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3 Businesses & The Road to $1M in Personal Income

inabox1

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One reason your sales Candidate is not working is...he has money and is weighing opportunities.

AS a sales guy myself, i've learned not to jump on the First offer. ALSO, interviewing is a 2 way process. The company interviews me, but i also 'interview them'....

Why would i want to work with a Start-up company?
-its risky
-tends to have little to no benefits
-Not much to bragg about on my resume (unless i get a piece of the action).
-Politics of small business
-Tends to be less opportunity in Small biz

No offense, but 'why would a Top tier Sales guy want to work for you?' (other than $). Sales ppl first and foremost are motivated by $, next is working for the best company in that field.

With that in mind, a higher initial salary (/commission?) for the first 3-6 months of employment doesn't seem like a bad solution to counter those cons?

Taking a guess here, but chances are the position is work from home - I feel like a lot of potential employees would be convinced just on that feature of the job alone.

Feel free to correct me, though
 

SPM_ENT

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Thank you for the updates and some of the details of your process, like who you are using for call processing (Ring Central) and other details.

It's a shame that someone who is on track to doing $1M this year with a 25% profit margin has a thread that virtually no one is interested in. I apologize for that.

Thank you for sharing brother. Many people here are proud of you. Look forward to hearing more.
Honestly, just you saying that means a lot to me. The road can be lonely sometimes but to have positive feedback from the person who wrote a book that helped change my thinking and lead me on a path to a better life is simply amazing. Thank you.

There are a million options on how to run a business but hopefully, someone will find the things I do helpful.

Also, I understand it's not too exciting when I don't go into details about exactly what I'm doing but this is the first time I've actually had a unique service offering so I'm protective of the idea until I get things more established.

Since you mentioned it I switched from Ring Central to Openphone. It's 10x better. Reliable, extremely easy to use, call routing, I can switch over to any of my team's phone numbers in a second to cover for them or monitor how they are doing. Also it's cheaper. I'd highly recommend OpenPhone over Ring Central.

I've loved following this thread. You're doing a great job. Wish we knew more details about the biz but understand that it's private.

Can't wait to see where this goes in 2022!!
Thanks man! Ya I know it's a bummer I don't feel more comfortable sharing, it would enhance the story. Hopefully, once things are a bit larger I can share more and more. Until then I appreciate your support and understanding.


Congrats! It's a good idea to post updates and occasionally look back on, to see how far you've come. We can all get lost in the moment.

What is the biggest reason your margins differ so much month to month? Is it more like a direct-cost thing or just general expenses?
Thank you. Good question, initially when I read it I had an assumption of what I thought the answer was. I was managing my averages over each quarter so I wasn't too worried about 1 month compared to the next. Looking back I don't think that is correct either. I should know the answer and not assume though. Currently, I'm working on reading GGOB and improving setting budgets and goals. It would be very helpful to know things like if we save 2% in "this area" that's 20k in additional income for me and for my employee's bonuses. Little things like that matter. I'm going to spend some more time looking into this and I'll share what I find so thanks again for the question.

I am curious to see if my assumptions will be correct though. Here's what I think at the moment and we'll see if I was close or not when I look it over with my bookkeeper this week.

I believe the swing in profit percentages comes from... the fact that our invoicing towards the end of the month doesn't match up with our vendor bills. As in we get a vendor bill on the 30th but we won't invoice the job until the 1st of the month. Additionally a few of the months I was working heavy on the branding with a consultant and also a designer which cost 5-10k for them and then some additional $ for uniforms and new marketing materials. If I'm doing 100k a month each 1k is 1% so those could account for big swings.
 
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BD64

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Woah I haven't seen this thred before now. Bookmarked & will dive in when I get a few minutes!

@SPM_ENT Nice work, keep crushing & thanks for posting
 
G

Guest-5ty5s4

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Thought I'd give an update on how 2021 turned out and what I'm working on now.

We pulled it off and had our second largest month ever and brought in over $126k to push us past our goal of 1m.

