Self-Employment Steps for Vocational Rehabilitation Counselors: Helping a Consumer Start a Business


Chapter 9

Supported Self-Employment

This chapter presents “Supported Self-Employment” – a simple stepped sequence of self-employment approaches for many people who might not be considered likely self-employment candidates. Supported self-employment approaches include resource ownership, partnerships, and sole proprietorships. For each approach, high quality supported employment services occur simultaneously with supported self-employment. This is not a cookbook. There is no single correct supported self-employment approach, and methods are constantly evolving due to the changing nature of business, supported employment methods, rehabilitation, and the economy. However, this chapter discusses some currently successful methods and shows how vocational rehabilitation might be involved.

Supported self-employment has been used successfully with people diagnosed with mild, moderate, severe, or profound developmental disabilities; severe and chronic mental illness; severe brain injuries; and multiple severe disabilities.

Many of the methods discussed previously in this book will need modification to work successfully for people who are “classified” into the above disability categories. This chapter discusses these modifications. Some existing rehabilitation methods (such as those discussed in this curriculum) and self-employment assessments (e.g., nonstandardized assessments, the Business Assessment Scale) may indicate that self-employment for a person with severe disabilities is unrealistic, non-sustainable, or impossible. But in reality, self-employment for people labeled “medically severe” is alive and well in today’s world.

Supported self-employment as discussed in this chapter augments much of the current “accepted” thinking about self-employment by using supported employment techniques. A basic premise of supported self-employment is that it does not rely on any of the current measures that predict how a person will perform.

Each supported self-employment approach has a sequence, sometimes unique to itself and sometimes shared with other approaches. When considering supported self-employment it is important to discuss each approach with the consumer or prospective partner or owner.

Resource Ownership

In resource ownership, the individual with a disability owns a significant high quality employment-related resource. This might be a computer-controlled sewing machine; a twenty-bin, sorting/stabling high-end Xerox copy machine; a mechanized three-hole punch; a best-of-breed Davenport Arabian stud horse; or any other “capital resource” needed, and defined by an employer. The resource is one of the employee’s “entrepreneurial assets.” It enhances the employee’s internal (used by the business) and external (used by the consumer at other times to increase income potential) entrepreneurial opportunities and profit potential. The employer is able to use the resource in accordance with the employee’s preferences and interests. Although the employee works for someone else, owning the significant employment-related resource lends an entrepreneurial twist. 

Sequence for implementing this approach:

  1. Identify the employee’s preferences and interests using community based assessments, vocational profiles, and/or futures planning.
  2. After establishing a preference, narrow job development to local employers engaged in such work. For example, Carol Ann’s interest in sewing led her and her Supported Employment Consultant to visit several sewing businesses. Carol Ann did not want to work for some employers and some employers did not want to hire her, but eventually the search narrowed to a business where both she and the employer felt comfortable.
  3. While negotiating employment, explain the concept of resource ownership to the job seeker and employer. Note the entrepreneurial advantages and ask the employer to define any capital equipment needs that could enhance the job seeker’s employment at his or her company. Also note this approach’s low risk to either party and the entrepreneurial opportunity for both parties for increased profits and employment.
  4. When the employer’s capital equipment/resources needs are matched with the employee’s interests, put the following requirements in writing:

    - The employer maintains and insures the equipment or resource;
    - The equipment is located in the employer’s place of business;
    - The employee retains ownership of the equipment; and
    - If the employee leaves, the equipment leaves.

  5. The risk to both parties is minimal.
  6. Buy the equipment with money from a Social Security Plan for Achieving Self Support, Vocational Rehabilitation funding, family members, or from a community-based rehabilitation agency. 
  7. The employee begins work, aided by the best supported employment methods, natural co-worker supports and high quality supported employment on-the-job training.

When implementing this approach:

  • Do not buy any resource or equipment until the employer identifies its specific requirements. All sewing machines, copiers, horses, packaging equipment, and computers are not alike – employers have specific needs and preferences.
  • Identify existing “redundant” resources while negotiating the employment/entrepreneurial joint venture. Make sure that if Carol Ann leaves and takes her sewing machine with her, she will not “significantly harm” her employer by taking the only sewing machine. The employer should have other “redundant” sewing equipment.
  • Use referrals and testimonials from successful employment/entrepreneurial situations to introduce the resource ownership approach to prospective employers and employees.

Partnerships

Partnerships offer an array of opportunities for successful, creative business relationships. A person with a severe disability can become a partner in an existing business with established cash flows, plans, markets, and customers. A cash investment from SSA, VR and/or other capital resources allows both partners to gain and minimizes the partners’ risks.

The sequence begins with steps one and two of the Resource Ownership approach. If you make a good match where both partners are comfortable with their shared interests and personalities, developing and implementing the methods and outcomes is fairly simple. 

Features of this approach include:

  • “Guaranteed or fixed payments to a partner” where the business plan and partnership proposal state that a percentage of the profit will eventually be shared.
  • The partner with a disability develops a greater sense and reality of power from being a part owner of a business than he or she would get in an employee/employer relationship.

