I’m now in my fifth month of entrepreneurship, and things are going well so far. I’m really happy with some areas, and not too happy with some other areas. Well, life is a learning experience, right?
First, a summary of what I’m happy with, and where I need to improve things:
The good stuff
- I’m happy with the freemium strategy I have pursued with Easy Voice Recorder. You can read more about my strategy at Digipom’s about page.
- I’m starting to interact more with the team at Google, as well as connect with more like-minded souls both online and in the real world, and it’s all been really helpful to date. There are a lot of entrepreneurial souls out there with a lot of passion for what they do. I never used to think of myself as entrepreneurial, but I now firmly believe that everyone is entrepreneurial. We all make entrepreneurial decisions in many aspects of our lives, we just never realize it. I really believe in the maxim of surrounding yourself with souls better than yourself, and recycling and distancing yourself from negative and destructive connections. Promote positive energy, not negative energy!
- I’m also happy with how I’ve managed to evolve the product and manage changes. I’m not the brightest or fastest coder in the room, but I believe that simply doing things with some care and love results in a product 10x better than if you don’t care, regardless of ability. This has really helped me out with managing bugs and features, and keeping quality at a high standard, in spite of the huge fragmented ecosystem that is Android.
The bad stuff
- I’ve made slower progress with the book than I expected, and it’s been a lot tougher than I expected. I’m still glad I started this project, but I need to improve my own abilities as an author — scheduling time, writing, overcoming writer’s block, etc…. The team I’ve been working with is great, and the back and forth dialogue between us has really helped me out a lot.
- I still have an issue with time management. I’m getting better at this, too, and I find taking notes and setting tasks for the day really helps out. I still think I can improve a lot more, especially with keeping a consistent schedule — I’ve been really horrible with this since coming back from Hawaii, as I haven’t recovered from the jet lag and I’ve had an awful schedule. I’ve also dropped the ball on a couple of side projects, and need to look at what I can do there.
- I really wanted to have at least two apps in beta and on the market by now. I spent a significant amount of time working on an app for somebody else, with potential ad revenue as the only compensation. That person has been M.I.A. and it now looks like I may have to throw that effort away. Lesson learned: when it comes to business, unless it only takes a couple of hours, there’s no “being nice” or selling oneself short. Time is precious, and promises sometimes just don’t mean all that much.
Now that you have my summary, let’s take a look at the first three months — February, March, and April. I’ll report on May, June, and July once we’re in early September.
MY OWN REVENUE — FIRST THREE MONTHS
What does the chart mean?
First, you can see my gross revenue, relative to my monthly nut. The red line is my monthly nut averaged out over a year, which includes but is not limited to housing, transportation, and food. My monthly nut does not include the effect of taxes. First, I don’t know for sure what the net impact of taxes will be since it depends on my actual level of income, and because the taxation situation is different between working for another company and working for oneself. Also, if I were to only make my monthly nut, I’m not so sure that I would pay any net tax. In order to compare apples to apples, I want to take a look at things at the gross level, before taxes are applied.
The first three months have been tough
The first couple of months were not that easy. Here are the main trends that I encountered during the first three months of operation:
- Website revenue took a big hit, as you can see in the decline from February to April.
- App revenue started to rise in April, arresting the decline. If not for that, I would have likely touched close to zero.
- I fell below my monthly nut in March and April, resulting in a draw-down on my reserves. This is one reason why it’s important to have reserves stored up before you make this type of a jump.
It looks pretty bad, and if I believed it would continue this way, it would probably have been time to start looking. On the other hand, I just started. Which business is an instant success right off the bat? Isn’t that asking for a little bit much?
KEEPING MY HEAD ABOVE WATER
Storing up more nuts
I believe that if anyone working on their own makes at least the monthly nut or more, they can sustain themselves for quite a period of time. Sure, you wouldn’t be building any savings, and unexpected and additional expenses would still result in a draw-down of capital. To be safer, it’s better to make at least double the monthly nut. Then there’s extra room to save as well as cover those unexpected expenses.
Tax punishes less at lower incomes
Taxes are significantly higher in Canada than they are in the US, salaries are lower, and I live in what is probably the highest-taxed Canadian province. Even with all of these taxes, however, I wouldn’t be paying too much if I only made double the monthly nut. My old gross salary was a typical middle-class Canadian salary, meaning in the mid five figures and not close to the six figure range, where taxes can really start to get punitive. Half of this income would be a pretty small income by national standards, meaning my tax burden would not be too bad and I could almost be comfortable at that level.
If you work twice as hard to gain 50% more net revenue, at some point you have to question whether the extra revenue is worth the increased effort.
Is survival enough?
However, is that really my long-term goal? To simply survive and perhaps be a bit comfortable? Not really. I believe there are three milestones on the path to financial success as an independent worker:
- First, I want to at least match my monthly nut, so I’m not at risk of depleting my saved capital.
- Then, I want to match my old gross income at my day job. This is an important milestone to reach, because it validates my choice, and because I think it would be so awesome to reach that point through doing what I love.
- After that, the sky is the limit. If I can go further without sacrificing other important areas in my life, then why not?
I believe that anyone branching out into working on their own should treat it as an integral part of their career, just like any job. That way, they would have the following options:
- If things don’t work out, you still have a great experience to take with you to your next interview.
- If things do work out, you can apply for the positions you really want, from a position of strength.
- If things really work out, then enjoy it!
I want to reach or surpass the second milestone by the end of January next year. Otherwise, time to go back into the workforce.
How do you define your milestones?
Are you an independent worker? If so, what are your most important milestones and goals? Would you be satisfied making half of your old day job income? Three-quarters? If so, why, and if not, why not? I guess it depends on each person. If you were making $50,000 before leaving your job, that money isn’t exactly a big enticement to staying in an office under fluorescent lighting, working on crap you don’t care about. Since the amount is lower, it’s also easier to make it up with your own side projects.
If you were making $250,000 before leaving your job, maybe making 1/4 of you day job income is enough. On the other hand, that’s a pretty big opportunity cost to give up — you could keep working for a few more years and have even more financial freedom down the road.
I’d love to hear your thoughts.