Archive | microISV RSS feed for this section

Stock Market Bingo, or, Investing for the uISV

Here’s something a wee bit off the beaten path for this blog: so lets say you’ve got a consistent cash cow, or at least a cash calf, of a program?  Well, I’m a) just not a very spendy person and b) have no efficient method of spending dollars on physical goods and c) have hideous tax and exchange consequences if I ever turn dollars into yen.  So basically my Bingo Card Creator earnings have sat in my US bank account and every month when I send home my transfer to my student loans I tack on the earnings.  Which is saves me 7% a year, and 7% times my lifetime earnings from Bingo Card Creator can buy a whole muffin. ;)  (I actually sort of pre-spent the money I saved from September: it gets me a Wii bit closer to a certain Christmas-present-for-me come December 12th, since I won’t have to transfer that amount of money home to my loans.)

However, as of next month, my student loans are going to be totally paid off (this has been my singleminded financial obsession since I got my current day job).  Hip, hip, hurray.  So I need to do something else with the money rather than let it languish in my checking account.  I considered opening a savings account with my American bank (Bank of America, naturally) but their .5% annual interest makes me wonder if they are sane.  I opened a wee little savings account at ING Direct which pays I want to say 4.4%, and after I figured “Eh, I’m not going to actually touch the money anytime soon” moved it to a 9 month 5.05% CD with them instead.  But investing in CDs is painfully boring and low-return.

Of course, generally as your return goes up so does your risk.  I’m perfectly OK with that, since I’ve been happily living within my means thanks to my day job and have always treated my uISV and the income it produces as an intellectually stimulating hobby.  If I were to sock it away in a portfolio that lost 20% of the value over the next year, it wouldn’t cause me to blink financially.  So I decided to fulfill a lifetime financial goal and become an investor.  (Note for those not in the know: I’m rather young.  I’m honestly embarassed to admit how young, because I have given people advice despite them having been professionals in this field when I was in swaddling clothes, but suffice it to say most people my age aren’t thinking of retirement yet.  Then again, most of us don’t have software companies, either.)

So here’s the question: what to invest in.  I’ve been reading the Wall Street Journal since the age of 8 and this is what I have learned from the experience: the market aggregates information with efficiency and scale which makes Google look like a single-celled organism.  I am not terrible at investing in the way I am terrible at art.  No, I am worse than terrible: I had a mock portfolio in 8th grade and managed to lose 15% of it in an up market in 6 weeks.  So I’m going to do the same thing with stock picking that I do with stock icons: outsource.

So some people would guess “Ah hah, mutual fund, huh”.  Well, yes.  Except not an actively managed mutual fund.  Paying 2% of my investment every year to somebody who has about a 1 in 4 chance of matching the return of the market does not appeal to me.  So instead I’m going with an index fund: pretty much a mathematical guarantee of being about a point below the market, as measured by whatever the tracked index is.  Since my job prospects are heavily, heavily dependent on the health of the Japanese economy, I decided to pick a US index: it lowers the risk of me having a catastrophically negative job market and a catastrophically negative investment market at the same time, and if those two countries are ever both down simultaneously then the world as I know it is pretty much screwed anyhow.  :)  And since my job prospects are similarly very intimately entwined with the tech field I decided to go with something broader (i.e. not NASDAQ): S&P500 sounds good.

Now, when there are billions of dollars to be made doing something there are a million ways to do it, and there are billions of dollars to be made in index funds.  I picked two vehicles based on convinience and a wee bit of research.  The first is a lightly managed large cap S&P500 index fund available through ING, which I figure is good enough for government work.  The second is buying shares in spiders (if you don’t know, pretend its a mutual fund which implements the Stock interface, it will save you pain) on Sharebuilder.  Both are relatively friendly for teeny-tiny little investors like myself, and extremely cheap on the fees (nothing for ING aside from the fairly low management fees on the fund, $4 a trade on Sharebuilder and I plan on making probably one trade a month).

I should also note that I anticipate getting $25 for signing up for Sharebuilder, which ought to improve my annual return a weeee bit :)  I signed up for them after logging into ebates.com, which is essentially an affiliate site that splits their affiliate commission with the customers.  Sharebuilder pays them a $50 affiliate commission or whatever and they Paypal you $25 of it eventually.  (There are also instructions online for abusing Sharebuilder promotion codes to get money from them, but I’m honest.  Besides, this blog gets hit enough by people looking for promotion codes, typically for free Mrs. Fields cookies from Quill, which I mentioned in a few of my posts about customer service.  Oh, if you were searching for a code to get cookies out of Quill, try JUSTFREAKINGASKFORTHEM.)

