As a senior developer, you’ve most likely played with the thought of reaching financial independence as you are one of the few that have skills that can really put a dent in the universe. Mark Zuckerberg is the prime example how a programmer took an existing idea and grew it from a small audience into global business. To be completely honest, there are only a couple of programmers who have become gazillionaires, but what about lowering the bar a bit and aiming for a level where you become rich enough to retire in 10-15 years? You have the skillset that is a huge force multiplier to your advantage. The blog post tries to paint a picture of few common paths that you could take. And as a small disclaimer, the paths are not comparable to each other as is and this is not a complete list of all possible scenarios.
To start off, let’s make a few assumptions in order to keep this blog post short and simple. This blog post focuses on the income-side of the FIRE equation. Investing and cutting living costs are out of the scope of this blog post.
- FIRE means Financial Independence + Early Retirement — having enough investments that generate enough cash flow to cover your living expenses and then some
- This article focuses in the Nordics, especially Norway and Finland (1 EUR ~= 10 NOK)
- To simplify things even more, let’s assume that FIRE means 1 million euro (10M NOK) investment portfolio
- During the timeframe, it’s assumed that the person invests steadily every month (stocks, ETF, funds, bonds, crypto, real estate, rare material, etc)
One key ingredient is your own ambition level. If you want to start pursuing any of the following career options in order to reach FIRE, you need to put in the work.
Career options for reaching financial independence
Detailed descriptions for each career path
Join a VC backed startup after several investment rounds, get stock options
Ok, so you joined a VC backed startup as a senior developer. You are clearly one of the most experienced developers in the company. It means you get all the hard problems to solve. When you signed the job contract, you also received stock options that most likely have a vesting period to keep you from leaving the company.
VC backed startup has one goal and that is growth. The company is constantly looking for new ways to grow the business and that typically means that there are a lot of new projects going on, which have pre-defined metrics for success and tight deadlines. If a project seems to be failing, the company stops it and re-allocates resources into other projects. In plain English, that means that the environment is hectic, projects are started and ended and it is business as usual.
Most likely, you don’t have much input on strategic level decisions. The growth targets that were set by VC’s have major role in the company strategic leadership.
When you reach FIRE? Probably never. In order for you to reach FIRE, the company needs to grow beyond the billion dollar magical unicorn level and do an IPO or get bought. If you have stock options, your stocks are the last in line to gain any financial benefit. But, imagine if you joined Google in 2004 and received stock options. You would have reached FIRE years ago.
Risk level: High, you are jumping on a rocket ship that is aiming for low-earth orbit where all the unicorn are, but the rocket will be remote detonated if the velocity is not high enough because there is no landing pad.
Probability of FIRE: Low, the stock options that you might get do not make you a millionaire unless the startup is the next Google or Facebook.
Independent contractor is a one-person company, trading working hours for money. The two major factors that determine the business size are billable hours and hourly rate, raising hourly rate or increasing billable hours.
Here is a simple math:
90 euros * 7,5 billable hours * 22 working days = monthly revenue
With this over-simplified example, the yearly revenue is over 150 000 euros. Depending on salary, expenses and taxation, the yearly profit could be over 50 000 euros. So, when you use those values for compounding interest formula, with annual interest of 7%, you would end up having about 1,4 million euros in 15 years.
The problem with being an independent contractor are the limits of scaling the business. The limits are pretty pre-defined and well known. As you gain more skills and experience, your hourly rate will increase but unless you become a really world-class specialist in highly valuable niche, like database optimization for Oracle products, you are not able to double your hourly rate every couple of years. The example above does not take into account that your yearly profits will slowly rise because you are able to raise your hourly rate.
The key here is the projects; you want to have long and high-paying projects. You want to have long projects so you don’t have to use time for filling up your project pipeline. You have two options, either use a third party broker that keeps you fully booked or do the sales yourself.
Risk level: Low, you can always get a project, just adjust your hourly rate accordingly.
Probability of FIRE: High, but it will take quite a long time.
Co-founder in a software consulting company
If you have friends that know how to write software, one good move is to start a consulting company. The first years will be tough, failure is not an option for the first couple of projects that you manage to get. This most likely means working long hours without any compensation. You will be working on a client project, but you need to work on your business as well. One critical thing for your success is the founding team’s sales skills.
Eventually the business grows enough that you are no longer working on client projects, but you can focus 100% on working on the company. You are then dealing with different kind of problems: What kind of a company culture you want to build? How to keep your employees happy?
In order to grow the company, you need to hire good developers and close more deals. One thing is for certain, you are either short of employees or you don’t have enough projects (classical demand and supply problem). You are basically running a two-sided marketplace. Google “two-sided marketplace” and you will see how hard it is. If you manage to balance the situation, it would probably take five minutes to tilt either way. As your company grows bigger, the stability increases.
What about reaching FIRE? It’s possible. You would have to grow the company over several million euros of annual profit. You’d reach FIRE by executive level salary and dividends over a course of several years. Or if the company is acquired by a bigger player. In that case you would get even more money but you would have to stay for the duration of the earn-out. In general, the timeframe that we are talking is about 10 years if everything goes according to the plan.
