IT pros and developers often dream about starting an independent business.
They're either motivated to earn some extra money on the side to make up for weak salaries in their part of the world. Or they want to free themselves from the shackles of employee life by starting a business of their own.
Both are admirable goals, but achieving them isn't as simple as it might look. Let's break down some of the problems that people run into.
Making Time to Add More to Your Life
In my post on Achieving Work/Life Balance in 168 Hours I broke down a typical week for me. A week is 168 hours, and after accounting for how I spend my week, there's usually 8 hours of time to do whatever I want to do. Sleep, work, exercise, family time, and more are all accounted for. So that 8 hours is free for me to choose to watch a movie, play video games, pick up a new hobby, write a book… anything I want.
If I wanted to start a new business, or go independent from my employer, that 8 hours is available to me. But 8 hours is not a lot of time to conceive, develop, market, sell, and provide a service or product to customers.
You might have more hours, or fewer hours, depending on your life circumstances right now. But either way, the first question you need to ask is – do you have enough time in your week to start your new venture?
If not, what are you willing to cut to make more time?
In my example, outsourcing all laundry and household maintenance frees up 4 more hours. I could shave a few more hours off by doing more batch cooking, or paying someone to prep meals for me. After that, I would need to cut out something I enjoy. That could mean less reading, which is a habit I find both soothing and stimulating. It could mean less exercise, which will impact my health. I could be less available for family time, definitely not ideal. Or I could sleep less, which would also impact on my health and mood.
As you can see, making time for more work means tough choices.
Trading Time for Money
When people think about side gigs, their instinct is to offer a service. An IT pro might offer support services to small businesses who don't have in-house IT people. A developer might do coding jobs on one of the many freelance marketplaces.
The first real money I earned “on the side” of my day job was writing technical blog posts for software companies. It paid okay, and I used that money for things that were important to me. But when I stopped writing, the money stopped coming in.
A few years later I wrote and self-published my own eBook. For 3-4 months of evening and weekend efforts I was able to earn revenue from the eBook for years afterwards. I used to joke that because most of the buyers were in the US, I was literally making money in my sleep. (If that's something that interests you, please read my blog post on writing technical books for more advice.)
Trading time for money doesn't scale. The most you can earn is the value of an hour of your time, multiplied by the number of hours you have available to sell. If you have 8 hours of time each week, and you believe that $40/hr is a fair price for small business IT services, your earning potential is $320/week (pre-tax and other overheads).
That's not an insignificant sum of money. If you can fill your 8 hours every week for an entire year, that's quite a nice side income. The kind of money that can pay for a nice family holiday, a wedding, some extra retirement savings, or any other financial goal that you have. The problem is that it goes away when you aren't working.
Attracting the Wrong Customers
Often people see a market advantage in their ability to undercut the market. A solo IT person will charge less than what a full IT company charges per hour.
But, this usually means attracting the wrong type of customer – cheapskates. The biggest problem with cheapskates is that their expectations far exceed what they're paying. They want champagne service on a beer budget.
You will quickly run up against a cheapskate who wants to pay you little money to be available on short notice and for long periods of time. This type of customer may not fit in with your longer term goals. For example, if you want to take a month off work each year to travel, you don't want cheapskates calling you while you're on a beach sipping cocktails.
You will also often find that cheapskates are willing to accept risks that you're not comfortable with. A classic example, setting up a new server without backups. I ended up firing one customer who kept calling with emergency server problems, but still wouldn't invest in a backup. It was stressful for me, working on their server without a safety net. I told them I didn't want their server to fail someday and ruin my weekend, for lack of a few hundred dollars investment
Conflicts of Interest and Legal Implications
When you work for an employer you're protected by their indemnity insurance. If you make an error on behalf of your employer the liability falls on the employer, not you.
When you work for yourself, the liability falls on you. So you'll need some form of professional idemnity and public liability insurance. Those policies aren't cheap. For someone planning to do odd-jobs on the side for a little bit of money, the cost of insurance can far outweigh the income you earn.
Offering services to customers can create also legal problems with your employer. Many employment contracts contain “moonlighting” and intellectual property clauses. If you're a developer, your employer may have an expectation that code you produce is their IP. Even if you produce it outside of work hours. If you're an IT technician for an MSP, offering services to your own customers may be competing with your employer.
Even if you're legally in the clear in those situations, you can still go broke defending yourself from a claim.
Doing More of The Same
For many side gigs, the obvious thing to do is sell your existing expertise. But if your job is not enjoyable right now, doing more of the same job will lose its appeal.
This is one of the reasons that a lot of developers contribute time to open source and volunteer projects. The work pushes them beyond what they deal with on a day to day basis. In doing so, they learn new skills to further their career, even if the open source work doesn't pay.
