CTO Breakfast Report: The No-Employee Business


At this months' CTO Breakfast we had a long discussion about preparing students for careers in software this morning. We debated how much students need to know real tools like Subversion, Eclipse, Ant, and so on versus knowing how to design. I'm not convinced that the two are separable, which was another thread in the discussion. No decisions, naturally, but informative to me and I hope others.

This led to a discussion of off shoring which then led to a longer discussion on switching from a reliance on paychecks to living from multiple revenue streams. Of course, this is nothing new--I remember my grandfather had a book from the 50's about this idea and real estate. What's changed is that there really are places to generate revenue these days without much investment--at least for geeks.

This is a topic I've been thinking about for a while. If you consult, for example, you trade your time for money and the only way to make more money is to make more per hour. That's hard and ultimately limited. If you use your time to generate a revenue stream, the recurring revenue is much more valuable.

There's now a tremendous support structure that you can use with little upfront investment to build online services: Paypal, Web hosting, and domain names all cost little or nothing these days. Google Ad Sense and similar services are another example.

The Technometria podcast I just published on IT Conversations with Doug Kaye and Jeff Barr (listen) discusses how Doug built a sophisticated Web application for transcoding audio for tens of thousands of potential customers with less than $1000 in upfront hardware costs. The power of this is that you essentially do away with the fixed costs and consequently, you're expenses scale with your revenue. Not bad.

One of the problems with this is getting started. A few ideas came out of the discussion. Scott Lemon started a Wi-Fi business in between jobs that is self-sustaining and needs little maintenance that generates income for him every month, even now that he's back working as the CTO at MediaForge. When you get to a lull in your life--whether between jobs or projects at work--build something that will generate revenue rather than catching up on Lost.

Of course, another time-tested method is to leverage the efforts of others. Find a partner or outsource some of the work. Often a partner with more time than you have can help get the job done for a cut of future earnings, which is especially nice. I recommend being generous with the cut.

The important thing is to get started, even if it's just something that generates a few hundred dollars a month. Getting something going will get you off the couch and thinking.

One example: if you've got some expertise and a blog, writing an eBook and marketing it on your blog could generate some revenue--especially if you spend some time marketing it. Attention is the chief problem. The distribution may be virtually free, but you've still got to market.

Compare this to writing a book. If you write a book, 10/10 ($10,000 retainer and 10% royalty) is a pretty standard deal. With a $10,000 retainer on a $40 technical book and 10% royalty, you'll probably never see any money past the retainer. But you've only got to sell 250 eBooks at $40 a pop to make $10,000.

That's not to ignore the value that publishers bring--including editing, but the reality is that the publisher and distribution eat up almost all the money. You're book has to support all of that and you get the left overs.

Here are a few books that came up in discussion related to this idea of no-employee businesses:

At the end, the conversation almost always devolves into rapid fire topics quickly giving way to something else. Today was no different. We ended up talking about electric power generation for some reason. Actually, I remember it was sparked by a discussion of Intel's 80-core prototype chip and a report that data centers use more power than Mississippi and that led to power.