Risk level: Low, you can always get a job as a senior developer.
Possibility of FIRE: Medium.
Co-founder in VC backed startup
Co-founding a startup as the tech guy in the team and getting a VC funding is a huge accomplishment. If you have done that successfully, congratulations for the massive effort! It does not necessary mean that your business will be successful, but you have ensured enough runway to chase the next growth milestone. Your salary is nothing like CTO’s / VP’s salaries in corporate world, the money that VC’s give must be used for growth, not for founders’ salaries.
Depending on the number of your co-founders, you will most likely be involved in fund raising for the next round so you cannot focus 100% on building the product. But when you have time to focus on the product, you are in for a ride! You have to provide technical leadership, hire engineers and communicate with stakeholders. Writing code during normal work hours is very unlikely because you will be interrupted constantly. You will write code in the evening and at night, when nobody is bothering you. The job is stressful and hectic, but you will learn so much that you cannot even imagine it. It’s an experience that you cannot get anywhere else.
As VC-backed company, your ownership will dilute with every funding round, but the company hopefully grows. If everything goes well, your startup will be bought by a bigger player or the company goes public. You might get filthy rich, you might get FIRE rich or you get nothing.
Risk level: High
Possible of FIRE: Low
Start a Bootstrapped product or service company
Bootstrapping a company means that you don’t take any outside investment when starting a company.
How come is the risk low? Easy, if your product or service fails, you have gained skills that you can use when you are working for somebody else. Just look for a job and work there until you want to do this again.
The holy grail of bootstrapped software business is SaaS and recurring revenue. If you get 1000 customers who pay you 25 euros per month, it’s 300000 euros of annual revenue. Sounds great, yeah? Building the product is the easiest part. Selling and marketing it will be the hardest.
If you start a bootstrapped company, make sure you have enough savings since everything takes twice longer than you estimated. Also, it’s good to prepare mentally that you’ll only get to build the product 20% of your time, 80% of your time will be spent on sales and marketing.
Risk level: Low, you can always get a job as a senior developer.
Possibility of FIRE: Medium
Join a FAANG as a remote worker and maximize the cost of living arbitrage
In this career path option, the place you live plays a huge factor in the equation. If you manage to get a job from FAANG or any other high salary tech company, and you live in Lemmenjoki or Kautokeino, the cost of living arbitrage is in your favour compared to your peers who live in Helsinki or Oslo. If you really want to maximize the arbitrage, you should consider moving to low-cost countries with a good internet connection. You can search for the perfect place on Nomadlist.
The most complex thing with this career path is the taxes. You have to do the research of how much and how you pay taxes. It also affects your employer since they might have some tax obligations as well.
The hardest part is to get the job. You have to go through the recruitment process, convince the person doing the hiring that you are the best person for the job, even if you work from another part of the world and most likely from a different time-zone.
If you can make it happen and you’ll get the salary in 100% cash and not in stock options, this could be a really fast path to FIRE. If you make 200 000€ after taxes and living expenses, you’ll be FIRE in couple of years! Just keep in mind that when and if you move back to your home country, the living expenses will go up significantly.
Risk level: Medium, and you can always get a job as a senior developer.
Possibility of FIRE: Medium
Build a career in a big corporation
Working for a big corporation definitely has its benefits. The salary is good, the working environment is calmer and if the business of the big corporation is growing, the job security is in good shape too. Possibilities for career advancement are plenty, and there are most likely courses and education provided by the employer. If you have the motivation and the skills, you might level up all the way to the top.
It might surprise you, but building a career in a big corporation is not the option with the lowest risk in the list. You might end up in a technology path that makes your skills obsolete in five years. Once, Symbian was an operating system that powered over 250 million mobile devices, and in a few years Symbian was no more. Just remember that you need to make sure that your skills stay relevant. Don’t get sucked into a project that is using legacy technology from the 80’s.
Ok, what about the most typical option? Working in a big corporation for 5-10 years and then moving on to a new big corporation where your salary will get bigger.
Reaching FIRE will take a long time, it might take over 20 years. With this option, your only way to increase yearly income is to negotiate raises. Your boss will fill in the paper work and somebody somewhere in the organization decides if you get a raise or not.
Please remember that the longer you stay in one big corporation, the more your skills and experience adapt to the bubble of the corporation. Even if you are a well-respected director in R&D, your skills do not necessary have any use in a startup. If you do not want 24/7 technology, but want to focus on other things in your free time, a big corporation might be the best option for you.
Risk level: Medium, don’t let your skills to become obsolete.
Possibility of FIRE: Low
Joining in a software consulting company
When working for a software consulting company, your options for increasing your income are limited by the profit target and your hourly billing rate. Your employer has to make profit out of you, otherwise they cannot pay you.
