I’m asked pretty regularly about the best way to start a physical product e-commerce site, or whether that’s a good way to get started selling online.

One major benefit of selling a physical product is you don’t have to build anything; the work is all in finding a supplier and putting up a site. This is great because you avoid the 200-400 hours to build something.

But there are two downfalls of selling physical products compared to software:

1. Unless you manufacture something yourself you are a commodity, which means price is a major issue. No matter where you go, any supplier you find will already be in use by someone else. If they aren’t, within 6 months of your success you’ll likely see someone else selling the same product on eBay for less.

2. As a result, margins are tight. If you want to stock products yourself (I am vehemently against this), you will need a garage or other large space, thousands of dollars in up-front inventory, and you will spend hours packing boxes and running to the post office…this is not work for a Micropreneur. The better route is to find a drop-shipper who will ship directly to your customers once you’ve made the sale. Which is great, except at that point your margins are slim…think 20-40% gross profit.

As a developer you have the ability to build/hire out/buy applications and websites, where the margin is huge and you have something unique. Whether you’re selling invoicing software or performance management software your gross margin is going to be close to 100%.

But with sunglasses, paper lanterns and beach towels the margin is much smaller.

Case Study - JustBeachTowels.com

Using JustBeachTowels.com as as an example, I purchased the site because of the #6 Google ranking for the term “beach towels” and because it was priced way below its potential. I added a shopping cart and found a beach towel dropshipper (surprisingly hard to find), and sales were around $100-200 per month. Gross margin was about 30%, which meant a whopping $30-$60 per month in my pocket.

So I spent time honing PPC, SEO, a new design, a new cart, finding more dropshippers…and I finally hit on the big low price guarantee revelation I wrote about in my blog. Sales shot up starting the next day and that month sales were in the low four-figures. I was pleased to say the least.

Except that four-figures in sales resulted in just a few hundred dollars in net profit after cost of goods sold.

Not bad…except I took in nearly 100 hundred orders to attain that number and I either had to place all of those orders myself or have a Virtual Assistant (VA) handle the order processing. The dropshippers are not very high-tech and don’t have a way to integrate programatically with their ordering system so every order has to be placed manually.

And even at $6/hour for the VA, the cost to place 100 orders manually through a shopping cart was close to $200. No big deal, I still made a few hundred bucks, right?

Except the shopping cart (shopify.com - awesome hosted cart) charged a percentage of sales that wound up totaling about $80. And credit card processing fees took another 3%, which left me with a net profit of around 10% of my gross revenue.

From a blockbuster month of sales I made just over 10% net profit.

Why Digital Products Are Superior

This was a big lesson for me. I had spent a lot of time coddling and growing this website and all I got was a lousy 10%? This was compared to my digital product sites like DotNetInvoice, where an increase in sales results in darn near 100% of the money hitting my bottom line as profit.

It was that moment I decided to focus my effort on digital products exclusively given the huge difference in profitability.

I sold justbeachtowels.com in January of 2009 and made a great return on my investment with the goal of investing the funds into my next digital product site. Though I haven’t acquired anything yet (I have my eye on a few), the return on those funds will be much higher with a software product or SaaS website.

This is not to say that you should never go into physical products; I’m sure there are exceptions to my experience, and if you stumble on a crazy deal as I did you would be foolish not to acquire something below market price. But to build a physical product e-commerce website from scratch would require much more time than it’s worth given that we can build and sell software at higher margins and with less competition.

And I didn’t even mention returns and lost shipments…

11 Pound, Two-Headed Laptop Rears Its Head(s) - Lenovo has released a massive laptop with two built-in screens (a 10.6-inch screen that slides out of a 17-inch screen). As a dual monitor user at home I have a tough time working at full capacity in coffee shops, but at 11 pounds I’d need to hit the weight room before I could lug this thing around town.

2.38 Pound, 10.2-inch Laptop - Netbooks had quite a year in 2008. Some say they’re a fad; other say they’re an alternative class of notebook and they have staying power. Bottom line: they’re cheap, light, and come with up to 6+ hours of battery life. Aside from the small screen and 95% keyboard, most of what I do these days when I’m on the road could be done on a Netbook. Imagine, a laptop you could open on an airplane and not hit the seatback in front of you.

A Look Back at the Internet ‘96 - A short walk through the Internet Archive. Check out the awesome background on Pepsi.com. Makes Fresno Web Design look like something out of 37Signals.

JournalSpace Crashes; Out of Business Due to Lack of Backups - Another sad story. If you haven’t setup no-touch backups for your personal system, check out Mozy.

8 Core CPUs on The Horizon - Even with 2.3 billion transistors and 8 cores, Intel says they “will be able to maintain the power envelope of its current Core 2 processors.”

The iPhone as Web Server - I’m racking my brain…trying to figure out a use for this.

The programming language is important because we provide the source code with every purchase…which created one heck of a mess for us a few weeks back.

How it All Started
About 3 months ago I contacted a company that provides a component for integrating with over 60 credit card payment gateways. Since traditionally we’ve supported two gateways, this would be a big win for DotNetInvoice.

I contacted the company and it turns out they have a royalty-free version that allows you to “freely distribute your own Applications that use [the component] as a runtime component without payment to [company].”

The up-front fee was hefty, but this was too good to be true!

So we contacted the company and worked out a deal. Within a week we were slogging through code and wiring up gateways like crazy.

The component was great - easy to use and well documented. After about 60 hours the integration was complete, the necessary API parameters were added to our database for all gateways (which took a bit of research), and we had a bunch of tests under our belt.

Fast forward 2 months to launch day (in the meantime we implemented a number of other features).

Picture the scene:

Our final package is prepared and we’re ready to throw the switch in the next few hours. Jeremy (co-owner of DotNetInvoice) is doing some final testing on our demo server and runs into a problem. The demo site is crashing because of a missing license file.

License file? We’d been running in our development environments for two months without any problems.