Sequence for implementing this approach:

  1. Use community based assessments, vocational profiles, and/or futures planning to identify the consumer’s preferences and interests.
  2. Once a preference is established, narrow job development to the local employers engaged in such work. 
  3. Negotiate employment and explain the concepts of partnerships, limited liability partnerships, limited liability companies, and resource ownership to the consumer and his or her partner/employer. Note the entrepreneurial advantages and ask the employer to define any capital resource needs that could enable the consumer’s employment or partnership with this company. Stress the low risk to either party with such approaches, plus the entrepreneurial opportunity for increased profits and employment.
  4. Match the employer’s needs for capital equipment/resources with the consumer’s interests. If, for example, a limited liability partnership seems appropriate, write a limited liability partnership proposal that clearly delineates:

    - The amount of fixed payments due to each partner;
    - The percentage of quarterly profits due to each partner (based on the sum invested in the partnership); and
    - The contribution of the consumer’s labor as an active (not passive) partner.

    Determine the consumer’s contribution to the partnership (often $3,000-$10,000 is enough). Propose and outline profit projections for the general partner, and describe how the partnership will be set up and fairly dissolved (a long term contingency). Both partners review and refine the proposal, with advice from a CPA on final financial projections. Again, the risk is minimal to both parties.
  5. Buy the partnership resources or secure the cash contribution with money from a Social Security Plan for Achieving Self Support, Vocational Rehabilitation funds, family members, or a community based rehabilitation agency. 
  6. Begin the partnership employment using the best supported employment methods, natural co-worker supports and high quality supported employment on-the-job training.

When implementing this approach:

  • Do not buy any resource or equipment until the major partner identifies specific requirements or determines the amount of cash needed.
  • Do not buy any resource or equipment before the partnership proposal and agreement are completed.
  • Be sure to inform the general partner that he or she will not have to develop a payroll or pay workers compensation because the new business partner is not an employee but an owner of the business.
  • Limited Liability Partnerships (LLP) offer substantial liability protection to the partner with a disability. Also partnership insurance is reasonably priced.
  • All states allow formation of Limited Liability Companies (LLC), which offer the liability protections of a corporation plus the tax advantages of a partnership. Both LLPs and LLCs offer tax (including estate and business inheritance tax) and business advantages to family run businesses.

Partnership Example

Glenn has had a relationship with three horse ranches over a nine-year period. This interest in ranching led Glenn and his supported employment consultant to visit several horse ranches. Eventually their visits resulted in a match in which Glenn and a rancher felt comfortable enough with one another to form a partnership to raise and train Davenport Arabian stud horses.

Their partnership agreement specified that the rancher would provide stable facilities and pay for half of the first horse. Glenn would pay for the other half of the first horse, all of a second horse, plus the costs of training. He would pay for care of the horses by working a predetermined number of hours for the rancher. Revenues from stud fees would be partially reinvested in additional horses, with any profits divided equally between the two partners. Glenn wrote a self-employment PASS to pay for the horse, training, transportation, work clothes, and advertising.

 

Sole Proprietorship

The process for developing a sole proprietorship is similar to steps one and two of the Resource Ownership or Partnership approaches, except that when developing a sole proprietorship the consumer’s interests and personality are matched to those of potential customers and owners of similar businesses where the business may co-locate. If the match is comfortable, developing and implementing methods and outcomes is fairly simple and the business owner emerges with a greater sense and reality of power than the typical employee. 

Sequence for implementing this approach:

  1. Identify the consumer’s preferences and interests through community based assessments, vocational profiles, and/or futures planning.
  2. Once a preference is established, narrow self-employment development to local employers and competitors with similar businesses. Carefully consider potential locations — the person with a severe disability may have been excluded from society in a sheltered workshop and other group settings. The business’s location is critical for promoting the business owner’s community participation. 
  3. During the negotiations explain sole proprietorships, partnerships, limited liability partnership, limited liability companies, corporations, and resource ownership to everyone involved. Note the entrepreneurial advantages (including low risk to all parties, increased profits and employment) and ask the employer/customer to define his business’s capital resource/business needs that could enable the consumer’s self-employment or partnership with this company.
  4. Match the consumer’s interests with the employer’s and customer’s needs, a desirable business location, and opportunities for community participation. Develop a small business plan. Determine the cash needed--often $1,000-$10,000 is enough for a small business start-up. Recently, a small retail business was started with $200 worth of wholesale merchandise in a rural/remote community. A local Nature Center agreed to share profits from the sale of nature-related items in exchange for business space. Both the Nature Center retail business and Terry’s small engine repair developed local relationships in which they exchanged commissions or profit percentages for business space. Community participation increased and start-up risks were minimal for all parties.
  5. Purchase start-up equipment and supplies or arrange necessary cash flow with money from a Social Security Plan for Achieving Self Support, Vocational Rehabilitation funding, family members, or a community based rehabilitation agency. 
  6. Start the business, using the best supported employment methods using natural community supports and high quality supported employment on-the-job training.

