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.
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.
>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
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 :)
Which point? 1?
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?
Plus, being in an obscure niche means nobody understands what you do, or much cares. Telephony ain’t sexy, and most specialised things that cater to very particular intra-industrial needs aren’t either. There is a small coterie of people in ATL with whom I can have fulfilling conversations about VoIP, and many of them are among my customers already. The chances of that happening at a generic business networking event are substantially zero.
So it’s not that one has literally nobody to talk to, anywhere. There just isn’t much of a support system given these two factors. It’s very rarefied, and one must develop a high tolerance for toiling in obscurity and the loneliness that comes with. Some developer types don’t mind that, I gather, but if you’re used to and generally enjoy working with humans, it’s really tough sometimes.
What few people understand is that a solo self-funded developer is not supposed to get tech things "right". That is a good way to run the business into the ground. Instead, the goal is to optimize cash flow by carefully balancing your time investment between technology and marketing.
The work I do for clients is always much higher quality from a purely technical perspective, but when you're solo and working on side projects, you optimize for a completely different set of variables (or fail).
Being a perfectionist and having no accountability and unbounded time to tinker on a side project and not release it or charge for it or market it is a recipe for disaster in my case. So now I try to do the shittiest first version that I can live with, and then revise as I go. It’s painful and stressful, but the money the projects make really helps :)
But yeah, I agree. So much advice out and Best Practices out there that only work if you've got a 10-person org and plenty of time to spare, as well as a clear ROI for gold-plating.
The best thing I’ve done to meet people is hosting in-person Indie Hackers meetups.
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.
How much time would you say you spend on consulting vs. product, per week, and how do you find your clients?
I tried consulting for a little, with the same goal of wanting to work with and learn from lots of different companies while working on my own product on the side, and found myself struggling to dedicate time to my product, with finding clients taking up a lot of my time (outside of working for my clients). Granted I was in very different circumstances than you--not nearly as much as 5-6 years of expenses saved up, I'm also pretty inexperienced, hey I'm young so yolo--but I'm still interested in hearing what's worked for you!
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.
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.
This book is quite good on the standard parts of managing professional firms e.g. accounting and law:
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.
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...
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.
Author here. This would simply not fly in my line of business. :-) I've tried. At the end of the day, either your conscience will balk, or the customer will.
One question: why not kill or sell all your side projects except the one making money? Splitting focus between consulting and a product business is hard enough, let alone multiple product businesses.
But instinctively, I agree. Churning out one product as a side project is hard enough; to really execute well, one cannot split focus among multiple products.
I have been consulting on my own for about 3 years - though the first was more during a transition out of full time employment. A couple thoughts on what HAS worked for me:
-I have been very focused on a specific and limited scope, product/market strategy for smart building/real estate tech firms (mostly startups who do not have their on product mgmt resources). I know folks who have been much more broad in focus and it doesn't seem to work. If you find a good gap in the market, you may find a consistent stream of work with enough flexibility on timelines to balance the days/weeks out so it's not so lumpy.
-much of the marketing I do (free newsletter, articles in trade journals) do generate leads but it takes ~6 months for a particular article or effort to generate leads. I'm not sure why this is, but most people who reach out to me for help cite something from months ago as "how they heard about me"
-pricing is difficult and the best response I have is that once you get a couple projects that are similar, you can use that average price as your list price - and you will have some confidence that it's a fair price based on the market.
Also, I have thought the easiest move into a product, for me, would be syndicated research. Instead of charging clients for consulting engagements, could I write reports that are of interest and then sell them. A few firms in my space do this, and I think it would be the most organic product I could deploy. I've been brainstorming ways to test this, as I don't really want to spend a long time writing a long report only to find that it does not sell...
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
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.
Thank you for the kind feedback.
This hard lesson does seem to make bootstrapping a risky strategy.
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.
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.
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.
Also: my whole point is that "previously cleaned spyware at Geek Squad" is kind of a silly hiring premise.
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.