~Rob navigates frantically to the vendor’s website~

“Let’s see…license file…blah…blah…blah…refer to end user license agreement for details…wait, WHAT?!”

The Sound of Me Blowing a Gasket

You may freely distribute your own Applications that use Licensed Software as a runtime component without payment to [the company], if and only if … the Applications … are in compiled, executable form.

Wait, did I read that right?

I think it said that even if you’ve purchased a royalty-free version of their application, which comes as a compiled DLL, your application also has to be compiled. Uh oh…

Surely that can’t be right…does it matter whether my application is compiled? Should it matter?

So we postponed the launch and contacted the vendor.

We asked if we could move forward as-is. Ummm…no.

We suggested that we compile our own DLL that contains the code we use to make calls into their DLL, then call our DLL from our un-compiled application. No go.

We asked if we had any options aside from compiling our entire application and not releasing source code (this, of course, was out of the question)…and yes, there was one option!

If everyone who purchases DotNetInvoice also purchases a development license to the vendor’s software (you know, the royalty-free version), we would be in compliance.

The only problem is that a single development license for their software is more expensive than our entire product.

Ouch.

The Workaround
You can pretty much guess how the next few days went.

*Rip* out lots of code.

*Re-test* everything.

*Launch* 5 days late.

We ended up launching with support for four credit card gateways - two more than we used to, but a heck of a lot less than we’d hoped.

Luckily, even with this blow to our egos version 2.5 is out the door and was greeted with much fanfare - it turns out people really wanted a C# version. (If you create invoices and want to save time and get paid faster by accepting payments online, check out the new features in version 2.5)

The Moral(s)
The obvious message is that royalty-free doesn’t always mean royalty-free. Sometimes it means “royalty-free unless you distribute your source code (even though you’re not distributing ours).”

Another obvious lesson is to read your licensing agreements carefully. I’d like to point out that I’m not a complete moron - although the license text is painfully obvious in the above quote, I had to edit heavily to get it that way. In the real agreement the key points are separated by a lot more legal gobbledygook and this statement was not nearly this obvious on the first read.

I should also note that I did look through the license before we began development, and asked some clarifying questions of the vendor before we moved forward with development…but it took an extensive read-through of the license to really pick up the problem.

You would think after my last licensing debacle I would have learned.

But there’s one more lesson here, and it’s for software companies (including Micropreneurs): don’t have a license agreement that screws your customers. If you advertise a product as “royalty-free,” mean what you say; don’t hide things in a license agreement just because no one reads them. Although the onus is on the customer, it’s still a bad deal.

Ultimately this vendor is 100% legally correct. But I lost 60 hours of development time and they lost a sale and a fan (I was going to rave about them on this blog). In addition, I will be suspect of their licensing in the future and will do what I can to avoid their products.

In the long run I wonder which of us lost more from this experience?

But you have to be wondering what the heck this thing is, right?

Well…it’s not another blog.

I talked a bit in the report about how blogs aren’t able to cover this material in enough depth.

And it’s not a book.

The problem with books is they fall out of date far too quickly. If I pick up a technology or online marketing book that’s published in 2007 a good portion of it will be out of date.

And it’s not an Ebook.

Ebooks are limited to expressing ideas in print…some subjects require a lot more than that.

The Micropreneur Academy is a place to find details about every tactic I’ve used to make a software product business fly.

It’s a single place that will house all of the training, articles, interviews, videos, and everything else relating to starting, launching, supporting, and marketing a product or website.

If that doesn’t spell it out, here are a few more answers to questions I’ve received:

Will the Academy Cost Money?
The short answer is: yes. Given the quantity and depth of the course material, I don’t see a way around this.

The long answer is: I started putting together an outline for a series of blog posts covering these topics, and it quickly became so involved I realized I could not give it the treatment it deserves. Many lessons require audio, video and in-depth research, analysis and demonstration.

These are the time consuming pieces I spoke about in the report - the parts that are never properly covered in blogs. In the interest of getting this material to people who can use it I’ve decided to take the route of setting up an academy.

When you say the charter membership will be limited to the first 250 sign-ups, do you mean the first 250 people who requested the report or is there an additional step to sign up?
The academy will launch in about 2 weeks, and the “first 250″ I spoke of are the first 250 people who sign up once the doors are open. I’m doing this to maintain an intimate setting to ensure we’re able to quickly form an interactive community.

I Would Never Do This If I Didn’t Know You From Your Blog!
That is absolutely true - that’s is why this is a “readers-only” launch. I’m not doing any publicizing outside of my blog. I realize there is a level of trust that’s needed to follow me into something like this, and appreciate that you have followed me this far. As you know, my reputation is on the line and I do not plan to disappoint.

What’s Next?
As more information becomes available I’ll be providing it via the the Six Figure Software mailing list - click here to sign up.

In the meantime I’m happy to answer your questions; drop me a line at rob@softwarebyrob.com.

The hardest part has been keeping quiet. But I’ve had a good reason for doing so: I haven’t invested years of work into this blog only to endanger my reputation with a half-baked idea.

But the time has come…today I lay everything on the table.

It’s OK If You Don’t Like Your Job
If you’re like the hundreds of software developers I’ve talked to over the past few years you’re not thrilled with your job.

One explanation could be that you’re smart, skilled, and creative but employers treat you like a retail clerk.

Whether it’s overtime, crappy pay, company politics or annoying co-workers, if you’re like most developers you would leave your office job if you could. In the end, you need something more than a 9 to 9 can offer.

What you really want is to solve interesting technical problems, write code instead of being forced to manage people, and work where and when you want.

You want to be in control.

Consider Yourself Lucky…
Software is an exceptional industry - it’s one of the few occupations where our skills translate into a huge number of options.

I don’t know of any electrical engineers who do contract work on the side. Or architects who have the option of starting a product company.

