BY CARY GRIFFIN AND DAVE HAMMIS
According to the U.S. Department of Commerce, nearly 80 percent of all small businesses succeed. Over 20 million Americans now work in home-based business and the self employment rate is growing at over 20% annually. Between 1990 and 1994, microenterprise (businesses employing 1 to 5 workers) generated 43% of all the new jobs in the United States, and in the past decade, 60% of microenterprises were owned by women and created more jobs than the entire Fortune 500 combined (USDOC, 2000; Forrester, 1996; Access to Credit, 1998; Friedman, 1996; Sirolli, 1999). With the unemployment rate slowly rising to a current figure of 4.5 %, loyalty to companies continues to fade, creating an even more fertile environment for small business exploration and growth. People with disabilities are being swept up in this world-wide movement after years of chronic unemployment and the supportive thrust of the self-determination movement.
Working with numerous individuals served by a variety of helping agencies such as Vocational Rehabilitation, community rehabilitation programs (CRPs), Work Force Investment Act funded entities, and transition from school to work programs, the Rural Institute at the University of Montana is amassing experience in creating self employment, developing individualized approaches to microenterprise, and exploring diverse business models that meet the career dreams of individuals. The process for developing a small business is always Person-Centered and blends the desires and talents of individuals with market opportunities to create economic opportunity. Our experience ranges from businesses struggling to extract minor profits, to those that are flourishing and becoming recognized large scale successes (Griffin & Hammis, 2001).
SELF EMPLOYMENT SCENARIOS
Rural Institute Adult Community Services and Supports Department (ACSS) staff, have experience working with and advising on well over 200 businesses in various states of tenure. Many are start-ups in the feasibility testing stage, while others are seasoned enterprises that require business model adaptations reflecting changing market demands. Four brief descriptions set the stage for a discussion of current trends, methods and concerns.
Jason is a young man with autism living in the Piedmont of the southeast. He is served by a developmental disability agency that struggled for years to find suitable employment based on Jason’s unique talents and interests. His behaviors often required heavy staff support and inhibited optimistic job development. A person-centered planning process that recognized Jason’s desires and his available family support revealed a desire to work on the family farm. His two older brothers own the nearby farm and liked the idea of having Jason set up a complimentary business. The small business development team (Jason, agency supported employment staff, and the brothers) working for almost a year to pull the idea and resources together, developed a small greenhouse business situated next to the brother’s produce stand on their farm. With assistance from Vocational Rehabilitation for the purchase of a used greenhouse, job coaching from the agency, and natural supports from the brothers, Jason’s specialty-crop business is projected to gross $20,000 in its first season (Hammis, 2001).
Edward is a young man in his late 30s living in a small town in the Northwest. For over a decade, between hospitalizations and stretches of unemployment, he worked for the several glass installation businesses in this town of 15,000. His erratic behavior cost him all those jobs, but not before he learned the ins and outs of the trade. Most importantly, Edward recognized gaps in customer service by his former employers and set out to start a business that accommodates the symptoms of bipolar disorder and that addresses the needs of construction companies and homebuilders seeking high quality windows and glazing.
Edward’s business idea was rejected by several human services agencies, but working with a U.S. Department of Labor funded disability demonstration project through the Montana Job Training Partnership and the Rural Institute, along with the local Small Business Development Center, grant money was secured to launch the enterprise. With an initial investment of under $20,000, Edward’s business was grossing over $100,000 a quarter after the first hard year, and is projected to generate $800,000 during its third year of operations.
Jack lives in a community of 50,000. He has several diagnostic labels and is slowed down a bit from the effects of a strong Psychotropic medicine. His local Vocational Rehabilitation counselor recognized Jack’s love of music and woodworking and sent him away to a community college in the Midwest that certified him as a violin repair professional. For the past several months, Jack has been marketing his services locally and refining his production methods. His long term strategy is to carve a niche that includes intense attention to customer service. Typically, customers for violin repair are high school and college music teachers who temporarily patch their student’s broken instruments in order to get them through the school term. Violin repair shops are inundated with rush orders over Christmas break and during the summer because sending a broken instrument in during the academic year often means a student has no violin to use for weeks.
Jack’s simple, yet elegant solution is to buy and repair an inventory of used violins and keep them as ready replacements for broken ones. He will advertise to music teachers and provide a loaned instrument, shipped overnight, to be used while repairs to the student’s violin are being performed. This presents an immediate solution to the music teacher and the student, and allows Jack to spread his work out over the year, instead of creating high anxiety periods of production over the holidays and the summer. His unique customer service niche accommodates his disability perfectly.
