Will the REAL Entrepreneurs Please Stand Up to be Recognized!
I had an interesting A-HA! moment the other night when I realized that the whole notion of being an entrepreneur is simply rooted in the fact that one becomes an entrepreneur merely by becoming self-employed in some capacity. There’s so much focus on “start-ups” and “market caps” and “innovation” that the vast majority of entrepreneurs are being ignored in most entrepreneurial discussions.
Everybody who chooses to go into any kind of 100% commission sales role, for example, has just become an entrepreneur and small business owner. But when was the last time someone selling real estate, insurance, mortgages, or doing property management, filed an IPO? When did they ever talk to VCs about capital needed to expand? How many of them have an “elevator pitch’?
In 1976, my dad, Dan Schwartz, started Dan Schwartz Realty (DSR), a company that ultimately became the 2nd or 3rd largest real estate firm in the State of AZ at the time of his death. He never talked about going public. There were never any conversations with VCs about expansion. The business grew naturally and steadily because of his business model. Cripes, it took nearly two decades before he opened a second office!
If there was anything innovative about what he did, it was the fact that he may have actually been the first RE brokerage to offer 100% commissions to his sales people. Only he never wanted to argue with Dale Rector, founder of Realty Executives (ReaEx), about who was REALLY first. My dad never cared because their business models and target markets were so totally different.
At a time when most brokers despised so-called “part-timers”, DSR embraced them whole-heartedly. DSR charged a fee to hang their license, along with a flat monthly “office” fee that ranged from $25-$50. Agents were paid 100% of their commissions, and in turn were billed for the actual costs incurred in each transaction, like E&O insurance and advertising expenses. They also had to pay their own fees to belong to the various boards to get access to MLS. There was an office … one office. There were desks, chairs, and computer terminals where you could access the MLS. But you couldn’t rent a desk permanently.
One day I was chatting with my dad and his business partner Duane, and I was rambling on about some ideas on to make the office more attractive to agents. After a bit, Duane quietly asked, “David, do you want to know who our ‘ideal agent’ is?” I shrugged and said, “Sure”. Duane looked at my dad, winked, and said with a sly grin, “Our ideal agent is someone who mails in their monthly check for $50 and never sticks their head in the door.” That pretty much summed up DSR’s business model.
ReaEx (and most other firms) would not work with the people who DSR embraced. Originally, they only took on “million dollar earners” and charged them a hefty monthly fee for renting a desk in an office. They had to be confirmed “full-timers” by virtue of their sales results. ReaEx only took on the best-of-the-best. My dad and Duane couldn’t care less. That wasn’t their market.
DSR took on the so-called “part-timers”: teachers, firefighters, property managers (before a license was required), and others who kept their license active for a chance to list or sell a home or two every year to friends and relatives. It was immensely profitable for him given how he structured the business. He didn’t need capital to expand, he simply needed more people who wanted their license and who were rejected by the other RE firms because they were not perceived as “being serious enough” about selling real estate as a career move.
For example, teachers need something to do during the summer, and real estate is a great option for many of them. The good ones would accumulate a few sales over the summer that paid out later in the fall and they were quite happy. To say they’re not “serious” or that they’re “part-timers” because they work the rest of the year doing something else always bothered my dad. They were full-time teachers because they loved what they did; they simply had the opportunity to do something else during the summer months when school was out. That didn’t make them “not serious” or even “part-timers” in my dad’s view, just to the rest of the real estate industry.
My dad had a life-long affection for entrepreneurs — people he observed who lifted themselves up by their own bootstraps and got along under their own power. For him the “road to success” was a simple formula that works for nearly everybody: keep knocking on doors and shaking more hands. (I’ve always been more interested in the tech world, so this never held much appeal for me, but it certainly applies to CEOs everywhere.)
My point here is that there are plenty of legitimate entrepreneurs who fit my dad’s definition but don’t seem to fit in with contemporary ideas of what’s involved in making a living on your own. Everybody who gets laid-off or retires and ends up getting a license to sell real estate, insurance, or securities, just became a “start-up”! How is the entrepreneurial community here helping them, other than so-called “networking” events where everybody is selling and nobody is buying?
They don’t need to learn about market capitalization, how to split up stock among founders, or shopping around for law firms to handle their IP needs. Most do need help with setting up a website, managing email, and basic stuff like that, but they sure don’t need to hire a CTO to help run any of it.
Most of them also ESPECIALLY need help with basic finance and financial planning, branding, marketing, advertising, and (self-)promotion. The same things every business needs.
SOME startups focus on “the Next Big Thing”; but the vast majority are just one- and two-person enterprises trying to carve out a little niche for themselves that lets them survive and hopefully thrive.
Everybody who drives for a ride-sharing business, for example, fits into this mold, although most of them aren’t even aware of that. They don’t even consider themselves “small business owners”! It’s just a new and easy way to survive financially today.
