Trading Time for Money

One of the most understandable agreements is that we trade our time for money.  This is the standard that most employees agree to when they take a job.  They are selling their expertise and trading their limited resource of time to the company for a salary.

There are ways to get your time back by de-coupling income from time.  What kind of things allow you to get paid without requiring time?

Products are perhaps the most obvious option.  There are products that can be created or replicated (software) that do not require incremental time to deliver to a customer.  Automated services can help customers without a human’s time involved.  Brokering deals can generate large commissions with very little time effort.

Recently I did some financial analysis of business models to see how they might work out if I decided to pivot my business efforts.  I was trying to understand the costs and risks associated with a consulting business compared to a product business or a hybrid of the two.

The resulting insight made me rethink my priorities and preconceptions.

The value created by a moderately successful business can be astonishing. A business that generates a profit of $5k/month would make $60k/year and might be able to sell for $300-$600k to be acquired.  How long would it take for a lone developer to create such a business? Working 40-60 hours/week could you create something in 3 months? 6 months? 12 months? That has potential for this kind of revenue?  If you figure it would take a year to accomplish would you be willing to use $60K of your savings to bootstrap it?

With the right product idea once launched you’d be able to scale back development work and maintain the business and the steady trickle of income it generates.  Or sell the business for the capital gains.

The consulting business on the other hand may present less risk and a shorter path to profitability, but as a single developer consulting your ability to sell the company would require you to transition to a job to maintain the cash flows.  As a consultant you remain tied to the dollars for time equation and experience has showed me that doing both consulting and products is a difficult balance.