Solopreneur or Empire Builder

You’ve heard me say it many times on this show, if you are your only source of income, you’re living in a very risky world. If your income is dependent solely on you and the hours you trade for it, your business model is built on sand and can crumble at any moment. Hear me out though because whatever your model, I’m for you. I might poke at single person businesses a bit from time to time because I know how risky they are as a business model, but I also understand the allure of the ‘solopreneur’ model.

Let’s dive in!

To be clear, it doesn’t matter to me which path you’re on. The vast majority of the appraisers I coach come to me as 1 or 2 person shops with little to no additional help. As we’ll discuss on today’s show, I’m ok with that as long as you understand the pros and cons of that particular business model. I know I’ve given some of you some grief over the years by saying repeatedly that I don’t think you should call the one-person appraisal business a ‘business’, because it’s really more of a job than a business, but if me saying that offends you, then just imagine I never said it and hopefully you can still take something of value from this episode.

I say those things because I’ve been there. Like most of you, when I parted ways with my mentor and started off on my own in the appraisal profession, I was a solopreneur. That’s a newfangled way of saying I was a one-person technician doing everything myself. Maybe the one big difference between the way most appraisers start out and the way I started out was simply that I had already built several multi-person businesses prior, I was trained in the appraisal profession by a very smart entrepreneur and empire builder who had already built a sizeable multi-seven figure residential and commercial appraisal business, and I knew when I set off on my own that I had no intention of truly being on my own, so I jumped right into renting the whole second floor of an office building, building out 12 workspaces with computers and technology, and had 5 appraisers and 2 trainees within the first 3 months after hanging out my shingle.

Business building is in my blood, and I have my parents and some life changing mentors to thank for that, but that’s not the right path for everyone. Even though I had a busy appraisal office right out of the gate, I didn’t necessarily have a busy appraisal business myself right out of the gate, nor did I have anyone helping me build it. What I had built was a community of appraisers under the same roof, some renting desk and computer space from me, much like what later would become WeWork style shared office spaces, and some on a commission-based income split. I created the infrastructure; they paid me for the convenience of not having to do it themselves. That alone provided some cash flow and income while I set out to do what I tell all of you to do: go meet people, do lunch and learns, host events, network, walk into banks and credit unions and meet the loan originators and the processors, and start to build a personal brand.

The solopreneur path can be a very rewarding one, if you understand leverage. If you don’t really understand leverage, you just end up with a job. Don’t get me wrong, like many of you have experienced, it can be a really well-paid job if you’re in a good market and you’ve established a good reputation.

So, let’s first make the case for the 1 person ‘business’. Before we get into this, let me clarify; If you’re the sole person responsible for all of the income generated in the business, despite having an assistant or two, you’re still a solopreneur. Yes, you may have some semblance of a team, and I definitely applaud those who do because that’s a definite indicator that they understand leverage, but that’s still a solopreneur job since taking any time off typically means your income stops and, depending on how your assistants are paid, their income stops as well.

For the sake of this episode, solopreneur vs team builder, the team builder is someone who not only applies leverage via the use of assistants, but they’re also applying leverage to the income generation side of things. This might mean that you have a trainee that can inspect even while you’re away and you can complete some appraisal work while on vacation. Maybe it means you have some licensed and certified appraisers working with or for you that are generating income for the business. Whatever the scenario, the ‘team builder’ in my comparisons is somebody whose income is not solely dependent on their own labor being applied in the business.

With that out of the way, the case for the solopreneur: first and foremost, it’s the lowest overhead and highest agility version of a job one can probably have. Once licensed, you can start a solopreneur style business with a computer, some licensing fees, some MLS fees, and some E&O insurance. For, say, $2500, you can be in business and earning income in the appraisal profession with no boss, 100% control over your time, no personnel drama, no worries about what your people are saying to the customers, no training someone else, no payroll stress, no management headaches, and nobody to answer to or for. The motto of the solopreneur is, ‘if it is to be, it is up to me’.