2021 Accrual Income: $1,023,728. If I take out all the "expenses" my partner and I pay ourselves for through the company and remove our "reasonable wages" we actually profited 29.28%

Sales & Marketing:


Originally our LA sales rep was part-time as he had a normal full-time job with benefits. He would do mostly social media outreach for a few hours a day. I had offered him a full-time position but he was hesitant to move away from his current job that was more secure. It was understandable and I was still training my SD guy so I wasn't in a rush at this point even though I wanted him full time. A few key points...
First, I started dividing up territories and showing it to both reps using google maps (I bought a list from Fiverr of all of our target clients and then imported it into a Google Map). I think the visual was very productive because my LA rep saw that my San Diego rep was spreading to more and more territory.
Second, In addition, our LA rep started to get traction with a few clients and was getting repeat business and more confidence that he could make more money with our company.
Third, I started having my QBO send out automatic reports every Monday showcasing the current amount billed by each salesman.
I believe all three of those things compelled my LA rep to quit his normal 9-5 job and take a risk on himself. He asked me if he could come on full time starting in Jan and we were happy to have him do so.

Here's a picture of the report that goes out on Monday. It's a good amount of competition and makes things interesting for them...

View attachment 41679
I've also included my marketing assistant in this auto report and I'm working out a plan to make her plan based on a small % of all income so she is incentivized to help support more business.

Great Game of Business:
As I've mentioned, I'm working on implementing an open book company where the employees can see their impact on the company and benefit (in the form of bonuses) from helping the company be more profitable. I've spent a lot of time working on figuring out how to do this. So far this is what I have worked out...

I know that we need to have three goals.

1st goal: Income: 2.3m (As projected by our sales guys. If people pick their own targets they are more likely to hit them)
2nd goal: Profitability % (TBD)
3rd goal: Quick Ratio = (The amount of cash on hand vs liabilities) (TBD)

Income is pretty self-explanatory.

For our profitability goal, I've been reviewing all line items from our P&L and making them very clear and easy for everyone to understand. From there I'm dividing them up into three different divisions, Accounting/Admin, Operations, Marketing & Sales. Each division will get an automatic report every Monday (Like I do for the sales guys) and be responsible for maintaining or improving our spending & percentage as compared to the income. If their department can improve our line items percentages that will increase our bottom line profit. Once I set the profit percentage goal, anything above it will be a sliding scale in terms of bonuses. Obviously, not all of the additional profit will go to bonuses but I'd like to be able to give people a chance to earn at least 10% of their annual income in a bonus. We'll have to wait to see how it actually turns out.

Quick Ratio as I understand it, or as it works for us, is our cash on hand vs our liabilities. Right now we're at about .70. If we stopped collecting right now we'd be able to pay about 70% of bills. That's not going to happen as we have a good amount of jobs billed and not collected yet but it gives us a more accurate representation of how secure our company is. This is important for employees because it 1st means job security and second a chance for bonuses. If we don't have money in the accounts we can't pay bonuses and risk not being able to pay regular wages.

Both goals have to be met at some capacity for employees to earn their bonuses. The bonuses will be paid out quarterly but on a sliding scale, as in Q1 is worth 10% of the annual bonus, Q2 20%, and so on.

That's what I have figured out so far as it's a work in progress. I'll update when I can about how it's going.


On a more personal update: I'm in contract with my second rental property in Tennessee. The market there did really well for my first rental property last year. I was so misguided for flipping cars when I should have been buying property. My money is making money hand over fist. A few of my friends have expressed extreme interest in investing with me so I'm considering putting a group together to continue to buy more and more. It's an idea that would need some looking into but I'm not planning on putting too much thought into it at the moment. My business is my primary focus.

I'm working on the company about 3 days a week with occasional meetings on other days. I try to work on my classic car build for another 2-3 days out of the week and 1 day to relax with no agenda. In my position now where my partner runs the daily operations I find that thinking and planning is where my value really comes from. Even when I'm working on my car it's almost like meditation to clear my mind and provide mental space to come up with more improvements for the company. I used to think I needed to work 24/7 but I've been able to accomplish more by living my life this way.

Hope everyone had a good end to 2021 and best wishes for 2022!
Great job!!

With add backs (your salaries, expenses to yourself) I'd imagine your profit may already be close to your goal, right?

You're killing it man!
 

SPM_ENT

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Great job!!

With add backs (your salaries, expenses to yourself) I'd imagine your profit may already be close to your goal, right?

