The Rise of One Person Businesses
Paul Kedrosky just published a fascinating post entitled The Rise of the People-Less Business:
"Some fascinating data out in a new Intuit/IFTF study on small business. [pdf] One factoid that caught my eye right away was on the rise of "personal businesses", the kind of one-person shows that helped drive the adoption of Ebay, Adsense, etc. :"
Personal businesses are a surprisingly large part of the American economy. According to the U.S. Census Bureau, at the end of 2004 almost 20 million Americans operated businesses with no employees. Businesses without a payroll make up over 70% of the nation’s businesses, and almost one million new businesses without payrolls were added in 2004 (the latest available data).
I'm not sure I'd call these people-less businesses -- after all, their owner-operators are people. What we're seeing though is the erosion of one of the pillars of society as we knew it, the industrial corporation. One effect of the internet and what Thomas Friedman calls "the flat world" is the re-empowerment of the individual as economic unit. These people aren't working alone -- it's just that they don't need to work in the same place or for the same company. It's not just companies like eBay and Google AdSense that support this rise -- it's also ubiquitous communication infrastructure, the ability to take orders over the net, the ability to deliver products anywhere in the world via global overnight shipping. Sole proprietors were formerly village or neighborhood based. They can now be non-local players.
And as is often the case, we saw this effect first in the software development community. As Larry Augustin pointed out long ago, the open source software movement could be seen as the rise of the software developer as free agent. Of course, the data could also just be related to the economy, with companies trying to run lean by spinning off employees. But it's still an interesting statistic, and possible "news from the future."
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[01.25.07 02:14 PM]
Very Interesting data. There was a book published in the early 90s titled Virtual Corp. which talks about independent workers coming together for common projects much like the movie business. As you rightly point out, with the growth of the net, associated affordable infrastructure and the ability to make money from Google AdSense etc. this trend has been further accelerated.
[01.25.07 03:04 PM]
Are these numbers software centric? This increase might reflect the hard job market most normal folks are facing more than any "world flattening paradigm." Laid off guys are doing landscaping and handy-work, and women doing home-care services.
[01.25.07 03:29 PM]
Interestingly the company I work for is growing rapidly by catering to this rise in single person businesses. We noticed this a few years ago and have been building office buildings with small single person office suites at a rate of knots. Couple this with a 'virtual office' product and not only has our potential market been growing like crazy but the service we (and our competitors) offer has allowed more of these small businesses to launch and avoid a lot of the costs that traditionally they would have to bear.
www.advantageofficesuites.com for those of you who are interested.
[01.25.07 05:53 PM]
For at least the last 15 years it has been true that most businesses have no "employees". I suspect it has always been the case and that when people look at the data for the first time they attribute it to the current "favorite trend". I can only find data back to 1992 (http://www.sba.gov/advo/research/us88_04.pdf) but non-employers as a percentage of overall businesses has ranged from 74% to 77% for that period. So we are talking about a 2-3% growth.
[01.25.07 06:06 PM]
I'm a co-author of the Intuit-IFTF Future of Small Business report. In answer to Someguy's question, the numbers are not software centric, they are for the entire US economy. If you look at the detailed data, you find that software is a small part of the total. I do agree that software development was one of the first fields to move in this direction.
The growth of personal businesses also is not just a function of current and/or recent job market conditions. It is being driven by a wide variety of factors, including the larger trend towards economic decentralization described by Tim.
Only1rob: we touch on offices like Advantage Office Suites in the report under the title of "Coworking". Companies like yours clearly are enablers of small business, and the field seems to be growing very rapidly. In case you haven't seen it, take a look at: http://coworking.pbwiki.com/
[01.25.07 10:02 PM]
Great read, and wonderful news! With the proliferation of broadband access, blogging, and social media, I think we'll see an explosion in one-person businesses over the next decade as people discover they can make a living from home.
Last year, I transitioned full-time to my new career as a "social media producer," which means I create and produce podcasts, vlogs, etc. Soon, I will monetize (beyond Google AdSense) a few podcasts I produce via sponsorship and advertising, which will dramatically change my lifestyle compared to a year ago (when I gave up a new car, etc. to focus on my passion).
The Internet is an exciting place to be!
[01.25.07 11:30 PM]
High taxation on business as is found in all first-world nations serves as a powerful disincentive for entrepreneurs considering whether or not to hire employees of any sort.
[01.26.07 02:28 AM]
And it's not just in the US. The rise of great communications means that it's possible to work from many different places. I used to live in the US, but now I live in the south of France. I keep in contact with clients in France, the US, the UK and elsewhere using the phone, Skype, IM and email. Sometimes I have to move my body to a customer's location, but I've worked on at least one contract where I never met the people I was working for, and in most cases one or two face-to-face meetings is enough.
John.
[01.26.07 07:20 AM]
Err I think they are called tax structures? For investments, 401k, real estate etc. I wouldn't read too much into it.
[01.26.07 09:22 AM]
JGC -- your comment reminds me of the amazing experience of the first Perl conference we did in 1997. It was incredibly exciting -- there were literally hundreds of people who'd worked closely together online but had never met. It was a unique experience -- almost jarring at times -- to reconcile the person you met in the flesh with the image you'd formed via email communications. (For example, my mental image of Larry Wall was of a big guy with a red beard -- he has a much larger personality online than he projects in person!) It was so funny to hear all these people saying "So you're Larry!" and imagining their own reconciliation of real and imaginary.
