
Seven tough lessons from ten years in bootstrapped business - kimi
https://likewise.am/2018/12/01/seven-tough-lessons-from-ten-years-in-bootstrapped-business/
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appstorelottery
I’ve been running my own consultancy for around 10 years as well. All of this
rings true.

The work I do is incredibly profitable in small bursts. This is because I’ve
spent years developing software which mostly automates the task.

My problem in developing a product on the side is that I cease hunting for
acquisition - savings dry up - and then I drop the product as I scramble to
find more work. I’ve been close to failing before, but luck has always
intervened.

I’ll spend a year building up 6 months runway, build something 70% and run low
on cash - go back to consulting for a few months - and then completely forget
what I was doing on the product side. By the time I get back to the product
the momentum as been lost.

Rinse, repeat.

~~~
abalashov
Oh, yes, the schizophrenic whiplash between consulting and product work based
on cash levels is painfully familiar as well, and has certainly characterised
much of my product development. I should have talked about it more explicitly.

------
ryanwaggoner
Point number is painfully true from my experience. I say that as someone who
has been a consultant for more than a decade, and worked on tons of side
hustles. From “never got off the ground” (most) to “making six figures in
revenue” (current one).

Juggling client work and my own profitable and slowly growing projects for the
last few years has been one of the most difficult things I’ve ever done.
Really hoping to hit escape velocity in 2019. But I said that about 2018, and
2017 too.

Sigh...back to work.

~~~
aaronm14
One of your side hustles is currently making 6 figures in revenue, but you're
saying you haven't hit "escape velocity yet?" I'm curious if your goals are
more ambitious, or perhaps 6 figures of _revenue_ isn't necessarily profitable
enough to sustain you?

>But I said that about 2018, and 2017 too. Rings so true for me as well,
unfortunately! This tweet from Justin Jackson has been making it's rounds the
last couple of days, maybe it will be encouraging to you:
[https://twitter.com/mijustin/status/1068773791952584704](https://twitter.com/mijustin/status/1068773791952584704)

~~~
ryanwaggoner
Combination of a few things :)

1\. I have good margin and am profitable, but not enough to cover lifestyle.
See below:

2\. I have a high cost-of-living, deliberately. I live in NYC, have a kid in
private school, and travel a lot.

Now, I fully recognize that I could lower my project risk by living a more
austere lifestyle, but I'm comfortable with the tradeoff that I'm currently
making.

Of course, I'm still stressed and impatient, but that's more of an internal
problem :)

~~~
abalashov
Yep, that's basically been my boat. I've not lived in a high-cost city per se,
but I've always had big sources of personal drag, partly by choice, partly
not.

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jwr
Another self-funded business founder here. One thing which rarely gets
mentioned is the incredible feeling of loneliness which you have to be able to
cope with. It’s not just that solo entrepreneurs usually work from home. On
top of that they have problems that none of their peers have, and often also
use technologies that are not common at larger companies (you have to use
newer/better tech to gain an edge).

As a result, there is no one to talk to. No watercooler, no peers that
understand you.

There is a certain subgroup of self-funded businesses that are strongly
marketing-oriented that has organized itself around Microconf. There might
even be a community of sorts. But not everyone is that strongly marketing-
focused and not everyone is even at a stage when they have the means to attend
a conference like that.

The article resonated deeply with me: I went through many similar issues as
the author did. Perhaps it is time to form a community of sorts?

~~~
riku_iki
Curious if coworking centers/hacker spaces can be solution for this..

~~~
dgwight
I and many self funded entrepreneurs are too cheap for this.

The best thing I’ve done to meet people is hosting in-person Indie Hackers
meetups.

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rcconf
I'm in a pretty similar situation, but it's actually working really well for
me because of some important things.

1\. Having a healthy amount of savings before embarking on a bootstrapping
business. There has been never a point where I have had trouble paying bills.
I have 5-6 years of expenses saved up.

2\. Doing the research in terms of how to run a business. I have an
accountant, I did tax planning from the beginning and I make sure to evolve on
the business operating side constantly. (use software that makes the process
easier, such as automatic invoicing, working with an accountant, working with
a lawyer.)

3\. Working in a start-up environment and learning how to prioritize work.

4\. Reading The Great CEO Within from Matt Mochary, there's so many tips in
there that have been amazing and helpful

I'm definitely struggling with the scaling issue of consulting tho. It's great
and all, but I find it a struggle to add people to the company because of how
specialized and good I am at my work. I'm generally the selling point.