You're killing it man!
Thank you!

Ya that's what I need to spend some more time doing. My partner and I want to pay for as many things as possible to reduce our taxes but at the same time need a baseline for the employees to shoot for. If we start to take more because we're profiting more it's not really fair for their bonuses. I think we'll need to set our goals for things we want to write off, then find the profit percentage we were able to accomplish last year minus those expenses, then use that percentage as a baseline. There shouldn't be any bonuses for achieving the status quo from last year. The goal is for the employees to be vested to help improve the company and benefit along with the company.

Orrr we can separate our expense items completely in a different chart of accounts on the P&L. However that would be hard using QBO sending the automatic reports showing the profit percentages of the company (it would include the expenses even if they are separated out).
 

SPM_ENT

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So you took home 100% of your profit and left none of it in the business?

(30% of $1 million = $300k, and $300k divided by the two of you is $150k)

I thought you said you kept some in the business, or maybe even had some capital expenditures. The rental appreciation helps a little.

Honestly, you should leave more profit in the business so it can grow faster.

We took 100k each and left 100k in the business. Leaving money in the business to make it grow faster is a function of the goals of the company, which is up to me at this point. You're thinking makes sense when related to the title of this thread but my position has changed since last year. Also, it depends on what you do with it and additionally how much time I have to implement it. The only investments we will be making will be to hire new sales and then the additional staff it will take to support them. Hiring a new salesperson costs about 5k/month and it takes anywhere from 1- 3 months to figure out if they are going to make it or not. If not, we start the process all over again and hire someone new. There is only 1 of me to train the new salespeople at this point and it takes two weeks at a time to get them up to speed. So even if I used all 100k we kept in the business I wouldn't be able to hire (more, I wouldn't want to) hire 6 new sales guys and train them simultaneously. Growing too fast can also cause a ton of issues so I'm okay with the pace we are growing. I'll be happy with a 150% increase for this year following 400% (or so) from last year while working around 20hrs a week. Mainly, I enjoy how my life is set up now and if I'm always working what's the point of having the money anyway, my real goal is freedom and I have that most days.

The plan as of now is to create the budgets for next year and then scale. I'm still determining how long it should take for a salesman to bring in 1m and then how much support operationally does that require. I know my AR collects at a rate of $1,300/hr so if we need to collect 150k in a month I will need 115hrs worked for the AR department. I'm also still working out other positions in the company as it grows so lots of planning still taking place before I step on the gas more aggressively.

I don't mind my ideas being challenged so tell me, what would you do differently?
 
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freek

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i love reading your updates, really cool to read about scaling up a business with all it's ups and downs. Thank you for your efforts, looking forward to the new update
 
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Two Dog

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Another member DM'd me saying he has some cost-effective solutions for what I'm looking for so I'm going to jump on a phone call with him.

However, my consideration is that I would like to own the code, it seems the company will be more valuable if it's a proprietary app/crm, no?

Having ultimate "control" is a must-have but maybe what you're saying is that I can get that even if I buy/purchase/lease it monthly.
The reason for using existing 3rd party solutions amounts to deciding "What business are you in?"

Here's what I've seen literally dozens of time while working with entrepreneurs and onboarding service companies.
  1. Company launches, survives and seems to be on a decent growth path. After 2 - 4 years...
  2. The Founder(s) universally decide that building/owning an internal tech system of some type (almost always software) will give them a can't lose advantage. They convince themselves it's a must-have, won't cost too much and won't take too much time. All of those beliefs are wrong.
  3. Design and coding begins. The best outcome is it fails and life returns to normal. More likely, the employees are forced to use a buggy app with minimal documentation that changes whimsically every time someone has a suggestion. It makes their lives miserable. Since the company knows nothing about developing software, best practices are non-existent but no one can ever speak badly about the Founder's baby. After a long while, it eventually gets replaced with an industry standard solution.
  4. Revenues and other projects often flatline because the Founder(s) are distracted getting the new toy just right.
Surprisingly, it makes little difference whether it's developed in-house or outsourced. Same outcome.
 