We are lucky to be developers, because it means we don’t have to work for corporations our whole life if we don’t want to.

We have options. And I’ve spent the better part of my career exploring them.

After years of trial and error I’ve found an approach that re-shaped my thinking about our industry, entrepreneurship, and our role as developers.

Read on…

My readership has grown faster than any similar period in this blog’s history. I realized I struck a nerve when I began receiving question after question about recent topics: one-person startups, the business of solo software, Micropreneurship, etc…

Until this point there have been many more questions than answers. But stick around; I’ll have some answers for you on Monday.

No, it’s not an idea…it’s a concept. I’ve been churning on it for six months, maybe more.

I’ve had a number of conversations with exceptionally talented developers who’ve made gutsy decisions and come out on top.

And I’ve been immersed in a world of risk, reward, independence, and sheer brilliance (other peoples’, not mine).

I’m in the cusp of something new that’s coming together from a perfect storm of the economy, my internal search for independence, and an undercurrent I’m observing with developers who’ve made the decision to pursue something worth pursuing.

I’ll be talking more about this during the coming week…

The problem was that when I’d purchased the site 18 months ago the conversion rate (the rate at which it converted visitors to buyers) was hovering right around 0%.

Correction…it was 0%.

Always Be Testing
The biggest lesson I learned while taking the site from a few hundred to a few thousand dollars a month (revenue, not profit), is that there are a lot of great theories about marketing, but no one can tell you the exact thing that’s going to lead to an uptick in sales.

With the goal of increasing the conversion rate I read piles of books on internet marketing, web analytics, and copywriting. Of course, actually doing something lead to the real leaps in my understanding of how to help people move from browsers to buyers.

And by far the biggest lesson I learned is that you have to test everything. You use your experience and rules of thumb to come up with ideas to try, and then you have to try them and test to see if they work.

Of course, this is exactly what I didn’t want to hear.

As a software developer I want things in neat little boxes. I want solid answers. Just as I go to my friend who’s a brilliant SQL developer to help me with my HAVING clause, I want to go to a marketing genius and have him/her tell me the exact steps I need to take to begin converting visitors to paying customers.

But the problem is that marketing isn’t like coding. Coding is a highly constrained environment and, with most problems, a well-known path to success.

Marketing is different - the options are infinite and the paths to success are unique to each problem.

Marketing Isn’t Coding. Marketing is Design.

Note: by “Design” I mean technical (application) design.

Design is a less constrained environment than coding. Design is a blank sheet of paper with no syntax highlighting, no compiler, a few rules of thumb, and a lot of experience.

If someone asks you to write a function that generates a random string you probably have a pretty clear picture of the code you’re going to write. You don’t have to consider the possibility that the compiler thinks orange towels are out of fashion or that it’s trying to save money because there’s a recession.

But if someone asks you to design a performance management system, there are a lot fewer constraints that you have to work with, which is simultaneously a blessing and a curse (for most developers, too many options is a curse).

The specifics of your design will be heavily influenced by your past experience designing applications, and by the human factors that come into play when designing anything that interacts with people. In design, trial and error (a.k.a. experience) is worth orders of magnitude more than what you can learn from books.

Such it is with marketing.

Wash. Rinse. Repeat.
As I’ve considered this analogy, the main difference I’ve found between online marketing and design is the speed of the test cycle.

Today you might design an application that hits production in 6 months. At that point the rubber really meets the road and you find out if your design is performant, scalable, and maintainable.

With enough visitors, your internet marketing test cycle can be as short as a few days.

With such a short test cycle, it’s easy to try some pretty crazy things since you can undo them in a matter of minutes. With this in mind I set out testing a stack of crazy ideas on my beach towels site.

I did this for about 6 months; I updated the graphic design twice, tried two different shopping carts, added new products, changed category names, added a personal greeting on the home page, adjusted shipping costs, added an 800 number, and made about 20 other changes.

Each time I made a change I waited for a few days to see if there was a noticeable difference in sales. But none of them made a difference. Until I added three small words…

“Low Price Guarantee”

Aargh.

What kills me is that being the low-cost provider is bad. Unless you’re disruptively low-priced (like Southwest Airlines and Wal*mart), being the low-cost provider is a recipe for price wars, commoditization of your offering, and a sign that your marketing department is not very creative. I have never entered a market (including this one) with a plan to be the cheapest.

So adding this phrase wasn’t on my radar for months. In fact, I made the change on a whim one afternoon and forgot about it until sales started pouring in the following day. This single change sent sales from $210/month to $2200/month immediately.

The lesson here is to be the cheapest provider in any market and you will multiply your sales by tenfold. No, wait! The underlying lesson is to make your customers feel at ease with what they are buying. And to do this you have to know your customer.

People buying beach towels from a website are doing it because they want to save time. They want to find a towel and make the purchase as quickly as possible. They want to feel good that they are making the right decision about their purchase, which is what “Low Price Guarantee” offers.

It gives them permission to buy here and stop surfing around looking for the best deal because they’ve found it.

It offers the promise that they don’t have to continue down the list of Google results. If they can find a towel they like, they can check this task off their list. No one goes online to window shop for beach towels; people want to get in and get out while still feeling good about their purchase.

So the real moral is three-fold:

1. Know your customer.
2. Make your customer feel at ease with what he/she is buying.
3. Always be testing.

And the honorary 4th:

Never use a compiler that thinks orange towels are out of fashion. Everyone knows that orange is the new pink.

The comments here and on a few social bookmarking sites mentioned that you could quit your day job if you wanted to, and that you could live on $2500/month just fine in many cities in the world (although in my hypothetical situation I was speaking about a developer based in the hypothetical U.S.).

We could get into a discussion about how much developers make, and how many costs you will take on by quitting your day job, but it’s completely irrelevant.

The Point
The point of The Software Product Myth is that at some point you are going to have too few sales to support yourself monetarily, yet too much work to fit comfortably into your evenings and weekends. Whether your number is $1000/month, $1500/month, or $5000/month has zero bearing on that point…what matters is that building a product is a lot more difficult than most people make it out to be.

