no-coder so I take this even further 😂
Wow, I needed this!
I'm currently overthinking on which market I should choose, this post definitely helped me decide. Thanks
Great to hear that! I'm glad it was useful for you
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