When implementing this approach:

  • Do not buy any resource or equipment until you have determined the business’s location and written the business plan.
  • Agreements to exchange commissions or profit percentages for business space do not require the primary business owner to pay salaries or workers compensation premiums because the consumer owns his or her business.
  • All states allow formation of Limited Liability Companies (LLCs), which offer the corporate liability protections and the tax (including estate and business inheritance) advantages of a partnership. LLCs are useful to family run businesses and can be a useful next step for a growing sole proprietorship or contracting business.
  • When developing a business that provides independent contractor services to other businesses no single customer should be the major user of the business’s services because the IRS has repeatedly ruled that when a single customer dominates a substantial share of a contractor’s work, the business is not a contract business. In that case all of the business’s employees are considered employees of the major customer. 

Sole Proprietorship Example

Terry, who lives in a rural community (population 1,200), wanted to work in the town’s only engine repair shop. Although Terry and the business owner felt comfortable with each other, the business could not support an employee. The owner rejected a limited liability partnership proposal but suggested that Terry operate his own small engine repair business within the repair shop. It would be based on a beauty salon model under which each self-employed beautician pays a commission to the salon’s owner for using the facility. With the repair shop owner’s help, supported employment consultants developed the idea and wrote a business plan for a sole proprietorship that required an initial investment of $2,500. 

 

Vocational Rehabilitation and Supported Self-Employment

Developing supported self-employment ventures is time consuming and labor intensive. They often require visits to a consumer’s home, visits with family, and discussions with the consumer to learn about likes/dislikes, interests, skills, etc. In most cases the consumer does not develop the business plan – it is developed by someone else, usually by someone familiar with supported employment. Generally, these are not the cases you would refer to a business development consultant or the Small Business Development Center. However, working with someone to become employed in this manner is very rewarding to all involved. These cases typically require a very creative approach. Most counselors will find it helpful to work with supported employment vendors experienced in supported self-employment. These vendors should use a holistic approach to deliver services, should understand Title VI-B funding extended time frames, and should aggressively identify and pursue long term supports. Further, you may find it helpful to contract with business development consultants or CPAs to review financial information and offer advice.

Each step of the approaches discussed in this chapter matches a supported employment funding check point and step in an Individual Plan of Employment (IPE). Initial community based situational assessments, vocational profiles, or futures plans fit VR protocol for assessments. Job development is integral to all of the approaches discussed in this chapter and it fits the billable activities requirement. Bank loans are a potential funding alternative if other sources are not available.

Past experience of those who assist people with supported self-employment indicates that purchasing or authorizing sheltered work or facility-based assessments is not an effective method for assessing the likelihood of success in supported self-employment of “medically severe” individuals. On-the-Job Training, On-the-Job Experience, or Community Experience are viable options for conducting community assessments. 

In a remote rural community, Clint, a person with a dual diagnosis of cognitive and emotional disabilities owns Clint’s Critters. In business for almost 1 year, his business is at the local Nature Center, which agreed to house his business in return for 10% of the profits. As much as possible, Clint orders and shelves stock, markets and sells, and participates in decision-making. He is supported by a job coach who orders stock and does the purchasing, bookkeeping, and accounting and by zoo volunteers who are cashiers. Clint started his business with $258. But because his business is still in the start-up stage, he has not quit his other job cleaning a restaurant kitchen. Over the past year his business made $500--twice as much as when he was in the group home. He also supports the Nature Center by returning 10% of his sales to it. 

Before starting his business Clint lived in a group home and was considered violent and irrational isolating himself in his room. Since his business opened he lives in a supported living situation with his pet cat. He makes his own meals, comes and goes as he pleases, and visits the sheltered workshop only when he wants. He controls his life. He has not had any violent outbursts since he began living on his own. 

VR and Supported Self-Employment Example

In a remote rural community, Clint, a person with a dual diagnosis of cognitive and emotional disabilities owns Clint’s Critters. In business for almost 1 year, his business is at the local Nature Center, which agreed to house his business in return for 10% of the profits. As much as possible, Clint orders and shelves stock, markets and sells, and participates in decision-making. He is supported by a job coach who orders stock and does the purchasing, bookkeeping, and accounting and by zoo volunteers who are cashiers. Clint started his business with $258. But because his business is still in the start-up stage, he has not quit his other job cleaning a restaurant kitchen. Over the past year his business made $500--twice as much as when he was in the group home. He also supports the Nature Center by returning 10% of his sales to it. 

Before starting his business Clint lived in a group home and was considered violent and irrational isolating himself in his room. Since his business opened he lives in a supported living situation with his pet cat. He makes his own meals, comes and goes as he pleases, and visits the sheltered workshop only when he wants. He controls his life. He has not had any violent outbursts since he began living on his own.




Chapter 9 Study Guide: Supported Self-Employment

  1. List the three approaches to supported self-employment discussed in this chapter.

  2. Supported self-employment approaches incorporate principles and techniques commonly used in __________ .

  3. Using the resources ownership approach, the consumer (leases/owns) a “capital resource.” 

  4. Supported self-employment is different than regular self-employment because, in most cases, the consumer (does/does not) develop his or her own business plan.

  5. Supported self-employment typically requires a ____________ approach .



Study Guide Answers: Chapter 9 - Supported Self-Employment




July 1998, 1st Revision June 1999, 2nd Revision February 2001