From Side Hustle to Success

Welcome to Building Better Developers, the Developer podcast, where we work on getting better step by step professionally and personally. Let's get started. Hello and welcome back. Thank you for coming back to the Developer Building Better Developers podcast. I'm Rob. The other guy that you're going to soon hear is Michael. We are talking deep into season 21. Hundreds, literally hundreds of episodes and Apple only keeps up with the last 300. We're like rapidly approaching three times that amount. Definitely past two already. This season we're focusing on business problems and just sort of talking about a problem of the week. Some of the things that we would normally see in a mentor or a mastermind kind of group. And this episode, we're continuing last episode, we talked about starting up a business and the costs and things like that. A little bit of bootstrapping. And this episode, we're going to tweak that a little bit. We're going to have a little bit more and focus on the basically breaking even. How do you go from, and it's really a two step process. How do you go from I'm running a side hustle and it is just an expensive hobby and to like I'm breaking even. So now I'm doing this thing, but it's paying for itself. And then the next step, obviously at some point you want to get a little bit of money out of that. But then the next step is when this generates enough money that it's like time for me to quit my day job and go work on the side hustle. So that's what we want to talk about this episode first. I'm going to throw it over to Michael and say hi and see what your thoughts are on this as we start into it. Hey everyone, I'm Michael Blasch, Vision QA and co-founder, developer. Yeah, so it's kind of funny. We talk about this all the time. We talk about bootstrapping businesses. We talk about doing side hustles and there's always that point when where, when do I say that my side hustles no longer a hobby? You know, I started this to make a couple bucks on the side, maybe buy a PlayStation or buy that new fancy phone. But now it's like, oh, it's actually making money. You know, at first it's costing me money, but now it's like, hey, I can buy things now. I'm making a small profit or breaking even. And there's, then you want to start looking at that next step. You know, well, can this supplement my day job or should it? You know, it all depends on your lifestyle choices and what you're comfortable living with monetarily wise. What I'd like us to kind of touch on this time is the breakeven point. So when we talk about breaking even, we have to consider those additional costs, right? Before we're looking at, OK, well, if you're a service based business, your time is your cost, right? So you need to make sure that you justify or have a justifiable cost to get paid for your work. You want to make sure that you're charging what you're worth so that you can make a living. However, if you're selling a product, you need to make sure that you're selling the product for enough to supplement the cost of either buying the product, making the product, shipping the product. So you have to figure out what all your hidden costs are there in order for you to break even. Yeah, and this goes back to something you mentioned earlier is the idea of making sure that you've got proper accounting of what you're what you're spending on this. I include and we sort of touched on this a little bit as hours I have for since I started, since I was side hustling and I wasn't even doing any business stuff. I was just sidling, hustling and had like my, you know, I had a day job and all that kind of stuff, and I wasn't even generating money out of my side hustle. I still had a little log, it's self spreadsheet or actually at that point, I remember it was a some spreadsheet and I would just put hours like did I, you know, I'd put an hour here if I put two hours there or whatever it is. And I had sort of a goal of spending, you know, 10 to 15 hours a week on basically it was side hustle and career development stuff worked out great. Over the years, and I would track that stuff and it that turns out pretty sizable. That's like you start doing that. That's easily going to be 500, 600, 700 hours a year. And that stuff starts to add up. You do that four years. That's a 2000, you know, that's 2000 plus hours. That's a full year of something. That's a full year of experience in that thing that you're doing. Now, a lot of what I did was to sort of augment and accentuate my day job. So if there was something I was needing to learn for my day job, that was what I was doing. I was going deeper into it in my side hustle stuff. But as you get further into that, especially when you say now, what is my, am I breaking even? What am I making versus what am I spending? You have to include the obvious things. I think for most people are the cost is and people forget to do this, but what does it cost me to generate this? What are my, what is the cost of goods sold? What's the cost of materials? But then the thing that we tend to miss is I'm put into this and even stress. It's like, what is it? How is this stressing me causing me issues that even though I'm not working on it, I'm thinking about it. And this comes from someone that was thinking about stuff all the time. And so there, you know, you, you have to, you don't have to, but you probably should, if you want to stay sane, be able to draw lines between your life and your business or your side hustle kind of stuff. And this is where you really do need to, I think, keep