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2018-02-09 18:42 by Karl Denninger
in Small Business , 81 references
[Comments enabled]  

The freeware version has been updated to 4.0.0

There are no major user-visible changes in this freeware release; the "full" version has the license server connectivity in it, but that's disabled in the freeware release since there is no encryption at all included in those builds, and they're required for the license server to talk to it (for obvious reasons.)

The documentation has also been updated.

The Raspberry Pi2 version is still available if people want it, but since the "2" is considered obsolete by most people, and the current model is and has been the "3" for quite some time, that's the only one I updated -- and have pulled down the Pi2 firmware image.

Feel free to check it out at -- and as a reminder, the entire package, including source and all rights, is for sale.  Look to the right to inquire or use the email link on the HomeDaemon-MCP page.

Bring a decent-sized checkbook smiley

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Bet against my view on "Make America Great Again".

And have about a million and a half to put on the table in support of your belief.

For what?


So let's say you spent the $1.5m and acquire everything.

Here's a hypothetical way of looking at the opportunity.

There are roughly 80 million single-family, detached homes in the US. (I'll ignore condos, mobile homes and townhouses, although some of the first and last are potential customers as well.)

We'll also assume you can appeal to just 0.1% of those single-family homes.  That's a tiny penetration.

But it would amount to 80,000 installations.

The hardware cost to install is under $100 for a minimal install (that's the power that comes from running on a $35 hardware base!) and under $500 for a typical install including sensors and control points (e.g. switches, etc.)

We'll assume you sell the base hardware and software alone for a one-time price of $350, and 50% of your installs go that way (homeowner does the rest on his or her own.)  That's $10m in gross profit.

The real money is in the annuity stream and installed systems.  We'll assume those have a minimum install of $1,500 billed out, of which $500 is your fixed cost.  That fixed cost includes $100 for the controller and $400 for a mix of motion sensors and controlled points.  Install time is 3 hours @ $60 each for skilled labor, or $180.  That's $820 across 40,000 installs, or $32.8 million.  We're now to $42.8 million in gross profit.

Now assume you use the certificate system built into the software and slightly extend it (yes, I can do that on a contract basis, or you can if you have a competent programmer on staff, since the framework is already in the code) to add an annuity-style revenue stream for maintenance, updates and offer an option to the customer for same.  We'll assume you charge $20/month for this and half your 40,000 install-it-for-me customers go for it.

That's another $4.8 million a year in revenue and the effort to issue the certs is about 1 minute each per year.  You can automate that, of course, but there will be expense in doing so.  Of course the actual time spent servicing said customer is variable (and you'd have to take a guess on that), but over 3 years that gets you to $57.2 million.

We haven't yet included what you can make off the "higher end" installations (the million dollar+ homes and condos) where the owner wants not 10 control points but 30, and is willing to pay for it.  He gets convenience, security (e.g. access to his IP cameras and triggering points from them), no cloud required so Google, Amazon and others do not have access to the inside of his home, everand you get to sell that -- it's private, it's his or hers, and it's accessible and controllable from anywhere in the world via said secure infrastructure that has no access for anyone other than him -- including you!

Let's assume that of the 40,000 "you install" locations 10% of them are truly high-end homes (remember, we started with 0.1% penetration into the market and now we're at 10% of 50% of those) are not $1,500 installations, they're $3,000+ installations and your gross margin on those is 50% -- which is easily achievable.  That's another $6 million in gross profit; we are now at $63.2 million.

Is this a reasonable projection over three years time?  It's in the game.  No, it's not "riskless" by any means, but on an adjusted risk:reward basis it looks pretty damn good.  In fact, it's not all that far off what I accomplished with MCSNet in terms of return-on-invested capital.  The real return is always on sweat equity as that gives you much more control for the risk you take, but you have to have something that affords you enough operating margin to make it worth it.

Of course there's SG&A to be accounted for.  How good of a businessperson are you?  Cost control is a big part of the game in any business but any line of work is a hell of a lot easier to succeed at when you start with a nice fat margin on the goods and services you sell up front.

