Consulting vs Ownership

I had a meeting a few days ago where I was looking to do some subcontracting though a company. The owner/founder of the company pitched the idea of joining the company as an employee. They are an employee owned company, so every employee has a stake in the company. The owner has a fairly good track record. He said said something that stood out to me. I recently passed it along to a fellow uISV and thought I would share it here as well.

As a consultant, you will typically start out making more money (figure about 2X your normal salary) than you would owning a company (or uISV in my case), but you can only bump your rate a little bit every year or so. If you price yourself low, you might have big jumps initially, but soon you will hit your limit. Even during the late 90's there was a maximum price that you could get out of desperate companies. And this is the limit of your income. You can only work so many hours in a day and that is all you can earn.

But as an owner, even of a uISV, your income is not tied to the number of hours you can work. It is tied to the number of people who buy your product or service. Initially you will probably not make anything near what you can make as a consultant. This is especially true with uISVs where revenue can sit at 0 for quite a while. But long term, you can make substantially more if you are successful.

There is risk that your business will fail and you will earn nothing for your valuable time. That is the risk/reward of being a business owner. This is a sample graph and is the ideal situation. Here is some real world data compiled by Neil Davidson last year that doesn't paint a really happy picture. But I think there is a small percentage of owners who see this type of scenario come true. And there is still a lot of space above the consulting line where many uISV's would be happy to find themselves.

And it isn't really an either/or model. I'm doing both at the same time. This pushes out the time frame on the success of the uISV, but it reduces the risk.

-- Side Note -- The graph was created using Google's Chart API. Its pretty cool to use. The graph took way longer to create than it would have in excel, but there was a learning curve involved.

Moving to Google Apps

I've been a user of GMail since the very beginning. I've been using Google Reader for a while now. I've always liked the google products for my personal needs. A recent post on BoS about using Google Apps for Email got me to look into using Google Apps for my uISV. I have 3 domains set up so I did a test with my least used domain. I configured the email correctly and everything worked like a charm. I had to do a little searching on how to update my MX records, but it was easy once I found how to do it. After using it for a little bit, I bit the bullet and switched over everything.

I'd like to say it went without a snag, but that is not the case. In Web Work Schedules, there are several places where email notifications are sent out, like when a schedule changes, or when a user sends feedback to me. Luckily I tested this after making the changes and found out that it was broken. It looked like a 5 minute fix to update the SMTP host, username, password, etc.

Things always take longer than anticipated. I was missing a setting in java mail for STARTTLS property that was a problem. Add that and retest. Oops. I was creating the mail session to soon, fix that retest. Everything should be working. Its working locally, so push it to the server. Damn, its not working. I'm checking the configuration files that I modified. I love typos, how about you. I was missing one little 's' in the username and for some reason, the authentication was failing :) So after 1 1/2 hours everything was back up and running.

One cool thing is that now that I'm splitting time between my desktop and my laptop, I'm using google docs more and I'm finding it pretty useful. The files I need are always available. I'm not 100% sold on everything, but so far I'm liking the experience.

Continued Bootstrapping

When I started blogging, I wrote a post about my bootstrapping efforts. At that time I was just about to start a new contract with my old company. That was a very successful contract (for both parties involved) that just wrapped up. Now I find myself deciding what I want to do now.

Since neither of my uISV efforts has launched into orbit yet, I still need some side work to pay the bills (and a few perks as well.) I had lunch with a former boss to talk about some work possibilities. There are two things to take away from that statement 1) Never burn your bridges, you never know when you might want to go back, 2) Maintain and grow your network. Don't lose contacts and constantly be on the look out to expand your network.

During the conversation, I said that I'm not interested in full time work. His questions is how is it possible that I don't need full time work? Here is my secret. I don't have a lot of vices, expensive hobbies or lots of new things. I'm driving a crappy old car (waiting to get a used Toyota Tacoma.) Its not a requirement to replace the car yet. I don't smoke or visit Starbucks at all (let alone every day.) I enjoy a nice beer or glass of wine, but I do that at home for a fraction of the cost of drinking at a bar. We never eat out. I can probably count on my hands the total number of times we ate out all of last year. And those times were when friends were in town. I've always been fairly frugal (cheap according to some of my friends.) And not having a paying job for 8 months while working at a start up really makes you focus on what you need vs. what you want.

I still will spend several hundred dollars at our Costco shopping trips ( I can't wait until both kids are out of diapers!) We don't skimp on food. There are a ton of things we could buy to fill up our house. When I was at the start up, there was a number of things that we wanted, but put off until there was steady paychecks coming in. Now that I have a somewhat steady income, we are making a few purchases, but I can't say that we missed out on anything in the mean time.