That’s the argument or case for being a solopreneur and I’m all for it, especially if it the business model that lets you start to live out your dreams, stop working for someone else, get out of cubicle hell, away from those ghoulish HR fun killers (and often business killers), and out into a world where you are the ruler of your own destiny. But we can’t just stop there, if we’re going to look at the pros of something, we also have to be open to the cons of it as well.

So, here’s the case against the solopreneur business model. The biggest issue I’ve seen against this one-person business model is that you’re the biggest risk to the model and you’re likely the biggest bottleneck in the model. Your income is intimately tied, not just to your time, but also to your energy, your health, your mobility, your schedule, and your motivation. If you stop, the business stops, which means it’s not really a business, it’s a treadmill. And, again, it might be a well-paid treadmill job that many of you are ok with. That is until you’re tired of running on the treadmill and can’t get off, or the treadmill breaks down and you’re stuck with nowhere to run.

In that analogy, the treadmill might be the market, the interest rates, Fed policy, industry regulations, AMCs, or the dozen other things that can throw a wrench into your business model. So many appraisers over the last couple years are experiencing the wrench and broken treadmill because their treadmill stopped when the interest rates increased. That is the downside and fatal flaw in the solopreneur model.

No scale, so sale, no leverage, capped income, and heading for a cliff. I’d also say ‘no legacy’ except that you are still building a legacy as a solopreneur. We’re all building legacies every moment of every day. The question isn’t whether we’re building a legacy or not, it’s what kind of legacy do you want to leave behind. Quite simply, solopreneurship can be a very rewarding model offering lots of opportunity to somebody, you just have to also know the risks involved in staying in that model forever. Most solopreneurs are stuck in a trap disguised as freedom. It works for a while; it rarely works great forever.

Let’s talk about what I simply call the team builder model. To clarify again for those who might start yelling at me because have a team of VA’s doing the low dollar and repeatable type work; when I compare these two models, I am concerned primarily with how many income generators there are in the business, not just how much leverage you’re applying to the actual work. I love the solopreneur model when you are, at the very least, applying leverage via additional talent and offloading the lowest dollar per hour tasks. I’m just not a fan of it long term because it relies solely on you for all of the income generation.

In the team builder model, you apply leverage by multiplying your value and your income beyond your own labor. I’m all about maximizing your income, but not just for the purpose of having more income. You maximize your income for the purpose of then using your income as leverage into other assets that produce additional income that is independent of your labor and your time. Those additional assets could be humans within your existing business model, they could be assets like income producing real estate, digital content and education, your personal brand, vending machines, another business, etcetera.

With that being said, if you’re a solopreneur and you’re doing just that; using the income you generate with your hours to invest in other assets and income streams, Awesome! You’re essentially doing what I suggest in that you are building a team; it might just be a team of hard assets like real estate that is working for you while you sleep. If you don’t wake up the next morning, or just don’t feel like working on that day, you still have something or someone producing income for you. That’s why I’m ok with the solopreneur model, as long as you have a plan to leverage the model so that, at some point, you can choose what to do with your time because your income is decoupled from your time.

The team builder model, at least in the appraisal profession, is one of the ways to create leverage, and potentially wealth, beyond your own labor. Does it take more effort? Well of course it does, but it’s just effort applied in a different way and a different area than the effort you might be applying to generating all of your own income. Effort is effort and you’re either applying effort in this direction and getting one result, or you’re applying it over there and getting a different result.

The thing about effort is that, depending on the reason you’re applying the effort, you are expecting some kind of return on the effort (ROE). When all of your income is dependent solely on you and your effort, you will always experience a level of limited outcome distribution, meaning, no matter how much or how hard you work, your returns are capped. Like in baseball, no matter how athletic you are, how skilled you are, how liked by the fans you are, or how hard you swing at the pitch, the most runs (points) you can ever get is four, with all the bases loaded. No matter how good you are, you will always be limited if it’s all up to you.

