From Independent Contractor to Business Owner: How to Take the Leap

Model #2: Built to Last

James Collins' and Jerry Porras' classic book Built to Last provides sound research about what differentiates companies that last from those that don't. The authors researched a series of companies that outperformed their rivals, and have been around for at least 50 years. They isolated the things that these companies did, and their rivals didn't do, in order to create a statistically valid model of tasks a business owner needs to do to create a company that lasts.

Their findings are not so different from Gerber's, although they are presented in a more academic format, with examples taken from publicly traded companies. But this book is so soundly researched, and so applicable even to fledgling companies, that it is worth my summarizing the findings. Here are the authors' conclusions:

First, build a clock instead of telling time.
The longest-lasting companies develop systems that are not dependent on any individual. Less successful companies tend to rely on charismatic, egotistical leaders. But when these leaders leave or die, their companies suffer. That's because there are no systems in place to keep the results going. And one of the most critical jobs of "clock building" for any owner is to develop future leaders. This first finding clearly parallels Gerber's approach.

Second, focus on "and" instead of "or."
The best companies don't get stuck in either/or ruts, like "profit or quality," "time and money or growth." Instead, the change the words "or" and "but" to "and." As a result, they are not constrained by limiting beliefs, and achieve remarkable breakthroughs.

Third, develop a "core ideology."
Lasting companies develop a mission, vision, and set of values that drive the company into the future. Hewlett and Packard didn't just want to create a product and cash out. They wanted to change people's lives with technology, and that mission led to one of the most successful technology companies ever.

Fourth, drive for progress while preserving the core ideology.
Great companies don't get stuck in a rut -- they keep progressing. They do this in two ways. First, they set what Collins calls "Big Hairy Audacious Goals" (BHAGs). These are huge, ambitious goals (e.g. Fedex's goal of 100% delivery; General Electric's goal to be #1 or #2 in every market it serves). Second, they try lots of smaller ideas and see what works. For instance, 3M is famous for constantly testing new ideas, which often result in products like their world-famous Post-It Notes.

Fifth, develop a cult-like culture.
Lasting companies have cultures that resemble cults. These are strong cultures with specific ways of doing things. You immediately know whether you fit into one of these companies or not. For instance, if you are not fanatical about details, you won't survive long at Disney or the Ritz. If you don't love the thrill of competition, Nike is unlikely to keep you around. As a business owner, it is your job to nurture and sustain a performance-oriented culture.

Sixth, rely on home grown management.
The authors found that the best companies groom people for leadership roles internally. This finding mirrors Gerber's ideas about documenting jobs and having employees teach those jobs to others.

Finally, according to the authors, "Good enough never is."
Just as Gerber insists that entrepreneurs measure and improve processes, so Collins and Porras found that the world's top companies keep raising the bar.

When you compare the E-Myth model and the Built to Last Model, you can't help but see the similarities. Both models present their information differently, but both are applicable to any Web design or development business.

Model #3: Become a Marketing Expert with Outsourced Talent

Okay, enough theory. Let's talk about some real companies. This example and the next focus on real companies that have gone from start-up mode to successful company mode.

The owner of the first company started as an independent contractor, who worked with companies in Silicon Valley. He went from job to job, constantly in search of the next gig. He was a classic "technician," to borrow the E-myth term.

After a year or two of this kind of work, he decided to go for it and build a larger organization. Immediately he realized a dilemma: if he stopped working in the business and started working on it, there would be a period of time when his income would drop significantly. In order to equal his salary and make a profit, he would have to have at least four contractors working full time at client organizations.

Here's what he did.

First, he made sure that he had at least two years of reserve funds in the bank to take care of his family and any emergencies.

Second, he built a database of outsourced talent that he could call upon at any time, for any client situation (e.g. in the case of Web designers, this would include QA, usability, ecommerce, navigation, SEO, Java, .NET, industry, and other experts). That way, when he talked to potential clients, he could immediately respond to their specific needs with specific resources.

Third, he became a marketing expert. He learned everything he could about marketing and sales, until he filled his sales pipeline with highly visible and desirable clients. He essentially sold experts into these companies, taking a nice mark up in exchange for finding great resources and guaranteeing quality.

Fourth, he outsourced his marketing and sales, and his sourcing of talent, to others.

Fifth, he developed processes to track client satisfaction and improve on it. This included processes to carefully screen his virtual talent and ensure that they understood his methodology to delight customers.

After two years, he had a full-fledged company with ten employees earning almost $1 million a year. He even made it to the Inc. 500 Fastest Growing Companies list.

Notice what he did: he gave up his original talent (e.g. Development), and outsourced it completely to virtual experts. He made marketing and sales, and finding great people, the core capabilities of his company. By putting his ego aside, he built a "clock" that has real value (his database of talent, his processes, and his high-profile client base).

Also notice how he was sure to have money in reserve to cover the lean times while he built his business up.

Model #4: Become a Talent Expert with Outsourced Marketing (a la WSI)

The final model is the inverse of Model #3. In this case, the company in question developed in-house Web design/development expertise. Their expertise went deep and broad, so that they could handle everything from simple Website designs to complex ecommerce projects. They also developed methodologies for writing proposals, starting work, phasing work, etc.

Here's where their model gets interesting: rather than marketing this in-house talent on their own, they developed a franchise system. They marketed their expertise, along with a marketing system, to IT professionals who wanted to augment their capabilities or start their own business. Even better, as a franchise system, they receive tens of thousands of dollars from their franchisees, along with royalties.

I can't vouch for the satisfaction of the franchisees in this system. But I know that the company, WSI, has over 750 franchisees and operates worldwide.

You could develop a comparable model, starting as a small design shop, and essentially signing on marketing representatives to sell your services for a commission. That will save you the money involved in building a franchise, and allow you to grow with an enormously leveraged model.

To succeed here, you need to have the skills to recruit marketing representatives, develop a system to serve clients, develop ways to keep the marketing representatives engaged and successful, and recruit broad and deep design/development talent that sets you apart. As in the previous example, you could even start out with a virtual on-demand talent pool to keep your overhead low.

Your Future Awaits!

Finding a model by which to shift from being an independent contractor to running a larger business is not hard, if you're ready to take the leap. You don't need to get fancy. Just by following the E-myth methodology, you can gradually add talent to your company and grow traditionally and organically.

What is hard is taking effective action, especially in the face of the setbacks and challenges you are likely to encounter along the way.

To give one example, the entrepreneur in Model #3 struggled for two years until he developed traction with his new business model. He essentially landed a very senior executive at a very large and visible company as his client, and that gave him instant credibility. Then, about six months later, he found a terrific salesperson that helped him grow his company exponentially.

Again, it is not easy and, as noted earlier, there are no guarantees. But the opportunity exists and, if you're prepared to take the leap, the models we've discussed here should put you on the right footing to get started.

So, what's your next step?