I am working on 2-3 products on the side of the consulting work with the hope
that the products eventually become the focus. I do understand the downfall of
the consulting taking a lot of my time and not spending enough on product
work, but somehow I've been able to keep up.

The great part about doing this is that you work with a lot of different
companies and you actually get to learn a bunch of of things that work and do
not work. You get to see how different business models work and scale and it's
very enlightening on your own company.

For example, I'm averse to starting any sort of agency in terms of web
development, since I've seen multiple of my clients have issues with scaling
the business model and retaining customers.

Overall, consulting has been a pretty positive experience. I've only been
doing it for 2 years, so we'll see how it works in the long term. But my side
product is generating $800 / mo in income and I hope to scale it to cover all
my expenses and then I'm more able to work on products and do less consulting.

~~~
thestepafter
Thank you for sharing where you are at and your struggles. I am having a
similar issue going from a one person shop to hiring people. Mainly because I
too realize that people are buying me because of my skill set and
communication. I don’t want to be hands to the keyboard for the rest of my
life though so I’m trying to figure out how to move forward from here. Do you
think reading The Great CEO Within would help?

~~~
rcconf
I'm not sure how much reading that book would help in terms of creating a
sustainable business model that does not require significant daily work from
the founder and also allows you to scale in a reasonably way.

It does help with the operations side of running a business and does give you
insight on how some other CEOs might run certain parts of the company (such as
marketing, hiring and finding product market fit.)

I've been looking at similar business models outside of software development
(such as law firms.) to get a better idea on how this business model could
scale.

Long term tho, I do not plan to scale the consulting side of the business, but
hope to phase it out since I believe products are probably a better way to
scale a business.

I don't think consulting is entirely a bad thing for us tho, I still strongly
believe it gives you insights into other companies and allows you to see other
companies mistakes every day and that's super useful.

Good luck to you.

~~~
abalashov
You raise an interesting point with your mention of law firms.

As I implied in the article, I've not wanted to scale out consulting far
beyond myself; it's a means to an end. But if I did, I think the way I would
do it is to try to build a partnership with other consultants like myself in
my specific area.

Professional associations such as law firms have all kinds of partnership
mechanisms, but a common one is something like: there are four partners, every
one of them has a monthly quota of hours to deliver to the firm. For every one
of those hours, (let's say) 50% goes to the company and 50% goes to the
partner. For every hour beyond the quota, the partner gets to keep, say, 80%
and the firm gets 20%. Then the firm's annual profit is distributed among the
partners at the end of the year, month, whatever. And although partners are
presumed to be able to generate their own business, common resources such as
marketing, administration, etc. are pooled and paid from the firm's common
funds.

The key issue with a partnership is that it really has to create (ugh, I
cringe at a non-ironic use of the term) synergies. Every partner's earnings
have to be greater enough in the partnership than they would be on their own
to warrant the bother. Otherwise, you end up with the all-too-common best-case
scenario of two partners who together double the revenue, but each take half
the profits, which makes it a bit of a wash, notwithstanding some small gains
in economies of scale through expense sharing.

~~~
jake_morrison
Great article, it resonated a lot with my experience.

This book is quite good on the standard parts of managing professional firms
e.g. accounting and law: [https://www.amazon.com/Managing-Professional-
Service-David-M...](https://www.amazon.com/Managing-Professional-Service-
David-Maister-ebook/dp/B00120955I/)

Technical consulting has significant differences, however. There is a big
separation between the sales and requirements side of the business and the
solution/execution side.

One of the things that most resonated with me from the book is three kinds of
consulting companies: expertise, experience and execution.

Expertise consultancies solve complex problems that require non-standard
solutions, e.g. a big merger/acquisition or designing a complex software
solution. The boss typically has decades of experience, and the "juniors" have
a decade.

Experience consultancies solve semi-custom problems, things that are amenable
to process and knowing the answer to common issues in a domain. An example
might be setting up a new legal entity for a startup, or building a custom
website to handle e-commerce.

Execution companies handle well understood problems at lower cost than it
would take to do in house, e.g. monthly book keeping, building WordPress
websites for small businesses.

In the book, he talks about a number of standard ways of splitting up profits
in a partnership. A lot depends on the goals of the firm based on its stage.
So the partners might value individual billable hours, managing staff that are
billable, bringing in business, or being the "managing partner" who makes sure
that the rent gets paid and the copy machine works.

