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Company of One

January 15, 2019
Paul Jarvis
I'd heard a lot of this advice before, but it's probably because I've been following Paul for years. This could be impactful for traditional business owners.
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Paul Jarvis is a contrarian INTJ solo entrepreneur and writer. In Company of One, he presents solid counterpoints to growth hacking, hiring employees, and endlessly scaling revenues. By questioning growth, you can create a highly profitable small business that affords you the life you want.

Company of One

My notes

There's no such thing as perpetual growth. Yet that's what traditional business people crave. But what is growth meant to achieve? If Oxford University is so successful, then why isn't there a branch in Washington, D.C.? If a symphony is successful with 120 musicians, why not even more so with 600? "To grow bigger" is not much of an effective business strategy at all.

Ricardo Semler, CEO of Semco Partners

Defining a company of one

What if you responded to the growth in support requests by finding a better way to teach your customers how to use what you sell, so they didn't have to ask questions as often? What if you didn't have to work more hours to finish a project but just more efficiently, so you could then enjoy more of your life away from work?

Freelancing is a great way to begin building a company of one. However, a true company of one doesn't trade time for money; they utilize systems, automations, and processes to build a long-term business. People should be able to buy from you without your direct involvement.

Growing your business might actually be the worst decision you could make for the longevity of your business.

The four traits of companies of one:

  1. Resilience. The ability to keep going when things get tough. Dean Becker of Adaptiv Learning Systems found that the level of resilience a person exhibits determines their success in business far more than their level of education, training, or experience. It can be learned. Resilient people 1. know they're in control/not helpless, 2. have a sense of purpose beyond just money, and 3. the ability to adapt.
  2. Autonomy and control. Before you can achieve autonomy with a skillset, you need to be good at it. Typically, you can't achieve this without putting in some time at the beginning of your career in a job that's less autonomous, offers less control, and requires less resilience, and learning a lot. Even freelancers start out with micromanager clients. Controlling a company of one requires that you're proficient at your core skill, sales, marketing, project management, and client retention. Basically, you need to be more of a generalist than a hyperspecialist.
  3. Speed. Getting your work done faster gives you more time to do the things you want. Find ways to work smarter and more efficiently, not more hours. Speed also gives you the ability to pivot faster than a traditional business could. Stewart Butterfield created two video games, Game Neverending and Glitch. Both games failed to gain traction, but both times, Stewart was able to pluck key features from each game and spin them into their own products: Flickr and Slack. (Slack is now a billion dollar company.)
  4. Simplicity. For a company of one at any size, simple rules, simple processes, and simple solutions typically win. If you have an idea for starting a business that requires a lot of money, time, or resources, you're most likely thinking too big. Your idea can be scaled down to the basics – do it now, do it on the cheap, and do it quickly – and then iterated upon. Start without automation or infrastructure or overhead.

Staying small as an end goal

The most important people to serve are your existing customers.

Once Sean D'Souza's business generates more than $500,000 in profits, he doesn't try to exceed it. His work routine revolves around playing a long-term game – gaining customers and keeping them. D'Souza's customer retention strategy involves sending them a box of chocolates with a handwritten note and sometimes a small cartoon he draws himself.

A study done by the Startup Genome Project, which analyzed more than 3,200 high-growth tech startups, found that 74 percent of those businesses failed, not because competition or bad business plans, but because they scaled up too quickly.

When the Kauffman Foundation and Inc. magazine did a followup study on a list of the 5,000 fastest growing companies five to eight years later, they found that almost 86 percent of companies that succeeded in the long term did not take VC money.

Growth can be a choice, not a requirement for success. The question is am I getting better rather than am I getting larger.

When you feel like you have to start out competing with the largest player in your market, you end up chasing your competitor's growth instead of bettering your own offering. Sometimes, finding and working with a single customer, and then adding another, and another, is a very useful and solid way to begin.

Just as the traditional way of doing business is changing, the outdated, fear-ridden assumption that entrepreneurialism is a hazardous venture needs to change as well. Paul gives many examples – one is his own practice, which he's been doing for 20 years and had stable, increasing income every year.