Larry is an older individual with a traumatic brain injury acquired in a boating accident as a young man. Over ten years ago, a progressive Vocational Rehabilitation Counselor set Larry up in business with a mobile knife and tool sharpening business. The Counselor sent Larry to training to teach him knife and tool sharpening and bought him a truck that housed his work bench and tools. At the time, the local economy was driven by a thriving fishing industry that employed hundreds of knife-wielding fish processors. Today, that industry is severely depressed and Larry’s business grosses less than $2000 per year. Larry’s business, like so many we work with, requires occasional Post-Employment Services and access to community economic development and small business assistance to expand or locate new customers, address changes in their traditional market, adapt the business model, up-date production techniques and tools, and change marketing and sales approaches to fit a changing consumer culture and evolving local and global economies.
Each of the above examples illustrates the amazing diversity of interests, talents, and market conditions in existence. Each business and individual faces unique circumstances that lead to success or failure. The most significant considerations for expanding self employment follow.
SELF-DETERMINED SELF EMPLOYMENT CONSIDERATIONS
FIND THE PASSION. Traditional economic development models assume that making money is the key motivator to small business success. Certainly, many entrepreneurs succeed based on this model (Griffin & Hammis, 2001; Petzinger, 1999). Today, however, there is a noticeable mind-set change in some sectors of the small business consulting industry, and it fits perfectly with the emergence of self-determination, funding portability, and person-centered approaches to career and life planning.
Unfortunately, disability systems are largely founded on the fallacy of vocational evaluation and predictive validity. Systems that evaluate deficits create barriers to success and effectively disqualify individuals from potential successes. Using a self-determination and support approach makes anyone with an interest in commerce a potential self employment candidate. Few business people can withstand the scrutiny of a deficits-based assessment. Most purchase supports to compensate for their lack of interest or skills in the areas of accounting, or sales, or marketing, or manufacturing; and many rely on family members for start-up and on-going assistance (Doyel, 2000).
Finding the passion entails paying attention to the unique gifts and dreams of the individual; seeking information regarding their support and instructional needs; and crafting a business model that most accommodates the individual and the needs of the market. Identifying passions often involves work exploration and even some time as a wage employee. Most small business owners, after all, learned their craft by working for others and taking their knowledge and applying a value-added or innovative spin on existing products or services. Another approach involves utilizing the Vocational Profile (Callahan and Nisbet, 1997) that reveals the individual’s unique contribution(s) to an enterprise and formulating a business approach from there, in the same way Jason’s love of the farm and excitement of growing plants launched his greenhouse venture. And, utilizing On-the-Job Experience (OJE) and On-the-Job Training (OJT) through VR or WIA programs allows an individual and his/her team to explore a variety of work situations, assess support needs and compatible teaching methods, and to find the spark of interest that may grow into a business idea.
BUSINESS PLANNING. Approximately 80% of successful small businesses in the United States do not have business plans. But, probably close to 100% of unsuccessful businesses did not have plans either. Business plans should never be the determining factor in supporting a business, but they are crucial if external funding is required (e.g. bank loans, microloan funds, investors). The power of a business plan is that it presents the opportunity to think critically about the future needs of a business and an individual; it maps out and anticipates critical decision-making points; it allows the individual opportunities to think through their commitments; it clarifies when capital, equipment, labor, inventory and various other resources will be needed; and it has the symbolic power of proving the individual’s dedication to the venture. Perhaps most important is that the business plan presents an opportunity to pull together a team to research and write the plan, thereby laying the foundation for a supportive network of friends and colleagues available to help at various stages of development.
Many individuals requesting self employment are unable to move beyond the business plan and feasibility stage. VR Counselors and WIA venders are often afraid to invest in feasability studies or business plans without some assurance of success. But without the financial support it takes to buy a business plan and feasibility study, the individual is doomed to wage employment or no employment. And, even though some Small Business Development Centers (SBDCs) will help people refine business plans and do feasibility studies, most have little expertise in understanding the interplay of disability benefits systems, the rehabilitation system, or the medical and psychological implications of disability. Frankly, most SBDCs are so understaffed that they cannot take a substantial role in writing a plan. Someone without writing skills can certainly own and operate a business, but without the capacity to write the plan may be doomed to unemployment.
The Social Security Administration recently suggested that Plans for Achieving Self Support (PASS) for self employment include a request for money for a business plan. This is a significant step forward and illustrates the Social Security Administrations’s commitment to employment. And, numerous Vocational Rehabilitation offices are now paying their vendors to develop feasibility studies and business plans, while slowly starting to minimize the reliance on deficit-based vocational evaluations that report over and over that people need more training, when in reality people need support.
