A lifestyle-first approach to passive income
After 10 years as the non-technical solo founder/operator of a micro SaaS, I was coaxed to expand a recent Indiehackers comment into a full post about how to build a passive income business that fits the lifestyle you want. The tips say make it short, but I'm an entrepreneur and we don't follow rules well.
First, know who you are and where you’re at. When I got a business idea in 2012, I was a recovered attorney who had escaped the corporate grind to find meaningful work in education. While I had advised many tech startups and VCs as a lawyer, I had no interest in that lifestyle, but was a self-taught PHP/MySQL hobbyist. As with many entrepreneurs, I got “my” idea trying to solve my own problem not looking to start a business or use my nascent tech skills.
The number of things I didn’t know then is too long to list, but I had a decent idea of who I was and what I wanted:
- Flying solo. My decisions, my timeline, my consequences.
- Side project only. I had left corporate for meaningful work and found it. I just wanted to scratch my entrepreneurial itch while keeping the stability of my career, healthcare and pension.
- Mo’ money without mo’ problems. I wasn’t seeking a multi-million dollar exit, just diversifying my already decent income to keep pace with the ridiculous cost of living in California. I liked my family life and wanted it to expand and not be squeezed out by the demands of startup life like at the companies I’d advised.
- Periodically Passive Income. Owning a rental condo, I knew passive income isn’t always passive, so I sought “periodically passive” income that was largely passive, punctuated with periods of activity to generate more growth.
Second, ruthlessly eliminate paths that don’t fit you or the journey you want. There is enough real and perceived pain in the world for you to find your niche - guaranteed! Armed with a bit of intuitive knowledge about myself, I had passed on many businesses for various reasons:
- The many books I haven’t written because I didn’t have the platform and HATE marketing (I’ll probably write a few in retirement)
- A few B2B SaaS ideas to build mission-critical software that would come with the headaches of being critical to somebody’s mission
- Non-scalable businesses that were basically software-informed consulting and could not effectively be done as a side project
- Many ideas to take on established players with portions of a better mousetrap where I didn’t have the technical skills or resources to competitively build or sell the mousetrap.
However, my 2012 idea was different. It scratched my own itch. It was a remarkably simple problem, yet the more I searched for a solution, the more frustrated future customers I found. It was an important solution, but not mission critical. There was NO competition and the solution was so “small”, you couldn’t build a $10M company around it, let alone a 100M company. It was small enough, I could try my hand at coding a solution and pay a developer if my skills or time weren’t sufficient.
Third, optimize your business for your goals, not someone else’s. Once I decided to make the jump, I built an MVP (not knowing what an MVP was). After some successful free “customers'', I actually paid a developer from Upwork to build the paid version which I’ve maintained (with help) ever since.
I’ve made MANY mistakes along the way, but I believe the following choices have helped keep the income largely passive and aligned to my lifestyle goals:
- Remove the free version. This “marketing” version of the product comes with customer service headaches that quickly outpace the marketing benefit for a time-strapped solopreneur. For a simple product, a free trial is sufficient.
- Keep prices low to discourage competition, but raise them as much as possible. Know thy demand curve as it’s the easiest way to increase revenue.
- Annual subscriptions only. I feel ahead of my time in this, but I just didn’t want to deal with the monthly headache and accepted the opportunities lost as a result. This won't work for every price point, so if it doesn't you can try the discourage monthly tactics I see everywhere now.
- Don’t handle credit cards or other sensitive information. Just didn’t want the headaches even before GDPR and its ilk. The less of your personal information I have the better. This may be counterintuitive for businesses that rely on this information for growth.
- Treat customers like family. This means routinely going above and beyond which builds reputation, but it also means removing some toxic relatives from your daily life.
- Automate, automate, automate. I didn’t start out good at this, but over time, I keep working to design a business that only needs me for strategic direction. As someone who sells subscriptions, I hate subscriptions and have largely survived on free tiers, Google Workspace and Zapier integrations to neatly tie all my systems together including Data Studio dashboards to keep tabs on everything. I continue to do customer service because it’s less than 2-3 hours a week and I have ‘trust issues’ with letting others interact with my customers.
Fourth, enjoy the benefits. I’ve probably made every entrepreneurial mistake possible, but I mostly got more benefits than I bargained for with my mostly passive micro SaaS.
