Hot answers tagged finance
21
I never used to think it would cost that much either ... but then I started to grow the company.
Each salary has to be paid for 2 years, 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 ...
12
Accounting means two things to me:
Book Keeping - definitely do that yourself and/or have a book-keeper employee (part-time if necessary). It is really important to be able to invoice customers, pay suppliers and know the state of basic cash flow.
Regulatory (or big) accounting - should be out-sourced. For small companies and start-ups look for someone ...
10
This is a tough one, but instead of focusing on the thing you don't have (money), focus on the thing you do have (time and talent).
Getting early customers is always, always hard. My advice would be to kick off a blog (that's a long term play, but still necessary). Second, start locating bloggers that are in your industry and forging the relationship. ...
10
Yes, going to your customer as a source of operating capital is a time honored and proven way to raise the resource you need to grow and expand. Whether it is a gift card that collects the money upfront, or preselling cars before they are even manufactured -- bypassing the "money changers in the temple" has been part of business marketing and growth ...
8
Those fees really add up and you will have to do some research comparing rates locally specifically for the type of business you are going to do. Note that national banks have different schedules in different states.
We are in Seattle and I had to resort to a two bank solution:
Bank of America for day-to-day operations. They work for us because they:
...
8
The person who pays the bills IS the customer.
NO company makes money by not charging the customer.
They may have a business model which makes money by not charging a user of their services -- but they do not make money by not charging their customer.
A start-up that fails to understand who their customer is will be in trouble.
If you are providing a ...
7
Growth companies eat cash, so the amount of cash you need depends on 1) how much you are spending ahead of revenue, and 2) how long it takes you to convert sales to cash. For example, if you hire a developer to create a new product, but you won't be able to sell it for a year, you'll need a lot of excess cash to help you finance that person's salary. And if ...
7
Do your own accounting, but develop a relationship with a CPA firm (to do your taxes at the end of the year). Open a Quickbooks account, create a Charter of Accounts with their help, and then track your expenses over time. At the end of the year, the CPA firm will be able to do your taxes very easily. This will also help you keep track of your burn rate ...
7
In addition to Tim's answer, just be aware that: 1) You need a lot of money in liquid funds, since you have to put the funds in escrow accounts to guarantee solvency; 2) The rules are set by both the federal government and the individual states; and 3) You usually need to be a corporation, and the corporation usually needs to have multiple shareholders. ...
7
What you're suggesting is mathematically impossible.
First, let's start by looking at how an anti-dilution clause works by using a super simple example.
The founder sets himself up a company and declares that it will have 100 shares. He owns them all, so he owns 100%.
He sells 20 of those shares to an invester. Now the investor owns 20% and he owns 80%.
...
7
All of my businesses now are subscription based. Over the last 10 years i have weaned off retail and consulting because i have done so well with subscription services.
Here are some concerns looking at your pricing:
Your development cost seems VERY Low. If you are building a very basic subscription service, and plan to integrate with merchant accounts, ...
7
Anybody who will give credit to a company with so little history will require one or more individuals with good personal credit to co-sign as guarantors in case the business flakes out.
There are lots of companies that lease capital equipment that way. Credit cards? I dunno. Look around; Chase keeps advertising their "Ink" cards on TV. You may find it less ...
6
It's not about right and wrong, it's about choosing a market/customer and being consistent.
Little fish:
Big market
Inexpensive advertising
Minimize support costs
Few features (hard to support)
Credit cards
Big fish:
Market size less relevant
Advertising budget can be big
You have to do big-time support -- conf calls, custom stuff folded in, etc.
...
6
--- Apologies if this is too simplistic for you but here's how I think of it:
How much does it cost to get a person to your site?
What percentage of the people that get to your site convert to a customer?
Do the math and you'll get the cost per customer. Let's say it costs $2 to get each person to your site, 10% conversion, then you're spending $20 to get ...
6
We've used Authorize.net on 2 e-commerce sites for almost 3 years. We've had absolutely no problems with them at all. They have two options for integration: simple and advanced. The simple integration method requires a redirection to their site. The advanced integration method allows you to make API calls with your own code so you can retain the look ...
