In 2002 Dan McCoy was working full-time as an electrical engineer for a large aerospace corporation. He knew how to build computers and was frustrated with all the “crapware,” as he put it, that popular computer companies like Dell were putting onto their computers.
Dan saw a niche where he could be of value. He started building personal computers that were more streamlined, higher quality, and faster than what most people were getting in the marketplace and selling them on the side. He also focused on providing great service to his customers.
It started out just as a hobby for him, but the business grew. Over time he began expanding his services. He worked with Wealth Factory, the company founded by my 5 Day Weekend collaborator Garrett Gunderson. With Wealth Factory’s help, he put his financial house in order and began to build the business.
By 2009 his side business had advanced to providing consulting and managed IT services for small businesses (although he was still working full-time). Dan noticed that there was something wrong with the common model of the industry. Companies only paid him and other service providers like him when their computers went down. So what incentive did they have to keep the computers up and running? He saw an opportunity to fix this model.
Instead of just charging an hourly rate for fixing things when they crashed, he switched to a recurring revenue model. Companies would pay him a flat fee to do proactive monitoring and keep their computers and their networks functional. It was a great value proposition for his clients, and a better fit for his business. Over time, he completely shifted his model. Within one year he had over $80,000 per year in recurring revenues coming in.
In September of 2010 his company censured him for having his side business and checking emails on company computers— even though he had never cheated the time clock. They gave him three days without pay. His daughter was a year old and his son was 9 years old. He spent those three days at home playing with his daughter. It made him realize how much of his son’s life he had missed and he vowed he wasn’t going to miss his daughter’s life as well. He knew it was time to make a change.
When he returned to work, his decision was even more solidified because his employers put stringent requirements on him. “They had me locked down to specific hours on the time clock,” Dan said. “They tied me to time instead of value and took my freedom to create value away. They were trying to control me, and I hated it.”
Dan followed the steps for freeing up cash flow that I’ve outlined. He freed up enough cash to make it possible for him to quit his job and take a 60% pay cut and still take care of his family. He also worked hard when he was off the clock to build his business and expand his customer base. His last day of work was January 14, 2011.
Within one year of quitting his job he had more than doubled his company’s revenues. Since then, his revenues have increased by more than four times and his profits have tripled. Fully 85% of his business is recurring revenue, and his gross profits are between 50 and 60%. He has two full-time employees and a team of more than 60 other people to whom he outsources work. He now has the freedom to do what he wants, when he wants. And it all started as a hobby on the side.
We asked him what advice he would give to someone who wants to transition from a job to a business. He answered, “First of all, do what brings you joy. There’s nothing worse than starting a business and hating it. It has to be fun for you. Do something you’re passionate about and where you can make a difference for other people,” he said.
“Without passion you are grazing through life as if nothing really matters. Also, be clear about your end game. Know where you want to be in five to ten years.”
In my next post, I look at the example of another entrepreneur.
I’d love to hear from you – do you know people who’ve started small, stuck with it and struck gold? What happened? And are you doing something similar? Thank you for sharing.
Secure your copy of the “5 Day Weekend” book. 5 Day Weekend: Freedom to Make Your Life and Work Rich with Purpose [Nik Halik & Garrett Gunderson]