Leveraging tech debt for massive profit

Some people think all debt is bad debt.

I can respect that in some ways, but I have watched firsthand as technical entrepreneurs have leveraged a significant amount of tech debt into 9-figure businesses.

It’s quite similar to taking on a debt to buy rental properties. As long as the property isn’t a money pit and there is a sea of renters and you didn’t get screwed on the rate/terms of the loan, it's a pretty sound investment.

The key to this is knowing what tech debt has a high interest rate and what tech debt has a low interest rate.

Let’s say you have a problem that needs to be fixed, but instead of fixing it, you just throw money at bigger servers and kick solving that problem down the road for a bit. Is that a problem?

For example, let's say we have a problem (AKA tech debt) that is costing you $1,000 extra in server costs per month, but it would take $10,000 in engineering hours to fix.

You might be tempted to throw the engineering hours at it. In 12 months, you will have a $2,000 positive ROI.

But let's say that $10,000 in engineering hours could be spent on features that would give you a gain of $100,000 over the next year. Is paying down that $12,000 (12x$1000/mo) worth more to you than that $100,000 of value over the next year?

The problem is it’s not as obvious as taking out a loan from a bank or buying T Bills. Spending extra on computers, though common, is on the simpler side of the spectrum when trying to quantify tech debt.

The bottom line is, if you can figure out how to leverage tech debt without being overwhelmed by it, then you can use that to build some amazing businesses. But just like financial debt, be careful, it can compound quickly.

Need help figuring out how to tell what the interest rates on your tech debt are or how to leverage it better? That’s part of what I do, so feel free to reach out for one-on-one consulting or join my group coaching community.