In the United States, the number of non-employee establishments (people who work for themselves and have no employees) with an annual revenue of $1 million grew by nearly 6% in 2015, according to the U.S. Census Bureau. It found that 38,029 companies (of one) were bringing in seven-figure revenues, and doing everything from the usual high-tech and scientific work to equipment repair and laundry services.

The Census Bureau data shows that each year it becomes easier and less risky to work for yourself and still make a decent living. You can outsource or hire freelancers to cover tasks that were traditionally done by an employee.

In the past, we needed more food, more water, and more protection to survive. But in modern times, more can work against us.

Envy is based on a false comparison, like comparing uncooked ingredients to a delicious baked pie. Envying others, we see only the end result or the final product – the delicious dessert. But in ourselves, we see all the not-so-tasty starting ingredients and are aware of all the real work required to combine them into a successful end product. But there is one way that envy can be useful: as a tool to recognize in ourselves what we truly value.

Growing a company that doesn't grow

By adding a pop-up message offering access to a free report on every page on your website, you might increase the number of subscribers to your company's mailing list, but you might also end up with a list that has few email opens and more unsubscribes... a company of one would have a mindset more in line with providing a great newsletter... its open rate and retention would be higher.

Growth as a one-dimensional metric for success is useless in the absence of real reasons for it.

Retaining users is less expensive than finding new ones. (According to the Econsultancy/Responsys Cross-Channel Marketing Report, whose name just rolls off the tongue, adding a new customer costs five times as much as keeping an old one.)

Over time, things cost more. This is inflation. You can combat this by gaining new users, but you can also do a slight price raise. If you have a chunk of profits left over, you can invest them in an account that beats inflation (i.e. not a savings account earning 0.001% interest).

When someone becomes a customer, focus on these questions: why did they buy? What motivated them to do so? How can I keep them happy? And the most important: how can I help them succeed? Treat customers as real relationships that you can grow and foster.

Peldi Guilizzoni founded a wire-framing company called Balsamiq in 2008... its goal – providing great software that's valuable and easy to use – leads to more customers and more profit... each year Peldi takes out $1 million personally, keeps an 18 month runway in the company (in case anything bad happens), and pays out the remainder to his twenty five employee team (which grows by only two to three people per year). He likes to make sure he has no business debts, and the only deadlines are the ones that Balsamiq self-imposes.

I'm Italian. Italians measure things in generations, not quarters. - Peldi Guilizzoni

Determining the right mindset

John Kotter and James Heskett report in their book Corporate Culture and Performance that purpose-based, values-driven companies outperform their counterparts by a factor of twelve. Without a purpose, customers have a harder time connecting to the company, and employees have less motivation. Purpose also serves as a litmus test for your business decisions.

Paul warns against blindly following your passion unless two things line up: 1. you are in-demand/good at what you're doing, and 2. you can take small steps forward without risking everything. You can pursue any passion you want, but you shouldn't feel entitled to make money off of it. Passion in work comes from first crafting a valuable skillset and mastering your work.

Research done by Hewlett-Packard found that the IQs of employees who were interrupted by email, calls, or messaging were reduced by more than ten points – which is twice the impact of smoking marijuana.

Block out specific days for a single task. For instance, on Mondays and Friday write words or code; on Thursdays, handle meetings and calls. On weekends, don't work for more than an hour. (This is Paul's schedule.)

Personality Matters

In high school, I was the kid everyone picked on. Day after day I'd get made fun of or someone would lure me into a fight. I figured my personality was the weakest part of who I was and attempted to hide it as much as I could. It wasn't until years later – when I sent a survey to more than 10,000 customers asking why they bought my products – that I realized that my personality was the number-one factor in their decision to purchase from my business and not from someone else. - Paul Jarvis

Paul's customers like him because he's an "awkward and excitable nerd" just like they are. What used to be a weakness has turned out to be a huge differentiator. (Same thing with Marie Forleo and her quirky nature.)

Traditional business teaches you to suppress personality under the guise of "professionalism", but companies of one can take advantage of it.

Our minds wander 46.9% of the time (Daniel Gilbert, Matthew Killingsworth, n = 5,000). So how can we hope to gain attention long enough to convert a person into a customer? The customer must be fascinated with us – they must develop an intense captivation and focus on our person or business.