I got into a rather heated argument with a guy on an Uber driver’s FB group once who insisted such drivers are NOT “small business owners” and that the IRS will even penalize anybody who tries to claim otherwise. These are people in OUR COMMUNITY who are so totally ignorant of this subject, and mis-informing others while beating their own chests. Of course, Uber doesn’t care; nor do any of the other big companies who love hiring these “independent contractors” (ICs). So how are these people to become educated? How do these ICs learn that 1099 income from Uber, Lyft, Amazon Flex, DoorDash, and other outfits, gives you access to a whole slew of legitimate tax deductions that the IRS has no problem with as long as they look reasonable and customary?
Ironically, my dad never set out to build a big enterprise; he hated dealing with employees and never wanted anything to do with anybody other than himself and his wife. (She took prospects to view properties, while he handled the paperwork.) His business grew by accident, mostly by the efforts of one of his first agents and eventual business partner, Duane Fouts.
If entrepreneurship skills and principles are to be taught and supported by the community, I believe THIS kind of entrepreneurship is the sweet-spot in the market. Not building another Silicon Valley where only 1% of the people are actively served and supported.
How many people in the Valley here are “unemployed” (and unemployable) in traditional jobs because of their age or limited abilities, but nonetheless need to keep working to put food on the table and a roof over their heads? They’re never going to get the attention of any VCs or angel investors. But they do provide most of the fuel that keeps our entrepreneurial economy running.
(I got an Uber ride once from a fellow about my age who said he was hired as the CEO of a local company, but it was taking them a while to go through their due diligence, and he couldn’t stand sitting at home. So he started driving for Uber just to keep busy.)
Why are so many entrepreneurial events filled with an under-30 crowd looking to become the next Mark Zuckerberg?
Why is there so much focus on “30 Under 30” and “40 Under 40”?
Why is entrepreneurship education focusing on building so-called “unicorns” rather than helping the growing ranks of ICs (ie., 1099 workers) get the most leverage from their new business enterprises?
How about a “500 over 50” celebration for new business founders who are at least surviving in a world that eschews old farts?
I’m 60 now, and I’m sure there’s nothing I have to look forward to in terms of accomplishments that anybody will care about other than retirement — which it’s looking increasingly likely that Congress will be forcing me to wait for another decade before I qualify. In the meantime, I’m pretty damn lucky to have a job as a programmer in the tech world today. And they’re pretty damn lucky to have me, although I don’t think they really appreciate what they’ve got — businesses today are not structured to leverage long-term experiences of their workforce, most of which has less than a decade of experience.
(As if to underscore this, a crew of a half-dozen interns just showed up at my workplace this past week to spend a couple of months supporting a team of (low-cost) developers under contract in Ukraine. These interns just graduated from High School (!), and are supposedly being paid pretty well. Why not hire some unemployed old-farts who can’t find work? I guess old-farts with 15 years of experience using the same Java tools these HS grads barely know is just too much to deal with? What’s the logic here that makes recent HS grads with zero experience more valuable to the company than highly-experienced developers who’d gladly do the same work for the same pay?)
As it happens, I’ve spent most of my life self-employed. I guess that makes me a “serial entrepreneur”, although I’ve not yet managed to create a hugely profitable business. I’m not big on sales, and prefer the technical end of things. I’m the kind of person who likes to keep the machinery running while others dance in the spotlight. I’ve found there’s plenty of room to innovate and exercise my creativity in this respect. I’ve even had some pretty good ideas of my own that I pursued, but they never made it out of the gate.
The problem is, if you’re not the guy or gal in the spotlight, your work has probably become a commodity. In order to succeed, the ones in the spotlights need to appease their investors by hiring the cheapest labor they can to get the job done quickly, and they leave the accrued “technical debt” to the next crew and funding round.
So we have millions of people today who drive their own cars for ride-sharing and delivery services and don’t realize that earning 65-cents per mile (gross) is simply not profitable. (At least, that’s what I was earning when I finally threw in the towel and stopped.)
A lot of people invest their time and money to qualify for a license to sell real estate, insurance, equities, whatever, and have no idea how to know if it’s even making them money. Driving for Uber should require some kind of business license only because the only people making money from it are Uber investors! (And even that’s becoming questionable now.)
I believe it’s important that people who work for themselves know whether they’re actually getting ahead or are simply treading water financially. Uber might look like it’s profitable for you … until it comes time to file your taxes the next year, and you didn’t get good advice and kept poor records and ended up getting screwed tax-wise.
There are people who clean homes and offices for a living. Many of them only make a profit because they accept a lot of cash payments and live on the cheap. They may be quite happy, but they’re a far cry from how people tend to view “entrepreneurship” through the eyes of those who are only interested in “moonshots”.
It makes me wonder … what can the community do to support all of these under-the-radar entrepreneurs who spend much of their lives barely making ends meet, who aren’t ever going to talk to investors, have nothing of value to take public in an IPO, but who seem to be providing the backbone of our economy in many respects? About all we ever see for most of them is “networking” events; this may get them a new client or two, but surely there are things they could do to improve the efficiency of their business. Or maybe they just need a better business model? What do you think?