MONEY. Perhaps the most controversial aspect of self-determination and self employment is access to and control of the money. The Montana Job Training Partnership (MJTP), the administrative unit charged with WIA implementation in Montana, in partnership with the Rural Institute, designed a demonstration project funded through the U.S. Dept. of Labor that illustrated the power of individualized funding and self determination in self employment. Over the past three years, over 180 individuals with disabilities have been served in Montana and Wyoming. Almost half of the participants developed a self employment goal. The Montana/Wyoming Careers through Partnerships project utilized a series of trained vendors to handle the money and provide some of the supports necessary for business development. The bulk of the money though went into training, equipment, inventory and other consumer business needs. Average cash start-up costs were under $5,000, with most small business owners earning approximately $8.00 per hour and working over 30 hours per week. Most enterprises were founded in Montana, a state that suffers among the lowest per capita earnings and productivity in the country (Newman, 2001). Self employment hours, wages, and costs rival those of wage employment; proved no more risky; offered a solution to job accommodations; and showed how numerous systems and communities come together to solve the long-standing tragedy of rural unemployment.
Critical to the success of this project was again a team approach to business development. The Rural Institute worked closely with the various community service vendors (WIA operators, DD and Mental Health agencies, and local VR offices) and with such entities as the Montana Community Development Corporation in Missoula that provided extensive technical support and feasability advice. Long term business supports were often required and available through a selected few community rehabilitation providers, family members, and the Rural Institute.
The lessons learned from this project guide new development and include the following:
- Most individuals know what they want to do, and customer choice and self-determination are the keys to success.
- Collaborative community-based supported employment practices provide formal and informal supports for working participants.
- Post-employment services are vital to job retention or career advancement.
- Self-Employment is a viable option of employment, particularly in rural areas. Not only does self-employment allow individuals to work out of their home, but often it provides accommodations such as flexible work schedules and accessible work areas. Self-employment also empowers individuals to establish partnerships which benefit their interests.
- Costs to individual programs are decreased when funds are leveraged from several sources resulting in services to more participants. No-cost/low cost services are available in every community.
- Very few participants have used funds for training, but many have accessed funds for post-employment services such as job coaching and financial support services (Newman, 2001).
Having financial resources (cash!) available is critical for all businesses, but especially for cash-poor individuals with disabilities. The Careers project demonstrated that people do not ask for more than what they need; and that what they need is minimal. If the money spent in an average year on evaluating people out of services was used instead to support people’s dreams, thousands of individuals could be earning a living today!
Another significant resource for cash, training, and support is the Social Security Administration’s (SSA) Work Incentives. Self employment offers the only substantial options available under our Social Security and Medicaid/Medicare systems to accumulate personal wealth and manage income in a way that is predictable and personally adjustable. Under Medicaid and Supplemental Security Income regulations an individual beneficiary can never accumulate more than $2000 in cash resources unless the cash resources are sheltered in a restricted irrevocable trust, or in a Plan for Achieving Self Support (PASS). A PASS is a powerful employment tool, but it is restricted to career spending only, and can never be cashed in for any other purpose (such as buying a home). A small business owner on Social Security, Supplemental Security Income, Medicaid or Medicare, can have unlimited funds in a small business checking account for legitimate operating expenses as defined by the IRS and SSA under rules defined as Property Essential for Self Support (PESS). Such a small business owner can accumulate operating cash and other business capital resources and have unlimited net worth in the business, sell the business, and then use the revenue to purchase a home. Unlike wage employment, self employment creates the opportunity for increasing individual wealth and personal equity without being penalized by government regulations.
Self employment makes sense for people with significant disabilities because Social Security benefits provide a financial cushion, income for survival, during the business start-up phase and often through the life of the business. The cash flow analysis for any business must include a breakeven analysis – the point when the business generates enough income to cover expenses. For a small business owner without a disability, who has no other source of income, the business must breakeven and provide survival income as well. However, most people with disabilities have Social Security benefits to cover daily living expenses, so the business does not need to generate survival income; it simply has to reach the breakeven point.
It is important to note that developing the cash flow analysis and profit analysis requires a knowledge of the Social Security and Medicaid/Medicare regulations which typical SBDCs and other community economic development resource people do not have. SSA knowledge is critical in the financial planning stage. For instance, if the fixed cost to sell stuffed animals at a Zoo is $100 per month, and the cost per stuffed animal sold is 50% of the selling price and the selling price per stuffed animal is $8.00, then the breakeven point per year is $2,400 per year in sales or 300 stuffed animals. Profit analysis shows that if $6,000 in stuffed animals are sold (750 products in a year), then the profits for that year are $1,800 or $150 per month. If the business owner receives SSI which is reduced $1.00 for every $2.00 earned after the first $85, then the SSI monthly check is reduced by $32.50 per month, or $390 per year. This $390 can be projected and SSI will reduce the SSI check each month based on the projections. Or, the amount of over-payment can be paid back to SSI at the end of the year when the business taxes are filed. If it is projected, SSI reduces his check, and if his cash flow is unbalanced due to seasonal sales, then he may, in some months, be unable meet his living expenses. The owner’s discretionary net personal profits are reduced from $150 per month to $117.50 per month due to the interaction of the SSI system rules.