To develop fascination, don't be boring; elicit a strong emotional response to your business and your personality. It's easy to forget or lose interest in information, but it's much harder to forget strong emotion. Allow your business to have an aspect of your own innate personality or quirks. Fascination in a product or service builds an emotional connection, and emotional connections hold attention.

Sally Hogshead has an assessment on how the world sees you.

Paul makes sure his personality bleeds through in his writing, on the sales pages for his products, and even when he's interviewed for podcasts. He took the Hogshead test and was classified as a "Provocateur," which is someone who has disdain for authority and the status quo. So he builds fascination in his own audience by leaning on provoking others with ideas.

Traditional companies try to be the vanilla ice cream of the market. Good, but bland. Companies of one need to be pistachio ice cream. People will either love you or hate you. You need to stand out, demand attention, and charge a premium.

Amplify the specific traits that make you you. When you use these strategically, they are a competitive advantage in a crowded marketplace. Do the unique and unusual things that attract attention in order to make your business distinct.

It can be scary to draw a line in the sand – especially when it's your business and livelihood. Doing so immediately alienates people. But taking a stand is important because you become a beacon for those individuals who fit into your audience.

Derek Sivers says that we should proudly exclude people, because we can't please everyone.

The poster child for polarization is Marmite, the classic yeast food spread from the UK. Marmite's tagline is "You either love it or you hate it," a message that's been tapping successfully for twenty years.

Guy Kawasaki, marketing specialist and venture capitalist, believes that we should create products that make specifically identified groups of people very happy and ignore everyone else.

To be a polarizing company of one, look to three strategies:

  1. placation – change the mind of so-called "haters"
  2. prodding – intentionally antagonize haters to sway neutrals
  3. amplification – single out a characteristic and lean heavily on it. (Marmite did this with Marmite XO, an extra-strong version of the flavor, and promoted it with their top customers on social media. It sold out quickly.)

For every email I send to my weekly newsletter, I get a handful of critical replies. "I don't want to buy anything from you because you believe in [fill in the blank]." This is actually a good thing, as I don't want to have customers who are so angry or complain so readily; if they paid for one of my products, I'd have to offer them technical or customer support.

Polarization can shorten a sales cycle because it forces customers into a quicker binary choice, to decide yes or no. After all, it's hard to make money from maybes.

The One Customer

Empathy in business can just mean being a caring human being. Well-treated customers are much more likely to be loyal. A study done by the White House Office of Consumer Affairs found that on average, loyal customers are worth up to ten times as much as their first purchase.

The most effective marketing, signal-to-conversion, is word of mouth. The best way to get word of mouth is to focus on helping your customers with personal touches. To treat them like they're the only customer in the world.

Trello had 100% organic growth (i.e. no paid ads) to more than 10,000,000 users. Their company spread via word of mouth, and they made built-in games that created sharable moments.

Customers don't care if your business is profitable – but if you help them become profitable, they'll never leave you.

According to MIT, more than 60 percent of profitable ideas come from your existing customers. 3M's Medical-Surgical Markets Division tried to fix its poor innovation record in the 1990s by creating new products based on information from its top users. Within five years, the division was bringing in $146 million, a dramatic improvement compared to the $18 million in average revenue from internally-led innovation.

According to Nicholas Epley, a professor of behavioral science at the University of Chicago Business School, maintaining good business relationships doesn't require you to be superhuman. Just do what you say you're going to do, and customers will be grateful. In addition, people tend to evaluate each other based on two dimensions: how interpersonally warm we appear to be, and how competent we seem to be. Simply make promises and keep them.

What can you do to ensure that your existing customers feel happy and acknowledged? Where can you exceed expectations with your customer service? How can you create opportunities for word of mouth and referrals? Are you owning your mistakes, and fixing them? What could you do to ensure that your customers end up with wins?

Scalable Systems

When you want to raise revenue, do it with scalable systems: one-to-many systems instead of one-to-one. (i.e. Instead of hiring sales teams, focus on email marketing. It takes the same amount of effort to send an email to 50,000 people as it does to one person.)

