Michigan needs to embrace its independent workforce
One of the elements missing from Michigan’s efforts to diversify its economy and become more entrepreneurial is embracing an independent workforce.
By an independent workforce, I mean those people that run one-person companies: The independent software developers, finance experts, legal experts, marketing and branding, and countless others that provide essential services to businesses in our area. I mean the people who have not had W-2 wages for years, and are successful precisely for that reason.
These one-person businesses get precious little support. That’s sad, because these people provide a lower barrier to entry for our local startups to get access to skill.
Equally important, these people are honing the skills they’ll need if they want to grow their companies in the future.
I started working as an independent software developer in 1993. My business partner, Dianne Marsh, did the same thing about the same time. Between us, we helped build software products for several of Ann Arbor’s startup companies.
We also learned about all the little details needed to run a business, regardless of size. Thinking about our experiences in this world made me realize that we need to embrace independents for the benefit of the independents, and the startups they help.
Almost every successful business owner I know has run a one-person company at some point in the past, which provided valuable insight into running a business.
I would encourage any of our aspiring entrepreneurs to spend some time running a one-person business before starting work on your idea for the ‘next big thing’.
To run a successful one-person company, you’ll learn about business finance: you are responsible for forecasting, managing cost, and managing your balance sheet.
You’ll learn about marketing and sales: If you want to have any business, you’ll need to perform those marketing and sales functions. You’ll learn something about contract law (hopefully with the help of an attorney) because you will be executing any business agreement you enter.
You’ll learn to evaluate markets. If you aren’t generating sales, you need to figure out why. You also need to change your offerings to match your market.
Our startup community also gains several advantages from a larger pool of independent experts.
Most obviously, independents provide a bridge to bringing in permanent employees. Independents provide more flexibility for startups. Startups, by their very nature, cannot predict their needs very far in the future, and yet, their needs are growing.
Startups need to ramp up, and sometimes down, very quickly. Startups need to produce the initial version of the product quickly, and then they need to push the marketing and sales of that initial version. That’s how they validate their markets, and plan the future release.
The startup model works well for independents. The tech independents will want to help create that first release. The marketing and sales independents will want to help launch that first generation product. The finance experts will spend smaller amounts of time, but be a more constant presence.
Despite the role they play in our economy, independents aren’t counted as important players. An independent consultant starting a new business does not show up as a ‘new job’ created. Our economic development organizations are tasked (rightly) with growing jobs in our region. That means growing new companies that hire employees. Only permanent new jobs are counted.
The most important change is to add those independents to how we track job creation. When I read how some of the unemployed have ‘stopped looking for work’, I’m certain that some of those people are now working as independents. I wish them luck. It’s hard, but it’s worthwhile.
I want to see our government statistics measure these independents as economic activity.
If we agree that we need to support these independents, what should we do? The easy answer is to continue some of the programs that already exist.
SPARK does provide some benefits to independents, like their OpenCoffee events. One challenge for SPARK is that their mission is to help high-potential startups. I’d bet that most independents have not even considered SPARK as a resource. SPARK doesn’t market their services to these individuals, and they should do more to make everyone aware of what is offered. SPARK Central and SPARK East offer space that can help independents that need places to hold meetings, but aren’t ready to have their own office space yet.
In addition to SPARK, Ann Arbor has some fantastic co working facilities that need to be part of our touted resources: Ann Arbor Tech Brewery, Workantile Exchange, and others.
Additionally, we do have some groups that provide networking opportunities for these independents: Ann Arbor Young Professionals, LA2M, and several technology user groups.
Independents also need to stop thinking that everything they do is completely unique. If you’re an independent, some things you’re doing may be completely unique. But other challenges have been faced by others before you, and are being faced by others in our community today. Look at that previous paragraph again, and realize that there are many locations and organizations where you can get advice, or even just talk through current challenges with someone else trying to go it alone.
We need to realize that all these different kinds of business activities are part of the greater economic ecosystem, and independents play an important role in that ecosystem.
Bill Wagner is co-founder of SRT Solutions in Ann Arbor and a software blogger. He shares this regular column with co-founder Diane Marsh.
Comments
Bill Wagner
Thu, Mar 18, 2010 : 12:48 p.m.
Technojunkie, There is paperwork to starting a business. I've done it twice, and I do wish it were simpler. However, that really shouldn't deter you. It's not nearly as bad as you've heard. Your first two calls should be to an attorney and an accountant. They can fill you in completely, and they can help you through this (they do these forms often). I think both services were less than $750 in the first year. That's a small price to pay for starting your own business. -bill
Spooner
Thu, Mar 18, 2010 : 11:12 a.m.
I have been an independent business since 1966. When I moved to Ann Arbor in 1969, my colorful hats, coats, etc. sold very well. By 1978 I had built a successful garlic business. I grew and sold garlic that I pealed. Many local restaurants (Real Seafood, Whiffeltree, Del Rio, Clancy's Fancy, Backalley Gourmet, Escoffier, etc.)were regular customers. With the advent of NAFTA, cheap Mexican or Chinese garlic put me out of that business. I still grow and sell garlic, but most people seem to be happy with the cheap imported stuff. The same is true with my crocheted hats. I can't compete with slave labor. I'm too old to do anything else, so I'm dependent on people paying what I need to charge, so that I can live here, now. The article suggests a number of groups for independents (oxymoron). Groucho Marx and I "won't join any group that would have me as a member". To summarize "Buy local or bye bye."
thurber
Thu, Mar 18, 2010 : 10:08 a.m.
Right on, Bill. Democrats support the union member; Republicans help the corporations. This bunch of gutsy bootstrappers have only their own resourcefulness and perhaps spousal support. Spark woos elusive bigger fish while these teeming minnows are in a tough, lonely fight for survival all around us.
Technojunkie
Thu, Mar 18, 2010 : 10:07 a.m.
The biggest thing that scares me away from going independent is all the paperwork. Tax compliance, lawyers, accounting, liability insurance, all the overhead that the nanny state inflicts on productive individuals. On top of that the macroeconomic conditions are awful. I'm not sure whether to start a business or spend my time learning how to grow my own food and get off the grid as much as possible.
jeffsab
Thu, Mar 18, 2010 : 8:37 a.m.
I've been a "one-person company" for the past 8 years, though the economy has finally driven me back to becoming a regular W-2 wage earner. It would be great if we could get more local support for people who work on a freelance basis. There are lots of us here in Ann Arbor and many are struggling, with no safety net of unemployment to fall back on. In many cases, were it not for a spouse with a conventional job, we would not be able to pursue these sorts of careers in the first place. Ann Arbor is still a pretty small town, making it challenging for both spouses to find conventional career paths.
Stephen J. Gill
Thu, Mar 18, 2010 : 7:40 a.m.
I think you have identified a very important part of our local economy that doesn't get the attention it deserves. The independent workforce is quite large in the Ann Arbor area, especially when you add management consultants, employee trainers, instructional designers, executive coaches, artists, fitness trainers, and others. Many of these folks are solo businesses that contribute a great deal to the local economy but, as you say, do not get much support. The only caveat I would add to what you say is that I don't think new professionals (recent graduates) should rush into a solo business. Their first stop should be at least a few years with a company that can give them an opportunity to develop the practical knowledge and skills they will need to serve their clients effectively.