Creative Tim: Growing a side project into a $17k/month business
indiehackers.com
indiehackers.com
Even the more successful interviewees make less revenue per month than I can make through straight consulting. And they're the success stories—most people (including myself) make far less per month from their products.
How do people keep motivated to work on side projects when consulting is so much more profitable?
The key is to keep raising your rates.
Did I miss the memo?
So yes, your hourly rate is significantly higher than a comparable salaried employee. No, you're not actually ending up with double the money at the end of the day.
With a consultant, you cut them a check, they do the work, and then they go away. No hassle or risk.
It's the difference between logging onto a website like Fiverr and putting in your credit card, and paying a lawyer $500/hour to help you set up an employee health care plan.
- Work at X company for Y years?
- GitHub?
- Networking?
You also need to understand what problems your potential clients are facing. This takes experience, which can come from working as an employee in that industry.
You need to convince your potential clients that you will reliably solve their problem--not only the technical skills, but the ability to apply them on time, on budget, and do what you say you can do. Case studies and client referrals are key here.
Working at X company for Y years is a good way to learn all about the problems that companies like X face, and to develop some stories about how you have solved those problems professionally. It can also be a good way to build a network.
GitHub is useful if it demonstrates skill and perseverance. If it is filled with half-done hobby projects, it will be useless or even a detriment. It is less important than a good track record on actual paying projects.
Finally, to be a profitable consultant, you need to know how to run the business--to estimate your expenses and set rates that are competitive but still make enough money.
EDIT: the blog at http://www.kalzumeus.com is chock full of detailed content on how to start your own software business, including consulting.
There are ways to use OSS contributions or networking to assist in developing that client and making that sale, but they are not required. "I worked 5 years at Google" does not entitle one to a consulting gig.
Most of the consultants charging >$150/hr are people who could readily get a job in Big Tech paying >$250k/yr.
https://news.ycombinator.com/item?id=8706043 (see in particular the linked comment)
https://news.ycombinator.com/item?id=7155387 (why a consultancy charges an $8k per month programmer out at $6k per week)
I've worked on products that you've used :)
There are tons of programming gigs at $100+/hour. $100 * 40 * 4.33 = $17320 per month. It's usually tough to fill 40 hours consistently, but if your rates are higher, you can work less hours.
Also, some SaaS/product success stories take the path of CONSULTING/AGENCY -> PRODUCT -> SUCCESS (e.g. Basecamp, SEOmoz, FreshBooks) but you rarely hear of the reverse.
That's very true, but I'd also speculate that the vast majority of software products never pay back the flat cost of development.
IndieHackers is a compendium of founders who were successful enough to be worth interviewing, and even the vast majority of them make less from their projects than consulting can make.
> most SaaS/product success stories take the path of CONSULTING/AGENCY -> PRODUCT -> SUCCESS (e.g. Basecamp, SEOmoz, FreshBooks) but you rarely hear of the reverse
Arguably that's because it's so common that it's not worth talking about. I know tons of people who have launched projects which ended up failing, so they fell back on consulting revenue. Far more people than have successful side projects.
Different people are motivated by different things I suppose.
The time you spend on developing previous side projects (which saw minimal return) should absolutely be a factor in deciding whether to start new ones.
There are a lot of people (i.e. @levelsio) who launch a career as a speaker out of products, I imagine part of that is consulting
My revenue doesn't come from speaking, it comes from product. I don't like those people who do that at all because how can you trust people that only speak but not make product?
I speak if I want to spread a message (although blogging is way more efficient).
Sure I can consult 110% and probably earn enough as three full time jobs. But I already have everything. Gadgets are not very exciting when your employer gives you top-of-the-line Macbooks and iPhones. I don't play video games. It's just an itch. Like hobby level soccer players who don't earn a cent yet play matches during weekends and train weeknights. It's a hobby, with an added benefit of actually maybe sustaining a full time developer (lower end of salary tier) in the future.
Would you mind linking to your interview? $3k/m is certainly respectable and more than I've ever reached.
Also posting revenues is never really interesting without talking about costs... Also taxes take a lot from different directions, so even after hosting costs it's VAT and corporate tax and even more. That's when you see the scale needed to actually succeed with it for a living.
As for the other side (marketing etc) I couldn't agree more. Getting in a third person who actually likes that part made a massive difference for us. Not only for the product, but also within the team. I can really respect why having complementing co-founders is so important.
Working with a team definitely makes a huge difference. It's a lot easier to stay motivated when someone else is handling their specialty and you're accountable to them as well as yourself.
We don't think of our projects as "side projects" and don't really want to be grouped in as an Indie Hacker.
That's a fair point and maybe something csallen could take into consideration for branding.
The success story for side projects should generally be that they cease to be side projects. I'd be very interested in hearing about more businesses which started as bootstrapped side projects.
(The tagline on the homepage does say "profitable businesses and side projects, after all.)
By the way, I'm not sure what company you're from, but if you're interested in appearing, feel free to get in touch :D
Once up and running, these projects typically require far less time and effort to maintain, and majority of time is spent in improvements so the revenue grows in the future. Or the owner can just sit back, relax, and enjoy the Four Hour Work Week [tm].