track. And there's a lot of tools out there, whether it's, you know, if you're a bill by the hour in some way at work, they probably already have stuff like that, like harvest and some of those kinds of time tracking tools, or just do it yourself or just like checking a watch and just making sure that you're getting into the habit of doing that. I think is very big. So this first part is, let's I'll toss it back to you on that thought of time put in. And then the nice thing is that is to figure out what your hourly rate is and just multiply that out. It's like, you need to generate that amount of money. Your thoughts. Yeah. So it's interesting. You were saying about, you know, the stress and the time, you know, that you put into it and the stress that can come out of it. Because if you're doing this full time, then your side hustle, your business is your business. You're just working on that. But if you have a full time job, be it hourly or salary, you're working probably 40 to 60 hours a week on a day job. And then now if you're trying to tack on a side hustle, you're taking another 10, 20 hours or more to try and get something else going. The problem you run into is, or at least I run into this a lot and I think you have too, Rob, but I don't sleep much, which is kind of a blessing and a curse where I look for things to fill my time. And typically it's looking for side hustles or learning new things in technology because I'm a huge geek when it comes to technology. You know, I don't mind picking up my Raspberry Pi and trying to put together some new project with it or figure out how to code. The thing is, if you are doing something that requires a lot of intellectual thinking or very deep thinking at your day job, if your side hustle is very similar to your day job, you potentially could burn out twice as fast. Because not only are you working 40 to 60 hours a week for someone else doing this thing, now you're doing an additional 10 to 20 hours. You are, you could essentially be compounding the problem. So if you don't make sure you take breaks, schedule times, or try to do things slightly on an off-kilter schedule, you're going to burn out and you may never get your side hustle off the ground. You may walk away from it completely. So you have to be careful of that. The other thing is time. I'm bad about this. I think we all are at some point. We get really good and strict at using tools to help us keep track of what we're doing. But then you could very easily sit down and you start watching a TV show on Netflix. Next thing you know, it's eight hours later. You've watched the entire binge, watched the entire season. You could do the same thing with work. You could sit down, get very interested in something you're working on. Next thing you know, you're eight to 10 hours into this, but you only build for four hours. So you have to be careful and more mindful with your personal work and even your professional work if you're working for a corporation. What are you putting time to? What is your task? What are your tasks costing you time-wise? And then that kind of leads to your billing and your hourly rate. If you really don't know what you're putting in, if you're not keeping good records of that, then you could be charging $100 an hour but getting paid $5 an hour. You just have to be very mindful of and keep track of how you're doing. And that's where I think it's very helpful if you're doing a side hustle to have like business hours for your side hustle. For many years, that was one of the things I did. I was able to track my hours so well because I would work from like nine to midnight or 10 to two or something like that. I had like certain days, certain nights, I had certain schedules that was like, this is my side hustle time. And I've talked about that over the years where it would be things like, hey, I would work from eight in the morning until noon on Saturdays. And that was just like a nice chunk to be able to do that. Now, that allows you to get into that habit of tracking the hours and then figure out what does that cost? What am I spending? As like, you know, what do I need to make technically to be able to pay myself for those hours? And you may think of it and it's really difficult because you're like, it's just for fun. This is a side hustle. It's just a hobby. Well, that's all well and good. But when that hobby suddenly is your full day job, now you've got a couple of things that complicate that. One is now what's your hobby going to be? Are you going to just blow that out and now you're going to add 40 hours a week to that? Or are you going to have like, is this going to allow you to change to a different hobby? You know, the bad answer to that is probably you're going to take all of that time up together. If you run a business, it takes more time than being an employee. I have literally talked to people and discussed amongst family and stuff like that. Having a job and treating it. It's like to me, it would be retirement because it goes from or partial retirement because it goes from something that can consume your life completely where you're easily spending 60, 70 hours a week on it to somewhere you're like, I'm going to spend 40. I'm going to do my 40 hours of work and whatever my commute time is, especially these days with remote work. I do 40 hours of work a week and I'm done. And you don't think about, I think most people don't realize that if you do eight hours of work, you really probably only got at best five or six hours of like productive work in there. And that's