How much money would be enough for you to consider jumping in and going full-time as an indie hacker? It's a scary thought we've all mulled over. And an exciting one.
Recently, one of the prolific makers I follow on Twitter, Damon Chen, made that very leap, and the idea started occupying my mind again.
I've frequently wondered what my own conditions for doing this would be. My own rough mental heuristic has always been that I'd leave my day-job if my side project managed to net enough to match my salary, for at least a couple of months.
One problem with this approach is that as your salary increases over the years, that threshold keeps getting higher and higher too. Golden shackles or increased motivation? - I guess it comes down to your point of view. But I digress.
To be honest, I've never really given much further thought to what "a couple of months" really meant either - I always figured I would know when it was time. Currently I'm leaning towards it being consistently more than my salary for between 3-6 months.
I don't know, I've never really been close to making that choice myself yet. But for the purposes of reflection(and this post) we can still consider the context of the choices for those who have.
Obviously, as a probably unneeded disclaimer, I must note that the decision to leave a stable job with a predictable income for the wild-west of indie hacking is very personal, since everyone's situation is different.
We all live in different countries with different costs of living. We have different tolerances to risk, amounts of dependents, income ranges, ages, and a whole host of other factors.
We can't nail down fit-for-all metrics to base such a decision on by just looking at raw dollar values. What we can assume though is that the key to taking the plunge(and not hitting rocks) comes to managing the downside and risk. After all, the upside could be an income of $10,000+.
Let's look at some examples of those who have gone 100% bootstrapped see if we can glean some commonalities.
3 Stories of success
Damon has been a very busy man the last year. He has been launching business after business and while he struggled to get traction initially, things seem to now be gaining proper momentum for him.
From his tweets, one can gather that he had a rough goal in mind of $1000 MMR as his quitting trigger.
But, seeing as he was a senior software engineer at Cisco systems for 8 years and that he has a lovely young family, I suspected that there was a little more prep work behind the scenes.
I DM'd him to pry a little and he was happy enough to oblige me.
Note that Damon didn't quit his job in a mad rush and reckless abandon with the first inkling of a random idea. He took the leap to full-time indie hacking with careful measured preparation;
- Enough savings to cover several years worth of expenses
- A secondary, stable household income
- An value proposition that has proven itself to have traction with solid growth and an MMR of at least $1000(at the time of writing)
- Years of experience as a software engineer to fall back on, just in case
Jon runs BannerBear.
He tweeted about this very subject not that long ago, inspired by a story of another indie hackers' failure.
Jon decided to take the leap with a runway of $200,000. He later clarified that he meant $200k in liquid savings specifically! In other words, not his entire net worth including retirement funds etc. I presume that he considered all assets outside of that $200k cash windfall as off-limits to living expenses.
He noted that when he went full-time bootstrapping he was single and had years of experience as a senior developer. He thus had a runway of literally years to try and make things work, fail, and try again.
There was no risk to anyone else, as he didn't have dependents that could end up living on the street.
And finally, he had some solid career prospects to fall back on just in case.
From following Jon on Twitter, I could also gather that he spends a lot of time in South East Asia. A dollar goes a long way in SEA, so the benefits of Geoarbitrage also come into play here too.
Alex quit when his side project, Cyberleads, made more than his salary for the 6th month in a row.
Alex was serious about managing his risk since he had tried and failed to start a business with real potential 19 times before.
He seems to be doing OK.
Another metric he considered was his MRR growth rate. He only felt comfortable taking the leap when his business growth proved to be consistent.
He also had some cash set aside - about $50,000. Not bad for a single guy. On top of that, he managed his expenses so that that $50k would last him 2-3 years too, a decent amount of breathing room to play with.
As another family man, Daniel did a pretty thorough blog post about his preparation for quitting his job.
Here's a view choice quotes;
I believe I would have still left my job and gone this route even with savings that covered just 1.5 years of expenses. One year of runway is a reasonable amount of time to give something a shot, with the other 6 months to fall back to the job market if things don’t work out...For example, in my case, I’m starting with 5.5 years of covered expenses.
In other words, Daniel had enough cash set aside to go without income for 5.5 years, and then a further 6 months worth to look for work.
That's... comparable to winning the lotto in my mind, and likely not doable for most folks reading this blog, but good on him. Most people would not be able to save up that amount of money during their entire lifetime, so you don't need to aim quite that high, but my point is that he had some cash set aside to buy him ample time.
On the other hand, that kind of salary would also mean that to compensate for the opportunity cost of leaving said job, you'd need to start a business that really makes a good amount of pips, and flippen quick!
I promised my family that our lifestyle wouldn’t have to change because of this experiment I’m doing with my career.
If you follow Daniel on Twitter you'd know that he's motivated by other things than just money. He values family time and freedom above all else.
But he's still financially prudent. He further had some practical advice on insurance and investment to consider before quitting too.
I still recommend getting life insurance while employed, since it makes the financial questions much simpler to answer.
I’ve put 70% of my savings in short-term US treasury bonds and about 10% in CDs, both of which pay about 2.5% right now. I picked up some CDs not for the slightly higher interest rate, but out of paranoia, just in case the US government does something unthinkable. The other 20% is in a few tech stocks that I’ve held on to for a long time. It wouldn’t be a bad idea to convert those stocks to treasuries as well, but I enjoy a bit of speculation on the side.
And since taking live easier, he's not doing to badly either.
We can surmise that to leave your job for full-time indie hacking you need to consider the following;
Accept that it's a risk
Social media tends to focus on success stories. Keep in mind that for every person who escaped the shackles of gainful employment, there are 10 who have not. A lot of unseen souls have crashed and burned, lost their life-savings, and had to go back to work.
Know this and prepare for the worst. Try to arrange your finances in such a way that minimises the downside as much as possible. Give yourself enough time to fall, get up again and pivot. A whole lot of times, just in case.
Also, know what you'll be doing if things don't work out. Plan it out. Consider at which point in your reserve burn you'll need to start looking for a full-time role again. Do not go on this journey this without a graceful backup plan.
Have a large runway
Your training wheels need a Boeing sized-runway. You will likely have many false starts and sharp turns to navigate.
Remember, the idea is to worry as little as possible about money for as long as possible. You want to focus all your mental effort on increasing that MRR.
You need to generate fuck-you money(or fuck-you frugality), but for flipping off stress. That means scratching together lots of liquid cash. Or hacking your lifestyle in such a way that reduces your expenses as much as possible.
Having a partner with a well-paying and steady job(and patience) will help. A tolerable alternative would be to get an easy, part-time job to help reduce the drain on your reserves, if need be. But that would, of course, be at the expense of spending time on your business again.
From the above examples, my suggestion would be to aim for, at the very least, 6 months worth of fixed costs saved up. And then only quit if your business is growing at mad multiples and covers your expenses outright.
A more reasonable amount would be enough reserves for a year. Best case would be for more than that.
Your idea needs to be validated
That means it should not be pre-revenue, untested or what "you think the market needs". It should be out there already earning decent bucks and be growing at a respectable rate before you can even consider leaving your job.
Depending on where you live, this might mean making at least $1000 per month and be growing at a steady 20-30% a month.
If you do not have a years worth of reserves, consider only taking the leap when your net business income has properly exceeded your current salary for more than 3-6 months.
I hope you found this post useful. Thanks for reading.
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