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Ask HN: Are side-projects still a good way to generate passive income?
85 points by vommina on Feb 3, 2019 | hide | past | web | favorite | 45 comments
I recently had the opportunity to read the famous personal finance book - "Rich Dad, Poor Dad"

I'm thoroughly inspired by the book. The bottomline being, use income to maximise assets and eventually use assets to maximise income.

In my case I'm starting at ground zero. Reasonably good income. Minimal liabilities. Absolutely no assets yet (except my software-making skills that I've acquired over these years)

I've decided to write softwares (likely a SaaS product) that would generate passive income, which would serve as my first asset and then start from there to maximise them.

I know this isn't as easy as it sounds. Anybody who've gone down the same road that I'm about to take? Stuff that I should watch out for? Is this too silly?

My experience is that yes, it is possible to generate a passive income with side projects (by passive I mean <5h work per week).

As someone who has built and sold a SaaS company however, I'd strongly recommend against starting off with one. They are almost never passive!

If your main goal is to make some money on the side, I'd recommend you first try:

- An info product (a course, ebook, video course etc)

- Something in the ecommerce space (check out lasertweets.co by Josh Pigford for inspiration)

It's a lot easier to make $1-10k/month with just a few hours work per week (and time invested upfront of course) doing something like this than it is with a SaaS.

SaaS is just too time intensive with support, sales, product dev etc.

Source: Have built a SaaS, an ecommerce project and am now working on my first info product.

I agree with you. SaaS is in my opinion the hardest way to make money as a developer. Not only do you have to make working software, you also have to do every other thing a freelance business requires.

The path I often see is:

Developer builds an app in private with no monitization strategy or "we'll put on ads", releases to crickets/not very many users, and nothing then happens.

The question is then asked "why won't anyone buy my software?" Answer: "because you made something nobody asked for."

My recommendation is, instead of starting with a SaaS you come up with yourself and try to sell it to people, start with the audience. Learn about them and try to find a problem they'd pay money to solve.

To make things automatically twice as easy, sell to businesses instead of individual non-business owners. You can sell a $500 a month service to a business that solves a business problem. My family values software at less than $1.

If the problem you are solving is something the audience might also want to learn how to do, start a mailing list around the idea and teach them about the thing. Make info products, and services around helping them do the thing. Create a consulting service to manually do what your SaaS app might do automatically. Then build an app to automate the process.

Audience -> Freelance/Consulting -> Info Products -> Software.

Each of these steps are necessary for all the following steps anyway. Building a SaaS first is like jumping into senior year as a freshman - you _could_ learn everything all at the same time but that may take a lot of effort and frustration.

This is one of my soapbox issues because I have spent so much of my side project time flailing around doing exactly the opposite of what I said above and never making a dime from it.

Am being seriously downvoted. Anyone care to explain why?

I know the idea of software (and SaaS in particular) being a tricky passive side project is unpopular amongst the HN crowd, but unfortunately it's true.

I would take the downvotes as a good sign as that means less competition for us who are more pragmatic on creating profitable side projects (the downvoters are probably still cobbling together their SaaS for years with no audience in mind).

> It's a lot easier to make $1-10k/month with just a few hours work per week.

$10k/month with just a few hours per week is BS. $120k / year would be a lot more than many peoples salary.

Other than a few western countries, $120K USD per year is a lot more than many people's multi year salary

You've missed the point, he said:

> It's a lot easier to make $1-10k/month with just a few hours work per week (and time invested upfront of course)

...and time invested upfront of course

There are many stories of folks who have done just this, it's not BS, they exist.

I agree with this approach and have seen it mentioned a few times in indiehacker or solopreneur communities.

Do you have any resources in particular you are following for this? 30x500 seems like one of the only courses for this but it has mixed reviews (source: google, HN)

I think you could buy the book or audio of Will It Fly by Pat Flynn and get most of the same process for a lot less.

Nathan Barry wrote a book call Authority that talks specifically about making an ebook or info product.

I'm going to go somewhat opposite to altariumblue.

Don't try to come up with a good idea. Come up with a few or even a lot of pretty decent ideas that can easily be monetized. After you figure out these ideas, figure out the shortest path to solve the problem they are after.

Build the shortest path in a decent way but don't spend years on it. Launch it. Did people like it? Did at least one person give you money? If not, go onto the next idea. If you love the idea, no need to slash and burn but if you're not sure the next step, play with another idea for a while.

"That's just luck!"

Uhhh... yeah. You're making your own "luck". Don't scam people obviously but don't feel like you need "That One Great Idea" either. Try out lots of things to help people in exchange for money until you find "That One Pretty Good Idea"

source: I wasted two years trying to build "That One Great Idea"

Would you recommend launching a new saas product in demo mode first, to gauge interest? For example, allow users to create a free account that works for two weeks to a month? Then hook in a way to get people's money after you have received enough feedback in the form of "Can I please throw money at you to purchase this product"?