something that when you start billing and doing things like that, you're going to you're probably going to be more sensitive to. One other part of that is taking that 15 hours a week, let's say that you're doing on your side hustle on your hobby. Does it actually grow? Can you grow that to 40 hours a week? Is that something that, because it may be that you can go bill exactly what you need 15 to 20 hours a week and it's awesome and you're always busy. But if you now suddenly have 40 to 50 hours a week that you're spending on that, are you going to just like burn through that really quick? Is there not that much work out there? So there's some things like that that are definitely bigger issues you want to take into account. So I kind of want to touch on the first part of that. When you're talking about, you know, looking at your rate, what you're charging versus what you're making to determine if you can, you know, sustain yourself. One of the biggest problems I would say in software, in technology, right, is you have a boss or you have an idea and you sit down and you throw out a proof of concept. Next thing you know, your proof of concept has been sold. It's now in production and you have this duct tape, rubber band concoction that is now going to cost you so much time to maintain or you start out billing at such a low rate. You have a hard time kicking that cost up because you basically have set yourself at a billing rate that's not sustainable. That's true as well as you have to. You have to. That's where you never want to undervalue, particularly if you're doing services and even your products the same way. You don't want to create a product in your side hustle or provide a service that you're doing at a cut rate. If you're doing it as a loss leader or something, so you're building stuff out, that's one thing. But you have to at some point be able to turn that nozzle up and say, okay, now I'm charging my real rate, the rate I'm expecting out of that and see if that's sustainable and then see if that's actually extendable because you're really growing your business at that point. You're really going from side hustle to a full time. You're essentially growing your business. Now, the nice thing about a side hustle is you can use that side hustle for a while to reduce the risk of jumping out of your, leaving your job. You can be generating revenue that you can put this again goes into like put it in your business coffers so that if you're going to pay yourself a salary and one thing I recommend is go to if you're going to pay yourself a salary is go figure out what that salary costs. You can go to like quick and quick books and stuff like that. There's some things you can do that says basically if I pay X amount, this is what I'm going to earn. This is my annual salary. This is what it's going to cost. This is what my take home pay is going to be. This is what I need to hold aside for taxes and all that kind of good stuff. So you can figure out what is it that you need to earn. And for me, that's really what is it comes down to. Can I, what is my target per week, per month that I need to bring in in revenue in order to sustain my, you know, the life that I'm accustomed to or that I want to be accustomed to. What does that, what does that require in me, you know, in customers and billable hours and products sold, whatever that happens to be. And now it's just a math problem. It's basically say, can I do that? And the nice thing with being the side hustle is if I need to be able to ramp up for a while, I can sit there and I can start putting some money into the business so that I can jump and know that I at least have, you know, a month or three months or six months of a runway that I have the bills paid so that I'm going to be able to actually do this right. And this has been discussed many times over the years. You don't want to get in a situation where you're just, you're so hungry, you'll take anything and they end up. So like you said, as you like, you undersell yourself, you undervalue yourself, you're taking this stuff just to pay a quick couple of quick bills. And the next thing you know, you're basically committed into something that you really can't or don't want to afford to be a part of. Exactly. The other thing with that, we haven't really touched on this too much, and this might be another conversation we can carry into, but with billing or setting hourly rates and selling your services and our products are a little bit easier to calculate because, you know, okay, I have a set salary. Here's how much my products are. Here's how many products I must sell to maintain this income. Right. When it comes to services, we're out there constantly having to hustle to get business. We're constantly having to find customers or you find a great big customer and that's great. It'll maintain you for a while. But as you start getting bigger and you start having larger clients, larger projects, do you start building in buffers where if you take on this 10 week project, do you require them to pay you 10% upfront that is non-refundable if they walk away from the project within the first or set up to where, you know, you do 10 hours. Yes. Okay. We're all on the same page. But because you start to set budgetary or monetary, you know, fixed not fixed, but like schedules of money that would be coming in based off of those projects. And then if they suddenly walk away, you're left with nothing. So how do you kind of buffer that in or is that something we should kick to the next one? I think we can cover