Day 64 - The first two months of bills for a lean software startup

by alex 5. April 2013 18:24

I've been running the business for a few days past two months, so this is a good time to review the financial burden of the software business so far.

First, a little background info on the business. I'm running a lean startup (very lean). There's one employee (me) I'm the programmer, designer, salesman, marketer, customer support rep and janitor. The business is run from my home, and I try to be frugal in my personal life to stretch the money further. Every dollar saved is money that goes towards keeping me self-employed.

I use a Google Doc spreadsheet to forecast my budget and Mint to track all of my after-the-fact expenses. In other words, the spreadsheet tells me where my money will probably go and Mint says where my money was actually spent.

From February 1st through March 31st, my business (and me personally) spent $4,423.97.

It's a little scary to see it laid out there like that. Let's look at a break down of where this money went.

  • Gifts & Donations - $2,120.00
  • Home - $1,210.67
  • Food & Dining - $504.17
  • Education - $217.00
  • Entertainment - $193.79
  • Auto & Transport - $77.15
  • Uncategorized - $47.99
  • Shopping - $33.63
  • Business Services - $19.57

There's one outlier expense, which is the first and largest in the list. Someone close to me needed a small loan for a few months so I helped them out. I'm listing it as an expense because whenever you loan money there's always a risk that the money won't be returned. The recipient of the loan could flake out, leave the country, or be hit by a bus. My point is, I think it's important to have a heart and help people when in need, but only if you can afford to do so. I wouldn't have given this loan if I wasn't willing to not get the money back, and that's why it's listed as an expense for now.

Secondly, my biggest cost is actually paying for a place for me to live and work. This number was just about spot on with the estimates. I'm fortunate to live in a city that has relatively cheap home prices and rental rates.

I budget $10 a day for food and this is the category that I run the greatest risk of exceeding.

My "Food and Dining" breakdown includes all instances where I spent money on food for me to eat, including business lunches, groceries and going out for dinner and drinks with friends. "Groceries" also includes personal hygiene purchases such as soap and razor blades. So, considering all of this, my food budget utilization is somewhere less than 85% of the budgeted amount, so I'm quite happy with this outcome so far.

My only transaction for education was enrolling in the Copy Hackers Copy Writing Course. This course is designed to teach you how to write good copy - that is, the text on a website or magazine article - for homepages. Good copy, by the way, is text that increases the willingness of a visitor to convert (e.g., signing up for your newsletter, buying your product, etc). As a programmer, I totally recommend Joanna's course. There's a solid process to follow and she has a number of good tips that I wouldn't have thought of. This $217 was paid for by my marketing budget.

There are a number of expenses that are not represented in this time slice, such as insurance and many business related expenses. My medical insurance is about $130 a month, but I haven't been billed yet, so I'll be hit with a $500-ish bill in May.

Most of my business expenses, such as web hosting, domain names and SSL certificates, are billed yearly. In fact, aside from the copy writing course, the only business expenses in this time slice were the purchase of a domain name BuildKeeper.NET ($10) and the monthly-recurring cost ($2) of a fixed IP addressed so my SSL certificate works on eisenhartsoftware.com.

Also, one final word on the entertainment expenses - all of this went to video games. $80 bucks for Sim City, which I played in the evenings for 3 days. This probably was not a wise purchase - the game cost more than a week's worth of food and it gave me a low entertainment value in return. Also, the cost of games can be quite high if you can't limit the time you spend playing them. Like the money I spend on food, the time I spend in games is a risk (I have been keeping game time to less than 5 hours a week, on average).

The rest of the entertainment money went towards funding the Game Stick Kickstarter. I funded the OUYA a few months before quitting my day job because it was an exciting idea and it was the first crowd funded console gaming system, but the Game Stick appealed for different reasons. I foresee long-term travel in the coming months and the portability of the Game Stick was the feature that made me buy on. The idea that I could travel with my entire childhood's collection of NES and SNES games in my backpack (with a nice controller) was too great to pass by =)

If you're considering starting your own business, I'd be happy to answer any questions that might help.

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