I think one major hang up for first-timers is crossing that threshold of taking money, because now you have liability. Which includes dealing with support issues (will customers be satisfied with 24 - 48 hour turnaround time, will they be OK with web/email support only because you have a day job?), and also you need to deal with fraud and other legal issues.

>Would you recommend launching a new saas product in demo mode first, to gauge interest?

If you think that would work. I have tried it before, people did use it but they never bought. You bring up that issue later in your post though. :) People are cheap. I never really dug into this idea further because I was cautioned by others that "Free SaaS" and "Paid SaaS" are different people.

You even bring up the issue of support around "Free SaaS" people. That crowd I think generally thinks "Free SaaS" == "VC". In my experience, as long as you get back to people within 12 - 24 hours, they don't mind. I go on walks during my day job and respond to support emails. ;)

>I think one major hang up for first-timers is crossing that threshold of taking money, because now you have liability.

Definitely! That's still kind of a hang-up for me. I feel kind of bad asking for money for something I built. It is slowly going away though the more that I do it though. I think this is a common thing though.

>also you need to deal with fraud and other legal issues.

I guess that depends on what you're building. Stripe, for the most part, handles the fraud and legal stuff. While we are talking about Stripe, I would recommend against Stripe Atlas. It is too much if you aren't going VC. An LLC (provided you're from the US), if even that, is enough.


Honestly, you should just try out all these hypothesis and apply what you learn. That's what I've been doing. Try something new, apply, try something new, repeat. It's the best you can do in my opinion. Reading books + blogs is great, I totally still do it, but beware analysis paralysis. ;)

I guess we might summarize this as "Greedy algorithms work very well in practice".

- to generate income you need to either provide something valuable, scam people or get extremely lucky

- if you want to provide something valuable you need a good idea, some skills and hundreds or even thousands of hours of work on your idea

- all that work on creating and maintaining your project makes the potential income not passive at all

My impression is that the people who succeed at this usually start with a good idea, work on it for a while and somewhere down the line potentially turn it into an income stream. But the interesting idea comes first. On the other hand, the people who begin with the goal of making money and just the wish to "have passive income" or "be an entrepreneur" usually don't get anywhere. Unless they scam people or happen to get lucky, of course.

Also, everything from Robert Kiyosaki including "Rich Dad, Poor Dad" is somewhere on the scale between questionable advice and scam.

It's a matter of scale. How many teenagers do you know who make $5 here, or $10 there, just mowing lawns, cleaning windows, or doing babysitting?

They're making money without luck, without scamming, and without being terribly valuable.

The problem is those things don't scale. I can imagine a couple of happy teenagers raking in $400-$500 a week, if they really push themselves, but it will be very seasonal work.

Hrm. uber for lawns? facebook for windows? (There are a lot of agencies that work as middlemen for childcare, where often vetting and background checks are involved. I'm not familiar with such a thing for pet-walking, window-cleaning, or lawn-mowing. Perhaps they exist, or perhaps there's your cheap and easy idea! Physical labour is cheap, anyway :)

Not to disagree or agree, but this reminded me of more than one story I've read of a young lawnmower person who got enterprising and started their own lawncare business, employing other people (and becoming quite successful).

They probably didn't have passion for mowing lawns, but perhaps their on-the-ground experience taught them enough that they could then use their other intellectual/social skills to scale up.

I don't have any formula for how to translate these anecdotes into new ideas... else I'd be doing one myself.

Pet-walking: rover.com

As a more practical and realistic alternative to Kiyosaki's "Rich Dad, Poor Dad" I would highly recommend "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko.

While not as eye catching or sexy as some other "get rich quick" books, it offers a profile of the average millionaire using research and interviews by the authors. As somebody who grew up thinking that wealth equated to status (and vice versa), this book was eye opening!

But the interesting idea comes first.

I am not sure this is a requirement. Some of the safest businesses are also the most boring, aren't they? Everybody needs to eat, everybody needs insurance, clothing, waste disposal... etc. There isn't anything unique or even interesting about waste management and yet, there are people making serious money in it.

I guess an idea just needs to be useful and executed well for it to make money. There are of course dumb ideas that make money and there are of course interesting ideas that make money, but the majority of businesses are just plain boring, just like many of our daily tasks.

> - to generate income you need to either provide something valuable, scam people or get extremely lucky

This isn't always true. If you're famous and/or important, you can get paid a high salary to sit on corporate boards and put in a few dozen hours/year.

I guess maybe that falls under "get extremely lucky"?