It's possible that you have a mix of Expertise, Experience and Execution in
one firm, but one basic rule is that in order to be a partner, you should not
be relying on another partner to make your team work, e.g. bring in sales.

This is one reason that technical consulting firms are different, because
being great at technical execution does not mean that you are good at sales
and relationship management. In fact, it's negatively correlated, and
essentially impossible to hire for. Anyone who can do the job well can run
their own consulting company.

~~~
abalashov
Thanks for the book recommendation! It looks interesting.

That said, there seems to be a bottomless opportunity in business writing in
offering taxonomies of things. I'm not saying the taxonomy is a bad one in
this case, just that there are perils in boxing things into the mental
categories someone else has set up for you to sell a book, as a very general
principle.

That said, it seems like a reasonable way to break down consulting firms...

~~~
jake_morrison
The useful part is that each of these has a certain business model, and
depends on ability to hire and/or retain people to do it.

My own company is a combination of me doing expertise consulting and the rest
being experience consulting, and we don't do execution, as it's a commodity.

Running a McDonalds is different from running a fine French restaurant. The
McDonalds likely makes more money, but requires a lot more scale. It's not
very satisfying if you are a chef.

------
puranjay
I’m 29. I’ve been self-employed since I left high school. I’ve gone through
virtually all the emotions and experiences described – the struggle between
maintaining a consulting practice and building a product, the loneliness of
self-employment, and the mishaps caused by poor tax planning.

I don’t think I’ve quite figured out the solutions to these problems, but I
can say that 10+ years of self-employment have instilled a hard sense of
discipline. I’ve tried out more routines than you can imagine; the only one
that seems to work is waking up very early (5-6AM) to get 2-4 hours of product
work in before heading off to consulting responsibilities

Another key learning from these 10 years is the importance of organization.
It’s so easy to miss everything from project deliverables to tax dates when
you’re working on your own. I’ve taken to maintaining copious notes and
spreadsheets that keep everything neatly organized. This didn’t come easy to
me; I’m not an organized person by nature.

If I had to do it all over again, I’m not sure if I’d recommend people to take
the same path. You’re likely better off in a good traditional job. There is
the upside of making a lot of money IF the product hits big (or in my case,
even bring in a substantial passive income), but that upside might not be
worth the long hours, discipline, and loneliness of this line of work

------
juddlyon
> I’m out to help promote a new, brutally honest way of writing about life in
> the trenches.

Thank you. This is superbly well-written and incisive. Accurate too.

As someone with a decade plus of continuous self-employment, one other
challenging (demoralizing? LOL) aspect is never being able to really,
completely, and truly take time off.

When you get sick, your money comes to a grinding halt, but your bills and
client support tickets keep piling up.

When you're on "vacation" you keep your laptop charged and ready to go in case
your phone lights up with notifications that a server is down.

Your brain is constantly adding up the next invoice, making the next sale,
coding the next method, etc, etc. It can be unrelenting.

You can make excellent money consulting, but to make a ton you either need to
scale a team, be absolutely world-class at a specific technology, or go the
cult of personality write-a-book/hit-the-speaking-circuit route. Otherwise
you're going to max out in the same range you could fairly easily get working
a 9-5, but with way more volatility, risk, and stress.

If anybody considering consulting happens to read this, specialize as soon as
possible, charge way more than you're comfortable asking, live below your
means, and build some sort of redundancy by way of an employee or 1099
partner.

~~~
abalashov
Every one of your points made me go "yup". Lived the dream in every one of
those ways. Still do.

Thank you for the kind feedback.

------
_Nat_
> Moreover, we’re simply not robots; one does not simply do consulting from 9
> AM to 1 PM, then switch one’s mind to product coding at 1:01 PM and carry on
> until 5 PM. The mind needs time to unwind, recharge, adapt, and get in gear.

This hard lesson does seem to make bootstrapping a risky strategy.

~~~
taneq
It's more that being a solo operator carries overheads which you might not
expect if you haven't run a business before.

