This Engineer's $21K/Year Side Hustle Helps Manufacturing Companies Go Digital
Hello! Who are you and what business did you start?
Hi there! My name is David Arroyo and I'm the founder of DigitalCollars, a digital consultancy that provides software solutions for manufacturing companies. My focus is on small and medium-size factories that need to optimize and automate some processes.
I’m making around $21,000 per year while working full-time in my day job. One-third of my revenue comes from implementing commercial apps and customizing them specifically for factory operations. The rest comes from consultant work, coding personalized solutions for certain areas, like planning or procurement.
I’ve been working in manufacturing for over nine years and realized there is a huge gap between software and factories. While the tech industry is thinking about DALL-E 2 and GPT-3, many factories are still running their production using spreadsheets.
What's your backstory and how did you come up with the idea?
The first seed of the idea started in 2013. By that time I got a job as a quality engineer, focused on improvements on the factory floor. I remember that, during college, I thought that all those big - and not so big - manufacturing companies had everything perfectly measured and controlled. I thought everything was digitally planned, accessible on their intranet, and optimized according to the demands. How naïeve I was!
Factories are always in an ever-changing state, and everything is urgent and important at the same time. The 9 to 5 schedule is a constant race against the deliveries, having very little time for improvements. Every second counts. You even need to allocate time to design and print the stickers for the machines. Such small details add up.
Being your customer is a huge competitive advantage.
One of the first bulky tasks my manager asked me was to write down all the quality sheets from production on a spreadsheet, to get statistics of the most common failures in the last month. By that time we made around 20 machines per week, so I had to go through 80-100 papers one by one. Not too complicated, but way too boring…It was time to automate. I created a digital form for the workers and managed to get my first budget approval of 10 tablets for production. Three years ago, our headquarters started integrating that same app globally and now is used in around 20 different factories worldwide.
For 99% of the people reading this website, it's very common to use digital tools like Typeform, Trello, or Notion. However, for many manufacturing companies, that's a sort of black magic. Of course, there are factories like Tesla, Audi, or Boeing, but the vast majority of them are not so tech-savvy.
I thought this was something related to the factory I worked at, but then I started traveling to other facilities, auditing suppliers, and visiting new customers. Almost every factory suffered the same problem as us. There are always last-minute modifications from the customers, missing material from the suppliers, delays from the transportation company, or mistakes from the workers at production, to name a few. I encourage the tech industry to focus on manufacturing companies. There is still huge room for improvement and they have the budget to pay for products.
As years went by, I developed a set of productivity tools to ease my work but I never thought about monetizing them until 2019. By that time I used to travel a lot to London, and I went to a tech workshop about digital marketing. During that event, they talk about many design tools, but also some productivity tools like digital whiteboards. It only took me one second to recognize the huge potential it had in production, so in one month it was fully implemented on the factory floor.
One day, while walking across the aisles, I overheard the oldest warehouse worker talking about the new software we had just implemented and he showed me he used it to organize the packed units in our outdoor camp. In the past, he wasted about one hour a day guessing where the finished units were located in a 3.000 square meters camp full of identical, white-wrapped units (workers from other shifts moved the units to free some spaces, or to let the incoming trucks pass) and now with this new app he had everything perfectly tracked.
How is it that this 60-years-old man, who has been doing the same job for over the last 30 years, is so excited about this app? At that moment my idea was completely validated already.
Take us through the process of designing, prototyping, and manufacturing your first product.
Designing the offering of the services was somehow easy. I had previous experience from my day job, solving our problems at the factory, and also from auditing suppliers and visiting clients. I could say that I was my customer before thinking about monetizing it.
I created a short survey for new customers, focused on the main core areas where the biggest improvements are. It’s all about the 80/20 rule, where fixing 20% of the factors represents an 80% improvement in the outcome. For example, almost every company falls short in inventory management. They trust their ERP system (usually SAP or a tailor-made one) but it’s not correctly configured, so the result is overstock in some items and missing material in others. It only requires a few hours of work to solve it, and companies could save a lot of money doing so.
Another recurrent problem in factories is the change management system. On the factory floor, many companies work only with paper, and it’s very common not to print the last version of the drawing or datasheet after the client’s modification. Tech people are very familiar with tons of even free platforms that could solve this issue, but factory workers don’t.