Two Dog

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It's changed and evolved quite a bit!
Funny enough, it was much easier in Granddad's day because coding was so limited and time consuming. You didn't spend hours agonizing over which shade of green would look best. Everything amounted to "Doing this is a PITA and giant time suck" and creating something to streamline that one bottleneck. It wasn't about creating a new Sim City universe from scratch.
 
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SPM_ENT

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One reason your sales Candidate is not working is...he has money and is weighing opportunities.

AS a sales guy myself, i've learned not to jump on the First offer. ALSO, interviewing is a 2 way process. The company interviews me, but i also 'interview them'....

Why would i want to work with a Start-up company?
-its risky
-tends to have little to no benefits
-Not much to bragg about on my resume (unless i get a piece of the action).
-Politics of small business
-Tends to be less opportunity in Small biz

No offense, but 'why would a Top tier Sales guy want to work for you?' (other than $). Sales ppl first and foremost are motivated by $, next is working for the best company in that field.
I believe you are correct that he has some money. I've interviewed him in what appeared to be his home which looked nice in the background.

It makes sense it's a two-way process but he definitely seems very eager to start with us. The current applicant has never worked in our industry and has only worked in one other industry his entire career in which he stopped being a salesman in 2008 when everything crashed and became a truck driver for the next 12 years. Recently he tried to start a business that failed and now he is applying to new positions.

No offense taken, your concerns are legitimate. We are a new company not many people have heard of yet, because of this and the reasons you listed I have priced our commission to earn 20-30% more than the rest of our competition.

My requirements are slim, I'm really looking for someone who eager to learn and motivated to make it work and make money. I can train that person how to sell. It might take some time but like you said it's going to be difficult to find a top-tier sales guy in the beginning.
 
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Silk Cuba

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Thank you. Good question, initially when I read it I had an assumption of what I thought the answer was. I was managing my averages over each quarter so I wasn't too worried about 1 month compared to the next. Looking back I don't think that is correct either. I should know the answer and not assume though. Currently, I'm working on reading GGOB and improving setting budgets and goals. It would be very helpful to know things like if we save 2% in "this area" that's 20k in additional income for me and for my employee's bonuses. Little things like that matter. I'm going to spend some more time looking into this and I'll share what I find so thanks again for the question.

I am curious to see if my assumptions will be correct though. Here's what I think at the moment and we'll see if I was close or not when I look it over with my bookkeeper this week.

I believe the swing in profit percentages comes from... the fact that our invoicing towards the end of the month doesn't match up with our vendor bills. As in we get a vendor bill on the 30th but we won't invoice the job until the 1st of the month. Additionally a few of the months I was working heavy on the branding with a consultant and also a designer which cost 5-10k for them and then some additional $ for uniforms and new marketing materials. If I'm doing 100k a month each 1k is 1% so those could account for big swings.

Since you mentioned the GGOB book, it made me order it. Maybe it'll be useful to me aswell.

I think business in its early stages always have varying profit margins. Mine was the same. In the early days, some months I used to spend $25k+ and others maybe $4-5k. The net margins would differ quite a bit.

What's still a question to me in general, even for my business, is how are expenses actually counted when bought to be used in the future? I.e. I spend $10k on packaging materials in January, yet the materials are to be used throughout the year. I still would count it as an expense for January but its definitely something I need to learn more about since it doesn't seem very clear to me.
 
G

Guest-5ty5s4

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Thank you!

Ya that's what I need to spend some more time doing. My partner and I want to pay for as many things as possible to reduce our taxes but at the same time need a baseline for the employees to shoot for. If we start to take more because we're profiting more it's not really fair for their bonuses. I think we'll need to set our goals for things we want to write off, then find the profit percentage we were able to accomplish last year minus those expenses, then use that percentage as a baseline. There shouldn't be any bonuses for achieving the status quo from last year. The goal is for the employees to be vested to help improve the company and benefit along with the company.

Orrr we can separate our expense items completely in a different chart of accounts on the P&L. However that would be hard using QBO sending the automatic reports showing the profit percentages of the company (it would include the expenses even if they are separated out).
I understand. That's how lots of businesses grow - by not taking profit to the owners. If you pay yourself everything, you won't have anything to invest on getting bigger.

