Freedom business case-study 1: My computer business

NetworkCablesIt’s no secret that I make the majority of my income as a freelance embedded firmware engineer. I’ve written at length about how I go about making that pay here.

However, the seeds of the freedom that I now enjoy were mostly sewn a long time before I was experienced enough to do that.

One of the key factors that has helped me to break out of the daily grind is having confidence in my ability to start with nothing and use my skills to generate some income independently.

Today I’m going to talk about the business that helped me to nurture that confidence.

Geek for hire!

Over the years since my late teens, I have run several incarnations of a one-man-band computer services business. Running this business allowed me to learn (the hard way) how to be a small-time entrepreneur.

Although I do very little IT support and training work now (as I enjoy engineering more), my experience running the computer business has taught me a lot about how to provide value to other people in flexible ways. It also introduced me to the freedom that doing so can afford you.

One of the biggest motivating factors that pushed me to write this particular article was to rebut a common objection to my philosophy:

It’s OK for you Andy. You’ve got a well-paid skill that you can sell as a freelancer.

I’m going to illustrate that it’s possible to produce income efficiently without having a traditional ‘professional’ skill like, in my case, engineering.

I believe passionately that, if you’re smart and willing to work hard, there’s probably something you can do which can be nurtured into a tiny, flexible business of some sort. If you can crack that step, gather some resources and live on a modest amount of money, your life is your own!

I’ll start at the beginning (I’m going to use the past tense throughout the rest of the article as I don’t actively promote this business any more).

Andy, could you look at my computer?

Although I’ve always had the entrepreneurial ‘itch’, I pretty much fell into fixing computers.

It was quite straightforward. Things broke. People complained about them. I knew how to fix them… so I did, usually for free.

I became the go to family member for any computer problems. And then the go to work colleague. And then… well, you get the picture.

I also learned at a pretty early age that having a job was distasteful to me and so, realising that there was a demand for my computer skills, I was soon in business, starry-eyed and dreaming of riches.

I had a shitty job as well, but there was definitely part of my psyche which was waking up to the possibility that money didn’t have to come in the form of a monthly salary.

Although I was doing computer work for money before I was 20, I was absolutely awful at running a business.

Peanuts

Looking back at some old accounts, in 2002, I charged my time out at £20 per hour, but discounted that to £10 per hour for friends and family. This sounds silly to me now as a 33 year old professional engineer, but at the time, it seemed like a pretty sweet deal compared to the £7 per hour I was being paid for work as a cashier in a high street bank.

I was shocked that anybody would pay me (what I considered to be) so much for my time and my ability to perform what I perceived as very basic work. Something felt unjust about the fact that I could charge a proper, 45 year old grown up more than the hourly rate he earned at his job to do things which I found trivially easy.

This was probably one of the most influential factors which stopped me from raising my rates in the early days.

Headaches

I wasn’t particularly discerning about my clients either. In fact I did work for anybody who asked me to.

It seemed intuitive at the time that I should make hay while the sun was shining. I always grabbed the work whenever an opportunity presented itself.

Over the course of the next few years, I began to learn the errors of my ways:

  • I’d always just agreed to do any work, no matter how tenuously related to my core skills
  • I took on some pain-in-the-arse, extremely cost-sensitive clients
  • I didn’t value my own time (yet I expected my customers to do so)

In a nutshell, I hadn’t yet designed a suitable client filtering procedure.

At the end of the day, I didn’t want just any work. I wanted to do work which was enjoyable, serving clients who were nice (and valued me) and I wanted a good monetary return on my effort.

Eventually the penny dropped. The best way to get what I wanted was to use the amount that I charged as a filter. I reasoned that if I targeted the appropriate potential clients (and raised my rates by enough), the time wasters would stop wasting my time and the ‘quality’ of my clients would increase.

It worked. By the time I decided to start winding the business down (around the time my first child was born), the reward:effort ratio was very high.

Tiny businesses and comfortably-off people

In the end, I attempted to limit my clientele to two broad classes of customer:

  • People who relied on their computers to make a living. For these people, it made sense to pay somebody handsomely to make problems go away when they occurred. A typical customer in this class would be somebody with a very small (often 1 person) business run from a home office or similar.
  • People with a very low level of IT skill and plenty of spare money available for discretionary expenses. Typical customers in this class had a desire to make their computers do what they wanted them to (or learn how to use them),  would tend to be older (55+) and well-educated. I served lots of retired professionals and business people.