When you have additional income producers in your model, now your return on effort is multiplied. Is it a different kind of effort? Of course! Managing, leading, teaching, coaching, and having a vision takes effort. Networking, speaking, teaching classes, and doing lunch and learns takes effort. It’s a different kind of effort than doing an inspection and picking comps, but effort, nonetheless.

The questions you should always be asking are: what is my return on effort in this kind of work versus that kind of work? Does the one that looks to be more difficult have asymmetrical and outsized returns relative that effort? And, if the answer to that one is yes, what do I need to learn and who do I need to become to make that one almost effortless at some point?

Remember, effort, by definition, is the conscious exertion of power. Things done over and over eventually require less and less effort, especially as you get better at them. Almost everything requires the most effort at the beginning or when first learning how to do it. If the thought of hiring, managing, leading, and training other people sounds like a lot of effort to you, it probably is. But it’s also likely that it’s more effort because the potential for much greater returns on your effort are the reward. Starting out requires the most effort because all of it is new and scary. There’s lots of learning and skill acquisition required to build something bigger than yourself. Eventually, however, it takes less and less effort as you skill up, which is what multiplies the returns on your effort.

The primary purpose for building a team over being a one-person business is to multiply your efforts and get exponential returns on that effort. No, the primary purpose is not to serve a bigger geographic area. No, the primary purpose is not to serve your clients better. No, the primary purpose is not so that you can get on more panels. Those are all outcomes and potential results; they are not the primary purpose of building a team.

Leaving a seemingly stable job is hard. Leaving benefits is hard. Going out on your own is hard. Building up a great client list is hard. Building a personal or professional brand is hard. Building your systems and processes is hard. Hiring and training other people is hard. Retaining those people and giving them a compelling future is hard. Scaling beyond your current skillsets is also hard. But every one of those things, and generally in that order, has greater and greater returns for the initial increase in effort and difficulty. We get to choose our hard, why not choose the hard that has the greatest ROE and ROI and gives you the most amount of life in the process? Especially when you know that what was difficult at first will eventually become less difficult over time.

Two of the greatest benefits of the team building model are that you start to decouple your income from your time, and you are setting yourself up to get exponential returns on your effort. Does the team building model solve all of your problems? Of course not, it often creates new ones. But again, the idea is that each new challenge in a different model holds the potential for asymmetric leverage and outsized returns for simply choosing a different kind of hard (a different kind of effort).

You know you can always shrink back to the solopreneur model if things don’t go well for you or you realize you just weren’t cut out for leadership and management, which is the proof that the solopreneur model is capped at some point. If you can say to yourself, “I know I can always go back to just me and do X number of appraisals per week and make $X in income”, that’s the sign that you have a ceiling in that model. If the ceiling bothers you, you can tweak some things in your system to become more efficient, go for higher paying clients, and do some things that I teach every day to maximize your income in the least amount of time, but the outcome will always be limited at some point regardless of the effort.

Let’s talk about the cons of the team building model.

For one, leadership is a skillset. In fact, I dare say it’s the one thing we can point to in the appraisal profession that is the greatest contributing factor to the commoditization and decline of the industry: no sound leadership at almost every level of the profession. Yes, there are some strong leaders in their own companies or markets, but leadership is not a character trait that predominates in the industry. The industry is filled primarily with technicians who just want to be head down, nose buried in a spreadsheet and debating on social media whether polynomial 4 is more statistically valid than using the Fetzer method. It’s all silly stuff when it comes to your life, your income, and your legacy.

Nevertheless, if you’re thinking of venturing into the team building world so as to multiply your efforts and your returns, I’d strongly suggest studying everything you can get your hands on regarding leadership, strategic vision, management, and public speaking because leadership is most definitely a skillset, and it’s a skillset most don’t have naturally. Yes, you can be a born leader, but most leaders were trained to be the leaders they eventually become. It’s a learned skillset.

