If you can do it for that amount then you are in better long term shape than the other guys. But you may have overlooked something:
- How many people and varying roles you will need.
- How much the marketing effort is going to take
- Your intended growth rate, they may be targeting 1 million new clients in a year, where your expecting 1000.
Here is a basic costing sheet for a software startup:
Each salary has to be paid for 2 years to start with, then have 30% on costs per person on average. So you have
- 3 good developers - $80-100K each. Say $300,000 per year.
- 1 marketing person = $150K
- 2 Sales - $100K each = $200K
- 2 support people answer questions and fixing things - $60K = $120K
- CEO $120K
= $890K in raw wages per year x 30% for on costs x 2 years approx $2.3M for a small team.
Then you have costs
- hosting costs, advertising, travel costs ramp up really quickly.
- Servers, programming tools, processes and systems, rent on a building to put them all in.
- Then you do promotions and trade shows ($40K per show minimum) 3 of those per year
- Then if you make it big and have to scale, you end up with full time PR people, full time web maintenance and performance tuners, HR people, inductions and ... it goes on
And what if your wrong and half way thorugh the 2 years you have to pivot and do something else ...
Then each specific business has its own unique issues / troubles, they all cost.
... i have 8 developers 1 key sales, 2 support and me in 2 companies ... we sell through Australia, New Zealand, Canada and the US ... $1M goes out the door pretty quickly each year.
As a CEO you need to have enough money to spend in order to build, if you are always paused waiting for the next dollar you may not get the momentum you need.