This is a 40%+ gross margin business, in short, as I analyze it, and in areas where you have existing people I bet you can sell to vastly more than 0.1% of the households.  Certainly in many metro areas far more than 0.1% are in the $300,000+ price category where a system like this is a tiny percentage of the home's price yet the value delivered in convenience, energy saving and security dramatically outweigh the tiny uptick in cost generated by including or adding it.

So if you're "MAGA" or just believe my view on monopolists, the rule of law and such is horribly pessimistic and wrong, and in addition have the cash to put on the table to back your position with a big fat check then come do so.  Show me that my pessimism is unwarranted the best way anyone ever can -- by making a bunch of money that I am intentionally leaving on the table, handing to me just one fortieth of what I could have had.  We'll drink a beer together when you prove my view on the business environment in the US to be unreasonably pessimistic and you'll laugh as you motor away from the pier on your new yacht.

Of course the above is all "back-of-the-envelope" speculation but that's how a decent functional business plan starts being developed.  It's how MCSNet was developed originally, but before it was actually executed on I fleshed it out and actually wrote a full five-year business plan with pro-forma financials.

The difference between doing something like this and the Ponzi scheme nonsense peddled by many on Wall Street such as belief in 30% growth figures into the indefinite future when you already have half the nation on your service (cough-amazon-netflix-facesucker-cough-cough!) this sort of back-of-the-envelope pencil-out assumes 0.1% penetration into potential buyers.

What happens if you can get 2% penetration?  You make well north of a billion, and then you really laugh at me.

So if you're both "accredited" (you almost-certainly are if you have the capital) and this makes you salivate look right, click and email me.  We'll talk.

When I started MCSNet my view on business changed. I don't consider a 10% gross margin to be attractive at all.  IMHO if you can't get into the 30s it's not worth it on a risk-adjusted basis, and the target is 40%.  IMHO this, while certainly not "buy it and sit" like speculating in something like Bitfraud, fits that category -- but since success is of course directly related to both your analysis (rather than mine) and how you execute (rather than how I execute) this is all hypothetical, but if that 0.1% penetration can be turned into 0.5%, well...... you do the math.

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I've talked about HomeDaemon-MCP before.

It's still here, of course, but has continued to be refined and developed.

The current version is 3.0.0 and runs the place.  What's distinct about it compared against other choices?

First and foremost, it has no "central site" requirement at all.

In other words nobody but the owner has access to it and what it controls and monitors.  It uses SSL certificates both to secure your login (via a simple https interface) and to control slave connections between units (of which it can support an effective infinite number of.)  It will talk seamlessly to Zwave devices (including secure ones using AES encryption) and, for those who insist or have legacy devices, X10.

The certificate-based security model means it's trivial to set it up either a "buy it once, get a certificate good for what amounts to lifetime service" or a "buy a certificate good for a year" sort of model (e.g. subscriptions) on the retail side.

In the present political environment I have no interest in retailing it or developing the business structure to either put forward a distribution model or a retail sales model.

But you might.

Oh, and there's a provisional patent related to it that I will file (obviously before I tell anyone what that is or how it works) and it will go with the code, if someone buys it from me.

Yes, this is a "one check" sort of deal, but as you can imagine it might be a fairly large check.

If there's interest use the links on the right to email me and I'll get back to you promptly.

This is what the "monitor" page looks like on my cellphone:

And this is what's running all of that except for the pool gear (it'll run on essentially any system that can run FreeBSD; the Pi happens to be nice and cheap!)

The pool gear has another Pi with a handful of inexpensive ADC (commodity "adafruit" modules for analog sense and relay) ports to switch the valves, pump VFD and spa heater, enclosed in an inexpensive outdoor-gasketed sprinkler-controller enclosure.  It connects over a machine-certificate secured SSL link via WiFi, appearing as a seamless part of the whole.

No more spying, no Alexa, and if you're wondering how stable it is here's your answer -- the last downtime was due to me voluntarily turning the power off to do some work on the rack underneath it..

HD-MCP Controller
Private System; unauthorized access is punishable by law.

$ uptime
2:57PM up 144 days, 17:16, 1 users, load averages: 0.19, 0.18, 0.13

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