Have side projects ever been a good way to generate passive income? For some people, sure. For most people, I'd argue it's a terrible financial decision. Most side projects fail and never generate any revenue. To stray from the software focus, how many people actually make money trying to sell Avon products (or Amway, etc.)? How many people lose money becoming a realtor to attempt a side job? Set up a booth at a flea market to hawk wares? Advertise their gutter cleaning service and never get customers?

The vast majority of non-mainstream money-making ventures fail. That doesn't mean they're a waste of time, especially if you enjoy the activity anyway. And there's something to be said for taking a chance. I applaud entrepreneurs on all levels. The idea that a side project in any field makes good financial sense is unfounded, though.

It's great if you're inspired, but be aware Kiyosaki is primarily a salesman: https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...

Thank you for this. I wasn't aware Kiyosaky was such a con. Friends of mine religiously adhere to his teachings (hint: no one got rich, yet).

In my experience, money as a side-project motivator or measure of future side-project success is folly. Make your side projects for fun, find other motivating factors to finish, or don't finish, it's all good. If you make something and gain adoption, then you can consider monetization. But otherwise, I've found building an imaginary future income on your not-yet-built, not-primary-work software does not result in happiness or success.

Granted, this is just my experience and only applies to side projects.

> Anybody who've gone down the same road that I'm about to take? Stuff that I should watch out for?

The major trap is to make sure people are willing to pay for what you're building. Don't spend ages building it in secret attempting to make it perfect and then find out nobody is willing to part with cash for it.

I'm making income from https://www.checkbot.io/, a Chrome extension that crawls your website looking for SEO, speed and security issues you should fix. I started building it to help automate what I was doing for clients so I knew the results were valuable and web developers I showed it to said they'd be willing to pay for it as well.

I don't often see people making money from extensions. Could you share what you are making? I understand if not.

Passive income is not starting a SAAS. That's "starting a SAAS." If you are able to build it and market it in a way that later on you dont have to do as much work THEN it can be passive income. But the idea of "I'll build a saas and make some easy money" is a terrible idea in almost every case.

I think the people making most passive income are those selling the passive income books and advertising :-)

My friend in the IT business says I am the only person he knows making close to passive income. I have a side project which has been generating income for the last 10 years. The sideline involved a lot of work to setup and after years takes little of my time.

So I would say go for it if you want to swap some of your time for money. I am proud of my sideline but most good things come at a cost.

Gambling is a great way to generate passive income so long as you always win.

Personally, I've found side-projects to be valuable even if they're not profitable. You gain experience, knowledge and you might even enjoy yourself too.

I know about 100 people who made a moderate to serious attempt at passive income, and the hardest part is finding something people will pay for. I can categorize them all into a few buckets:

1. Got industry experience through freelancing, and used that to find something valuable

2. Worked on their "passive income" project fulltime for > 6 months

3. Both, or

4. Made less than minimum wage

Now, anecdotes aren't data, and most of these people aren't software engineers. But I would encourage you to try taking your product ideas, freelancing in that industry with small contracts, and using that to refine your sense of what the market wants.

Maybe a bit off-topic. Say I have an idea for a web app. More like a service. I also have a person who's willing to go out to the targeted group and present the product/get feedback.

Personally I'm a Java backend developer, and building MVP for the backend part is a piece of cake.

But I lack UX and mobile development skills, which is the crucial part of the idea.

Is there a place/site to present the idea (no need for any NDI - not that kind of person) and get someone on board for development in needed areas?

Drop me a line.. I'm full stack... read: Not a designer, and not an x10 dev, but I can use vue+vuetify, or Quasar, or Ionic Framework to build out the frontend. Been trying to find a coder to team up w/ for a VERY long time... Wouldn't mind helping out on back either, I haven't had a chance to do much w/ Java, would love to put that on my resume. patrick @ Zvive.com

I was thinking about making apps catered towards places where android devices are just getting popular. Like imagine a country like Bangladesh. A homogenous population of 180m where most of the people probably have similar needs and speak the similar language. The playstore barely has apps to cater to the people. I think the absence of apps can probably be attributed to developers unable to hire UX designers and maybe lack of good hardware. A lot of the current Bangla apps that are out there are very poor in terms of design. They look like they were made by a solo dev. And the devs are probably missing the point that a lot of "pointless" apps are able to make money in the states. They probably don't see the opportunity. The hot startups in Bangladesh are trying to copy Uber and Grubhub.

That's my current goal right now. I've been trying to learn android dev for a while but it's hard to manage with a fulltime job...maybe I'm making excuses.

