And "your time" counts when we discuss "how long"...
A side project is something you choose to do, and saying you're still in the red because of your time, even though it cost you $4k to get off the ground and it's given you $40k back is ludicrous.
If possible build something your existing business needs. That way if it doesn't take off as a product you still have something that meets a need you have.
Launch the smallest thing that solves a problem your prospective customers have. The smallest thing they will be willing to pay for, then iterate from there.
Our product was something we needed in our service business (a small CMS that didn't insert unwanted markup) and took us about 4 weekends to get to launch in terms of the product, and about the same for the infrastructure around it (documentation, sales site and so on). It was tiny compared to where it is now, but enough people wanted it to make it worth continuing development.
I value my R&D cost based on what I used to make when I was coding for the man. Which was a lot.
So three years in, I haven't broken even on my real opportunity cost. Given my trajectory, I fully expect to. But it's not an overnight thing.
Same here - approximately three years in. We aren't far from "breakeven" in terms of actual dollars spent, because we don't actually spend much money right now. But in terms of return on founders time, we're way in the red right now.
But, we're in the B2B space, doing complex enterprise software that addresses challenging problems using cutting edge technology. You don't go from zero to thousands of customers overnight. TBH, we're only just now at a point where we have a real product (two products, really) that are ready to sell to the early adopter / earlyvangelist types. So now I get to go out and meet customers and see if I can retrain myself, on the fly, to be a sales-person.
So yeah, nobody expected this to be an overnight thing either. It's been a tough slog so far, but we think we're getting close to really turning a corner.
One difference is that we've been out talking and selling from day one. Our first customer was willing to be an early adopter and was sold on the vision of what we could build for them. We couldn't have mastered the problem domain without having real users and data.
It's actually a good deal for both sides: the customer gets high-touch, custom-tailored software for relatively little money (because you're funding the development and you own the software). You get a proving ground and data. As long as you've identified a problem shared by other customers that you'll be able to sell again and again, it can be a big win.
It also helps that we've been out selling (at least regionally) for three years now. It adds to our legitimacy. People in the industry are getting to know us, and that has made them more willing to say yes.
And B2B sales cycles can be absurdly long. We have heard "sounds great, but I just finished making my budget for this year", and then eleven months later they're back with a signed contract.
It doesn't help that we don't yet have a dedicated salesperson with selling experience. So I've been working to reinvent myself as a salesperson over the years, and I think part of it is that I'm only not starting to feel like I know what needs to be done to go out and sell this stuff.
That said, there are things I would certainly do differently if I could go back and do it again. :-)
a. Web Consulting (Rails, iOS, Android)?
b. Cleaning / Laundry / etc?
c. Foodservice ?
d. Niche Software Consulting ?
e. Other ?
"True" costs didn't arrive until I thought I actually had something worth investing in. Which meant I had to purchase boxscore data for the sports I couldn't find.
So to answer your question... ideally your project should cost very little to start with. Once you discover that you might be on to something, then slowly increment costs. Baby steps.
Of course, I'm talking about photography, which I do because I love it and not because I expect to make money at it. I'm ok with it being permanently in the red and have no intention of ever trying to make it my primary source of income, as that would suck all the fun out of it for me.
I've absolutely zero interest in trying to be full time, because as you say it would suddenly become non-fun.
It took almost 4 years for it to replace our entire income as a consultancy and for us to stop taking on client projects. Between launch and that point we were slowly scaling back the client work as the customer base for Perch grew.
A possible milestone for break-even was when I was able to use the same PayPal account for booking sales and for all of my business expenses. That took roughly another few months, so maybe nine months all told.
My biggest cost is my time, even if I don't hang a number on it, because I've got a finite amount of it. I try to keep a running estimate of dollars profit per hour of work. To expand the business at this point, I have to let some older models slide into oblivion, and come up with something that can attract a higher price.
We also have higher expenses in terms of our support team (3 full-time) — there are higher expectations for sharp, fast support in an industry like CRM.
- How many founders do you all have?
- How did you get your initial set of (small) customers?
- How are you all expanding to new customers (bigger customers): via advertising? word of mouth? initial customers increasing seats? other? salesmen ?
- Why did you all pick CRM initially? (isn't it pretty crowded already: SugarCRM, ZOHO, Oracle, et al.). I'm genuinely curious as I don't know much about the market.
There are four of us on the founding team — three of whom have some other obligations, and myself. I spend 90% of my day coding or working on product with our designer.
> - How did you get your initial set of (small) customers?
Primarily through Google Adwords. Initially we had an inside sales rep who worked hard to talk to every trial, even if it meant spending a few hours walking a 4-user shop into signing up.
We were also one of the early CRMs to be in the Google Apps Enterprise Marketplace (i.e. integration w/ Google Apps). We got some free front-and-center placement there, and this brought in a lot of customers. This was in summer 2011, and for a while it doubled our monthly trials.
> - How are you all expanding to new customers (bigger customers): via advertising? word of mouth? initial customers increasing seats? other? salesmen ?
We’re definitely spiraling into more organic growth. We’re also doubling down on some more marketing efforts like a booth and sponsorships at SXSW. The product has also matured quite a bit into a place where it’s a genuine competitor with the lower end of the Salesforce market.
And we’re doubling down on integrations with other services, which (in my mind) is the “partner / channel program” of the SaaS world.
But this is an area of interest to me, and one we’ve been talking about a lot. I’m interested to hear what others are doing in the heavy growth area.
> - Why did you all pick CRM initially? (isn't it pretty crowded already: SugarCRM, ZOHO, Oracle, et al.). I'm genuinely curious as I don't know much about the market.
It was borne out of the sheer ineptitude of the market. Salesforce is ugly, expensive and nobody likes it. Sugar is an OSS clone of Salesforce. Zoho is trying to be Microsoft Exchange as well as CRM. </hyperbole>
We focused on bringing beautiful design and ease of use to CRM: something that a lot of smart people are doing to various components of business software (Freshbooks, MailChimp, etc.)
Well, in terms of money. But my side-projects that I wrote to make me more productive have been paying off since shortly after starting to write them. The most useful one for me is Phoenix. Although that'll soon be useless to me when I switch to Linux after finally becoming a nerd.
In terms of breaking even, it's in the black if you don't consider the time I spent building it (and rebuilding it when Grails started falling over). It runs on a single Heroku dyno, so that's not casting me anything and uses the free tier of MongoHQ.
If somebody enters a string value with "<script>alert(3)</script>" that breaks it. For example:
If you consider my time...well.
Any money they've made gets immediately reinvested in advertising. One of these days I'm going to make enough to pay myself.
Since we no longer have scaling limitations, we don't have to temper our client conversations anymore, allowing us to take on much larger campaigns.
Many of our leads lately have been from new clients contacting us from word of mouth which is extremely exciting. So it's taken about a year since we started to get the potential clients contacting us.
Not quite breaking even, but the cost to run the service is tiny. Been operating for two months.