Of course, not everybody fit neatly into one of these two categories. However, the classes above described my ideal target clients.

After many years of honing, I eventually had a client list full of people who (a) I liked and, importantly, (b) could afford to pay my rate of £40 per hour (incidentally, a really low hourly rate in the IT industry). With no further advertising, the business would generate around 25 billable hours per month of work (which I fitted in around my engineering day job). This was mostly repeat business but also included referrals from existing customer.

The business produced something like £1000 per month in profit for what usually amounted to one evening and one weekend morning per week of work. It took a lot of sweat (and unpaid time!) to build my tiny enterprise up to this level, but once it was established, it was reasonably easy to maintain the income level.

The reason I didn’t make any more money from the business is that I intentionally didn’t grow it any bigger (as I had plenty of money and not enough time!) but I’m confident that appropriately-directed effort could easily have boosted my business income higher than my salary at the time.

So, how did I get the business to this stage?

Getting customers – KISS

Obviously, to be profitable, my business needed customers.

My early attempts to make money as a techie revolved around a lot of ‘word of mouth’ recommendations mainly through friends and work colleagues. However, when I met my (now) wife, I committed business suicide and moved 120 miles away from my hometown and existing social network in order to live with her. At this point I was 22.

During this period, I also got fed up with my day job (a recurring theme throughout my adult life) and actually tried for the first time to live on what my computer business earned. I walked out of my job with less than a month’s salary saved and declared that I would be making my income independently from then on. I failed miserably and was forced to pay the costs of doing so and get another soul destroying job (more of that in a later article).

However, forcing myself into a ‘sink or swim’ situation gave me an opportunity to try some really wacky ideas to acquire a new customer base from a standing start.

I did traditional newspaper adverts. I did radio advertising (complete with voice-over artist). I used the Royal Mail ‘Door 2 Door’ service which you might know by its unofficial title of ‘All that junk mail that the postman puts through my front door every day’.

I lined the pockets of many an advertising space salesperson, but made very little progress on building a truly profitable business.

After many years of poor customer acquisition performance, I finally learned a really difficult lesson. I had always wanted my advertising to be really clever, quirky and creative.

These were the wrong things to focus on.

What I really needed was a way of getting the right type of customers reliably and cost effectively. Well, duh!

Stick to what works

It turns out that, if there’s a market for what you’re selling, doing this is quite straightforward. You need to:

  • Work out who your ideal customer is
  • Craft a message that highlights why their life will be better if they do business with you and instructs them to get in touch
  • Work out where they are and get the message in front of them

By the time I’d built the last iteration of the computer business (2012-2014, as featured in my free course), I had learned that the most cost-effective ways to acquire customers were:

  • High quality (300 gsm) A6 glossy flyers, hand delivered to the houses and businesses of members of my target demographic
  • Encouraging existing customers to refer me to their friends and business associates

Here’s an annotated example of one of my later advertising flyers. As you can see, it’s not very fancy, but it worked well.

Flyer

 

Here are a few key facts relating to my advertising technique:

  • I tried a few varieties of paper stock over the years but found that paying more for good quality flyers meant that they tended to survive their encounters with people’s letterboxes (and a lot of people pinned them to their notice boards for later use). Incidentally, very few people complained that I was delivering ‘junk mail’ to them and many complimented me on having good-quality advertising materials.
  • After trying various methods to fulfil the delivery of my flyers, I eventually settled upon paying reliable delivery people an hourly rate to deliver them. I also asked the delivery people for GPS tracking reports (having been burned in the past by people dumping batches of flyers in bins).
  • I worked out which houses and businesses to target with my flyers by examining things like average house price and the household income data sets from previous censuses.

You will note that, what worked in the end for me wasn’t rocket science. In fact it was quite similar to the advertising method used by other tiny business owners like window cleaners and landscape gardeners.

In order to build my customer base to the point where I no longer had to do any proactive promotion, I simply reinvested all of my profits back in to more advertising. This illustrates the beauty of building a tiny business on the side when you don’t need the income!

I found that having around 60 customers for whom I was the ‘go to’ computer guy was sufficient to achieve my desired level of income.

What could you do?

I won’t go into any more detail about the specifics of my computer business, as it’s probably starting to get boring. Please get in touch if there’s anything else you’d like to know about it.