that sort of quickly in this one. And that's it really, it's an interesting approach and I've seen it done a couple of different ways. I've done it different ways. I usually one, I usually, I have been told many, many times I'm way too, I don't charge enough. I'm way too easy on billing. I'm just way too light on that. So I am probably the wrong person to ask. My mentor is he does stuff upfront and he usually does. And it's not a bad thing is it's like, and it's going to be a bigger project. So, you know, if it's going to be a three to six month project, then what you do, and this is very common is that you're going to do like four to six weeks that you're like, if we're going to start it, I'm going to send you an invoice for the first four to six weeks, whatever that hours is like, you know, for 150 hours, I'm going to send you an invoice for 150 hours. And what I'm going to do is I'm going to start, you know, every week I'm going to say, hey, I burn, you know, 10 hours, 20 hours, 40 hours on this. And we're going to keep that little ticker until we go down to a certain point. And then I'm going to, you know, I'm going to get down to whatever my amount is. Maybe it's like at every, when I get down to 20 hours or less, I'm going to invoice you for the next 150 hours. I have seen it done a lot. And I've even tried in the past to do like half up front and half at the end. But what you want to look at in those situations is like what is making sure that your revenue flow is something that makes sense and that it's it makes sense for your customers. If you, if you've got a two year project and you want to half up front and a half at the end, that means you're going to take a year's worth of that. There's two invoices. And if it's a, let's say it's a, you know, $500,000 project, then you're going to ask, going to pay you $250,000 before you've done anything. And then you're not going to see another dollar until two years from now. It's probably not going to work for them for, for, for their cash flow, nor is it going to work for you for your cash flow. So a lot of times I'm going to look at that first, I think like, yeah, it's like, it's not bad to say, Hey, I need 5% or 10% off or upfront basically to cover maybe like your first week or two, or maybe your first month, depending on how you do it, particularly if you're going to hire somebody or you're going to, you're getting other people to commit. There's money that you have to put out or something like that. Then you're going to want a little bit more upfront and you say, Hey, I've got bills to pay. I've got people that I've got payroll to make. I have to have the cash. I can't risk a delay from you guys, or sometimes you just not get paid. I've had a couple of times I've gotten burned. And usually that's when I, I'm a little harder, you know, moving forward on that, where you like, you step into something and maybe you get paid for the first, you know, first invoice, but now you get, you know, an invoice that's missed and another one's late. And the next one's late. And the next thing you know, you're a lot of money into this that they owe you and they may walk away. I've had stuff where they've come back and they know now that they have leverage. So it may be that they, you know, it could be a, you know, just pick a number. It could be a thousand dollar project and they paid you 50 bucks, but now they owe you 800 more of work you've done. They have leverage there to say, Hey, well, we'll pay you this, but, you know, we're thinking we need a little bit of a discount or something like that. And, you know, those are the kinds of things you have to, again, you have to be more wary of. If you're running your own business that you probably aren't going to have as you're not going to see those issues as much as an employee. And so you have to understand that there's going to be, there's going to be losses. There's going to be like a customer is going to back out. Customers going to want money back, you know, things like that. There's going to be things you're going to have to deal with that. If it's your bread and butter, if that's how you're paying the bills, then it becomes obviously a lot more serious kind of issue for to have those kinds of things hit you. Well, would it be interesting? So this is kind of something I've been bouncing around a little bit. And this goes back to, I think it was something in the four hour work week about dealing with offshore. I think it was your man in India, like kind of outsourcing your life kind of thing where the first guy, yeah, at like five dollars an hour, he ran up a $200 bill for something that should have taken an hour. Whereas he went with someone else at like $20 an hour. He was built $40, but got it done quickly, you know, in two hours. It's one of those where, especially when you take on customers, do you, I almost want to tack on like 10% upfront, like you pay 10% non-refundable front at the start of the project. And that covers like the first 10 hours or something small first and foremost to get them to commit, actually put money, hey, I want to do this, but that is also non-refundable, but it's applied to the bill at 10 hours. So, okay, we will deduct this from your bill if you stick with us. But if you drop at that 10 hour or even before that 10 hours, I keep that money. Like basically that is non-refundable, but it's one of those words like, do you kind of, I don't want to say carrot and cake kind of thing, but it's one of those words. I kind of want to get customer buy-in that they are going to commit