I think bootstrapping your business is a lot like living below your means. Its a simple concept that a lot of people have trouble with. If you can do that in your personal life, you can do that with your business.

I have another week to decide between a few different contract offers. I aware that this is a great position to be in and I've got a post about selling yourself that will go into more details about why I am able to be in this position. Stay tuned.

Balancing Act

Its nice to be wanted. I have another potential contract that I'm considering doing. The big issue is that some of the work will have to be done on site. I've got really use to my 10 foot commute. The commute and time commitment is making me really think if I want to take the work or not.

I read T.J.'s post about Making a Goal to Quit the Day Job. It made me reconsider how much time I've been putting into the consulting vs the uISV. Deadlines and paychecks have forced me to do more consulting and less uISV. Even so I feel that given the holidays and the deadlines, my recent progress has been good. But I think I need to find a more even balance between the two.

And then there is the TV. Normally I only watch 1-2 hours a week with my wife, but NFL playoffs have bumped that number up a bit. But that will not go on to much longer and you can watch a game pretty quickly with Tivo.

And its almost spring in San Diego, the recent rains have the weeds growing like crazy and I promised the wife that I'd have the lawn in 4 months ago.

And then there are my two kids that I want to spend as much time with as I can before they grow up. I can't believe my son will be two next month. Where did the time go?

And then there this blog :)

I know most of you probably have just as much if not more going on in your lives. So how do you keep it all balanced?

January Update

I've been a little quite on this blog. Part of it was the holidays and not having time and the second is a deadline with my consulting contract. I've actually have two seperate projects with the same company. The first phase of the first project is wrapped up and I'm waiting for the second phase to start. The second project wraps up next week. I should have some down time before the tasking picks back up. I hope to use this time make a lot of progress on my uISV.

I feel pretty good in that I set 3 goals to accomplish over the last month and I've done with 2 of them. The first was adding a "Demo Account" functionality to WWS. Potential users can now give Web Work Schedules a test drive for creating online employee schedules. This creates a fictional business with empoyees, messages, time off requets, etc. This allows them to get a feel for the application and see how it works. I've seen pretty good traffic (for me) in the demo account.

The second thing that I accomplished was an experiment with outsourcing some content creation for the website. I consider this experiment a huge success. I had 10 articles written at a great rate and the content is better than I expected. If you are in need of website content / articles, drop me an email and I'll send you the contact info. Once she has her website up, I'll add a link to it. I'll be publishing the articles over the next month on the site.

The one thing I have not accomplished, but I still have a few more days left to do it, is old fashion sales. I wanted to go out and talk to some local business and see if I can get at least one to sign up. I have not done this. Two main reasons:

1) I just ordered my laptop and I'm waiting for it to show up. I want this to be able to do a demo on the spot.
2) I'm not sure the application is ready yet. I need to get over this and just go out and do it. If it is not ready, the way I will find out is by talking to customers not by waiting for them to contact me.

So that's where things are. Things are looking positive so far in January and I hope that it will be a great year.

uISV Class '07 January Grades

Well its a new year and a new month. Here's last months results for a reference point. I noticed that WebSiteGrader has gone through a major overhaul. I'll need to dig into it to see what the changes are, but that's another post. Here is how we are all doing:

Site	Score	Page Rank
chatspring.com (was steplively.com)	45	0
www.thinklife.co.uk/	64	3
joelmarcey.com	78	4
www.smallfarmcentral.com/	81	4
www.sportavista.com/	N/A	N/A
www.sendalong.com/	33	0
catchthebest.com	87	5
www.heliumfoot.com/	72	0
http://www.blogger.com/www.lokad.com/	98	4
twistedwave.com	79	5
www.omnicustomersupport.com/	59	0
www.webworkschedules.com/	38	0
www.sixproducts.com/	47	0

Wow. Great improvements across the board. I'm not sure if the underlying scoring algorithm change along with the UI to WebSiteGrader. Its hard to tell. I did not see any discussion on their blog. If anyone knows the details, please let me know.

Lokad is nearing perfection with a slight improvement to 98! But I think the bigger news is Keith Alperin of Helium Foot moving up 33 points to a 72 and Joel Marcy moving up 30 points to 78. Huge improvements. Congratulations to both of you. If either of you (or anyone else on the list) made any changes in the last month that helped improved your score, please let the rest of us know so we can try to do the same. The average improvement was 16.5 points so we are doing some things right. The other possibility is that more people with bad sites are using WebSiteGrader which is making us look better by comparison.

All and all I think we are off to a good start in 2008. I'll run the scores again next month.