As a contrast, consulting gig is good money while you're working. When you stop (vacation, illness, whatever), the money flow stops as well.
Best advice I've ever seen on this topic: https://news.ycombinator.com/item?id=13213871
Although my model won't be recurring revenue, so will have to do enough marketing to keep a more consistent churn. Fortunately, I can do some pretty targeted marketing in a service that isn't saturated, and the incumbents haven't kept up well.
It takes quite a bit of level to get it to the point where you can afford to be lazy (passive), which just means spending less time on it, not no time.
That's why income from side project services/products is great in conjunction with consulting (or whatever) income. You can make an extra few thousand a month on a project that you wanted to start in the first place, with some part time number of hours per week.
Even the example in the post is $17k rev with a 6 person team. Although, this guy and his partner are from Romania - it's awesome there and your USD go VERY far.
In the business I created with my cofounder, we never made that much on a monthly basis, but when we finally sold the company, we did very well.
So to motivate yourself, just ask yourself how much would you like your business to be worth if you ever decide to sell it?
What I'm working on isn't a side project, it's my main gig, but it's paying the bills nicely. But I started this after quitting from a post-acquisition job at Google paying $400k plus 4 years of retention bonus totalling a lot of money. I would absolutely have been financially much, much better off at Google. But I would have had to live in the US which I didn't want to do, and I would have spent my life in meetings, and I would have been working at least 50 hours a week on things that didn't interest me.
Currently I live in a small town that I love with no tech scene or jobs, I make a good living, and I spend lots of time with my wife and daughter. Importantly, I spend time with them whenever I feel like it, or when they need me to, and not when it's good for some company. I have great users and I enjoy improving their lives through my product, which is mostly a lot of fun to work on.
A few people have mentioned that working on your own thing requires a bunch of things that you'd rather not do - marketing etc, as well as things that are taken care of for you at larger companies such as setting up payment systems, worrying about tax, and so on. That is all true, but it's massively offset in my case by not having employees or bosses, and not having meetings. The sum total of doing things I'd rather not do is much, much higher working at a company doing those things than what I do now, where I spend most of my days writing interesting code and a relatively small fraction of my time on boring stuff.
I don't want to say you're wrong, but money isn't everything is easy to say when you have it.
One reason for someone to think this way: in most western countries income at these levels is taxed at very high rates. Why work more when the government just takes a big chunk of your earnings?
As if excellence were measured in money.
This mentality is what drives people to misery, greed, depression, stress, strained personal life and ill health.
One's "full potential" is not about making as much money as one could make.
Yes, but you can trivially find people who say it even though they don't have the money. And that they have made proven sacrifices for other causes (e.g. left lucrative careers for much less good paying ones that they love more).
Money might not be everything, but it certainly is something. This is especially true when comparing consulting (something I genuinely quite like doing, it's almost totally bullshit free) with running my own SaaS startup (which also seems attractive, but would involve doing more of the things I dislike than now).
Still, to be clear, I absolutely do want to make side projects happen. It's just hard to keep the motivation up when there's a steady flow of interesting projects from clients which have immediate, guaranteed revenue attached to them.
For me, the really major win is not having to live in or near a tech hub or large city to have interesting work, and to have control of my time. Most of the lifestyle stuff just flows on from that.
Being able to work from anywhere is definitely a huge advantage (of both consulting and lifestyle businesses). I just wish I could make a lifestyle business which actually paid for the lifestyle my consulting does.
For now, my plan is to focus on becoming financially independent so I can work on anything (including side projects) without worrying about money.
Working and consulting limits your money making abilities to yourself. I have the potential to make much more running my own company (and I do).
"It's just hard to keep the motivation up when there's a steady flow of interesting projects from clients which have immediate, guaranteed revenue attached to them."
There is, for now. But this will change. It always does. I don't look forward to the roller coaster ride of finding that next consulting client or dealing with ridiculously difficult ones.
This also changes as you get older and have a family (many consulting gigs require traveling to work onsite or for important meetings). Consultants are also usually cut first at any big company, if you have long-term gigs.
The other difference is the type of work you want to do. I enjoy the challenge of starting a business from scratch and wearing many hats (including many non-technical roles).
I don't think I could ever go back to consulting.
When you are trying to establish enterprise value, it's different. The value of a company is roughly (m/(i-c+g) - f) where m = margin dollars, i = the interest rate of your funders, c = churn, g = revenue growth and f = fixed costs. If you have a repeatable (and growable) cash flow, then it's worth a lot more than consulting work that you have to win every year. The math is highly oversimplified, but this is why a company like LinkedIn (Or Ariba in Web 1.0) can sell for 8 or 10 times revenue.
They're side projects. Unless consulting is your side project, I don't really see the ultimatum here. Either you enjoy working on side projects or you don't.
The 'passive' income you get from them is a really nice benefit, but still the reason why you do a side project (as opposed to making it a full-time project) should be because you enjoy making things.