6
There are quite a few honest and not so honest ways for a company to make money without charging customers directly.
A company may limit the free service and charge for add-on features. (The Fremium model)
For sites that have a "provider" and a "consumer", they can charge only the provider side for listing a product/service. (craigslist, zocdoc, ebay use ...
6
That's a question I ask me often, too. And speaking frankly, I haven't a straight answer yet, but I found three recurrent topics:
Attitude: Although its not a skill, people cite often the need for the correct behaviors and mindset to reach your goals. And acquiring these behaviors do involve some skills, e.g. Proactivity.
Technical Skills: If you are going ...
6
When I speak with people that are interested in starting a new business, I always ask them the following questions:
Where is your first sale/client going to come from?
Where are your next 25 sales/clients going to come from?
Can you replicate question number 2?
In my experience business is really only two things (especially in small business)
Getting ...
6
Assuming the Danish economy is fundamentally sound:
I consider this a reasonable assumption due to the maturity and structure of the Danish economy.
The peg to the Euro likely keeps your currency artificially low within the general zone due to stronger economic growth.
The korune is likely to appreciate due to people seeking less risky Euro currencies.
...
6
You need to know enough to direct your accountant on what to do and to understand your burn rate (e.g. cash in - cash out).
Most accountants will setup your business on the accrual basis which is different than on a cash basis. Accrual means that sales are booked when you make the sale -- not when you get the money.
Cash basis is just that -- when you get ...
6
In the agreements that I work on, the typical approach is that the payee has the right to audit the payer's accounting records. If an underpayment is discovered, the payer pays the underpayment amount plus interest. If the underpayment exceeds X% of the amount due, the payer also reimburses the payee for the cost of the audit.
I don't know whether this ...
5
At SEOmoz, we're currently keeping between 3-4 months of full expenses in the bank (a higher multiple for purely operational expenses). I think that's a bit low, but I can say that many of the VCs we talked to felt that our bank reserves were quite conservative for a tech startup and actually worried about why we hadn't been more aggressive with spend if we ...
5
I just setup an account through a community bank. I figured, as a small business person, I should support local businesses. I used http://moveyourmoney.info/ to find a local bank that was rated well. I ended up with The Mechanics Bank, which is local to the San Francisco Bay Area. So far, so good. The big selling point for Mechanics Bank was that they had ...
5
Yes, it is perfectly legal to do this. In fact many businesses, small and big, play these sorts of games to reduce their tax bills. A good accountant can help you with this.
Something to keep in mind, however, is your accounting method. Are you using Cash or Accrual? The technique you describe mostly makes sense with cash accounting, not accrual. In cash ...
5
Currently, you have to file a 1099-M (or Misc.) for any subcontractor to whom you pay in excess of $600 per year.
Here are they IRS instructions http://www.irs.gov/pub/irs-pdf/i1099msc.pdf .
You should have all subcontractors complete a W-9 so you have sufficient information to file a 1099-M when and if they cross the $600 limit.
Most potential ...
5
A convertible note is a loan with the right to convert that loan to equity later on. One of the reasons it is used by startups and their investors:
No need to come to an agreement at a valuation - this is good because valuations can be very hard to do early on. It also removes some distraction and overhead this early to focus on other things. The ...
5
First of all -- I am so sorry that things have not worked out. Everything looks great on paper polished with projections; and as you know as the development takes longer, the marketing is harder, the customers don't come, the margins don't materialize even the best of angel intentions can become a nightmare of Devils fire.
You can check with your lawyer to ...
5
I currently work for a regional IT services firm in the Midwest. Until three years ago we had five employees (all technicians). Our operations averaged a 46% bill-out which means we paid 2.17 technician hours for each hour we billed clients. Our technicians averaged 22 hours onsite with clients per week. Our technicians averaged wage was $13.40/hr and ...
4
Freemium business models can afford to give away their free services because they make enough from their premium models to support the non-paying users. Don't forget that the free users aren't just freeloaders. They also help you to spread your service via word-of-mouth, and they offer valuable feedback.
Twitter currently has no way of making money. They ...
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