If I had time for a side project I would either do:

* an info product (a book on a popular new technology, or an evergreen topic, preferably related to software development). The best example here was the stripe rails book. I bought it for $40 because it saved me hours of dev time. Used it once. Never opened it again. Was worth every penny. https://www.masteringmodernpayments.com/

* Or, if I was looking for a longer play, find a local niche business type where people spend money and search online. Prefer if data is already collected by someone else (data.gov or the state agencies are good places to check, for example child care facilities). Use a WordPress directory plugin to gather demand side up and then monetize by ads plus premium listings.

No coding for either of these.

About your second idea : do directory sites still make money? Doesn't Google frown on these?

I don't know about the SEO implications, but I think a well made directory site that provides value to consumers would work. I run one for CSAs that I haven't monetized thoroughly and several of my competitors have done a much better job of. And I don't see Google penalizing them. #anecdata

The problem with passive income is someone else will be prepared to do the same (i.e. not much!) for very little money.

The market is likely to eventually price stuff that requires no effort to make, very cheaply.

You may be able to get quite a lot of money out of it before that happens, depending on how brilliant your idea is.

A SaaS can fail... if you're the solo dev on it -- nothing you build is ever a failure. Most other business ventures - like someone mentioned 'info products' -- none of those has inherent value unless it's a success and you make money.

The value in ALL side projects is that as long as it's 'live', it's something you can use on your portfolio, and worst case scenario -- open source that baby -- and now you're an OSS maintainer.

> that would generate passive income.

I am also a big fan of "Rich Dad, Poor Dad". Coupled with "The Richest Man in Babylon", I think these two small books told me pretty much all I wanted to know about how to get rich.

Passive income is great. However recently I learned a new term - delayed income. Delayed income, or lack thereof, is what all my side projects have been about. I start with an idea that I'm gonna sell this product to 1000 people at $30/mo, it'll generate 30k monthly for me, and I dont' have to work for anyone. Then I either "gonna sell it to 30 000 ppl for a $1" or "gonna sell it to 300ppl for a $100" or "gonna sell it to 50 per $100" cause 5k monthly isn't at all bad... I'm only gonna work like 10/20 hours a week, but wherever I want, and not reporting to anyone... Needless to say, it's all very stupid, but my point isn't about that.

My point is that I never took into consideration the time I need to spend upfront. Assuming you need to work, say, 3 months. You're a software engineer, who makes "Reasonably good income". That's what? 3 months * 4 weeks * 40 hours * say 40/hour ~ $20k.

So you work for 3 months in hopes to later make more than 20 grand later. So when later you finally, if you're very lucky, start making money, it's not really all that passive, it's delayed. You just weren't paid. And most of the time, unfortunately - nobody is interested in your project - or you didn't finish it - or you just don't make back the money you invested. - or something else.

Passive income is when you buy stock and don't do literally anything. Or something similar.

Maximizing your income is a different thing, getting paid 40/hour or 100/hour is a different conversation from passive income and feels like something you might want to think about.

So yeah,

> I know this isn't as easy as it sounds. Anybody who've gone down the same road that I'm about to take? Stuff that I should watch out for? Is this too silly?

Don't work for free, especially for yourself. Every hour you spend on your project must be accounted for. You could be doing contract work and getting paid during this time, so ask yourself: is it worth it?

Starting a new project is very easy, completing it is super hard. So if you want to do this, maybe try to do a simpler project, something you can be done with sooner, which would mean risking less. Ideally of course, do something you enjoy, in which case it won't be such a drag doing it as work, because if it's successful, it's nothing more than more work.

As a few other people have said, running a SAAS will probably be more time-intensive than you anticipate. An informational product like a book or video series is much less time-consuming and requires less upkeep. Your business model (selling a product) is also a lot simpler and easier to experiment with than a monthly subscription plan.

How much of books like Rich dad, 4 hour workweek etc is practical? Kiyosaki is more of a salesman than an investment wizard. Tim Ferriss is successful, but works his ass off, far from 4 hours a week. Not saying these books are useless, but wondering if we should take them at face value.

Tim Ferris's literally used to do sales too. I read his book as more of a philosophy book personally

To me, passive income is to make content based sites, streamline traffic sources, paste ads and check back twice a month to see how it goes.

So, if I have 10 sites each making $100/month "passively", that's some nice passive income on the side.

The hope the dream, chasing the SaaS.

Lots of developers succeed with side projects, products/SaaS. It isn't easy, but it's possible, worth chasing.

Checkout @DHH's Startup School Talk for some inspiration. https://www.youtube.com/watch?v=0CDXJ6bMkMY

Check out the StartUpsForTheRestOfUs.com podcast if you haven't already.

Rob is a great story to follow, from drop shipping, to job sites, invoicing app to founding and exiting drip.com. He calls it the stair step approach building up to a SaaS.

Start in the archives Episode 1. All the advice is still relevant.

Good luck.

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