- Mostly Passive. Except when something new breaks, I can spend 2 hours a week on customer service and that’s it! Of course, that's after a few years building saved replies, logs and knowledgebase articles covering everything that goes wrong.
- Professional backup. When something does break, I have paid professionals that can get me back on track, usually in under 48 hours with limited stress and time from me. While 48 hours is an eternity in SaaS, it does happen and it sucks, but it’s no big deal in the larger scheme of things.
- Life happens. I can deal with spikes in my day job, go on vacation, handle family drama or start my next side project all without jeopardizing the business. This has been huge and made the whole thing sustainable. My next venture launched earlier this year.
- More opportunities. I think I’ve finally gotten it through my thick skull to put more effort toward marketing. That’s the next frontier of my learning and discipline. This time I’m going to automate it as much as humanly possible because, did I mention, I HATE IT.
I wish I had same clarity of why I was building my first company. I didn't opitimize it for my lifestyle and what I want for myself. I was chasing the vc-backed startup dream that was never my destiny. Reading this at least gave me clarity on that ;-)
What stands out is how clear you were from the beginning about what you wanted your business to do for your life, not the other way around. A lot of founders chase scale for its own sake, but you leaned into the idea of “periodically passive” income and built something sustainable around that.
Gold. There is usable wisdom in here. Commenting to bookmark since I'm a noob and IH won't let me bookmark yet 🙃.
Thanks for taking the time to share your thoughts Troy
I love the idea that you change the narrative of do this and that to figure out what you want to do.
But I'm someone who lives with my parents and have no personal money, any ideas on how to do it?
By the way, I'm 20 and a college student
You have something I don't have anymore - TIME. College is a busy time, but it's also usually the first time you have more freedom than responsibility. Use that freedom to find things you care about and create things that benefit people. It'll make you feel great and after some trial and error you may land on something that both sells and matches your personality and desired lifestyle.
Honestly, at 20, I had all kind of ideas of what life was without experiencing much of life. At this stage, I'd just follow your passions. In my late twenties I built a dating site that never got off the ground. I did it because I was passionate about creating something for minorities in an area with no minorities around. This was all before Facebook or anything that's existed only during your lifetime.
Although it never materialized, I learned how to build a data-driven website before all the modern tools existed. I also learned how to follow my passion to solve a problem and create something useful.
I would encourage to find and validate relevant ideas and just create. Something will stick and if it doesn't, you'll improve your skills and marketability.
Buy a script from code canyon (or other similar website), transform it to your needs and make some money ;)
I particularly appreciate the emphasis on self-awareness and finding a business model that aligns with one's lifestyle. Too often, we see founders chasing the "unicorn" dream without considering the personal costs. This post is a great reminder that it's possible to build a sustainable and fulfilling business without sacrificing everything.
The focus on automation and minimizing customer service overhead is also spot on. It's essential for maintaining a healthy work-life balance while running a business.
I'd love to hear more about the author's experiences with marketing and growth strategies, particularly now that they're focusing on this area.
why would you hate marketing? it's magic
Excellent Analysis
Thanks for your thoughts.
This is pretty awesome -- question: What's going to be (or is) your marketing strategy for a small SaaS product like this?
Because our service is an integration service, the best free marketing has been riding the coat tails of the companies we integrate with. We haven't done many formal partnerships, but getting added to their app directory of integrations helps us constantly stay in front of their users.
There are also communities built around the apps we support so staying active in those communities help.
Maybe we've done it wrong, but social media hasn't been worth the effort.
Influencer marketing is our next endeavor. And, you're always doing some level of SEO, which AI is making a bit easier.
Our target market is busy people and unless you catch them search for a solution, they have many walls up trying to avoid time wastage, so getting to them has been a challenge.
App directory of integrations.. interesting, I've never even heard of that
Thanks for sharing this!
I found this helpful, thanks.
Great post, Troy. I like how you're not concerned with maximising profits or customer base and are happy to let it practically run itself. If it can pay off your groceries or a holiday from time to time, then that's a win in itself, especially when you're not sacrificing anything. Thanks for sharing.
sim muitos estão desempregados e é possível ter renda passiva até mesmo como afiliado no marketing digital
Thanks for the post Troy, I really like the mindset. You mentioned you hate marketing, could you share how did you go about it? Did you try to learn it regardless, paid a professsional, or just let it sit there for people to find it? Along with the customer support do you do any marketing on regular basis? Thanks!