Typical business advisors generally do not understand these rules and regulations, and require assistance in addressing the interactions of SSI and SSDI. SSI does not balance net self employment income on a month by month basis, but by law divides the entire year by 12 months in order to perform its reduction calculations. This is a significant benefit to self employment that is not present in wage employment, and allows for large fluctuations in income that do not impact benefits or Medicaid monthly. Another advantage to the SSI rules and self employment is that if the business is exceeding projections to SSI, and the owner chooses to reinvest the excess profit back into the business, the “reduction” interactions with SSI can be controlled avoiding an SSI overpayment while simultaneously growing the business.
Of course, the use of PASS plans for small business development is well documented. With a PASS, money is set aside for the purchase of a variety of business-related expenses. Such items have included business plans and feasibility studies, tools, inventory, delivery vehicles, accounting and marketing services, work clothes, advertising, computers, and space rental. The scope of this chapter does not allow for a full explanation of PASS and other work incentives, but numerous examples and resources exist for the reader (Shelley, et al., 2001; Griffin & Hammis, 2001; Griffin, et al., 1999).
STAFF COMPETENCIES AND LEADERSHIP SUPPORT. As with all new techniques, finding local champions is critical to success. In today’s rehabilitation market there is much talk and some action regarding systems change, funding portability, individualized budgets, and person-directed approaches. However, also today, placements in sheltered workshops are on the rise (Butterworth, et al., 1999). One of the enduring issues of self employment for anyone is the issue of team assistance in developing a venture, and long-term support for maintaining the effort. While much of the support necessary is not costly and natural community supports can be leveraged for anyone, disability does present some unique challenges, costs, and adaptations. The role of the rehabilitation system cannot be overlooked as critical, and should indeed be transformed to focus on the individual instead of the program or funding stream. The major barriers remain the lack of business skills of rehabilitation professionals and the hesitancy of VR and WIA to fund self employment ventures, regardless of its success rate with typical citizens.
Providing rehabilitation personnel tools necessary to evaluate business ideas is one part of the approach (Griffin, et al, 2001). And, numerous state agencies and Federal entities are providing much needed resources as professionals attend seminars and courses on business planning, feasability, marketing and sales, SSA Work Incentives, and related topics that augment their decision-making skills. Also necessary is training and experience in building local teams, knowing their communities and its resources, facilitating planning meetings, and respecting and supporting the dreams of people with significant disabilities. We are finding that teaching good vocational profiling (instead of assessment), utilizing systematic instruction techniques to design production and operational approaches, and working with CRP Executive Directors, Finance Directors, and Program Managers to understand their role in making individuals successful are critical avenues for organizational change and acceptance of self employment as a community-referenced outcome (Griffin, 1999).
Systems change is needed that provides all the major systems (DD, MH, VR, WIA) with support for changing from internally focused programs (rules, regulations, creating more and bigger funding streams) to community referenced entities in true partnership with cities and towns. One irony is that VR and WIA programs are driven so much by the demand for outcomes that risk taking is marginalized and excludes, or seriously delays, self employment. For self employment candidates, the VR and WIA systems sometimes wear them out or wait them out, and they either drop out of the system or accept wage employment as their only viable option.
On the other hand, in the Developmental Disability and Mental Health realm, there is so little emphasis on community employment outcomes that people with disabilities often spend their entire lives with few opportunities for employment and freedom from clienthood. Even today, after years of supported employment funding, training, and pilot programs, the professions do not emphasize community employment, and rely still on the failed train and place readiness trap that forever dooms people in these programs to lives of poverty and isolation. Somewhere between the obsessive need for cost-effective and predictable outcomes of the VR and WIA systems, and the complacency of the community rehabilitation program and day treatment models, is the answer.
Issues faced by people with disabilities are also of interest to communities, which historically solve problems for themselves (McKnight, 1995; Etzioni, 1998). Ernesto Sirolli has adequately demonstrated in communities worldwide that person-centered self employment works when teams rally around individuals and ideas (Sirolli, 1999), and numerous self employment ventures by people with disabilities prove that microenterprise is a feasible avenue to economic fulfillment. Addressing the issues outlined above will streamline the self employment process and create opportunities for success for individuals with disabilities, for the rehabilitation system, and for communities in need of economic development.
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