Friday, July 14, 2006

Don't Quit Your Day Job.

So often this question comes up on the BusinessOfSoftware discussion boards. "Should I quit my day job? I have X great product, but I'm having trouble getting it out because I work X amount of hours a week. I'm pretty sure if I can devote my full day to it, i'll get it to launch soon."

Well... first lets go over the advantages of a mISV over a traditional business.

1) Cost to launch business extremely low. Varies from $5-2000 depending on how incorporated, insured, server setup you decide to go etc...

2) No physical presence necessary

3) No physical marketing necessary

4) No salarys to pay

5) Risk extremely low, if you make $10 or $10,000 you still have your day job. Growth can occur slowly.

All of those basically relate to number one. Now if you quit your job, how does this change the MicroISV equation?

1) The cost to launch is now the money you make from your mISV minus the amount of money you would have made at your job. So even if your mISV is a huge sucess, if it takes 3 months to develop, and you make $80k a year, you've lost $30k in salary to start your business. Just to get dollar one. You may also need to eat into savings to pay the bills, add that to the startup costs.

2 and 3 don't really change

4) You now need to pay your OWN salary before you pocket a single dime. Even if your signficant other/parents support you, you're still $80k in the hole from where you started.

5) Risk is now extremely high. 90%+ of businesses fail. Your idea for a Web based stop watch may not look like such a good business plan when your out of savings. You are now in a sink or swim situation, if your business isn't profitable in say 3 months, you may have to shut down. What if month 4 was where your business would have taken off? I can tell you that the 10% that do succeed usually don't do it by their 3rd month.

I also think the idea of being able to get more work done by quitting is largely a myth. If you don't have the dedication to put in an extra 40 hours a week for your mISV while your working a job, it's unlikely you'll be able to be more productive with the stress of the above added to the mix.

To me, the idea of a mISV has always been about low risk, low investment, with either the additional pocket change or the ability to work for yourself being the end goal. By quitting, you're no different then a traditional business. Given the above scenario, it could take basically $50k to make your first dollar. If you invested that in stocks, you have a much higher probability of making a profit then with your business. You could take a $50k loan to startup a traditional retail business and probably still have better odds of making a few bucks or breaking even.

Cut back in hours, take a vacation, find a job that requires less of you. But don't quit your job until your mISV can survive without it.


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