Can't believe I'm just replying. I think I've tried most "free" marketing, but the most effective has been influencer marketing which I started before the term "influencer" was being used. My niche is small so finding folks in that niche really helps target efforts, paid or unpaid. My price point is low so most paid ads weren't worth it due to competition. Partnerships and Influencer marketing is where I'm focused now, but it will definitely be different for different businesses.
Loved reading it, thanks for the share!
I found many things in common in your journey with my 1st micro SaaS journey, good to hear the same thoughts from someone else 😊
I'm amazed and inspired thank you for sharing your story
Annual subscriptions only...
friend of mine acquired a company that did "Annual subscriptions only". He divided that into monthly plan and instead of losing customers as most people think, he gained 30-60% customers.
Secondly, after 3-6 months, he decided to round up the monthly fee to a round number.
Overall, in 12 months, he increased 40% revenue by just playing with the numbers.
Totally possible. As I said, I knew I'd be losing opportunities for more customers because depending on the price point, few are willing to commit for a year. I just decided I didn't want to deal with it and at the time I was using Paypal and monthly subscriptions would have been a nightmare if not impossible to manage. That technology situation is different now.
I could definitely increase overall revenue by adding a monthly option. I would increase headaches for me also. Right now, not worth the tradeoff. Maybe later . . .
What are your thoughts on pricing based on monthly usage? E.g. I bill my customers every month for the number of active customers they had the previous month.
I think a usage model can be ideal for some businesses. Generally subscriptions are payments for the ability to do something, not actually doing it. If usage is expected to be periodic with high variance, a usage model would seem appropriate. Many subscriptions do this already with usage caps and different levels. I find pricing is business specific while incorporating the practices of the particular industry. You can always choose to price different than your industry, but there is usually a tradeoff you must accept.
Great post! It's refreshing to learn about a different approach!
Thanks for your thoughts. Can you disclose the SaaS business that gives you passive income?
It's not really hidden. My handle here is my Twitter handle and my actual name. The service is https://taskclone.com. I also launched https://eduvizy.org earlier this year which is a side-project connected to my day job with no plans of monetization.
Thanks for disclosing the name!
But even when I still believe you can make passive income with it, I don't believe this income would be really enough for living in California. I'd like to be wrong...
That was never the goal, nor would I rely on it. If you want a business to be your primary source of income, you need it to 2x or 3x your cost of living due to the risk and variability in any business. To have a business as a sole income source in CA for 20+ years, I think you'll need more than a microSaaS and likely more than passive.
When employed people think of their cost of living, they seldom think of healthcare, disability and worker's comp coverage, pension/retirement, medicare and inflation. If you already make 6 figures in salary plus these extras, replacing that for 20+ years with a passive microSaaS is not realistic in most cases.
Instead, microSaaS can take pressure off of your career, provide cushion, pay for niceties and lead to a career of side projects or side projects that become a career. That, and an outlet for my creative tendencies was the goal.
Honestly, I don't consider the ability to pay for niceties as "passive income". It's like considering an occasional drive to bottle depot as "passive income".
That's why everyone should build their business to fit their own definitions and lifestyle. What you consider success is up to you.
Just curious, what do you consider as "passive income"? I always assumed it was effort related and not dependent on the amount.
Well, I'm maybe seeing it wrong but every time when I see the "passive income" somewhere I imagine a person living on it so the exact amount is different - of course - but it should be enough for a current person.
Right. Then your comment makes more sense. I see it as recurring income that requires little to no effort. So even interest earned on your bank account would count as passive even though it is, for me at least, so little that it just gets eaten up by bank costs.
Of course, earning enough passive income to be able to live from it would be the dream
Absolutely. And this is what most people want, not just a couple of bucks in a month.
Just how i wanna be always. some day I'll surely post like this.
Thanks for sharing. It's definitely a good idea to really think about what you want in life, before starting a business and run into the pit fall that will control your life instead of supporting your life.
It took me and my former co-founder many (hard) years before we were profitable. We finally reached a really comfortable MRR with a small team (over 50k€ at the time) when I realised we had completely grown apart and the company was build around his lifestyle, and not mine. I've been working 100% remote, living the digital nomad life. While he was still at home with wife and kids. My goal is to create more passive income, but all these years the work was really involved and focussed around excellent customer support, which for me was not sustainable.
