
The Software Millionaire Next Door - davidw
http://journal.dedasys.com/2013/01/04/the-software-millionaire-next-door
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patio11
I mostly hang out with folks who run product businesses, but numerically, I'd
bet on services businesses being substantially more numerous. There are
probably tens of thousands of consulting firms in the US. Most of them produce
bespoke software for businesses at five/six figures an engagement. The math
works out such that the principals at this type of firm become modestly
wealthy fairly quickly, with little execution risk.

Think of every Rails dev shop you've ever heard of: $8k monthly salary per
dev, $12k in fully loaded costs. Each dev has 70% utilization (~35 weeks a
year) at a chargeout rate of $6k to $8k per week for journeymen and $8k to
$10k for partners.

You can do the math yourself, but the short version is that a consultancy that
would fit around my dinner table makes all partners millionaires, with the
approximate inevitability of gravity.

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killahpriest
Customers are not as inevitable as gravity. How do they find their customers?

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tptacek
A consultancy usually starts by nucleating around the contacts and first few
engagements brought in by the principals. Given a few starting engagements for
a few different customers, one of them is likely to turn into recurring
revenue, and another is likely to provide a referral.

Then, if your delivery establishes any kind of track record at all and you're
working in a "hot" area (Rails in 2008-2009, iOS in the last 3 years, &c) you
can start picking up cold inbounds just by putting your name out there (on a
website, with a blog, posting on message boards).

Things snowball after that.

Most small consultancies I'm acquainted with never advertise and don't have
salespeople.

One thing you really need to understand is that successful consultancies don't
treat clients the way HN tends to think about customers. If the process of
extracting recurring engagements and referrals from customers is mysterious to
you, it's because you're thinking too transactionally. You see this all the
time on HN on threads about people's time tracking and invoicing techniques.
The people on those threads often sound like they can't wait to get away from
their customers. Of course they have trouble finding new ones. Their business
processes are client-aversive.

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Evbn
I have never met someone who hired a programming consultant or contract
company. (not talking about a MSFT contract employee. ) I have seen a few
Oracle database contractors.

Who are these companies hiring Pivotal or whoever less famous?

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king_magic
Consultant here :-)

Believe me, the demand is huge. I can't name my company's clients, but we have
consulted for a good deal of very big names.

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jacques_chester
This helped catalyse a ranty blog post I've been meaning to write for a while:
<http://chester.id.au/2013/01/05/on-selling-to-consumers/>

The tl;dr is that using Jobs, Gates _et al_ as your business inspirations is
just sample bias. Most of the money is in selling to businesses.

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flipp
Oh no way.

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swombat
Oh yes way.

~~~
jacques_chester
patio11's made our points. Just that he does it better.

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tluyben2
Don't equate millionaires with billionaires; those 'in the spotlight' people
(he names) are all billionaires, not millionaires. That's why they are
automatically in the spotlight. What billionaire quietly toiled to make his
money?

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jaxn
Seems like quite a lot of the billionaires in the US are relatively unknown:
[http://www.forbes.com/forbes-400/list/#page:1_sort:0_directi...](http://www.forbes.com/forbes-400/list/#page:1_sort:0_direction:asc_search:_filter:All%20industries_filter:All%20states_filter:All%20categories)

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tluyben2
I was referring to the list the OP named in the article.

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charlescearl
A more interesting question still is whether high income or high cash-out
(e.g. Google employee who cashed out options in excess of $1million after IPO)
software professionals cluster around the Under Accumulator of Wealth (UAW)
category? Is that hypothetical Google ex-employee likely to have moved into a
Palo Alto, bought a new European performance vehicle, treated themselves to a
plasma in every room? These would seem to be tell tale signs of the UAW
mentality.

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negamax
Is this the top post because it has "millionaire" and "software" in the title?
Everyone's aspiration here, I guess.

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martinced
no, because otherwise you'd be having a fourth category: people who are
professional software developer but who also inherited so much more money than
they'd make during their entire programming career ; )