I first started working for free for some companies, trying to validate the services I could provide, but quickly shifted to selling mode as I saw the big returns I was making for them. These companies pay millions in raw materials, so they don’t bother with the $500 fee I charged. Many of my clients don’t even have a quality department, but when they see what they can achieve with little investment, they don’t have second thoughts.
Describe the process of launching the business.
I launched DigitalCollars in the first days of March 2020, just before the pandemic. I created the website and started writing some content, but just when I began searching for new customers, everything closed and suddenly we were all in lockdown.
During that period, I was too focused on my day job and couldn't work much on my own business, but it was the perfect time to stress-test all these digital tools. I was excited to see that we could indeed run a factory working from home.
DigitalCollars doesn’t have many costs. I’m the only employee and work remotely, so I could survive during covid. I could say I had a second launch after Summer 2020 when I came back to my business and started looking for customers again. The timing was excellent, as many companies struggled to properly switch to a remote environment during lockdowns. In retrospect, I should have started earlier with all this.
One of the things I regret the most is not having started earlier. Idea validation is key but also working on the project itself. When you put yourself out there in front of the client, your priorities change. That logo you worked on for three days is no longer on the top of your list.
Since launch, what has worked to attract and retain customers?
Knowing your customer is key, and being your customer is a huge competitive advantage. Manufacturing companies don’t usually look for services/suppliers on the internet, yet they appreciate the online presence of new vendors. If they find value in your work, they will call you every year. They are not as price sensitive as in other sectors like retail.
My main way of attracting new clients was - and still is - via LinkedIn. Sending cold emails or direct messages to quality or production managers has been the most effective way of getting new customers. It's all about solving a problem they are facing. Targeting the right client is also critical for my services. Some companies already have 10-15 people in their quality department, so they clearly won’t need my services.
Since there is so much room for improvement, there are many opportunities for growth in this field. People talk about AI, machine learning, and so on, but many factories still use Hotmail domains in their sales emails (and they are fully booked!).
How are you doing today and what does the future look like?
I’m still working in my day job and running DigitalCollars async on the side. I use the evenings and weekends to work on my business and I’m either working on some projects or looking for new customers. I have no expenses as all these tools are free, so my time is my only cost so far. No ads either. The net sum is positive, and I average around $1,700 per month. I’m profitable and I hope this could be my official job in the future, but there are a few things that I need to work on.
My business model is not scalable right now, so I can only work for some customers at a time. I’m thinking about options to scale, like online courses or creating my platform, but I don’t want to lose the human connection too much. Ideally, I would like to consolidate some customers and increase my rates, so my side hustle becomes my main source of income.
Through starting the business, have you learned anything particularly helpful or advantageous?
Listen to your customers. It might be obvious, but it’s such an underrated action. Not only to solve their problems but what works for them might also work for another customer. Connecting ideas is a superpower that can be developed with active listening.
Also getting your hands dirty on the job is critical. Put yourself in the worker’s shoes and think about what the actual problem is and how they would use the tools to solve it. It’s easy to have a biased view while sitting on your office chair. Be open-minded with your approach.
What platform/tools do you use for your business?
I use Github for my codes, to store the scripts I use in consulting. For the production department, I use many productivity tools such as Trello, Airtable, or Notion. And for payments, I use Stripe.
What have been the most influential books, podcasts, or other resources?
Having a great mentor is by far the greatest shortcut one could get. Alberto, my former manager, taught me a lot of great values and made me feel confident when proposing new projects to the management.
I’m also inspired by those bootstrap companies that find value in certain features of specific products, extend them and make a completely new startup from them. For example, using the API of the original product and creating a new platform from it. They approach a new type of customer that the original company didn’t even think of. Product Hunt is full of those people who think outside the box.
Additionally, there are many web pages full of information and resources for founders, like Indie Hackers or Starter Story. Pieter Levels, Harry Dry, and Damon Chen have also had a great influence on my way of approaching my business.
Advice for other entrepreneurs who want to get started or are just starting out?
Just start as early as possible. One of the things I regret the most is not having started earlier. Idea validation is key but also working on the project itself. When you put yourself out there in front of the client, your priorities change. That logo you worked on for three days is no longer on the top of your list.
Many startups want to build stuff for people that can't afford their products. Instead, focus your efforts on paying customers. Factories have money, and they can easily pay your honoraries if you manage to solve their problems.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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