I am a big believer in splitting life into chapters and this month marks the start of a new chapter for me.
I'm reducing my work week to four days.
This has not been a snap decision. I've considered it as an option for years, seriously considered it for the last 6 months and made moves to make it a reality about 3 months ago. With everything being paused for two years and the pandemic (hopefully) ending, I was becoming restless with my current situation.
I think it's easy to make changes when things are going bad, but for me, I was very comfortable. I was working for a good company, on a good salary and was enjoying the work I was doing. So why was I becoming restless?
Simply, I was not making a lot of progress to where I ultimately want to be in life.
There are multiple paths to get where I want to be. Some of my options were:
- Continue - Work on side-business intermittently in my spare time
- Quit - Live off of my savings and go full time on my side-business
- Move - Earn more and funnel money into my side-business
- Negotiate - Stay, negotiate for more money and funnel it into my side-business
- Freelance - Work part time as a consultant and spend rest of time on my side-business
- Reduce - Stay, reduce my hours and put those hours into my side-business
- Fundraise - Take on external investment and go full time on my business
I ended up deciding the most sensible option was to reduce my hours, if possible, and spend that additional time building my side business. It's a medium risk option, with the main downside being that I earn less in the short term. Benefits include a predictable salary at a job that I enjoy, four days a week to advance my baseline career and dedicated time that I can put into my side-business. It's also the option that leaves all other options on the table.
So, how's this possible?
The first thing to say is that this is not part of the UK government trials happening in 2022. I have a taken a pay cut. Approximately 20%.
I work for an agency, whose business model requires that time is traded for money. It therefore makes sense that if I'm spending 20% less time working, I should be paid 20% less. I think the arrangement is fair.
The second thing is to say is that my employer (Inktrap) has been reasonable with me bringing this to them which I'm really appreciative of.
I do think we are at the beginning of a cultural shift, especially in tech, where time spent does not always equal outcome. I think this will be led by product companies and that agencies/consultancies will be the last to change, because they are tied to time.
What am I going to do with this time?
Throughout this, I've used the words 'projects', 'business' and 'side-business', but what will I actually be spending this time on?
I'll write a much more in-depth article about this one day, however, I'll give a not-so-short summary here.
I'll be working on Skyrack, a digital product studio, concentrating on building Software as a Service products. The idea is that I will be building a new Minimum Viable Product every six weeks.
I flip-flopped between two ideas before this:
- Building a single product and concentrating fully on marketing.
- Building lot's of tiny products hoping one takes off.
They both have pros and cons. Concentrating on one product might mean I end up fully focussed on a losing product. Concentrating on lots of tiny products will lack depth and likely lead to burnout.
After reading Basecamp's 'Shape Up', I came across the concept of having these 6 week cycles. Each cycle would have a fixed time, variable scope piece of work.
I've adapted this to create my own product development process that allows a worthwhile product to be built within a fixed period of time, with a valid marketing approach and a go to market strategy.
It's an output driven, Goldilocks approach to the two ideas above.
The ultimate goal will be to create a portfolio of revenue generating products. Each product I will treat as an asset and each asset has a valuation. Borrowing ideas from the private equity world, I want to maximise the total asset valuation of the firm. This will be my success metric.
There is value in a non-revenue generating product. Access to the codebase could save a company weeks of expensive development time. A marketing expert could purchase a product and apply their magic. I've witnessed and heard countless stories where this has happened. This is all to say, design and code quality matter, they create a more valuable asset.
For those unfamiliar with the tech world and think all this is a stupid idea, predictable revenue, growing at a steady, self-sustained pace, makes an incredibly valuable asset. Typical valuations tend to be in the 4-6 times ARR (Annual Recurring Revenue) range, but can sometimes extend past 10+ times ARR.
Some back of the envelope maths for you:
A product has 10 customers, each paying an average of £30 a month. That's £300 MRR (Monthly Recurring Revenue).
Times that £300 MRR by 12 months. That's £3600 ARR.
Times that by the 4-6 valuation multiples. You have an asset worth £14,400 - £21,600.
The beauty is:
- Find 10 more customers and it's worth £28,800 - £43,200.
- Get 100 total customers and it's worth £144,000 - £216,000.
- Increase the average customer spend to £100 per month, with 100 customers, it's worth £480,000 - £720,000.
Can I give 10 businesses £30 worth of value every month? I'd hope so.
I'm a design educated, full-stack developer obsessed about business/finance mechanics. That means, good products, well built, value orientated.
Why not me.