I'm just curious what the numbers are, because you could already be above $1 million per year when you add up all of the "seller's discretionary cash flow." Even if it isn't going straight to you
 
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SPM_ENT

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I understand. That's how lots of businesses grow - by not taking profit to the owners. If you pay yourself everything, you won't have anything to invest on getting bigger.

I'm just curious what the numbers are, because you could already be above $1 million per year when you add up all of the "seller's discretionary cash flow." Even if it isn't going straight to you
Well, we did 1m at 30% profit counting our discretionary income. My partner and I each "took home" 150k. So not really close to 1m of personal income last year but I'm not too concerned with that at the moment. I started working on this company less than two years ago so we're just getting started and that money will come. I would like to take the company to 100m and believe I will be able to do so but it just takes time. I live comfortably so it's all creative enjoyment, bonus, and security for the future from here.

In addition to my "150k income," my rental did appreciate 120k with 20k down but I don't count that as income. It's long term and the market will go up and down.
 
G

Guest-5ty5s4

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Well, we did 1m at 30% profit counting our discretionary income. My partner and I each "took home" 150k. So not really close to 1m of personal income last year but I'm not too concerned with that at the moment. I started working on this company less than two years ago so we're just getting started and that money will come. I would like to take the company to 100m and believe I will be able to do so but it just takes time. I live comfortably so it's all creative enjoyment, bonus, and security for the future from here.

In addition to my "150k income," my rental did appreciate 120k with 20k down but I don't count that as income. It's long term and the market will go up and down.
So you took home 100% of your profit and left none of it in the business?

(30% of $1 million = $300k, and $300k divided by the two of you is $150k)

I thought you said you kept some in the business, or maybe even had some capital expenditures. The rental appreciation helps a little.

Honestly, you should leave more profit in the business so it can grow faster.
 
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SPM_ENT

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January is about to end and this month to date we have brought in slightly over 140k. My sales guys have set their goal at 2.3m for next year's revenue but I can't help but wonder if I'm limiting them to territory size (Los Angeles & San Diego). I know there are customers out there who are in need and just one phone call or an office visit would get them to start using our company. Finding a balance between taking the right amount of time to build a B2B relationship and reaching out to new clients is difficult. Most big fish target clients already have a service provider that they have been using for years so it takes time to get in there to give us a chance.

I'm considering a business coach/consultant to help me with growth to figure out this problem but if anyone has been in this situation or could recommend someone who can help that would be much appreciated!
 
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SPM_ENT

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Hey everyone,

I read a thread from @FineDay and got really motivated to focus in the right direction. My recent issues have been that I want to scale and hire salespeople faster than my partner can keep up operationally including managing employees.

He was used to doing everything himself so giving up control has been hard for him. He starts "helping" the employees to make sure they're doing a good job. He doesn't want them to fail but then ends up doing all the work. He's also got some issues with having to fire people. I admit firing is hard to do especially when you work with these people every day and they're good people who just might not be up to the position. I keep enforcing that we need Allstars on our team if we want to be the best and if they're not, we need to remove them. However, I do believe I have contributed to not attracting the "Allstar" employees by being concerned about paying the wrong person too much money. I also feel more comfortable with hiring people who I know I can control by simply knowing more. With both our psychological downfalls in this area, it doesn't make for a very good combo when hiring and managing the staff to keep up with the growth I want to achieve.

For those reasons, I've decided to hire a partime/consultant COO. This person will have the experience we need and be able to help my partner create systems (previously this was up to me), evaluate employees (old and hire new), and make sure our core machine is correct so that I can expand while feeling confident the business can handle it. I bought the idea to my partner and thankfuly, he loved it. We both feel very relieved to have someone who can help him get this done. It's also nice that I don't have to be the one to tell him what to do/give him the answers and he will be more willing to hear them from a third party. Overall I'm really excited about this direction and it will free me up to focus on growth.

In the near future, I'm also going to do the same with a CFO to train my current Financial controller. They will focus on how much money we need for growth and what goals we need to hit before I start a new territory.

Overall I'm excited to not have to be the one to hold it together on all ends. I will, of course, have to evaluate the performance of the COO and CFO and hire/fire accordingly but because they are more consultant types this will be much easier than if they were full-time.