With that said, one of the helpful points that came out of the discussion is how many expenses you encounter when starting a company that you never knew existed.

Remember that line item on your paycheck that said something about retirement matching?

Or the disability insurance your company offers that you never knew they paid for?

Yeah, those are going to hurt.

You can go without these expenses for a short time while in startup mode, but if you plan to build a company that’s sustainable in the long-run you’re going to need to cover these expenses before you think about collecting a salary.

The Expenses
In putting together this list I looked through some of my old posts and also scanned my recent bank and credit card statements. I’m amazed at how many business costs I pay throughout the course of a year.

Depending on your country of residency these may not apply to you (people with national health care - consider yourself lucky!), but most of them apply in one form or another throughout the world. In addition, it is unlikely you will need every one of these expenses, but the intent is to be as close to an all-encompassing list as possible.

Core Business Expenses

• Business Filing Fees - This includes your business license, fictitious name statement, and reseller license fees (if applicable). They tend be paid annually and vary widely, but for a sole proprietorship (in the U.S.) you’re looking at around $100/year. L.L.C.s and Corporations range from a few hundred dollars into the thousands.
• Accountant - Business taxes, especially if you have a home office, are easy to get wrong. As I said in The Five Minute Guide to Becoming a Freelance Software Developer, an accountant is not an optional expense. Costs range from $300-$1000 per year.
• Lawyer - Lawyers I’ve worked with run $250/hour and up. If you want contracts that hold up in court you’re going to drop serious coin with our friends in the legal profession.
• Liability/ E & O Insurance - Varies widely, typically from $1500-$2500/year.
• Health Insurance - In the U.S., decent insurance for a family of three is now hovering around $800/month. It’s less if you’re single.
• Disability Insurance - It varies, but typically runs $250-500/month in the U.S. You may think this is optional, but consider that during any given year you are 4x more likely to become disabled than to die.
• Life Insurance - While you probably don’t need it if you don’t have a family, it’s a good idea to have if you’re married (and I would argue a requirement if you have children). If you’re young and go with term life insurance you’ll pay $10-20/month, but as you age that will increase dramatically into the hundreds.
• The “Employer” portion of Social Security (FICA) and Medicare - Often called the “self-employment tax,” it eats up an additional 7.65% of your gross income if you’re self-employed (since your employer usually picks up this portion).
• Retirement - Save for a rainy day. No one’s matching your 401(k) anymore, and you should be putting away at least 10% of what you make.

Technical Expenses
A few of these apply only to companies that build software, but most apply across the board.

• Windows Hosting - You can go cheap, but you’ll pay in other ways (don’t say I didn’t warn you). Decent hosting with decent support will run $20/month. I recommend DiscountASP.NET (even though they have a terrible website). They are responsive to support issues and very  developer-centric. They roll out new .NET frameworks and while they are still in beta, and they are inexpensive considering the service and uptime.
• Linux Hosting - The same sentiment as Windows Hosting, but $10/month will serve you pretty well. As always, I recommend DreamHost, even with my recent blog issues. Did I mention the issue turned out to be a WordPress plug-in?
• Bug Tracking - You can go open source and save money, but you may lose it eventually in the time you spend maintaining and upgrading it. This one’s your call. I’ve chosen to outsource my bug tracking to FogBugz, and it runs me $25/user per month. Pricey, but based on my hourly rate it’s cheaper than the open source solution I used previously when you factor in upgrades, crashes, and manual workarounds for missing functionality.
• Source Control - This is one place where you can probably get away without spending any money, but I wanted to mention it anyway. As I discussed in Source Control for Micro-ISVs, I use DreamHost for hosting my Subversion repository, as it comes free with their base hosting account.
• Advertising - This will vary widely, but a decent Adwords budget will run $100-600/month (though it should be paying for itself).
• Graphic Design - Here’s another danger zone where developers cost themselves money by trying to design their own graphics. Please, I beg you, pay someone to design your web site.
• Phone - $20/month for a land line. $50-100/month for a cell phone with a decent chunk of minutes.
• Internet - $20-60/month.
• Fax Service or Fax Machine - It seems like it should be brought into the back yard and shot, but I still send a couple faxes each month. eFax will run you $14/month (annual plan) or if you have a land line you can fork over $50 for a fax machine (or buy a multi-function printer).
• Printer - A color laser will run you $300-600 these days (I love my new Samsung Clx-3175fn). If you’re fine going old-school you can get a B&W laser for around $80. Either way, the toner is what kills you. Set aside $50-150/year for toner and paper.
• Computer - If you’re writing software you’re probably upgrading your PC every 2-3 years. Figure $1,500 for a new laptop, $700 for a desktop, give or take a few hundred.
• Software - If you’re one of those lucky Ruby or PHP developers then most of your tools are free. If you work with .NET be prepared to pay $1000-2000 for an MSDN subscription (or if you’re developing a product talk to Bob Walsh, get signed up with Microsoft BizSpark and get the same thing for a few hundred bucks).

Based on the above, you can probably see how $2500/month isn’t going to keep you in the lifestyle you’re accustomed to…it’ll barely keep the doors open.

Of course, this is far from an exhaustive list. If you have additional items that have caught you by surprise as you’ve started your business, please post them in the comments.

Update: If you disagree with one of my estimates, please don’t post to the comments or email me. I’ve received a lot of email with information about using $1 Linux hosting, $1200 laptops, $100 printers, etc… I already know about these options, but saving $9 per month has absolutely zero impact on the point of this post, and as I said above, if you go with cheap hosting/laptops/printers “you will pay for it in other ways.”

The Software Product Myth
“A certain percentage of developers become unhappy with salaried development over time (typically it’s shortly after they’re asked to manage people, or maintain legacy code), and they dream of breaking out of the cube walls and running their own show. Some choose consulting, but many more inevitably decide to build a software product.

