Information Technology Dark Side

Hobby startups don’t have to be expensive. My startup, TroopTrack.com, has a burn rate of $106 each month. All I have to do is add three paying customers every month and I’ll break even (roughly). Guess what? I’ve been breaking even for almost six months now.

I’ve found that breaking even is very important to Shannon (my wife). She doesn’t mind the time I spend working on TroopTrack most of the time, and she wouldn’t mind investing a little money in a marketing campaign every now and then, but when it comes to every day operating costs, she wants TroopTrack to be self-sufficient, no matter how small it is.

Honestly, I just kind of fell into my financial strategy for TroopTrack (no use pretending it was part of my original grand strategy). But, now that I’ve been in it for over a year I have a real strategy that guides not just how I spend my money, but also how I spend my time. I want TroopTrack to break even there too (figuratively). In other words, I want to spend my time adding stuff the customer can see, not doing things that make no difference as far as they can tell. So, here’s my strategy in a single sentence:

Operationalize TroopTrack in a way that optimizes the amount of time and money I can spend adding new features, supporting existing customers, and adding new customers.

Given that strategy, here are a few of the ways I’ve implemented this.

Investments to Avoid Until You Need Them

1. Hardware – Don’t buy hardware, just rent or borrow it. Make sure to choose a host that is inexpensive and has a good reputation. Only get one environment – production. If you REALLY need a test environment run it on an old PC – you probably have six in your closet. Start with the smallest environment you can and only upgrade it when customers complain about performance (or you have some other clearly demonstrable problem requiring an upgrade). I recommend Heroku for Rails apps or SliceHost.
2. Billing Solutions – Keep this as simple as possible and don’t bother automating it until you really need to. TroopTrack billing still isn’t automated – after a customer makes a payment I have to manually mark their account as paid. Trust me, at three transactions a month I can keep up. Frankly, at 100 tx/mo it wouldn’t be a problem – Shannon would be happy to do it at that point. I recommend Google Checkout – it only took me about ten minutes to add payment through Google Checkout to TroopTrack. Avoid any service with a monthly fee. You don’t need those guys until you need them.
3. Provisioning- Cell phone companies didn’t start out with phones that provisioned themselves when you turned them on. New customers had to walk through manual steps, usually with the aid of an expert, for YEARS and that industry still took off. In the same vein, don’t go to huge lengths to automate everything related to adding new customers, at least not until you need it and you have enough experience to know what it should be like.

Investments You Should Make Early

1. Help Desk- don’t roll your own. It will suck time away from real development. For less than $10/month, you can get a Help Desk with forums, SLAs, single-sign-on and other great features from ZenDesk. Your customers will love your help desk, and it will save you countless hours and help you avoid costly mistakes with your customers.
2. Source Control - Sure, you can install git or svn on your own computer and keep your code there, but don’t. It’s just another thing you have to maintain yourself that also limits how you work with others. Just buy that private GitHub account (less than $10/month) and let them handle it.
3. Backups- Your hosting company probably has a backup option for your server. Get it. You don’t want to lose customer data or have to start over. This is usually pretty inexpensive as well.

Here’s what my monthly burn rate for TroopTrack is:
- Hosting @ SliceHost: $70
- Backups @ SliceHost: $20
- ZenDesk: $9
- GitHub: $7

Grand Total: $106 per month

Many people spend more than that on coffee in a month.

I am going to add another big expense soon – I’m moving all my email over to RackMail. That’s gonna cost me another $3 each month. So put down that Latte – you just paid for next month’s email server!

Stumble it!