The same can apply to any IT professional. If you're a desktop support technician, providing a service to clean viruses for home users is more of the same.
Often the money is not enough to keep you interested. And the work uses up what little energy you have left after your day job. Using the time to learn new things instead may deliver more long term benefits.
Should You Just Not Bother?
Despite all those problems listed above, it's not all bad. I've enjoyed success as an independent consultant. At times I had to suck it up and do things that didn't interest me to get ahead. In the long run, sacrifice and persistence definitely got me results.
So I would never tell you that it's impossible or that you shouldn't try.
But I would caution you to go into it with your eyes open. It's easy to fall into those common traps. Instead of improving your life, you've actually made it worse by giving up sleep, health, and family time for very little in return.
So what can you do to avoid those problems?
Choose a Services Business Model That Scales
Scaling a services business beyond yourself is challenging. It either takes a partnership, outside investment, or significant financial runway of your own.
Even then, there's no guarantee that a well-funded venture won't fail. You still need to grow it to a point where you can afford to hire people to provide services and support products.
Otherwise all you've done is create a horrible job for yourself. Doing 40 hours a week of client work and then all the sales and business development on top of that is a fast road to burnout.
Here's how you can avoid that problem:
- Focus on high end consulting that involves fewer clients but with high margin, specialist work. The kind of work where clients will wait a few weeks for you to become available for their project. This lets you keep a steady pipeline as you move from project to project. Charging at the high end ensures enough profit that you can also survive the gaps between projects. Having profit also means you can hire people to help with supporting tasks (e.g. part-time book keeper and assistant). As a further benefit, pricing high avoids attracting those cheapskates that you don't want. And yes, you can probably stand to charge more.
- Focus on subscription or managed services. These let you build a steady base of revenue. You can hire staff as the business grows, knowing that your future revenue is predictable and consistent. There's a reason the Microsoft's of the world focus so much on recurring/subscription revenue these days.
- Create a product or service that you’re able to sell and support with little overhead required. This gives you a steady flow of revenue while you build other parts of your business. E.g. books, courses/workshops, tools, SaaS products. Some people call this passive income. I prefer to think of it as deferred income.
Your business may combine two or three of those. For example, a security expert who sells a high priced audit and remediation services can also sell tools, training, and workshops.
Each of those will also feed into the others. All of the demand generated for me as a consultant came from my blog and books. I did no advertising or marketing outside of that. The same customer who attended your training might invite you to come onsite and perform an audit. The same customers who try (or buy) your tools may send their new hires to your workshop or online course.
None of those are easy solutions of course. There’s still a lot of work involved in producing the things you can sell. But it’s a lot more strategic in the long run than diving into freelance work.
What About Individuals Who Just Want a Little Side Income?
If a full-blown business is not your aim, that's okay. You can still make some extra money if you approach it the right way.
As I mentioned earlier, doing work on the side of your day job creates conflict and liability issues for a typical employee. You also risk attracting the wrong type of customers. So I still believe it's best to avoid that type of work. That's a decision for you to make though, weighing up the risk vs. reward.
If you want some semi-regular side income, consider safer options such as:
- Writing for online publications that pay contributors.
- Earning affiliate/referral commissions through your own blog. For example, Amazon has an affiliate program you can earn from when recommending products.
- Hosting a podcast that attracts paid sponsorships and advertisers. A podcast is a great way to get access to experts and expand your professional network.
- Create a small product of your own to sell, such as an eBook or online training course. Or promote others work for affiliate commissions.
- If you have expertise in teaching something, you can also apply to be an instructor/author for an online training provider.
Earn More Without Doing More
Although side projects can generate income, they usually need a sustained, ongoing effort. So it may be that a better approach for you is to boost your earning potential.
As I wrote earlier, a typical week for me has 8 hours of free time to do whatever I want. Instead of trading that time for money on an hourly basis, I can invest that time in learning new skills. That in turn opens up new job or business opportunities that pay more.
So instead of being a sysadmin on $40k/yr earning $5k/yr on the side by selling all my free time, with a few months of focussed effort I can learn new skills to get a new job that pays $50k/yr and gain back that free time in the process.
Focus On The Real Benefits for You
I appreciate that people need money for different reasons. Some have bills and debt to pay, some want to save for a little extra fun, and some have a long term vision to start and grow a business.
Whatever your needs are, start by answering these questions:
- How will this benefit me? E.g. more money for a holiday, freedom to choose customers, flexible hours, learning and growth opportunities, expanded network, re-energising.
- How much am I willing to work now, and in the future? I.e. while it may be acceptable to work 50 hour weeks for a few months to get started, creating a situation where you're working long hours forever is not a great outcome.
- How much do I need to earn? This will feed into service offerings, types of clients you target, pricing, and more. It will also help you work out where to draw the line to measure success so you're not chasing “more” all the time.