I hope however, that I’ve demonstrated how powerful these tiny business ideas can be to help you break free of your 9-5 job. They can be an excellent training ground for developing your entrepreneurial skills and a fantastic way of fattening up your reserves before you make the jump to ditch the daily grind.

If you’re not fortunate enough to already have a skill which translates directly to a well-paid career as a freelancer, I honestly think that setting up a tiny service business might be your best option for achieving some freedom quickly.

If you can think of something that

  • You are good at (or can become good at with enough effort)
  • Would make people’s lives better in some way if you did it for them and;
  • Might have a market
    • who can afford to pay you what you want to earn
    • can be reached easily (e.g. A6 advertising flyers landing on the door mat of every detached house in the area)

then you have the seeds of an enterprise which could allow you to achieve all sorts of amazing things, such as earning twice as much per hour as you currently do.

I’ll leave you with this: any idea that you have is like a hypothesis. You don’t know if it’s going to work unless you try it. So get to work, NOW!

Decide what skill you think you can sell and then get out there and try to sell it. You will fail a lot. You will be absolutely terrible at making it pay to start with. You need to get back up, dust yourself off and try again! Keep working at it and eventually, you will make something work!

Thanks for reading. I’ll be back with more next week.

I’d be really interested to hear about tiny businesses you’re already running (or are thinking about starting). What are the main challenges you face?

Perhaps you feel like this sort of idea really couldn’t work for you. Let me know why.

Is there anything else related to micro-businesses you’d like me to write about? Don’t be shy – please leave a comment.


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[Image “Cartoon Character Hamster Exercise” courtesy of saphatthachat at FreeDigitalPhotos.net]

9 thoughts on “Freedom business case-study 1: My computer business

  1. Really interesting article.

    I recently started a side project (picture framing).

    The two things that I have learnt so far, albeit that it is early days, is firstly how great it is to do something different. I am a lawyer by day so it is really nice to do something a little more creative.

    Secondly it gives me a real sense of having a safety net. Knowing that I now have a skill that has a relative value (rather than being a knowledge based job), I feel more secure in my current full-time role.

    I shall give the promotional tips a go.

    1. Hi James.

      Thank you for your kind words.

      I think that the first tiny bit of profit you ever make independently is the single biggest step towards having confidence in your abilities to earn income outside the confines of a job. That first venture is rarely ‘the one’ but it’s a fantastic proof of concept.

      After that first try, you’ve gone from being ‘person who has only ever earned money from a job’ to ‘person who has started with nothing but an idea and some skills and turned them into money’.

      It’s great that you’ve found a way to express your creativity too. I also agree with you about change. One of the reasons I like doing the blogging/coaching thing is that it’s really different to solving programming problems.

      I’m not sure where your picture framing gig fits into the grand scheme of things, but as we’re on my blog about moving towards life without a job, I feel I must point out one thing: manual artisan work is rarely economically efficient (i.e. all told, it translates to a low hourly rate). I’m not sure if that description fits your business well or not.

      It’s not problem anyway if the enterprise is intended to be an enjoyable side-project, but it’s not necessarily something I’d choose as a good candidate for income replacement if, for instance, I was aiming to follow the strategy I set out here: http://liberate.life/index.php/2016/08/29/how-to-work-33-of-full-time/. That might be completely irrelevant for you though so don’t take what I said as criticism.

      Keep me posted on how things are coming along (I’m always on the lookout for side hustle case studies!)

      Thanks again for a thoughtful comment.

  2. Hi,

    My current problem with starting my own microbusiness is that my employment contract states that I can’t work another job.

    Though we do have ‘external appointments’ which in theory allow people to be involved with other companies. But I have been told that if it counts as a second job it will be rejected.

    I fully intend to apply for an external appointment (you never know unless you try). But I thought I would ask you for your opinion on routes I could take other then that?

    (I’m UK based if that matters and my main work is as a website developer).

    James

    1. Hi James.

      I read this last night and decided to have a think and sleep on it before answering. Here are some thoughts (obviously do your own research etc):

      1) Are you really that attached to a job which has (in my mind) such limiting terms and conditions? Perhaps, as an interim step, you could look for a new job (or even a well-paid contracting gig for 6 months if you’re a developer).