So I decided to quit, I got a great deal and took a long 3 month holiday to think about my new SaaS projects. The 3 months turned into a year because I couldn't find the motivation to start, I couldn't really pin point the problem, but a few months ago I realised that the ideas I had would pull me back into the same rabbithole.
I turned the idea around and instead of running the SaaS projects myself, I'm building tools that help others build new SaaS products faster. I went public with my first product 3 weeks ago and already have the first paying customers. I feel back in control and I'm really loving what I'm doing.
Periodically passive is definitely also what I'm after. My movitation to work really depends on the time of year, eg in the winter I like cramming out long days of programming, while in the summer I really can't and prefer to be out and about.
Good luck!
That's awesome and thanks for sharing parts of your journey. I think the easy money is definitely in selling shovels to those clamoring for the gold rush. For example, whether crypto does well or not in the end, $Billions will be made on ancillary services and products.
Best of luck!
Great post Troy! Thank you for sharing your journey with the community, this is very inspiring.
I recently left the corporate grind at a large tech company as I wanted to find something more meaningful. I wondered how you went about finding this kind of work arrangement that allowed you the headspace to focus on your entrepreneurial ambitions on the side? It seems a challenge to find work that isn't all consuming these days, especially if it's a tech company even with a positive mission. I thought about consulting but as you rightly mentioned, it's hardly low key and I've found platforms such as Upwork challenging due to the downward pressure on price.
Honestly, my life in corporate America was 12-14 hour days. When I transitioned to education, there were a few years with a steep learning curve, but after about 5, I was in a role that was periodically all-consuming and periodically manageable.
My side project idea came from an all-consuming period to make a service to help myself and others manage the chaos. I built it during my periodically manageable periods.
If you need money, Upwork and Fiverr can be good and you can carve a niche and set your own prices. Just specialize as there are far too many generalists on those platforms. For example, I needed a Google Add-on for Docs and there were probably 2 specialists whose profiles indicated they specialized in those APIs.
If you don't need immediate cash, I'd prefer income streams that have a future that is more passive.
I haven’t come across the “periodically passive” term before and find it very useful, thank you! I’m curious:
Did you adopt that approach from the beginning, or evolve to it after X years of more intensive work on the idea?
"In the beginning," I thought I'd be cranking really hard and earn money over a short period (2-3 years) and then become technologically obsolete. It was a simple business, so I didn't expect it to be overwhelming, but I didn't have a concept of how much time it would take for development, customer service, marketing, blogging, etc. I also thought I would do all that stuff myself (NOT!).
I learned that customer service is the only thing that HAS to happen. If your code is simple and you don't fall prey to "growth by development", you can make development, marketing and blogging periodic to match your desired schedule. These days you can automate most of this stuff pretty easily too. Being older, the value of my time was greater personally and professionally so I became more ruthless about what I would put my time into vs. what I would someone else to do. I'm in the productivity space, so I even built a Time is Money Calculator (https://timeismoneycalculator.com) to help others be as ruthless.
Now that the business is stable, how do you decide when you want to work and when you don’t?
I don't think any business is "stable". You just grow or die more or less quickly. My business has grown fast, died slow and is again growing slow. I do customer service at predetermined times each day (one pomodoro at a time). If there's nothing in the queue, I read something business related. Other than that, I work based on my desire and other responsibilities/interest.
Did I mention I HATE marketing?!? Well, that's where my efforts have gone into automation. I still have to do some of it myself, but I outsource the heavy lifting. I expect this is where growth will come moreso than product.
Really great post, thank you for sharing! I think you've put in writing much of what I'm striving for as well (solo, side-project, not mission critical, periodically passive).
One of the concerns that I'm facing right now (I'm in my idea stage and am interviewing potential customers) is that it seems like my hypothesis keeps gravitating toward those "software-informed consulting" opportunities. It's hard for me to say no (great for income) but they can be so time and anxiety producing as well. I'm hoping I can stay focused enough to continue to steer it towards my goals (likely means I need to continue to interview and pivot until I - hopefully - find customers for those goals). Thinking about your post will help, much appreciated!
I found lots of that software with consulting stuff because many people need others to make meaning of what the software provides.
If you truly want to be solo, avoid it. You could also partner with someone who loves the consulting part and you can be their referral source. You do what you love and they do what they love. Win/Win!
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