The Economics Of Owning a Business as a Developer

A 15-minute explainer by Bgo, a former software engineering manager who now runs an AI consulting firm and an accelerator for developers, and who ends the video with a pitch for it. He runs the whole thing as a comparison with opening a cafe.

The cash cost of a developer business is tiny: $200 to $2,000, against a quarter of a million for a cafe. That is the trap. The real cost is time. A senior engineer worth about $90 an hour who puts 15 hours a week into a side project for a year has spent about $65,000 of his own time, and the usual result is a repository with no customers. Gross margins are absurd (a $10,000 project might cost $100 in API credits), but they compress fast. Only half to 60% of a solo developer’s hours are billable, so the real hourly rate is about half the stated one. One client at 60% of revenue is the developer’s version of a ruinous lease. And because nobody sells while delivering, work arrives in feast and famine.

His fixes follow from that. Charge for outcomes, not hours. Use retainers and productised offers. Keep any one client under a third of revenue, and build the pipeline while busy. Above all, sell before building: don’t form the company or buy the domain until someone has paid. He compares three paths. A SaaS built first and sold second, which he advises against. Hourly freelancing on Upwork, which he says rebuilds the day job with worse benefits. And what he calls the positioned path: become the AI or software person for a local market and one kind of problem, with two or three fixed offers. His illustration is three retainers and a project a month, for $15,000 to $25,000 at over 90% gross margin, backed by one client story from his own programme. Developer businesses, he says, die from bad selling, never bad code.

The arithmetic holds as illustration: $180,000 a year is about $90 an hour, and 750 hours at that rate is about $67,500. California does charge LLCs an $800 annual franchise tax, and the SBA counts over 36 million small businesses in the US, most with no employees. One borrowed figure is weaker than it sounds: the claim that 50 to 74% of coffee shops close within five years comes from a 2019 survey that asked 232 owners for their estimate, not from a count of closures. His income figures come with an accelerator pitch attached, and the one success story he gives is a member of it.