to this for at least the initial part. And then if they like the services, cool, if they don't think and walk away or vice versa, you know, if they walk away right at the beginning, it's like, well, we decide we didn't want to do this. Well, you just wasted my time because I'm not going to get paid for that. But if you paid upfront, then I'm not out. You know what I mean? It just, it's kind of one of those things I'm struggling with and wondering what your thoughts are on that. That is really a, it is really a challenge when you are, if you're particularly, if you're in a service based kind of thing, and particularly some sort of consulting or something like that, because what you end up with is that you'll, and I've had this, I've had situations where you have a customer just keeps coming back and it's like an hour here and an hour there and an hour here. And I want to talk about this. I want to talk about it. And they're, they're doing it as part of their, maybe their RFP process kind of thing or something like that, where they're trying to just like figure out if they want to work with you. There's a certain point where I'll say to them, and it's, I think it's totally valid to say, hey, look, like it is, you know, as they say, fish or cut bait kind of time. It's like, look, we've spent, you know, our company, myself, however it is, I've invested X amount of hours into this. It is a point where if we're going to go forward, I need you to step in as well. I need like, I need to invoice you for these hours or we need to something. And I, and it's something you don't want to get into, like where you're saying, because sometimes if I know a customer and I trust them and things like that, it's just like those hours will just get, you know, they get swept into whatever gets billed sometime down the road. It's just like, yeah, we'll take care of that. We'll like, you get, you're covered for that time. But if it's something that's brand new, the last thing you want to do is go deep into, you know, designing and doing all this stuff for somebody. And then they walk away early, early on when the lessons learned is I had a, I was like wanted this project. It was really cool. It was really big. And this guy just kept coming back and it was like, you know, you're, you're the short list and you're shorter list. And can you just do this? Can just do that. By the time it was done, I had a, I don't know, a 50 to 75 page detailed design document that had been built for this guy. It was like, this is what we're going to do. This is what it's going to take all of that. It was a full plan. And, you know, I don't know, but I have a feeling he just had me just for free design his entire solution for him. Cause then he was, he got the, he was like, oh, I'm going with the other guys. And that was it. It was like, you've got to like, you have to figure out where that is. And some people are going to ask for more than you want to give them. Honestly, in that case, like that's where you probably should know upfront. What are you willing to give or what are you willing to risk? And this goes with like invoicing. I have a, I have my numbers that I'm willing in my head. It's like, if I have more than X amount of unpaid invoices, then I'm not going to spend much time on them. I'm going to say, Hey, you need to pay. And usually it's a percentage or based on what they're doing. You know, if they're only, if, if they're just like a really small little thing, which is what you run into a side hustle a lot of times, if it's not really bothering me, I can take more risks. So I'm going to have more, more money on the table, potentially. If I'm having to pay bills, then suddenly that, you know, that comes down, but you also need to make sure that you're, you are pushing that and saying, Hey, we've got, you know, there's unpaid invoices. There's so don't let it get close to your limit where you're suddenly at a point. Like I have had that before. I said, look, this is, this has gone on too long. I can't afford to do, I literally cannot afford to work with you guys because I'm not getting paid for it. The billable stuff, the stuff that's sitting out there in my receivables basically is huge. If I can get paid that then we're back on track. And I ended up, you know, basically walking away that customer. I did finally get paid, but it was some of those things that by then it was, you know, I had just like, I was like, I have to go find something else. I cannot keep doing that. I was like, you know, I was basically loaning the money into me, not being able to pay all my bills. So that's something you want to watch out for, for sure. Yeah. So that's like you were talking about the RFP process. So what I've kind of constructed in the current business model is I'm offering a free 30 minute consultation to do like a high level introductory QA assessment of what the company has. From there, I'll spend an additional 30 minutes, take that detail, and then I will produce a report for them on, you know, kind of where they're at, where they need to go. That's almost a sales sheet, but just kind of like, here is a high level stamp of your current software QA process. And then if they buy into that, what my thought was that, okay, so I'm going to then bill you if you want to do the full QA assessment, I'll bill you upfront for the first 10 hours, which if it's a small project, you know, I think I'm looking at about 5,000 for the assessment. So you figure, you know, about 10 hours of that. So it's going to be about a grand. And if they pay the