Another con of the team building model is there is simply more complexity. Instead of just rolling out of bed and heading out to your first inspection, you’re typically dealing with everyone else’s issues first. You have people challenges, client challenges, training, quality control, systems building, etcetera. If none of that stuff sounds enjoyable to you, count yourself as normal. Those things aren’t enjoyable for most people. And therein lies one of the biggest paradigm shifts required to go from the solopreneur to the team builder: if you want exponentially greater leverage over your time, your income, and your future, you’re going to have to accept that it simply ‘ain’t’ all fun.

The solopreneur model is, almost by definition, a very selfish model because the solopreneur typically has a list of things they simply don’t want to do, which they use as justifications for being a solo operator. “I don’t want to train somebody else. I don’t want the hassles that come with other people. I don’t want to worry about quality from someone else. I don’t want to train my competition”. The list doesn’t need to be long to be valid. You just have to imagine the word “limits” or “limited” after each reason on the list because each one of those reasons comes with a limit to your time, your freedom, and your income.

Another con of the team building model is the pressure to keep everyone fed. When you build a business with other humans involved, there is some inherent pressure to take care of them, which is what most decent human beings would feel. Some people love that pressure and point to that as the reason their business produces what it does, while others will simply say, “I don’t want that pressure”, to which I completely understand.

Another con of the team builder model, and certainly not the last one, is that one bad hire can cost you lots of time and money. That’s why I always advise people, before they make that first hire, to study up on interview practices and questions, hiring and onboarding best practices, the cost of a bad hire and also bad leadership, the red flags of a future nightmare hire, and so on. If leadership is a skillset, so is attracting, interviewing, hiring, managing, and retaining talent. If you don’t have those skills, you’ll either need to farm that out on a subcontractor basis, which you can do, or bone up on that skillset.

Alright, let’s summarize:

The solopreneur model pros:
1. You are the product, you control the process, you keep the profits.
2. High profit margins, no payroll, you eat what you kill.
3. Simplicity: minimal systems require, low overhead, fewer moving parts.
4. Control: you call the shots, you’re responsible for quality, very little to manage.
5. Flexibility: You can pivot on a dime because it’s just you.
6. Lifestyle first: You can work as little or as much as you desire.

The solopreneur model cons:
1. Income ceiling: you’re capped because your time is your inventory. When you run out of inventory, you have nothing else to sell.
2. Burnout risk: Every single dollar you earn is tied to your physical labor and your efforts.
3. Vulnerable: If you get sick, tired, injured, burned out, or take a vacation, your income stops.
4. Limited leverage: Yes, you can hire some assistance, but that only aids in efficiency, it doesn’t completely decouple your time from your income.
5. No exit strategy. Death, a job, or another business is the exit strategy.

The Team Builder Pros:
1. Time and income leverage: you’re building a machine that can run and earn without you.
2. Scale: you’re building something that can handle more volume, more and better clients, and more markets.
3. Leverage: you’re building a machine that leverages the time, talent, and treasure of others.
4. Infinite game: You now have an income producing asset that can build long term wealth, not just personal income.
5. Exit strategy: When you have a team builder business, you have a variety of potential exit strategies.

The Team Builder Cons:
1. Complexity: Systems, hiring, training, and management aren’t for the weak.
2. Margin Compression: More expenses, especially early on.
3. Leadership Pressure: You must develop team culture and vision.
4. Risk Exposure: Payroll, compliance, client churn—stakes are higher.
5. Slower Start: It’s a longer runway to profitability.

The bottom-line friends, there is no right or wrong, only what works for you based on what you desire for your life and from your business. I only encourage deep introspection and intellectual honesty within yourself for the justifications you may use to rationalize your choices. If your rationalizations for choosing one model over the other are based in fantasy instead of fact, you may end up suffering more than if you were honest with yourself to begin with.

Solopreneurs build lifestyle businesses; team builders build legacy businesses. There’s no other way to frame this than to say, if our business and income depends solely on us, it owns us. As we’ve learned from Michael Gerber and the E-Myth book he wrote, being great at the work isn’t the same as building a business that works great. You’re either a technician with a job or a strategist with a system. I don’t care which one you choose, I care which one gives you what you truly desire.