Ask HN: How should aspiring founders plan financially?

15 points by jlizzle30 4 years ago | 6 comments

I’m in-line to receive my green card in 2 years. At that time I’d like to try my hand at a startup. I’ve been saving money to fund myself for the first year (or two, or …?) but there are lots of unknowns financially once you start to get traction. How long until a founder can typically draw a salary? How much is typically drawn?

I suspect the answer is ‘keep your burn as low as possible’ but advice is appreciated. Some details about my situation: - married with baby - live in non-BA big tech center - interested in buying house but concerned about locking in my burn rate - currently working at a well paying large CO as a SWE

devoutsalsa 4 years ago |

Identify your biggest optional expenses and reduce them. Spending a lot of eating out? Cook at home. Living in your own by renting a palace? Rent something smaller. But honestly you can only cut back so much before you just make yourself miserable.

If you have the focus and energy, can you start your startup while you are working? There’s nothing wrong with letting your current thing pay for the next thing. It might take a little longer, but a paycheck is nice. You could even use your current thing to pay someone else to build the next thing.

rl1987 4 years ago |

Start tracking your expenses ASAP with app like Spentable. All of them. Do this for few months. This will establish your baseline of how much you are spending per month. That's your personal burn rate.

Now this enables you to perform basic calculations on how long your savings will last. If you spend 1000 monetary units per month, 12k monetary units will last you entire year, and so on. Base your budget on burn rate that gives you balance between comfort and frugality.

Do a financial review every month. Look into how much you are spending for each category of expenses and see if it can be reasonably reduced. Are you within budget? Also recalculate runway duration that your stash of personal savings converts into. Calculate the date of your money running out under your current burn rate if you made zero new money. Write all of this down to keep track of your financial situation during the year.

Avoid taking out money out of your new company until you reach the point of being able to do so without hurting the business. Keep your personal funds separate from business funds even if you are the sole owner of your startup.

France_is_bacon 4 years ago |

Cut your projections on your revenue in half. Triple your projected expenses.

As you stated, spend as little as possible. Make every penny cry. Jeff Bezos had all his desks for himself and his employees made out of old doors put on legs - they built the desks themselves.

https://bucket.trending.com/trending/twitter/2018-01-28/the-...

Bill Gates only flew coach until 1997 when he was worth $35 billion. You think you have to ride first class? Why are you so special when Gates was riding coach until he was up to $35 billion?

Mike Tyson earned 1/3 billion dollars and blew it all and declared bankruptcy. Johnny Depp has made $500 million and almost went broke, doing shit like spending $3 million on Hunter Thompson's funeral, where he shot Thompson's ashes out of a large cannon.

You need to start earning cash immediately. Make sure you get some clients before you quit your job, if possible.

If you are really successful, don't be a douchebag - pay everyone a fantastic salary, even receptionists and data entry people, like, $80,000 minimum for everyone.

This guy was making $1 million per year, but his secretary was earning $40 and so were others, and barely making it in life. So, he paid everyone $70,000, including himself. https://www.bbc.com/news/stories-51332811 Be this guy.

jasfi 4 years ago |

You need to budget. You also need to network so that you can go back to a job if you need to. My startup aims to help with this sort of advice: CxO Industries (https://cxo.industries).

Good luck!

blueboo 4 years ago |

Most founders never draw a salary. Funding yourself amounts to spending money, not earning it. Starting a business with no investment or cash flow is a huge risk at odds with the security of providing for a family. Getting a mortgage on a house likely requires a stable salary.

Getting some seed funding would likely radically improve your lifestyle without curtailing your upside much. At least make sure your partner knows you’re making this choice. Good luck!

jlizzle30 4 years ago | |

  Most founders never draw a salary

Is this true? Do they live off savings for > 5 years?