‘After all,’ they think ‘you code it up and sell it a thousand times - it’s like printing your own money! I build apps all the time, how hard could it be to launch a product?’”

Should You Build or Buy Your Micro-ISV?
“None of the products I’ve built or bought required skills beyond that of a mid-level developer. Let’s be honest, building an invoicing system does not involve insanely complex algorithms and coding chops. Most successful Micro-ISV products (and a lot of not-so-Micro-ISV products) could have been built by a few solid mid-level developers.”

Lessons Learned “Selling” My Micro-ISV
“Within a week of my ‘for sale’ post I received 20 email inquiries, sent out nearly that many NDAs, distributed 13 sales packets, and spent about 10 hours answering questions via email. I set a deadline for offers, and by the time the deadline passed I had three suitable offers on my desk. Two of them were nearly identical, with a down payment and monthly payments. The third was something I hadn’t expected.”

The Five Minute Guide to Becoming a Freelance Software Developer
“This advice is intended for someone looking to become a freelance software developer or web designer (or looking to start a small web design/development/consulting firm). If you intend to seek venture capital then move along…these aren’t the droids you’re looking for.”

8 Ways to Recession-Proof Your Programming Career
“So in this age of uncertainty how should someone react who simply wants to collect a few greenbacks in exchange for their brilliant programming acumen? You could hide under your imitation Aeron and hope no one notices, or you could start pursuing ways to recession-proof your career.”

The Single Most Important Career Question You Can Ask Yourself
“Some people are consumers by nature; they consume vast quantities of knowledge purely for learning’s sake. Others are producers; they consume knowledge with the intent of one day acting on the knowledge and producing something, be it a book, a song, a blog, a startup, etc… Neither is better than the other. The key is to answer one question: which are you?”

How to Recruit a Developer Entrepreneur for Your Startup
“If you’re a non-technical founder looking for a developer entrepreneur, these are questions you should ask yourself. Having been on the developer side of the coin a number of times, here is my take.”

It’s a bit anti-climactic, seeing as we’ve been hearing about the financial crisis from every major media source for months. But stock indexes continue to slide and the unemployment numbers are getting worse.

So in this age of uncertainty how should someone react who simply wants to collect a few greenbacks in exchange for their brilliant programming acumen?

You could hide under your imitation Aeron and hope no one notices, or you could start pursuing ways to recession-proof your career.

1. Volunteer to Lead a Big Project
The opportunity to lead a project may not be available to everyone, but if you have serious concerns about losing your job it’s a sure-fire way to make yourself almost irreplaceable.

No manager in their right mind would fire the technical lead of a big software project. And if your manage isn’t in their right mind, it’s probably time to find another job.

2. Show Up Early, Leave Late
I’ve talked about how crunch time should be the exception in software projects. But desperate times may call for some extra hours.

I know, I know…it sounds like you’re giving in to “the man,” but let’s be honest: your company has more to worry about right now than keeping you happy. Realize it’s only temporary, and a better way to spend your time than looking for a new job.

If you were a manager forced to layoff 10% of your team, who would you let go?

3. Start a MicroISV
Build it or buy it, it doesn’t matter. What matters is that you begin generating recurring income that will sustain without your day job.

The average U.S. recession lasts 10 months and we’re supposedly 12 months into our current situation. If you were laid off next week how long do you think it would take you to find a job? A month? 2 months? 4 months?

How much would an extra $1000 or $2000 per month help during that time?

MicroISVs are a fantastic way to create recurring income that weathers tough economic times, especially if you have a niche product and you’re ruthless about automating everything.

I recently wrote about the challenges of launching a microISV, but I’ll be talking more about how to get past these difficulties in a future post.

4. Moonlight
If you have the chance think about taking on side work.

Right now companies are cutting costs and letting go of their $125/hour development shop. A lot of contract work is out there looking for mid- to low-cost providers. Keep your feelers out for contract work.

While moonlighting is not a sustainable option, if you start during a recession you’ll find that one of three things will happen:

1. You’ll get so much work you’ll be able to quit your job and consult full time. Lucky you.
2. You’ll make some money and won’t get laid off. When the recession is over you can buy an iPhone, a Kindle, and go to Cancun.
3. You’ll make some money and get laid off and be really glad you have the extra cash.

5. Become a Popular Blogger, Author, Speaker, Podcaster, etc…
In good times and bad, being a superstar is a good way to keep your job.

It’s hard to fire a developer with 10,000 podcast listeners, not because she might say bad things about the company, but because co-workers look up to her as an alpha-geek. Fire her and morale will take a big hit.

6. Become a Trainer
It’s generally accepted that recessions boost college enrollment. But companies that perform technical training also see a jump as laid off workers go back to the classroom to update their skills.

Back in 2001 I worked with a consultant who was a developer when times were really good, and a trainer when times were really bad. He did a little of both during the rest of the time to keep himself interested, and  maintain his skills in both arenas.

If you have the gift of teaching, now is a great time to pursue it.

7. Write Technical Articles
Not only do technical articles help with your alpha-geek status (see #5), but you can make a little coin along the way.

Surprisingly enough, articles for programming magazines can bring in several hundred to a thousand dollars each, depending on length.

Check out one of these directories for a magazine that matches your skillset.

8. Work for a “Recession-Proof” Company
Granted, no company is completely recession-proof, but sectors like health care, pharmaceuticals, defense, government, and consumer staples do well in good or bad times.

Boring programming jobs? Indeed. Stable in a recession? You betcha.

Coinstar, and companies like it, do well during recessions because people start cashing in their unused change.

Walmart, Target and other discount retailers also fare well, since consumers tend to ease back on luxury items and head to the discount stores.

After about 8 hours of troubleshooting I was downloading all of the files and database to move to another host, when the DreamHost support rep suggested I try to run this site under a different shell username. It was a shot in the dark, but sure enough as soon as I moved it to a new user everything started working. Unbelievable.