The salary model has variations, either you are on a fixed monthly salary or your salary is based on the commission. The commission typically has a default-salary and then the commission part is added on top of that, for example 50% of hourly billing is paid as a salary to you. The more risk the company has per employee, the faster they will cut expenses (a.k.a. lay-off) if they cannot get you a project and you end up spending time on the “bench”. If you are on a commission based salary, you are the one carrying more risk and the risk is mitigated with higher salary. The bigger your commission percentage is, the closer you are to being a independent contractor.
When salary is not a competitive edge for a software consulting company, they really put effort on keeping their employees happy. So even if the salary is not near the market maximum, it still has it’s own benefits which make working for a software consultancy a good option.
If you want to reach FIRE on this career path, you really need to put focus on your investments and your living expenses. Since the salary has it’s upper limit based on your hourly billing, you have to adjust it by cutting your personal expenses.
Risk level: Low
Possibility of FIRE: Low
Start a productized consulting company
If you are really good at something, productized consulting lets you do that more often. Productized service company provides services for it’s clients by utilizing processes, automations and outsourcing, making it more scalable business. Think independent contracting but fixed scope and fixed pricing. For example, SEO Audit is a prime example for productized consulting. Automate your tasks as much as possible, and you can do more audits per week. It means more revenue. It means you can put more focus on finding good clients.
This one is harder than the independent contractor’s career path. You need to have better relationships with your clients, you need to put a lot of effort on your sales pipeline. The good thing is that you can automate your sales process as well. And if this fails, you can always go fully back to independent contracting.
If done right, this is a fast way to reach FIRE. Your annual revenue can be scaled much higher than if you would trade your working hours for money. You are still trading working hours for money, but now you have automated some of the hours.
Risk level: Medium, customer acquisition is the hard part.
Possibility of FIRE: Medium
Sell education products
Did you know that Steve Schoger and Adam Wathan made over $1M by selling a video course that teaches design for developers? If you have deep knowledge on a technical subject and you are really good at teaching them to others, building educational products might be your path.
This option is the one where building an audience matters the most. Your customers will buy from you because they trust you, they trust that you know the topic inside out. If they do not know you, they don’t buy from you. That is why you need an audience. Luckily, building an audience is easy, just be useful on the internet. Don’t watch the number of your email newsletter subscribers or twitter followers. Focus on learning interesting stuff and share it with the world. Good things will happen. After you have built an sizeable audience (for example, 1000 true fans), you are ready for another step, and it might be educational product.
The possibility of reaching FIRE is quite low. The competition is tough and you need to find that thing that makes you unique from others.
Risk level: Low, your reputation grows
Possibility of FIRE: Low
Join an idea-stage startup for sweat equity
Your friend has been thinking about a business idea for a mobile app for many years and is asking you to build the very first version. The compensation will be 2% of the company once the company is set up. Your friend promises that this will be a 1000 billion NOK company in 5 years.
If the person with the idea has done proper customer validation for the business idea and it shows positive signs, then there is a possibility that it might be a real business one day.
If one of the co-founders has technical skills (that is you), then that person should get 50% of the company, and the rest of the co-founders get the remaining 50%. That is pretty much the ratio what is the impact for success per co-founder. Ideas are worthless, execution is what actually generates business value. Share this blog post to your future co-founders.
But if it’s just an idea, with no research backing it up, thank your friend for the honour and decline respecfully.
Risk level: Absurd
Possibility of FIRE: None, and you will lose your friendship.
Start a B2B company with an industry expert
This option looks like a few others on the list, but take a note on the difference of this path. This one requires a co-founder with solid industry expertise, lots of connections and deep industry knowledge. The co-founder must have a proven track record that he or she is a highly skilled individual on the area of their expertise and knows how to sell successfully.
The co-founder’s expertise is equal or deeper than yours; this way your company has knowledge on the problem and the solution, increasing the probability of success. This is the major point, the level of expertise of both co-founders must be at very high level. The odds are even more on your favor if the industry of choice is a growing one.
Do your due diligence on your co-founder, do your homework to make sure the expertise exists and the validation of the business idea is on a solid ground. When you ask your potential co-founder how the business idea and the market was validated, the answer should be along the lines like “I have four customers ready to sign the two-year deal worth of 8000 euros as soon as we are ready”. The more concrete example of validation, the better. To play it safe, you call a couple of those customers and talk to them yourself. And of course you should get along as well.
The possibility of reaching FIRE: Quite good, actually. You have a co-founder with equally high level skillset, making you two a double force multiplier in the industry.
Risk level: Low, you gain a lot of domain expertise that you can use if this adventure goes bust.
What is the best career option for you? For anyone? I don’t think there is just one right career path.
You are a senior developer so you have a lot of options; be the DJ of your own life and mix it up! Try being an independent contractor for a while, then join a VC backed start-up. Work for a big corporate or FAANG. As long as you keep your skills up to date and you gain domain knowledge from wide range, you have no problem with finding jobs.
Also, keep your FIRE spreadsheet up to date and eventually, you will get there.
Finally, a huge thanks to the Talented Developer Community for giving me feedback for this blog post!
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