James Clear has 400,000 subscribers and is growing at 1,000 per week. His company is just him and an assistant. He has a few rules for his products: 1. they must take little to no time to manage (no ongoing live webinars or training sessions – just watch-at-your-own-pace videos), and 2. charge a onetime fee for everything he offers; no retainers, no ongoing consulting work.

Scale down employee collaboration time. If you're operating a company, requiring employees to be available throughout the entire workday for Slack messaging, conference calls, etc. is potentially hurting their productivity. Allow people to sign off for most of the day to get their important work done without distractions. Don't require people to work together all the time unless you're doing focused collaboration (for instance, hackathons).

Use automation and technology to scale so your business doesn't need to. Outsource tasks that require massive scale. And add personalization and segmentation to your one-to-many communication channels.

Teach Everything You Know

Brian Clark, the founder of CopyBlogger, learned that his competitive advantage was his ability to outshare his competition. He learned from Seth Godin that selling to people who truly want to hear from you, because you've been sharing with them, is far more effective than interrupting strangers online who don't even know you. This is "education through content", and it builds the necessary trust to turn readers into customers. In Brian's case, $12M/year with 200,000 customers.

Great salespeople – from car dealers to real estate agents to B2B sellers – know sales increase when you honestly evaluate what someone needs and then teach them the value of what you're selling. (If your product doesn't fit their needs, you need to let them know that as well.)

These days, more and more consumers are demanding honest and straight information about products, so they can make their buying decisions at their own speed. By providing them with important knowledge, your company will form a strong link with customers, as you were the most helpful in their quest to learn before deciding.

A 2009 study by neuroscientist Greg Burns at Emory University found that the decision-making centers of our brain slow down or shut off when we are receiving wanted advice from experts.

Basecamp has no internal goals or quotas around conversions or customer growth – its only mandate is to outshare and outteach everyone else by writing books, speaking at conferences, and even hosting workshops at the Chicago office.

What could you share that would position your company as an authority in a niche? What investments could you make in education as a marketing channel?

Properly Utilizing Trust and Scale

Like I wrote about in my article on trust, trust is what sells.

More than anyone else, people trust their family and friends. They trust word-of-mouth recommendations. So if you provide a service so good that people have to tell their friends and family, you will have an easier time selling. Close interpersonal recommendation leads to six times as many sales than all of paid online media: $6 trillion.

The Internet makes it easier for friends to share things. About a week after your customers join the platform, send out an email that lets people share your product with their audiences. Paul did this (with prewritten copy for them to use) and it resulted in double the amount of shares.

Many creatives look at marketing in a negative light, but they shouldn't. Marketing is just building trust and empathy with a specific group of people by consistently communicating with them.

Choosing a narrow niche helps with trust. If you were a Shopify store owner, who would you want to do business with: a general e-commerce consultant, or a consultant who focuses only on helping Shopify stores?

When you're a customer, you want to buy from businesses you trust. So why change that when you're doing the selling?

How can you embed trust and honesty as a marketing strategy? How can you foster relationships with customers? How can you incentivize them to share your business with others? Is everything you're doing honoring your word?

Launching and Iterating in Tiny Steps

Be profitable as soon as possible. Profit is achieved only after the business owner is paid a salary – this isn't a passion project. In the beginning, only work on the core product and what is going to help you cover your costs. The other stuff can wait.

Once you've hit profitability, you can choose on what to work on next:

  • to focus on scaling systems
  • to pay yourself more
  • to work less and keep the same salary
  • to use your profits to grow

The launch

The launch should be simple in features, simple in messaging, and hypertargeted to one audience. Launch quickly, and launch often. If a launch isn't immediately successful, it's not dead – you can iterate on feedback and try again. (WD-40, the lubricant, is named after its 39 failures and 1 success.)

When to quit your startup

If you're at a place where you aren't sure what to do because things haven't worked out, do you still think your initial assumption was correct? Knowing everything you know at this point, would you pursue the project all over again? If the answer is yes, and you still think your original idea could be profitable in some way, you should carry on. If you're continuing only because you've put so much of your time and energy and heart into the project, then it's not logical to keep at it. If you're overvaluing your plan because it's your plan, then you should probably quit.