Of course, next was the hard question: Do I spend the 5 hours to move this blog to another hose, knowing that I’ve had no trouble with DreamHost in the past couple years and that a new host is as likely to have similar issues?

I’m sure some people will post comments about how bad DreamHost is, and all the problems they experience, but every host I’ve used (4 total) has at least this many problems, and I’ve experienced more downtime at other hosts.

After much consideration I’ve decided to stay with DreamHost for now, and have upgraded to their Private Server (PS) hosting, which allows me to move a dial and increase my usage in real time so this kind of thing can be avoided in the future.

But what bothers me is that this still doesn’t explain why my blog, which was not getting any more traffic than usual on Wednesday morning, suddenly became a processor hog.

WordPress? DreamHost? I’ll probably never know…

Update: An awesome DreamHost tech support rep named Mike M. went above and beyond and figured out one of my problems was a malicious comment spammer who was hitting my site repeatedly.

After taking care of that I noticed that the wp-cache is locking the site up once every couple days. I now know how to correct it once the lock happens (clearing the cache), but I have yet to find a sustainable resolution.

For now I am disabling the plug-in and hoping I don’t wind up with a big spike in traffic before I can install another decent WordPress caching plug-in.

===

You may have noticed this site was down all day yesterday.

After about 5 hours of troubleshooting I’ve narrowed it down to either a WordPress issue, or a DreamHost issue.

Closing HTML Tag Killer
I know how to fix the problem: If I go into footer.php and remove the closing HTML tag the home page and single post display work…if I add it back they crash (500 error - when I look in the error log the message is “Premature end of script headers: php5.cgi”).

But the weirdest part is that I haven’t touched the blog, aside from publishing a couple new posts, in weeks. So for this to start suddenly means something else must have changed.

RSS Also Down
Although I hate the idea, I was considering leaving it without a closing HTML tag for the weekend and coming back to it after the holiday since browsers are very forgiving about not having a closing HTML tag. However, I noticed my RSS feed is also down, and when I remove the closing RSS tag the feed works in my browser, but FeedBurner chokes on it.

So I actually have to solve this problem. I’ve tried everything I can think of but haven’t made any progress in the last few hours.

404 Works
The last piece of information is that the 404 page works whether or not the closing HTML tag is in place. But when I copy the 404 page code into the index or single post template, it still crashes. So it seems like the content of the index and single post page don’t matter that much, although if I remove all of the content from these pages they do load fine.

Add to this the fact that the site stopped working very suddenly at 9 in the morning and it seems to me this is either a DreamHost issue or I’ve been hacked.

Help?
Any ideas are appreciated…

If you’re a WordPress guru and want to take a crack at fixing it I have no trouble compensating you for your time. Please email me at rob@softwarebyrob.com.

MileMeter - Auto insurance by the mile. If you drive less than 12,000 miles per year it will probably lower your insurance expenses. It also encourages you to drive less.

The Stupidest Exercise Machine You’ll Ever See - Title says it all.

91 Surefire Ways to Become an Event Greater Developer - Careful, you could kill days trying to do everything suggested in this list.

ResearchedFacts.com - “Tired of losing arguments just because your facts happen to be incorrect? We can help! Simply make your dubious assertions anywhere on the web and link back to us. We’ll back up your claim as a ‘Researched Fact’.”

Has A Customer Ever Tattooed Your Company Name on Their Arm?

Open Source, For-Profit Startups - “FairSoftware is the place to start and grow your online business. We help you team with others, track revenue and share it openly and fairly. Hire people in return for a share of your income stream instead of upfront cash. You save money and they have more incentive to collaborate.”

One Laptop Per Child Give One Get One 2008 - For $399 you get one XO laptop for yourself, and one is sent to a child in a developing nation. The keyboards are small, but they run Linux and have wireless NICs.

$19 Usability Testing -  This is awesome. For around $19 (you can add bonus money to get your tests completed faster), you get a 15-minute video of a real user going through your site or web app, and a written summary of their findings. I’ve used it on two projects and it has raised a slew of issues we had no idea people would have problems with. Definitely worth a look.

And finally, from Paul Graham’s essay Why to Start a Startup in a Bad Economy (emphasis added):

If we’ve learned one thing from funding so many startups, it’s that they succeed or fail based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it’s a rounding error compared to the founders.

A certain percentage of developers become unhappy with salaried development over time (typically it’s shortly after they’re asked to manage people, or maintain legacy code), and they dream of breaking out of the cube walls and running their own show. Some choose consulting, but many more inevitably decide to build a software product.

“After all,” they think “you code it up and sell it a thousand times - it’s like printing your own money! I build apps all the time, how hard could it be to launch a product?”

Against All Odds
And most often the developer who chooses to become a consultant (whether as a freelancer or working for a company), does okay. She doesn’t have a ton of risk and she gets paid for the hours she works, so as long as she has consulting gigs she can live high on the hog

But developers who make the leap to develop a product are another story. Building a product involves a large up-front time investment, and as a result is far riskier than becoming a consultant because you have to wait months to find out if your effort will generate revenue. In addition, growing a product to the point of providing substantial income is a long, arduous road.

But let’s say, for the sake of argument, that you spend 6 months of your spare time and you now own a web-based car key locator that sells 100 copies per month at $25 a pop. At long last, after months of working nights and weekends, spending every waking moment poring over your code, marketing, selling, and burning the midnight oil, you’re living the dream of a MicroISV.

Except for one thing.

