how do you increase your runway? really – i’m asking!

In my last post, I mentioned that I’m running a business that’s not “ramen profitable”. That might not be true; it depends on how you define “ramen profitable”. If it means “you can afford to buy enough ramen to live on”, then, in fact, I am ramen profitable! That’s actually pretty cool. But if it means “you can afford to pay for your basic necessities”, then no, I’m not ramen profitable. And that kind of makes me sad. I can afford to pay my groceries on the income from my project. I can’t afford to pay for my health insurance, or my rent, or the gas that I put into my car. Any extra expenses come out of my savings.

more runway is better

In the startup world, your “runway” is the amount of time you have to run your company before it runs out of money. I worked as a software developer for many years before I decided to start my own business. During that time, I saved up a few years of living expenses. So my runway is pretty long. But it’s not indefinite. That means it’s imperative that I find a way to make more money from my current project, or that I figure out some new way to make money. If neither of those options works out, then it’s back to full-time employment for me. That would be more than just a little bit disagreeable, so you could say I’m highly motivated.

In case you are wondering, I’m already aware that you can improve your runway by trimming expenses. I’m pretty good at that, and I’ve done basically all I can do (or am willing to do) in that area.

I wouldn’t exactly call myself a “startup founder”, since I’m not trying to start a company that employs anyone other than me. I’m probably more aligned with people who run “lifestyle” businesses. The truth is, I wouldn’t work at all if I didn’t have to. It always surprises me when people claim that they would work even if they didn’t need to. There are so many other things to do in life, and so much of “work” is completely unproductive nonsense.

These are my ideal situations, in order of preference:

  • Do what I want and not work at all
  • Work on something that’s at least marginally fun, but not full-time, so I have plenty of time for other things
  • Work on something full time, but with flex hours; so, for example, I can go have fun during the week when other people are at work

I’m not even going to put FT work in that list. If I have to go back to the dreaded FT, it will be far from ideal. If it comes down to that, then I guess it will be a win if I can find FT work with flex hours. Not easy, even as a software dev.

So, my current and most urgent problem is that I need to increase my runway. People will tell you to “just take some contract work” in situations like this. This advice leaves me scratching my head. Based on past experience, I am pretty sure that I’m a good software developer and that I am quite capable of doing contract work. However, my experience has been that contract work is hard to come by, unless perhaps you are willing to take temporary full-time gigs. This is something I’d rather not do, because it would mean stopping all progress on my project. And even then, most of the available contract gigs are temp-to-perm. If you take one, you may have to lie, and say that you are potentially interested in going full-time at the end of the contract.

I have this vague feeling that there are tons of software devs out there, chugging along, doing contract work part-time to fund their labor-of-love projects. Is it true? If so, how do you get there??

health insurance

If your employer pays for part of your health insurance premiums, you may be one of the lucky ones who can ignore the turbulence in the health insurance market.

That’s not me, though. I live in the United States, and like it or not, I’m forced to participate in the whacky health insurance system that we have here. I’m self-employed. Last year, I was paying about $5000/year for health insurance premiums. I was on a high-deductible plan that I had bought directly from the insurance company. I’d started on it before the ACA came into effect, and never tried to move off it.

what does a crutch really cost?
how much?

And then, last year, I moved to a new state. I’d estimated that my living expenses would go down if I moved. I knew I’d enjoy an increase in opportunities for outdoor activities, which would make me happier. I had some trepidation about what my new health insurance premiums might be. However, I decided that it was not an option to continue to live in one state for the rest of my life simply due to uncertainty about health insurance. I pulled the trigger, and made the move.

In the ACA, a move to a new state is called a “qualifying event”, and it lets you use the health insurance exchange to buy a new plan. During the search process, I learned that my income was so small that I qualified for Medicaid, and that I wouldn’t have to pay any premiums at all! It was galling, since I don’t think of myself as someone who needs Medicaid. However, I’m also not someone to pay for something that I can get free of charge. So I went on Medicaid.