check for the grand, then, okay, we're off and running. You don't pay the check for the grand. Well, then you're not really committed to doing this process. It's kind of that, ask them to buy and then tell them, well, here, because if you ask them, will you buy it? 90% of people say yes. But if you say, here's the product, buy it. You may get only 40% to actually buy it. So I'm trying to set the expectation a little differently with this and I might be wrong, but it's after doing like the marketing strategies we've done for a couple of different things, that kind of mindset seems to work for me and some of the other technical businesses I've been talking to. They kind of get a little bit in upfront to get the customer to commit. They cash that check. They have that money for that first part and it's applied to the total bill. But if the customer walks away within that timeframe, then no one's at a loss. Yeah. And that's exactly why I do the same thing is to give the customer enough to understand what is being offered to them. And I guess it's a little bit of a different approach. And this is very common is that you get free consulting up front. It's typically a half hour to an hour and it's sort of the same thing. I'll do a half hour, real high level, just talk to them about their problems in their situation so I can give them a couple of... It's basically like you run into somebody at a bar, they talk about stuff and they're like, hey, here's what I'm going through. You're just like, hey, I don't mind solving your problem. And then you're like, okay, I'm going to give you a half hour. And then you're like, hey, I'm going to give you a half hour. You're just like, hey, I don't mind solving your problem. Good example is I've got a lead right now that came back to me and said, hey, I'm just getting started. I don't know if I need an IT assessment. And I said, you know what? Starting your business probably the best time I get that you maybe can't afford it, don't want to put the money into it. So just like, let's spend that time. Let's just have that initial call and then see what comes out of it. Because if nothing else, I get to learn about their business. I have somebody that I have helped them out and maybe they'll tell somebody else or they'll come back to me later, whatever it is. But then if I'm going to go beyond that, if I'm going to actually start putting serious time into something, then yeah, I'm going to say, hey, all right, this is the agreement. This is what you're getting billed. This is what the rate is. However that works, this is the fixed bid, fixed amount, whatever it is. And then a lot of places, I mean, like if you go buy a TV, you don't get the TV, go watch it for six months and get to pay for it. I mean, unless you're charging on credit, but it's the same thing. It's like, hey, you know, if I'm going to commit into this, if I'm going to burn hours on this, then I'm going to expect to get paid for it. Sometimes I'll work with people and say, you know, up front initially, and then I'm later going to come back. And I'll allow you to, you know, pay on 15, every 15 days or 30 days or something like that. The nice thing, this is what's really nice about if you use a lot of these sites from a service point of view, do use Upwork or Guru or some of those, they have all of their own payment, like guarantees and stuff like that. So as part of them taking their cut, one of the things they do is they make sure, or you can make that part of the project. It's like that customer has to have already put money into their, their, you know, that service provider account so that you bill it through the system. And then when that comes through, unless they go in and, you know, like argue it and say, you didn't, you didn't deliver or something like that, then that money gets released to you. But that's where, you know, all of this is stuff you want to consider as you're stepping into your, your own business. I think that's, I want to run sort of wrap this one up because we have gone, you know, we've got a pretty solid episode here and we will come back to these. These are recurring themes. We've talked about pricing. We've talked about these kinds of issues before next episode. We're going to change gears a little bit, but we will be back to this. So for those of you out there listening, shoot us an email info at developerneur.com. If you have any questions, comments, suggestions, things like that, you can always check out the developerneur.com site. You can sign up there. You can get the newsletter and keep up with sort of what the latest stuff is going on. You'd see insane amounts of content. It's like we go back all the time and we, I use, I use our site all the time to just like, how do we do that? And sure enough, we did it at some point and we have a blog article or something about it. So great place to go. Send your friends if they're trying to solve some technical problem. It's not uncommon for us to find stuff that we've already covered because that's what we're doing every day. That being said, we'll, we're going to continue here and we will see you next time around. We are just like cruising right through this season. We're going to continue going for a while. So don't, you know, don't like pause your subscription or anything because we're going to be right back next episode. That being said, go out there and have yourself a great day, a great week, and we will talk to you next time. And remember just a little bit of effort every day ends up adding into great momentum and great success.