The Inmates are Running the Asylum
In our completely un-contrived scenario you’re now making $2500/month from your product, but since you make $60k as a salaried developer you’re not going to move back in with your parents so you can quit your day job. So you work 8-10 hours during the day writing code for someone else, and come home each night to a slow but steady stream of support emails. And the worst part is that if you’ve built your software right the majority of the issues will not be problems with your product, but degraded OS installations, crazy configurations, a customer who doesn’t know how to double-click, etc…

The next step is to figure out, between the 5-10 hours per week you’re spending on support, and the 40-50 hours per week you spend at work, how you’re going to find time to add new features. And the kicker is that support burden actually worsens with time because your customer base grows. After 1 month you have 100 customers with potential problems, after a year, 1,200.

And yes, the person you decided to sell to even though they complained about the high price ($25) and then couldn’t get it installed on their Win95 machine so you spent 3 hours on the phone with them and finally got it working only through an act of ritual sacrifice is still hanging around, emailing you weekly wondering when the next release is coming out with his feature requests included (requests that not a single one of your other 1199 customers have conceived of).

But you persevere, and manage to slog your way through the incoming support requests and get started on new features.

What you find is that ongoing development, as with any legacy system, is much slower than green field development. You’re now tied to legacy code and design decisions, and you soon realize this isn’t what you signed up for when you had that brilliant flash of insight that people need web-based help locating their keys.

It’s about this time that support emails start going unanswered, releases stop, and the product withers on the vine. It may wind up for sale on SitePoint, or it may be relegated to the bone yard of failed software products.

The Upside
The flip side to all of this is what you’ve already heard on the blogs of successful product developers.

Once a product hits critical mass you’ve conquered the hardest part of the equation. After that the exponential leverage of software products kicks in and you can live large on your empire of web-based unlocking-device locator applications. It’s a recurring revenue stream that can grow far beyond what you would make as a consultant, all the while creating balance sheet value meaning one day you can sell it for stacks of proverbial cash and retire.

This is unlike your consultant buddy, whose consulting firm is worth about 42 cents (he had an unused stamp on his desk) once he decides to retire.

But there is a dip before you get to this place of exponential leverage and proverbial cash. A big dip. And if you can get through it once, it’s more likely that you’ll be able to get through it with your next product. And the one after that.

Once you make it to the other side, you’ve learned what it takes to launch and maintain a product, and next time you will have a monumentally better chance of success because you are now a more savvy software entrepreneur.

Congratulations! Go buy yourself a nice bottle of wine and sit back, relax…and enjoy answering your support emails.

It’s an easy book to pick up for a few minutes at a time since each chapter (comprising one interview) is only 5 or 6 pages. Many of the ideas presented are unique to this book, and I’ve been keeping a running list of changes I plan to implement on this blog.

The book hit the shelves last week. You can buy it from Amazon, or from the Blog Blazers website.

I’m intrigued by the unique concept of this book: to provide alternatives to IT workers looking to change careers, but who want to leverage their existing technical knowledge.

The book lists 20 positions and includes an overview of each, a job description, an example of the typical workday, advice on where to look for this type of job, and a look at how the job is likely to hold up to outsourcing and a recession.

A few of the job titles include:

• Product Manager
• Systems Engineer
• Technology Due Diligence Analyst
• Technology Insurance Underwriter
• Intellectual Property Lawyer

For someone looking to leave software development, this book would serve as a good starting point for additional research. I would not recommend it to the casual reader (the text is a bit dry), but if you are seriously considering leaving programming it’s a good way to get an idea of where you might find refuge.

If you’re in this position drop me an email and I will send you my copy. (sent)

I’ve been on both sides of the coin: I’ve purchased 10 profit-oriented software products or websites, and built three.

Knowing what it takes to develop the initial version of a non-trivial software product (read: hundreds of hours), I’ve become a fan of buying. This is based on two factors:

1. I have no spare time and a bit of spare money
2. Hmm…no, I guess #1 is the only reason

As a software consultant I’m booked full-time and I bill a reasonable hourly rate. So to spend 348 hours (2 months) building a product means I’m approaching a mid-five figure investment into a software product. That’s not play money; those are real dollars that don’t wind up in my pocket.

And I don’t have the confidence in my ability to know a market well enough that I would drop that kind of money on an untested product idea when there are less risky alternatives.

Looking at the products I’ve bought and built, none of them required skills beyond that of a mid-level developer. Sure, there are products that are more complex, but let’s be honest, building an invoicing system does not involve insanely complex algorithms and coding chops. Most successful Micro-ISV products (and a lot of not-so-Micro-ISV products) could have been built by a few solid mid-level developers.

With this in mind, spending 348 hours of my time doesn’t seem like the best business decision when I can:

1. Hire someone to build the application (in my case, use the team I already have in place), or
2. Find a proven product that may already have a customer base, sales website, etc… that I can buy for less than I can build it

You probably think I’m nuts, preaching “buy” over “build” to a group of software developers. So let’s take a closer look at the scenarios:

Building It
I love writing software, so this has historically been my path of choice. However, the amount of money (based on lost consulting hours) I would spend on a 1.0, plus building a sales site, documentation, SEO, pay per click (PPC) campaign, etc… would be at least $40,000.

I have faith in my ability to build and market software, but that’s a lot of faith to put into something that’s generating zero cash. You’d be nuts to buy a software product with no revenue for $40,000.

However, if you want to run a Micro-ISV because you enjoy writing code, or you have a lot of non-billable spare time, then this is a viable option.

But I must caution you - laptops around the world are filled with the remnants of half-built products. Committing 200+ hours of your spare time to build and launch a product is no joke. Writing code 50 hours per week you would have a 200 hour project launched in 4 weeks…no problem!

But if you’re coding in your spare time you’ll be lucky to get in 10 hours of coding per week, and your productivity will be low because it will be 2 hour blocks when you’re already tired from schlepping mindless reports all day for “the man.” Trust me - I’ve done it. It’s not easy.

Soon that 200 hour project turns into more than 20 weeks of your free time…almost 6 months. The first month is a breeze, it’s the last five that’ll kill ya!

Hiring It Out
Hiring someone to build your software is a good middle ground, and allows you to maintain some control over the technical piece without it sucking the coding life from your veins.

