By Elaine Pofeldt
Forbes - March 27, 2013
Buried in this week’s New York Times article on the Freelancers Union are some surprising statistics. A recent survey found that 58% of the group’s members earn less than $50,000 a year from freelancing and that 29% bring in less than $25,000–leaving many worried about how to get affordable health insurance. Among the members–many of whom are college educated pros in their 30s and 40s–12% had to get food stamps in the recession.
I’m not pointing out these statistics to discourage anyone from going into business. Freelancers are not representative of all entrepreneurs.
But numbers like these send an important message: If you’re planning to leave a corporate job to start your own business and want to maintain the lifestyle and financial stability you had as an employee, you must find a way to earn significantly more than you did as an employee. To buy benefits and protect yourself from cash flow problems, you need a much bigger cash cushion than friends with steady paychecks. The money you save on commuting and dry cleaning isn’t enough to give you this.
Many people learn this the hard way. Having started my own business as the Great Recession was picking up steam, I got a crash course in how big businesses slow down payments to small contractors when times are tough. Many of us learn, over time, how to run our businesses in ways that insulate us from situations like this–but many small businesses struggle. Recent research by MBO Partners, which provides business infrastructure to self-employed professionals, found that low income was a chief source of unhappiness for dissatisfied independent workers and drives some back into seeking full-time jobs.
So how to you build a business with the potential to earn you a great income, year in and year out–so you don’t have to go back to corporate life?
The secret is not really a secret: It’s investing time, every day, in business development and making sales. Even if your idea of nirvana is running a one-person creative business where you can spend most of the day on projects you’re passionate about and lead some semblance of a balanced life (as mine is), there’s a lot we all can learn from the mindset of entrepreneurs who have built much larger, high-revenue companies.
Here are some valuable lessons I’ve taken away from three high-profile entrepreneurs I’ve spoken with recently.
Break the rules. When Liz Edlich and her sister Rachel launched Radical Skincare, they stepped into a market dominated by giants like Estee Lauder. But they had one big advantage: They knew their products worked, because they spent years perfecting their formulas and used their creams and lotions themselves. Instead of using the usual teen-age models in their marketing, Liz, 49, and Rachel, 44, decided to do something dramatically different: They appeared in the company’s ads themselves. ”We knew women are intelligent, are not going to be 19 again, and frankly, don’t want to be,” says Liz. That approach helped them to build a huge following. Now their products, which debuted at Barneys in 2011, are sold in more than 250 stores in 13 countries. Liz, who previously had a high powered private-equity career, has brought in investors with experience as executives in some of the world’s biggest cosmetics companies, helping to fuel growth even more.
Know your value. Years ago, a client taught serial entrepreneur Adrienne Graham, who runs the Atlanta-based growth consultancy Empower Me, a valuable lesson. Graham was working around the clock to deliver amazing service at a recruiting firm she eventually built to seven-figure revenues. Clients loved her work, but, when it came to pricing, she lacked confidence. In one negotiation, a client kept talking her down, saying, “That’s too much money.” She kept lowering her fee and ended up offering a fraction of what her service was worth. “Have you learned your lesson yet?” he asked. That unlikely mentor taught her to believe in the value of her services. She learned to go after big, corporate clients with confidence–and stick with her price.
Expand your horizons. As a student at New York University‘s Stern School of Business, Liz Elting noticed that the business world was becoming more global–and decided to get in on the trend early. From a dorm room, she and partner Phil Shawe co-founded TransPerfect, a now 20-year-old translation firm that has grown to 2,300 employees. The business started at a time when, she recalls, “We didn’t have email. There was no internet. We were working with floppy disks.” The duo found a way to keep the firm on the cutting edge by continuing to integrate advanced new technology. By continually adapting to a fast-changing global marketplace, they kept the company growing rapidly. Today, it has offices in more than 80 cities on six continents.