When you are ill, don't work in the weekend, go on holiday, you don't get paid.
His business keeps selling, in weekends, during vacations. When he wants to get out, he can sell his company for 2x to 4x his annual profit. Or he can remove himself out of the equation and spend only a small amount of time on it, and still make a profit each month.
He is building something of value next to getting paid, you are not.
For one, you get to work on what YOU like, and do it the way YOU want it done.
Second, in lots of places in the world, that's equal or way more than you can make in consulting. And not everybody has the connections to go into consulting or desires to move to another country like the US to make more money.
Third, these money can be passive income, in which case, you do minimal or even no work, and still get them. That's a huge win, even if you make less you have 8+ more hours per day free for yourself.
According to the numbers here, 42% of the 17,000 monthly revenues are spent on 6 people. That's $1190 per person per month if everyone is paid equally.
Is everyone in Romania, and is that a living wage there? If not, how are your employees making ends meet?
Edit: that last sentence sounds accusatory - I don't mean it to. I just mean: do you have a strategy of part-timers who have other income streams, do you take side contracts, etc.
It's a very good living wage for Romania but low for what other IT people are earning, ~$2k monthly.
It's a very good wage for _surviving_.
After taking care of rent/utility bills there's not much left to go around for actually living.
Are you implying rent/bills in Romania are $1k/mo?
Romania is eastern Europe. It should be way cheaper than that.
Get a decent apartment, have some fun in your free time and 1000 does turn into a "barely getting by"-wage. 1.5k-2k is comfortable wage, but median is around 500-600 in most of eastern Europe afaik.
https://www.numbeo.com/cost-of-living/in/Bucharest?displayCu...
That's a very privileged view of "barely getting by". All you've described is someone spending everything they make on luxuries (nicer apartment, "having fun" - whatever that implies). By that token, someone could easily be "barely getting by" in San Francisco on an income of $400k by getting a nice 2 bedroom apartment to themselves in a hot location.
It has to be really worth the other party's time.
Not everyone can be a freelancer, that's one of the points behind the theory of the firm.
Technological advances can and have shifted the % of freelancers, but I doubt it will ever be near 100%.
I say that as both having been a freelancer, currently working semi-remote, and hiring freelancers (both locally and from India and Pakistan).
$1k Euro/month is decent living in Eastern Europe, Romania, Hungary, almost any place closer to Russia.
Romania is a lot cheaper than any much any other place in the Western world. Granted, $1.2k a month wouldn't be enough to go on shopping sprees every weekend, but it's enough for quite a good life.
You can also take a look here to get an idea: https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou...
I think a good senior software engineer makes around $2.5k per month, but I think that's sort of on the higher end unless you're really a hot shot, and for Romania, that's an awesome salary, way above the average.
So if someone's getting $2.5K per month it's not the same as an American getting 12x that in annual salary, because it's (presumably) the after-tax number in Romania while it'd be the pre-tax number in the US.
Still, I get that tech talent is a great value in Romania. I wonder if there's a problem finding good people because so many would go to the West to make more money. But it seems the OP solves that problem by hiring beginners, which is probably what I'd do.
With regards to the tech talent, I definitely think there is some truth to that. I'm no expert, but I'd say it might have something to do with the education system, or maybe even culture, which is quite heavily focused on maths and physics. With that said, we always rank quite low on most international education indices and the like. I think it might be some sort of educational inequality where children in the cities get quite good education and are pushed by their parents to study, while the ones in rural areas get the short end of the stick.
Also, something that really pisses me off is how many Romanians overstate our IT prowess. "Romanian is the second language spoken at Microsoft" is now part of folk wisdom, despite being proved to be false and just a media hoax in the '00s. We have many big companies with offices in Bucharest (and other cities), but they aren't really flocking to get all of this "enormous talent" just laying around. Don't get me wrong, we do have many reputable engineers and university professors, but nothing that would warrant this common perception about how incredibly skilled Romanians are in IT.
Any idea how it compares to neighboring Hungary?
In Budapest there's anecdotally a lot of software talent and a fairly visible coworking/hipster-hacking/startup scene, but I still see Tata bringing people in from India to work.
And in Berlin there are people from all over the world toiling in the Salt Mines of Samwer, I would assume a lot of them from the former Eastern Bloc.
If you have any suggestions or feedback I would be glad to talk with you.
Best, Alex
Great work. I'm curious how did you get your affiliate programs in place, did you reach out to folks or did they reach out to you?
You have an excellent business on your hands.
I was wondering, what you pay your affiliates is missing from the break down of costs. Why is that?
I'm now happily using paper-dashboard for some internal admin areas. Thank you!
[1] https://github.com/creativetimofficial/material-dashboard
Their pricing is also very affordable compared to many alternatives. You don't have to think twice before making a purchase.
Salaries in Romania aren't as good as in the States.
I'm currently based in Italy and a programmer can make as little as 1,200/mo. (salaries in Italy are much higher than in Romania, possibly 100-200% more). I make more than that freelancing, but I don't think 17,000/mo. is bad, both in general and for a company based in Romania.
Appears effective.