The advantage of hiring out product development is that it gives you time to build the sales site, write documentation, focus on SEO, marketing, PPC advertising set-up, payment processing, and the hundred other things I’m forgetting to mention.

If you’re doing things right, the effort to get your product built is around 50% of the total time it takes to launch a Micro-ISV.

I’ve found success in outsourcing code and graphic design, and handling everything else myself. “Everything else” means the business side of things…the piece where you will  likely learn the most, where you can bring the most value, and that you can’t easily outsource.

And think about it…a lot of people can build a good invoicing application. A lot.

But how many can work the necessary marketing angles, form partnerships, create a profitable pay per click campaign, and build a compelling sales site? Finding someone who can execute on these is much more difficult (and more expensive) than finding a developer who can build your application.

The single most important factor in the success of a Micro-ISV is marketing and sales, not the software itself.

In no way am I arguing for mediocrity in software development - your software has to get the job done. However, don’t believe for a minute that great software beats great marketing. It never happens.

There’s a reason Bob Walsh doesn’t help developers write better applications. He helps educate them on sales and marketing.

FogBugz is good, but probably not the best bug tracking software on the market. Yet I bet it outsells most of its competitors by a huge margin based on marketing.

If you don’t know how to work the marketing angles, form the partnerships, and do the other things I mentioned above you’re going to need to:

1. learn fast,
2. find a partner, or
3. stick to the day job.

Seriously…building (or buying) a great application is not going to get you there.

With this in mind, let’s take a wild swing at the costs involved in this approach:

The graphic design and HTML will run from $500-$1500 if you offshore (optional depending on your personal view). Doing it in the U.S. will cost $2,000-6,000.

Two months of development (a safe estimate when hiring someone to build a small product from scratch) will run $14k-$21k here in the states, or around $7k if you offshore.

Total you’re looking at $16k-$27k in the states, $8-9k if you offshore. These are obviously very rough numbers based on a typical Micro-ISV product requiring two months of development.

The potential pitfalls of this approach are obvious: if the developer is bad, you get software that doesn’t work. A key strategy here is to screen your developer carefully and only hire really good ones.

Also, design the DB and screen mock-ups yourself. Not only will you get much closer to the product you envision, you’ll be able to maintain it in the long-term.

Buying It
This is the approach I started favoring about two years ago. It started with my interest in buying (and later selling) domain names and websites. I soon realized that there are bargains to be had when buying a product or site that’s already making money.

DotNetInvoice (my ASP.NET billing product) is a good example - I purchased the product, sales site, payment processing code, search engine rankings, and a small customer base for about 20% of what it would have taken me to build it, and yes, even cheaper than I could have hired someone to build it. It was built in Florida by two professional developers in their spare time. Quite a deal, indeed.

The reason these products and websites sell for such low valuations is that the market values revenue, and most of the product developers don’t have the marketing and sales knowledge to bring their product to its full revenue potential.

This means there are completed software products and websites for sale, selling for literally pennies on the dollar compared to your cost to build them. I realize this sounds like a late night infomercial, but believe me, it’s true. And how much would you expect to pay for this information? Just kidding…

The pitfalls of this approach:

1. You’re taking on risk in buying a product you didn’t build
2. You can’t search for a specific type of product; for the most part you’re limited to what’s for sale

As an example, I didn’t go looking for an invoicing system. I happened across DotNetInvoice and made an unsolicited offer. If you read my original account of the purchase you’ll know there were some early hurdles that I had to overcome. But once I worked out those kinks I’ve never doubted that I made the right decision.

One aspect I really like about buying a product is that it forces you, right off the bat, to not think about code.

As developers we want to spend all of our time working on technology because it’s where we’re most comfortable. But as I mentioned above the real hard work, and where you should spend the majority of your time, is on marketing, PPC, SEO, and partnerships. Buying a product forces you to think like this because the thing’s already built.

If you don’t want to spend the majority of your spare time on non-technical issues like marketing, I suggest partnering with someone who does, or sticking to the day job. The day job will probably pay better, anyway.

I recently purchased a brand new Inspiron 1525 and ran into a number of problems after the order was placed that resulted in a 6-week delay in receiving it. I killed at least three or four hours with customer service, and several reps were actually quite rude on the phone. It was very interesting to have them give me attitidue and then to have no recourse (i.e., I asked to talk to their supervisor and they kept saying he was not available. I called back, waited on hold for another 20 minutes and talked to a supervisor who totally blew me off). That put me on the edge.

Then last night, I restarted my laptop and saw this:

My six-week old hard-drive is failing.

Sure, I have backups, but six weeks ago I spent close to 20 hours installing Vista 64 and the other 40 apps I use on a regular basis. Needless to say I don’t have another 20 hours to kill. But after 30 minutes on the phone with an unhelpful (and downright nasty) Dell tech support rep, a new drive is on its way. Don’t invite me to your house this weekend; you know what I’ll be doing.

Next time it will be Sony or Toshiba. Or does anyone have other suggestions on good brands?

Dell is dead. Long live the king.

Update
The day after this post went live I received a call from a Dell Level 3 Tech Support Specialist who was asked to contact me by Dell Corporate. The guy was a “Fixer,” and a good one at that.

The new hard drive had arrived by 7am that morning and the Fixer walked me through the install process and asked a few detailed questions about my previous experience with tech support. He let me rant for a few minutes, apologized, and got my system running again very quickly. He was insanely knowledgable - by far the best tech support person I had ever spoken with at Dell. Level 3, indeed.

He gave me his direct email and phone number and said if I ran into any problems to contact him. I re-installed Windows and my other apps in about 14 hours this time around, and was ready to work by the following Monday.

So at least one big company is listening. At the same time, if you don’t find a company with great customer service, or you don’t have a public soap box through which to voice your complaints, you’re going to be forever relegated to poor customer service prison.