Now many of the open source communities have met F2F for years, but back then, it really was new. (I was in fact inspired to launch the open source summit by the realization that many of the key players in what should have been seen as a common movement had in fact never met.)
[01.27.07 11:24 PM]
It is now easier than ever to have a productive one person office:
How many jobs have been eliminated in the past three decades because of the following tech advances"
Faxes
VOIP
Voice Mail - Hi tech Answering Services
Outsourcing
Business Productivity Software
Voice Recognition
VPN
Outlook Webmail
Exchange
Online Storage
Small Business Forums
Online Banking
[01.29.07 05:34 AM]
People don't mention how lonely a one-person business can be. Yes, it's incredibly productive and liberating to not have to discuss important issues with others, but then again, us human beings still need to see others F2F on a regular basis. Besides, it's always great having somebody nearby to brag about how tight and efficient your new algorithm is.
Just my $0.02.
[01.29.07 07:38 AM]
Tomas, I know some of the remote employees of O'Reilly use IM (including voice chat and sometimes even video) to be "virtual cube mates." Other folks have found like-minded developers at small businesses and share office space. (Rael's new company started with just him sharing space with platial.)
[01.29.07 12:44 PM]
Bob Walsh of Safari Software wrote about this topic from the software business perspective in his book Micro-ISV. He not only sees this as a trend, but he firmly believes that this model represents the future of the software industry in the Internet age. I may not buy into that as strongly as he does, but his book is certainly full of compelling arguments and good advice for anyone looking to go this route. You can find him at http://safarisoftware.typepad.com. I would definitely recommend the book.
[01.29.07 07:35 PM]
FYI: A "factoid" is not an "interesting factette". I know there are dictionaries that will define it so, subscribing to the philosopy that if enough people use something incorrectly, that then becomes the new meaning, but this really rubs me the wrong way. Especially since a word like "factoid" is so needed in this day and age of purposeful, Bush White House mis-information. Let's not abuse the word into oblivion just because everybody else does.
Remember, human-OID is "human-like". We wouldn't need another word for "human" that looked and sounded almost the same. So, fact-OID is not the same as "fact". "-oid" means to appear to be something, but it ain't that something.
American Heritage dictionary:
1. A piece of unverified or inaccurate information that is presented in the press as factual, often as part of a publicity effort, and that is then accepted as true because of frequent repetition: "What one misses finally is what might have emerged beyond both facts and factoids�a profound definition of the Marilyn Monroe phenomenon" (Christopher Lehmann-Haupt).
2. Usage Problem A brief, somewhat interesting fact.
Usage Note: The -oid suffix normally imparts the meaning �resembling, having the appearance of� to the words it attaches to. Thus the anthropoid apes are the apes that are most like humans (from Greek anthrpos, �human being�). In some words -oid has a slightly extended meaning�having characteristics of, but not the same as,� as in humanoid, a being that has human characteristics but is not really human. Similarly, factoid originally referred to a piece of information that appears to be reliable or accurate, as from being repeated so often that people assume it is true. The word still has this meaning in standard usage. Seventy-three percent of the Usage Panel accepts it in the sentence It would be easy to condemn the book as a concession to the television age, as a McLuhanish melange of pictures and factoids which give the illusion of learning without the substance. �Factoid has since developed a second meaning, that of a brief, somewhat interesting fact, that might better have been called a factette. The Panelists have less enthusiasm for this usage, however, perhaps because they believe it to be confusing. Only 43 percent of the panel accepts it in Each issue of the magazine begins with a list of factoids, like how many pounds of hamburger were consumed in Texas last month. Many Panelists prefer terms such as statistics, trivia, useless facts, and just plain facts in this sentence.
Source: The American Heritage� Dictionary of the English Language, Fourth Edition Copyright � 2000 by Houghton Mifflin Company.
BTW: why does this posting software eat paragraph breaks and force one to enter HTML tags just to get paragraph separation?? That kinda sucks!
[02.08.07 06:18 PM]
I operate as an independent scientist providing bioinformatics services to clients, both local and remote, under the label BioinfoTools. All the technologies 'Search Engines' listed have certainly helped. It has also helped that science has long used the internet to collaborate, from well before the WWW, so the medium is natural to my clients. Like others here, meeting a couple of times or sometimes even just email correspondence is enough to start a line of work.
It'd be nice to see governments acknowledge one-person businesses with a more appropriate tax system. There are some relatively small tax advantages to being self employed in New Zealand, but the business taxation system here is really designed as one system, i.e. it better suits larger firms and there is no separate "small business" tax scheme. This forces small business owners to either learn about things of no relevance in order to learn that they are of no relevance (obviously silly) and/or do extra accounting for no particularly useful reason. Once you're familiar with the issues its manageable, but it makes for a steeper learning curve than I think is really necessary.
I agree with Thomas about loneliness and working alone--I presume you work from home? Tim's suggestion of sharing office space, or even just a private office in a larger building is a good one I'm assuming people actually socialise in the building for the second option! In most situations you'd a little lose money if you did this in New Zealand, however. (In many cases the tax write-off of a home office is cheaper than renting an external one.)
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ryan christensen [01.25.07 01:44 PM]
I think one person businesses are on the rise because its easier to get contractors, sub contractors, hosted services etc. Speaking as a one person business.... Projects can grow to 4-10 efficient contractors that have worked together for a long time.