I thought I'd spend more time coding / designing / researching and less time
on unrelated paperwork. I was so very wrong. And the context switch time is
real - after a month or two away from the code it takes me at least a couple
of days to get my head back into it.

~~~
paulie_a
If you work with another person you are selling 50 percent of the time. If
it's a venture with someone else 75 percent of the time is selling. you will
definitely not be coding a lot

------
tptacek
So I've had basically the opposite experience this person has with consulting.
The problem with all these retrospective analyses (positive and negative, I
concede!) is that they're situational. Scaling up a consultancy is both its
own skill and also idiosyncratic to the field you're trying to work in. Maybe
IP telephony is especially hard to consult in! Maybe security is especially
easy!

So, just some general shotgun-blast responses:

* Whether you're trying to scale out or just keep a steady income for yourself, if you're not specializing, you're going to have a bad time. If you're trying to sell basic IT services on a piecemeal basis, consulting is going to be a drag (but: if you can reliably deliver IT services for 20-60 person organizations, you're I think actually in a pretty good place right now, since a lot of our clients are auditioning firms for just that, and there aren't many good ones!).

* There's a whole spectrum of aptitude and experience to hire in between "entry level" and "fully billable" and part of the basic challenge of running a consultancy is figuring out how to ramp up talent and where on that spectrum to hire people. The basic job of a specialized consultancy is finding sharp people and rapidly conferring on them the tools to get billable work done, and then structuring projects so that everyone cal be billable. The analysis of "you can hire entry level people but then it takes months for them to be billable" is pretty superficial; every serious consultancy has strategies for dealing with that problem (some better than others, but all better than "hire and then wait a year and hope").

* The bit about how scaling consultancies is a matter of creating a big binder of methodology so that an English major can execute your projects is lifted straight from Joel Spolsky, and Spolsky is just as wrong as this person is, at least at the scale consultancies started by HN'ers (for all I know it's actually true at Accenture scale, but it's definitely not true at for-hire DBA or security or IT or distributed systems or iOS development scale).

* The idea that consulting work will sap your ability to build product is a bit of a head-scratcher, or, at least, the explanation this article gives is. The "reliable" way to do a product/consultancy is to use consulting headcount to fund development headcount. Developers aren't billable, full stop. When you've reached the point where you can fund 3-4 full time developers, you've run out of "consulting made this hard" excuses. The simpler reality is: building and launching products is hard, and, by a wide margin, most startups (consulting or otherwise) that attempt it fail.

~~~
abalashov
1) I strongly agree with the need for specialisation, and declared a
presumption of specialisation early in the article. I also repeatedly refer to
niches and other things which insinuate that the consulting subject matter is
not entirely trivial or commoditised.

2) Admittedly, much depends on the talent market to which one has access, but
sometimes all the tooling and infrastructure in the world can’t make a dent in
the fundamental requirement that the junior associates be extensively
conversant with the subject matter as well as a variety of technical skills.

I wouldn’t know; I have only been able to afford salaries entry-level folk
would take. When I say entry level, I mean entry level. Like, “previously
cleaned spyware at Geek Squad” entry level.

The upside of this bargain from the perspective of someone in IP telephony is
that at least one doesn’t have to pay for a raft of highly marketable IT
skills (e.g. web development) that aren’t needed. That’s about the only
upside, though.

3) I was referring specifically to the multibillion dollar PWC and Accenture
scale, and made examples of them for that very reason.

Did Joel say something like that? It sounds like something he’d say, I guess.
I actually know a few fellow humanities majors who went to work for
Deloitte—-people as far from a background in financial auditing and compliance
as Heaven is from Earth. Yet, clearly, that’s what they do, because a group of
very smart folks figured out how to dumb down, automate, package and bill
that.

4) This article was intended for one-man bands more or less, not for people
who have scaled up their consulting enough to fund one or more developers.
Although still small and not without challenges by any means, that’s a
considerably more luxurious place to be.

~~~
tptacek
Why is Accenture and PwC at all interesting to the audience you have? Just
like the spectrum between "entry level" and "billable", there's a (vast)
spectrum between "1 man band" and "Accenture". There are many 10-100 person
consultancies, most of them lucrative, and none of them are run like Accenture
is. I don't know many people who have attempted to start something on the
scale of Accenture, but a whole bunch of people who have managed to get
10+-person practices off the ground.

Also: my whole point is that "previously cleaned spyware at Geek Squad" is
kind of a silly hiring premise.

~~~
abalashov
It was a rhetorical example about the extremes to which consulting can be
processised, precisely to convey that there’s a huge spectrum in between. One
often delineates things in extremes to demonstrate that something is, in
principle, quite possible—-and indeed, to a very lucrative scale. I guess it
didn’t read that way.

And yeah, hiring that way is stupid, don’t do that. This article was largely a
list of things not to do. :-) An omitted premise is that I don’t (any longer)
live in a market with a non-negligible concentration of IT talent. Not that it
matters much; I spent the last decade in Atlanta and couldn’t have conceivably
paid anything remotely resembling a decent IT salary even by those standards.