Also still very thankful for the "Profit First" accounting method. Using it has allowed us to put money aside to be able to invest in hiring these type of people. The money won't come out of or increase our normal operating expenses so it's a very easy decision to make. Not having money set aside to invest in making our product/service better would leave us stressed and stranded without being able to get help.

I'm was going to update my first post to include the monthly #'s and update each month but I don't see the "edit" button anymore.

So far Q2 has been good:

April: $187,704 (Largest month so far)
May: $134,421
 
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Two Dog

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July was a bit slower we hit $154k in sales. Last year Aug was our biggest month so we'll see if history repeats this year.

I want our service to be 1 - 3 clicks to submit an order, it needs to be that simple like with Amazon or Uber. So that lead me to an integrated app for our clients. Basically, all of our clients need to get Work Authorizations from their customers to move forward with their services and these Authorizations have all the information we need. If I can develop an app like adobe sign or DocuSign and then add integration to our CRM it could automatically input data into our system and make the new job orders 1-3 additional clicks for our clients to submit.

I have no idea how to make this app but hopefully, someone has some info on where I can look? Maybe even white label something and hire someone who can add the features/integrations I need. Any help is appreciated!
Anything you want can be purchased for $0.06 monthly from a VC funded tech startup. More or less true.

I made my wife promise to say "NO" whenever I start talking about needing custom development and hiring devs.

How are you fulfilling the service work? Are the sales all lead gen to outside vendors?
 

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Anything you want can be purchased for $0.06 monthly from a VC funded tech startup. More or less true.

I made my wife promise to say "NO" whenever I start talking about needing custom development and hiring devs.

How are you fulfilling the service work? Are the sales all lead gen to outside vendors?
Another member DM'd me saying he has some cost-effective solutions for what I'm looking for so I'm going to jump on a phone call with him.

However, my consideration is that I would like to own the code, it seems the company will be more valuable if it's a proprietary app/crm, no?

Having ultimate "control" is a must-have but maybe what you're saying is that I can get that even if I buy/purchase/lease it monthly.
 
G

Guest-5ty5s4

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The reason for using existing 3rd party solutions amounts to deciding "What business are you in?"

Here's what I've seen literally dozens of time while working with entrepreneurs and onboarding service companies.
  1. Company launches, survives and seems to be on a decent growth path. After 2 - 4 years...
  2. The Founder(s) universally decide that building/owning an internal tech system of some type (almost always software) will give them a can't lose advantage. They convince themselves it's a must-have, won't cost too much and won't take too much time. All of those beliefs are wrong.
  3. Design and coding begins. The best outcome is it fails and life returns to normal. More likely, the employees are forced to use a buggy app with minimal documentation that changes whimsically every time someone has a suggestion. It makes their lives miserable. Since the company knows nothing about developing software, best practices are non-existent but no one can ever speak badly about the Founder's baby. After a long while, it eventually gets replaced with an industry standard solution.
  4. Revenues and other projects often flatline because the Founder(s) are distracted getting the new toy just right.
Surprisingly, it makes little difference whether it's developed in-house or outsourced. Same outcome.
My family's business has gone through this, BUT, we are outliers because our in-house software has stood the test of time.

My no-college-degree-having, oil rig working, CEO grandpa designed the software and has two FT programmers working for him (in addition to the main workforce) and we've used it for decades now. Actually sold copies to a couple other companies recently.
 

Two Dog

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Another member DM'd me saying he has some cost-effective solutions for what I'm looking for so I'm going to jump on a phone call with him.
I told my wife she should say "No, no, no!" if I ever brought up the need for custom development.

After that actually happened about two months ago (NO!!!) :rofl:, it took two days to find a far better version of my must-have solution for $99 / month. That's because the company selling it raised $99M in total funding and knows everything imaginable about developing great software.

Feel free to DM me with some idea of what you're trying to accomplish. Can't imagine it doesn't exist in many forms.
 
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Guest-5ty5s4

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Funny enough, it was much easier in Granddad's day because coding was so limited and time consuming. You didn't spend hours agonizing over which shade of green would look best. Everything amounted to "Doing this is a PITA and giant time suck" and creating something to streamline that one bottleneck. It wasn't about creating a new Sim City universe from scratch.
Would you believe he's never written a line of code? I didn't mean to hijack this thread, sorry OP.
 

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