The idea that winners never quit is overly simplistic and false. Winners quit things that aren't working, and they try again.

So, the questions to ask yourself: how can your project be scaled back to be launched as quickly as possible? What would the simplest solution to a problem your customers are having? How can you start without investing a ton of time and money?

The Hidden Value of Relationships

Chris Brogan takes time to promote his fans' products without being asked to.

Share a simple message, repeatedly, through your marketing channels. First and foremost, you want to see your philosophy take off; second, you promote your product as a means to get it. Nobody wants to subscribe to a weekly product pitch, but they do want solutions to their problems, and you can present how your product helps them get it.

Businesses run on financial (monetary), human (work ethic), and social (relationship) capital. Social capital is often what makes or breaks a business. Social capital increases as you provide value and decreases as you ask for sales, so it's smart to balance this out.

Divide your mass interactions with your audience into three parts:

  • one third should be about your business or your content
  • one third should be about sharing content from others
  • one third should be personal interactions that build relationships with your audience

When Highrise (an offshoot of Basecamp) gets a new customer, they film a 30-second, personalized video for the customer from a smartphone. It's a simple strategy but it goes over incredibly well with the customers. It is often shared to social media and gets press.

Matthew Lieberman argues that, even before safety, our most basic needs are belonging and connection.

Chris Brogan doesn't want to make $100 from a customer once; he wants to make thousands of dollars off each customer over the span of many years. This is why he focuses on customer relationships after each sale – to make customers who are happy enough to come back again and again to buy more from him.

Jim Dougherty's (MIT Sloan School of Management) key points to building customer relationships:

  1. ensure customers like your business; go out of your way to be personal, friendly, and helpful
  2. respect must be present; customers have to admire your work, and you should follow up with them
  3. customers should admire you (or your company's leadership) – "how you project yourselves"
  4. you must maintain the relationship over time, even with customers who haven't made a recent purchase

Finally, you don't need to be a lone wolf. Reach out to other business owners and see if they'll work on partnerships with you. Build a network of people you can turn to when you need help. We want to retain our autonomy and independence, sure, but it's good to run with a pack sometimes, as there's strength in numbers.

How can you get to know your customers as real people with specific problems? What's the mission ("the true north") of your business, and how can you stay aligned with it?

Starting a Company of One - Paul's Story

Some days you're buried in accounting spreadsheets; other days, you're on the third round of revisions from a client, or dealing with an irate customer. The daily slog is what seperates wannabe business owners from those who make it a reality.

If Paul had to start all over again, he'd start out by offering free consulting via email or Skype. He'd share his knowledge with the type of people he wants to work with, and he'd learn what his future audience is looking for, and where they're getting hung up in projects in their field, and how he can communicate with them effectively to help solve those problems.

Paul found out the hard way that it's never a smart idea to be either the biggest or smallest client of anyone you hire for professional services.

Paul talks to his accountant whenever he is thinking of making any changes, adding a new product or partnership, or anticipating a new and large expense – or any time he gets a letter from the government to his business. Paul's accountant also audits his bookkeeping to make sure everything is done correctly, and nothing is missed.

Afterword: Never Grow Up

Interestingly, about 90% of all businesses worldwide that are more than 100 years old are Japanese. They all have fewer than 300 employees, and the ones that still exist never grow quickly or without great reason. The oldest hotel in the world is Onsen Keiunkan, which has been in business for 1,300 years, and hosted emperors, politicians, samurai, and military commanders; it has never expanded (holding only fewer than forty rooms and six hot springs). To put this into perspective, the average life span of a business on the S&P 500 is only fifteen years total.

Entrepreneurs are the most risk-averse people Paul knows. They iterate on ideas and move slowly when it comes to risk, but move quickly to create profit.

The more products, the more markets, the more alliances a company makes, the less money it makes. "Full speed ahead in all directions" seems to be the call from the corporate bridge. When will companies learn that line extension ultimately leads to oblivion.

– Al Ries and Jack Trout, The 22 Immutable Laws of Marketing