A Texan Web Developer

What Kind of Business Are You Building?

I originally read The Art of Non-Conformity by Chris Guillebeau back in 2010 and the ideas in it formed several of the decisions I’ve made since then.  My wife Amanda started reading it last week and I’ve enjoyed quizzing her about where she is in the book and what she thought about what she has read.

While reading over her shoulder I saw a chart on Page 92 of the book titled Characteristics of Good and Bad Businesses. In this chapter Chris is talking about building an unconventional career around building a business that allows freedom of schedule and focus.

The first line of the table really stood out to me:

Good: Creates assets that sell on their own

Bad: Trades time for money

What I Had Been Doing

Earlier this year I came to a realization: I don’t scale.  Meaning that there is a limit to the number of hours I am capable of working and thus a limit to the income I can generate if I stick to a billable hours, or trading time for money business model. Plus, I learned last year that as my billable hours go up, my quality of life goes down.  Working long hours makes Daniel a grumpy dude.

There are a few solutions to this problem.  One is to increase my hourly rate.  Another is to hire contractors or employees to increase the total number of billable hours per week.

After considering both of these solutions I decided neither fit the direction I want to take in the future.  My rate as a freelancer is $75/hr, and I could go up near the $100/hr range, but was finding I was encountering the “Why Are You Worth This Rate?” discussion more and more.  That’s an exhausting discussion so I stopped having it.  Plus, keeping the pipeline full of work is tiresome.

After reading Dave Ramsey’s EntreLeadership earlier this year I got a glimpse into the process of hiring and managing a team by someone who is doing it at the highest level.  Although I enjoy collaborating with others and mentoring, being a team leader isn’t something I want to do at the moment.  Plus, forming an agency would force me into hiring or becoming a project manager.  I’d rather tweeze every hair on my body than be a project manager.

Realizing It Was Time For A Change

Taking a cue from several sources of inspiration I refocused my efforts on building products.  These sources of inspiration included:

  • The aforementioned AofC book – some businesses lend themselves to the type of freedom I seek more than others
  • EntreLeadership – Dave talks about products ‘life cycles’ in one of the chapters
  • Built to Sell by John Warrillow – the book centers around an allegory of an agency owner transitioning from being an overwhelmed and mediocre “one stop shop” to being a niche service provider and finally selling the company outright
  • All the Mixergy podcasts
  • The Startups for the Rest of Us podcast – This podcast is specifically geared towards developers looking to create products to sell
  • Freelance Jam’s talk with Pippin Williamson on Building & Selling WordPress modules
  • Matt Henderson’s recent post “Watch out for no-man’s land on the road to bootstrapping a start-up” – Being stuck in ‘no-man’s land’ of client work defined my recent history

As part of this shift I finished all open projects and stopped taking on new web development clients.  I also recently stopped working with an agency I had been doing work for.  This has been a huge step of faith,  but it is one that fits with my family’s goals and vision for the future.

What I Am Now Doing

Last September I connected with two guys on Twitter that were looking for someone to build a plugin.  The plugin would be a paid-for extension to a shopping cart plugin available at no cost.  The revenue for the plugin would be split 50/50 ongoing.

Since I had been doing ecommerce development for a few years the plugin took me 10 hours to develop.  If I were trading time for hours I would have collected $750 for my time and moved on to the next project.  Instead, a funny thing happened.  The module made a few hundred bucks the first month.  Then that total grew the next month.  Then it grew again.  Last month alone that one module generated $5,000 in total revenue.  Based on the developer agreement my portion was around $2,500.  A much better return on that 10 hours of work back in September!

One caveat to this is that products don’t sell on their own.  They require marketing and support to be successful.  Thankfully the module I built was for a very popular ecommerce plugin and has benefited from that popularity.  But my eyes were opened to the world of selling and marketing digital products!

I am now taking the table above very seriously:

“Creates assets that sell on their own”.

My main question for anything that I do from now on will be “Does it make me money while I sleep?”  …Or while I’m taking a sick day, or while I’m helping a friend move, or while I’m climbing Machu Piccu with my family?  That is a sustainable business.  That’s a path to freedom.

Your turn.  What type of business are you building?  What are characteristics of a ‘Good’ business for you?