During the course of this year, I picked up some freelance work to help bolster my income (unfortunately, my business is not even “ramen profitable”, and I do freelancing to pay my bills). Apparently, I am not a shrewd enough business person, however. I did enough freelance work that my income disqualified me from Medicaid. This meant that I was tossed off Medicaid mid-year. Getting tossed off Medicaid is also a qualifying event, so I went searching on the exchange again. “Fortunately”, I’m still making such a minimal income that I qualify for tax credits that pay for almost all of my health insurance premiums. I put “fortunately” in quotes because I don’t think it’s fun to live on approximately $20K of income per year. I’d rather make plenty of money, and have to suffer with paying the premiums myself. But that’s just the way things are going for me right now.

So why am I writing about health insurance premiums? If you live in the USA, health insurance premiums can make or break your plans to bootstrap a business. You can do all kinds of things to reduce your cost of living. Get one or more housemates. Eat ramen. Buy your clothing from thrift shops. Participate in the “gig economy”. However, you have very few choices when it comes to health insurance. You can refuse to pay into the system, and run the risk that you might incur enough medical expenses to bankrupt you (or, possibly, to even wind up killing you). Or you can choose a plan with a high deductible. This is what I’ve always done, but even those plans have become quite pricey. As an example, I’ve now bought into a plan that covers me for the next year. The annual cost will be almost $8000, without taking into account tax credits. And that plan has a deductible of about $7000.

I don’t like the health insurance system in this country. I don’t like that health insurance is heavily linked with employment. I don’t like that my health insurance plan has to change when I move from one state to another. I don’t like that even though I’ve been covered by health insurance for most of my life, I may incur huge expenses if I’m unlucky enough to have an accident or become sick during a brief period when I’m uninsured (and I’ve never been uninsured intentionally – it was always a move or the recent Medicaid fiasco that caused me to become uninsured for a short period of time).

Single payer is the way to go. I’m tired of hearing about how larger companies have more bargaining power with health insurance companies, and that this is why small firms have such high premiums.  If a large corporation has bargaining power, then how much more bargaining power would the entire population of the US have? Oh yeah, and I’m also tired of having my health insurance options decided by people who are disconnected from the health insurance reality that faces less privileged members of our society.

If we can get everyone covered by a single group insurance plan, I’m betting that everyone’s rates would go down. I think the cost of healthcare in this country would go down as well. I don’t have proof, except to point to how much better it works in numerous other countries. The US population has been comfortable ignoring the fact that many less well-off, self-employed people have been screwed by the tight link that formed between health insurance and employment during WWII. As more people lose their full-time jobs and start working in the crappy gig economy, it’s clear that something has got to change. It is time to cut the cord between employment and health insurance!

should bootstrappers reveal their revenue?

The user patio11 is legendary on hacker news. In 2006, he developed a piece of software called “Bingo Card Creator” which let users “print custom bingo cards on [their] own PC or Mac”. In 2008, he went open kimono to the world with his sales stats. He was selling up to $60K/year of software, at times. Then, in 2015, he sold the website (in case you are wondering, it did not bring him a fortune).

Revealing your company’s revenue probably didn’t start with patio11, and it certainly didn’t end with him. Amongst microISVs, it has become faddish to do so (e.g. see Indie Hackers and Baremetrics). From a spectator’s viewpoint, it’s both entertaining and informative. Seeing these stats, any developer who is tired of working for others will surely think: “If there are so many successful micropreneurs, why can’t I be one, too?”

Such openness is inviting and attractive, and it might even generate favorable PR. But it also seems like a huge vulnerability. The biggest danger is telling a bunch of ambitious software devs (or product / biz-dev people) about your income-generating website or software product. You may very well wake up one day to find that 30 clones of your site (or product) exist, each making a small amount of money, and your own revenue source suddenly decimated. To be sure, I think this is more of a danger for smaller sites. If you are making hundreds of thousands of dollars in revenue each month, you probably have a monolithic organization with a sales and marketing / PR team to protect your business. But then you aren’t really a microISV anymore, are you?

So why do some software micropreneurs and bootstrappers share their revenue? Ya got me. I’m betting the number of software shops that share their revenue numbers is small compared to the number that are quietly humming along successfully and hiding their revenue. I hope that’s the case! It would be nice to know that there’s still a lot of room for the rest of us to enter this frothy market.

There’s a related discussion of this topic at hacker news: Ask HN: successful, transparent bootstrappers?. Caveat: it’s 7 years old! There was a suggestion that being transparent helps to build business contacts… so you might consider that as a useful side-effect to this kind of openness, if that’s something that might help your business.