      2) If you really do want to stick with your current job for now, maybe you could start a side-gig which is not a commercial venture to start with. For instance, if you wanted to try building an authority website, maybe it could be a ‘hobby’ for a while. It might take a couple of years to even be in a position to monetise such a site, but if you put your effort into building an audience and solid traffic without monetising, you can wait until you’ve banked plenty of cash from your day job before you switch the income on. Surely your employer couldn’t object to you having a website as a hobby.

      3) Are you in a good negotiating position? Perhaps you could arrive at a win-win agreement with your employer which allowed you to pursue the side hustle. Maybe you’d have to give something in return.

      4) Check out MMM’s article There’s Something You Need To Know About The Rules. I’m not trying to encourage you to willingly break the terms of your contract (I’m certainly not knowledgeable enough about contract law to even risk giving advice).

      However, instead of seeing things as ‘brick walls’ which prevent you from taking action, think about ‘costs and benefits’. If you broke that rule, I guarantee that you would not set on fire or catch the bubonic plague. You might get disciplined or sacked but what are the odds? I don’t know, I’m just trying to get you to have a think about it. However, there are obvious up sides to trying something.

      Your employer does not own you. I didn’t even look at my contract of employment before starting my first side business. I may or may not have been breaching the terms and conditions, but I’m glad I did it.

      Notwithstanding anything I’ve written here, I DO thinks that it’s absolutely imperative that you avoid conflicts of interest. For example, don’t poach clients from your employer, don’t compete with them and don’t provide services to their competitors.

      Oh and, obviously, get into a position where, if you make a move and it goes against you, you won’t sink.

      Just to repeat my disclaimer: I’m not giving you advice, merely trying to help you to think through some options.

      Thanks for the question. I’d be really interested in hearing what you decided upon and how your getting on.

  3. I really enjoyed this article as It shows me that in my retirement dotage I am doing everything wrong as an IT “freelancer” in my small town in Ontario, Canada.
    I concentrate on senior citizens who are mostly poor and cannot afford to hire me.
    I don’t advertise. Strictly word of mouth.
    I don’t charge anything at all to help out.
    That said I enjoy it. Most seniors trust me because I have the same white hair and shuffling gait. They think I’ll understand their technical illiteracy (I don’t) and that I’ll sympathise with their plight (usually I do.)
    If pressed for confidence building I point out my MASSIVE experience in computing – all the way back to punch cards 50 years ago. Most of that stuff doesn’t apply anymore but they don’t know that.
    In my opinion computers haven’t gotten easier to use over the years. Maybe the basic unit has but everybody’s got 2-3 of them, a network, and a wireless printer now. I spend more time on networking than fixing the individual PC or tablet.
    The other sad fact is that although at one time using a computer implied some degree of intellectual competence, today most users are idiots that fall for technical scams and phishing sites. Everybody I know thinks they are getting hacked when in fact they are just stupid.
    Oh well. I do get the odd free coffee or bottle of cognac so life ain’t too bad.

    1. Thanks Ray.

      You’re definitely not doing it ‘wrong’ 🙂

      I think you’ve just perfectly illustrated the difference between an enjoyable hobby which might occasionally pay money and an alternative to a job (which is really what I was driving at with this article).

      If I was retired/FI, it’s likely that I’d do something similar (when convenient of course), but alas, I have to make a living one way or another.

      Yeah… the scams. I used to get ‘repeat offenders’ (i.e. people who fell for a new scam every month despite me saying ‘if anybody calls and asks you for money, say no and talk to me’). I also found out more than I wanted to about the, shall we say, ‘tastes’ of a few people. Interesting stuff!

      1. I certainly understand the difference. We have a couple of younger folks in town who do charge for their work and I’ve been careful not to step on their toes or compete in any way for business IT services.
        It just rankles me when local business supply stores that sell new PCs want to charge $100 additional or more to an impoverished senior to set up a PC password, get a printer working and maybe dump some crapware. That’s money that could be spent on a faster processor or more memory when buying the thing in the first place.

        1. Technology is certainly an industry in which it’s easy for service providers to take advantage of the inherent information asymmetry in order to sell unneeded or overpriced services to unknowledgeable buyers.

          Fortunately, other people exist who have some sort of moral standards.

          Another example is car mechanics. I’m really fortunate to use a mechanic whose prices are too low and he’s too nice. We’ve been in a few debates where I’ve tried to persuade him to charge more (as he works his fingers to the bone) but he thinks he’ll lose customers. He certainly wouldn’t lose me!

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