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How I Built a $5,000 Per Month Side Project — Up Up Grow

Passive income. The 4 hour work week. The dream, as my cousin referred to it recently. As a millennial there are few things that rank as desirable as finding a recurring source of income that doesnt take much work (or a boss). In April of this year I decided to give the dream a shot and set out to build a side project that could pay my bills while I watched Netflix.

Last month I booked $5,000 in monthly recurring revenue (MRR). Im on track to double that this month. And what started as my 4 hour work week dream has turned into a new way of work, and of life. 

This is the story of how I came up with the idea, found customers and built a business in one of the most competitive markets in business. Ive structured it as a playbook and my hope is that it will help you build your 4 hour dream. 

Play #1 Monetize your brainThe thesis of this project was simple: take what is in my head and monetize it. In other words, build a business that leverages all of the skills that Ive learned over the last three years of entrepreneurship, marketing and sales. This gave me a foundation for what to look for in business ideas. 

When I started SkyRocket my last (failed) startup I solved someone elses problem which meant the time-to-market was significantly longer and the investment had to be much larger. I had to stay up late in the night reading industry journals just to be on the same playing field as my competition. This time I didnt want to do that. 

With that in mind I decided to solve a problem in the sales development space. At Highfive I made a name for myself as a saleshacker by applying some basic web scraping and front end development to my job. I had carved out a niche by applying what I knew about technology to sales. This was my unique skill, and I wanted to monetize it. 

Play #2 Find the painFinding a skill that I could use as leverage pointed me in the right direction, but in order to actually make money I knew Id need more clarity. I needed the specifics of what problem I would solve, who Id solve it for and how it would make money. And all of that could be found if I were able to answer a simple question: what do people in sales development need, and is there any pain in the current process of achieving that?

As I thought about problems to solve I remembered a story one of Highfives account executives told me. She was $5,000 short of quota (her quarterly revenue goal) and the only way to hit it was to email and call as many people as she possibly could to see if they needed video conferencing. In order to get that list of people she stayed up until 1am and built a prospect list (a spreadsheet of people to reach out to). 1am is painful. 1am is opportunity for improvement. 

When I took over the Sales Development effort at Highfive the first thing I did was hire a team in the Philipinnes to ensure I never had to stay up until 1am building lists or build any lists for that matter! I made a couple videos with instructions, bought some tools and found a virtual assistant on oDesk named Jonathan. For most sales development reps building lists can take two hours out of their day. I had eliminated it entirely. 

When I put two and two together I realized that sales development outsourcing was an idea worth pursuing. If I could prevent salespeople from having an end of quarter frenzy like my co-worker, I could probably make a buck.

Play #3 Competition isnt always a bad thing

In March of 2015 I decided that I would build a sales outsourcing side project. The goal would be to provide a turn-key service for sales teams to request leads. But there was a problem with the idea: the market was highly competitive. Whenever I told people about what I was building they replied, Oh something like [competitor]. Most people I spoke with told me I shouldnt build the business for this reason. Thats when I learned play #3. 

Most people I bump into in San Francisco are brainwashed by Silicon Valley group think. These people believe that every business must have a billion dollar opportunity. This isnt true, especially for side projects. In fact, when pursuing the passive income dream competition is your friend. Let me explain. 

Competitive markets are by their very nature mature markets. And the more mature a market, the less time and money a business has to spend educating that market on the problem. Think about real examples. Coca-cola isnt spending money on ads telling you why you should drink soda. They spend money telling you why Coke is better than Pepsi. Soylent the future of food startup on the other hand must spend money educating people on why they should drink their food. In order to succeed Soylent will have to spend tens of millions of dollars and years in the market. 

Creating a new soda to compete with Coke would take less time and money than creating a new food and beverage category entirely (like Soylent). Coke has spent billions educating people on why they should drink soda. And you could educate people on why they need to drink your soda specifically. Granted, the long term opportunity may be smaller. Thats besides the point. The passive income dream isnt about making billions, its about making thousands per month and doing it quick. 

So is it better to create a future of food side project or a soda side project? I put my money on the mature, yet competitive market. 

Play #4 Find a position in the marketBy April I decided that competition wasnt going to stop me from starting a sales outsourcing startup. But in the back of my head I heard the voice of one of my mentors Highfives VP of Product Marketing. I recalled a lesson he gave me during a 1:1 at Backyard Coffee in Redwood City. 

When you hear Volvo what comes to mind? Scandanavians, but more importantly you probably think Safe car. How about Honda? Odds are Reliable car came to mind. This is the basic idea of positioning. What comes to mind when people hear {company name}?The concept of positioning is incredibly important when starting a business because it determines who will buy your product. A product with no positioning that sells to everyone is likely to sell to no one. Thats because people need to identify with your product and brand in order to buy. To put this in context Ill give an example of positioning in my life. I no longer buy Abercombie and Fitch because they position themselves as the high end clothing brand for middle schoolers. I do buy from Urban Outfitters though because as Highfives VP of Sales liked to say, Im a wannabe mission hipster. 

Previously I thought positioning was just another business school buzzword. But its important. At its core, positioning means Pick a niche to get rich. Isnt the entire point of a side project to get rich?

In order to find a unique position in the market you must look at the competitive landscape. When I looked at the lead generation space I realized that companies fell into three categories:

Platforms: Data.com, Hoovers and DiscoverOrg are all examples of companies that charge annually for a set amount of lead exports from their platform. These databases are sold to thousands of companies which means everyone is emailing the same person. This results in worse response rates for their customer. And the average cost is about $30,000 per year (billed upfront). Ouch. Bad data for a high price. 

Service-as-a-service: LeadGenius is an example of a company that charges annually for a team that prospects for you. Great concept, but there business model is built to work for them, not the customer. The cost is about $24,000 upfront ($2,000 per month billed annually). Not so great for a startup on a tight budget with changing business needs. 

Freelancers: oDesk and Elance are examples of platforms where you can hire your own virtual assistant team to prospect. Customers have to train their team and the billing is variable so your cost per lead ranges from $.50 to $5. Cheap entry point, but time intensive and unpredictable. 

I knew that there was an opportunity to create a turn-key service with a pricing model that customers could love. And thus, the first pay-as-you-go lead generation service was born!

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