Howdy! I write this blog to share what I've learned in running a small software company. Want more great articles? I keep a list of my best work curated. A brief summary of the last few years is available here. If you like what you see, I encourage you to sign up for the RSS feed. If you'd like an email every two weeks or so with advice for software businesses, see here. Thanks for visiting!

Outsourcing for the uISV

Recently, on the Business of Software board (an excellent resource, by the way), there was a discussion about using stock icons for your application.  Some folks turned up their noses at paying $29.95 for stock icons when you could do them yourself for free.  And I suppose you could.

My question is what you’d have to be smoking to want to.  Your time as an ISV is severely limited and there are several demands on it: programming the next version of your software, marketing marketing marketing, optimizing your AdWords campaign, rewriting your website, answering customer inquiries, and doing all the things in your life that don’t happen in front of a computer screen.  Presumably you’re good at all of these things or you wouldn’t have decided to go into this business.  For things you are less good at, outsource them.  Now.

Here’s a couple of things that strongly suggest to me “Yep, I should let somebody else do that”.

No customer will be able to tell the difference.  I would never outsource support or customer service for the simple reason that people hate, hate, hate that.  Doing it all myself lets me brag on my website that people can get an answer “straight from the top” and I think the personal connection (or potential for one) is one of the primary advantages of this form of business.  Similarly, I wouldn’t outsource programming the key features of my program (e.g. the logic which controls printing).  But everything else is fair game.

The cost of outsourcing is lower than the cost to even consider whether you’re capable of insourcing.  I pay e-junkie $5 a month for them to handle Paypal IPN notifications for me (receive notice from Paypal that someone has paid me, send out an email to the customer with their serial number).  I’m not a web programming guru but I’m pretty certain I could whip up a Perl script to do this… but, crickeys, $5 a month.  I know it will take me hours of researching the IPN spec, brushing up on my perl syntax, looking at code snippets, etc etc, before I even start coding my version.  And e-junkie is already there… for $5 a month.  This is a no-brainer.

The outsourcing would result in higher quality than insourcing.  This is why I spent $29.95 on the Roma icon set yesterday (price good to the end of August, incidentally — you might consider taking advantage of it).  I’m not an artist — the one thing in my life I have ever successfully drawn is a goomba (little mushroom monster from Mario which requires about 5 pencil strokes, for those people who have lived under a rock for the past twenty years).  Meanwhile, the stock icons look professionally done (because they are, naturally), they stand out vibrantly when compared to the (free) stock Java icons I had been using previously, and they’ll make my screenshots leap off the page.  I remember how much of an impact the graphical design of Direct Access had on me — it was stylish and professional looking, and I think bringing that flavor to Bingo Card Creator will generate at least two marginal sales over the next 10,000 downloads, which would pay off the investment handily.

Speaking of stock icons, somebody cooked up this resource: stock icons review.  Its probably the only example of a socially beneficial AdSense site I’ve seen: it aggregates information which is of genuine use to someone looking for stock icons, such as a list of a few dozen players, their prices and formats, and a save-you-hours-of-looking estimation of their quality.  And in return it has AdSense ads (for stock icons, naturally) and affiliate relationships with a lot of the icon producers (check for the links which point to tinyurl).  I hope the site makes the author a mint, to encourage folks to actually create value with AdSense rather than just spamming the entire Internet with, e.g., automatic scrapings from blogs.

You wouldn’t pay yourself $5/hr to do the work.  Are you tempted to code a minor component yourself instead of just buying something which will do it for $19.95?  Try this little experiment: put a cookie jar next to your computer.  Now, take $5 out of your pocket every hour on the hour and put it into the cookie jar.  The point of this excercize is essentially to demean and annoy you: first, you’re really worth a lot more than $5 an hour (and should return to the tasks where you’ll make more than that), second, $5 is an inconvinient denomination which will have you constantly trying to make change.  Have you ever noticed that computer programmers can’t tolerate 15 seconds of nuisance an hour but will happily spend man-weeks reinventing the wheel?  This way, you get to internalize that annoyance and do what you should do, which is abandon the trivial task to the person who already solved it and get back to what makes your business special.

I did the cookie jar trick (although I used a plastic cup, since I don’t own a cookie jar) for my newest feature: implementing a font chooser.  I was pretty sure I could do it myself rather than just adapting pre-existing code (which was available for an attractive license: give me credit in the documentation and its yours).  After 1000 yen was in the cup (in 100 yen coins, five an hour) I surrendered and just downloaded this guy’s solution.  I ended up extending that code a bit (I finished off his todo list, added in sane default choices for the font, and improved the time complexity of initialization) but I estimate I probably saved six hours even counting the two I wasted due to stubbornness.  And its time saved writing Java GUI code, which on the scale of “tasks which I relish” falls right between taking out the trash and cleaning the bathroom.

Incidentally, the 1,000 yen stupidity tax is lunch today.  I’m thinking chicken.