Ten Things that Kill a Side Project
Who hasn't thought about building a side hustle? I've been through it several times and this is what I've learnt.
Side Projects are great: they let you scratch an itch you may have been having for a while and they hold the potential for striking gold. But having launched at least 12 side projects in my time (there are probably some others I’ve forgotten), these are the things that held some of them back.
Broadly, the problems fit under three categories: Product; Organizational; and Revenue. Let’s take each of them in turn.
Not validating early on
Entrepreneurs often believe they have a sixth sense when it comes to knowing what customers want. They call it ‘trusting their gut’. And while gut-feel is great for prompting ideas, you have to speak to real potential customers to see if the problem you are solving is actually that much of a big deal to them, or whether you are only half-solving the problem. It could be that you are solving a problem only you care about. We spent over a year working on a product that solved the ‘admin problem’ of getting a new domain, setting up all your DNS etc and firing up your related social media accounts. Trouble is, we didn’t show our thinking to any customers before we jumped in and when it was done, nobody wanted it.
Lack of optimization
If your product is your main business you are obsessed with optimizing every part of it. Onboarding your customers, for example, becomes an exercise in scrutinizing every aspect of the funnel, working out where things could be improved and experimenting to see if you can convert more of the gold dust that are your leads. But in my experience, a side project just doesn’t get the head-room (or resources) for improving things. If it’s allowing customers to sign up then great. Maybe only 50% of leads actually make it through the onboarding process, but who has time to figure that out, let’s just be thankful we have paying customers, right?
Lack of innovation
Ditto looking forward. You may have a vague road map about future features you want to introduce when you get a bit of down-time, but only if you have the time and even then, you may prioritize things that can be done quickly or things that feel the most sexy, over things that will have the biggest impact. And these new features come from where? The results of a detailed validation exercise with potential and existing customers, or the whims of an engineer who had a great idea in the shower? Ok - I might be exaggerating, but you get the picture.
If nobody really ‘owns’ the side project this can really hamper progress. But just being responsible for a project in itself isn’t enough. What are they actually responsible for? What targets are they given? What are the consequences of missing or smashing the targets? What resources can they call on? Is it their full-time job or one of many, and if so, how do they decide which job takes priority? In my experience, where we had a full-time resource to run the side project , it did a lot better. Better still when it was us who were fully dedicated to running it.
Our idea at one point was to build a portfolio of side projects. The trouble is, the more you have, the less focus and resources you have for each of them. That thing I said at the beginning of this article about the potential promise of striking gold. Is that more or less likely to happen if you only give your nascent creations a fraction of your time each? World-class Decathletes don’t tend to also be world-class in a single discipline.
Squeakiest wheel gets the oil (or grease)
If you run a services business and have some side projects, what happens when your biggest client screams? Do you say, ‘yep, we’ll be right onto it once we’ve finished this important update to our side project’? Of course you don’t. And the problem is, there is always someone somewhere screaming about something or the other: the project is late, or it has bugs, or the design hasn’t impressed the CEO, or there is an argument about project creep. You know the score. So when do you get to spend quality time with your baby(ies)?
Aligned to the above. Generally-speaking, if you are doing projects, these will be to clients who are paying you more than those who use your product. You might charge $100,000 for a consultancy/agency project, but your side-hustle charges a $20/month/licence fee. Which in turn means that your side project serves a different class of customers. But if you are the one paying, whether it’s $100,000 or $20, you want to be treated like a valued customer. Whether that means that the product feels like its constantly being improved, or the customer service response times and resolutions are fast, or whether there is a sense that the leadership is also a thought-leader in the field. You can soon get a sense of whether you are considered valuable or not. And nobody likes paying someone if they don’t value their custom.
Passive Income Mindset
Passive Income sounds amazing. I remember the first year one of our mobile apps blew up over Christmas (the year when everyone got an iPad in their stockings) and I realized we made more money eating turkey and drinking mulled wine, than we paid ourselves in a year for the blood, sweat and tears that agency-work demanded. The reality though is that if your main objective is to make income passively, then all of the issues I’ve outlined in this article are way more likely to come true because you’re going to resent spending any additional time, money or effort.
Expectation of early-profitability
Naively, when we first had a minor ‘hit’ with our first SaaS product, I thought the hard work was done and we just had to bide our time to get paid for the effort. As it turned out, this particular project repaid our investment many times over. And part of the reason it did was because we didn’t really do much more with it once it was out there. Or at least we did the bare minimum. Why? Because I thought that spending any more money would make us unprofitable and that would be just stupid. But in reality, spending more money would have/should have delivered greater returns down the line. Amazon took 9.25 years to break even. Imagine if Jeff Bezos had decided he was done doubling-down on Amazon’s growth and sat back to enjoy the fruits of his labor in 2000?
Churn: the silent killer
A side-effect of a successful product (assuming its a subscription-based one), is that as your revenue grows, so does your churn (the revenue you lose each month because customers leave you or want to reduce the amount of licences they use). Churn normally runs at a predictable percentage of total revenue. So if your monthly churn rate is 5% and your Monthly Recurring Revenue is $10,000, your revenue churn is $500. And when you get to $100,000 it will still be 5% which will mean $5,000. Trouble is, your new business isn’t really related to how much revenue you are doing, it’s much more related to the level of sales and marketing investment you are making. And unless you ramp it up, your churn will soon catch up with and eclipse your new customer revenue, meaning your recurring revenue growth will plateau and decline.
Man this is depressing, isn’t it? Well yes and no. Side projects are brilliant and help you hone your skills. And there’s nothing wrong with having a portfolio of IP that you can monetize. They key thing is being aware that nothing just magically becomes an overnight success without a lot of effort. For us, the only side project that really blew up was the one we decided to fully commit to, to the exclusion of everything else. Want to know how? Get in touch and I’ll see if I can help you.