6 ms·
Ask HN: What's your burn rate? What do you do to reduce it?
In light of the recent 'Ask HN' on churn rate: what's your burn rate: how much money do you need every month to stay afloat? Which techniques do you use to reduce your burn rate?
[Edited to add the burnrate reduction topic]
- wfjackson3 16y agobootstrapped business, basics already up, full product is prelaunch, maintaining other full-time employment, about $45 a month.
- MicahWedemeyer 16y agoYou can eat and live on $45 a month? I see that you're still maintaining other full-time employment (which is a good idea, IMO), but let's be serious. True burn rate is more than just hosting costs.
- wfjackson3 16y agoI see burn rate as the expenses of the company, not of the person. Right now I don't need the company to pay me for living expenses because I still have other employment.
- c1sc0 16y agoThat's why I think it's interesting to make this distinction when reporting burn rate.
- blackswan 16y agoI think this is something that is highly variable - based on personal requirements, cost of living in your country and your acceptable minimum standards of comfort. I think techniques to minimise burn would be more interesting than actual rates. One tip from my startup: I think a lot of people think getting employees and office space should happen at around the same time. I don't think office space is worth the premium you pay for it until you have more than a couple employees. We have one already and will probably only move after we have employed at least three more. Obviously a caveat here is that the house must be sufficiently pleasant for work and living and that your work is not something that requires client facing offices.
- deleted 16y ago[deleted]
- tyrelb 16y agoWe minimize the burn by: - keeping a highly active role with the outside developers - ramping down costs in all areas except development and minor ($1,000 per mo) G&A - minimal salaries - pay the first employees "rent money", with a quick rampup in salaries once cash-flow positive - pull in less money - and gives you incentive to figure out how to do things with less money - keep the 'thinking' in-house as much as possible - don't hire the wrong people - so that you don't waste time/money with the wrong people - PLAN - plan your launches, align your strategy and spending, etc.
- tyrelb 16y agoAgree with office idea! Don't sign any long-term leases (over 6 months), and keep it month-to-month. If you start to take off, your damn lease will come back to haunt you... this is a burnt-out economy - grind those leasing agents down, get them to throw in free furniture, free rent, renovations, etc. with the promise that you'll expand out in a couple months with a larger space in the same building. When you get office space - you'll likely need insurance, phone setup, internet, etc... so get the landlord or phone company to throw all these things in for free. REPEAT: no long-term lease, nothing more than 6 months, and better month-to-month. And nothing beats the kitchen table with a few guys around it.
- blackswan 16y agoI agree with what you write re: bargaining with the leasing agent - a couple of my friends have got really good deals recently by simply saying "I'll take it now if you include 3 parking bays and give us a shorter-term lease" or equivalent. Now is actually a really good time to lease space if you are certain that it's the right thing cash flow wise.
- redrobot5050 16y agoAnother idea is to sub-lease un-used space of a business. A couple investment banking firms in Manhattan that have significantly downsized have rented out floors to start-ups. You get free phones and private WiFi as part of the deal. My friend's start up is doing this and its pretty nice. There are a couple of micro-startups (3-5 employees) on the same floor with his company right now, so it got that "incubation" feel.
- tyrelb 16y ago$25k per month for outsourced development team (10+ experienced people, Canada/US based), three full-time employees (Canada), office space, phones, and at a pre-launch stage.
- ant5 16y agoHoly crap. Pre-launch, so no revenue stream? $25k across 13+ people, plus office space? If you split the 25k evenly, that would be $1.9k each, or a yearly salary of roughly $23k. What kind of developers are you able to hire for that paltry sum? In SF -- We spend $30k/month on salary/benefits/taxes for 4 people (not including rent and other expenses), and even then we're paying below market rate. Our other expenses, including rent, add up to $4k, and we try to sock away at least another $10-15k every month. Of course, this also isn't a "burn" rate. We've worked hard to build a business the old-fashioned way -- by making money with which to pay ourselves.
- tyrelb 16y agoMembers of the development team come "on and off" during the process. We kept IA in-house to ensure specs and continuity - we aren't locked into any vendor / supplier should we want to switch and bring all development in-house. Office space is $1,700 - this is up in Vancouver, BC. Again, a bombed-out economy lends itself to finding deals. I cannot go into the level of developers, but I can say some are presenters at tech conferences, attend the tech conferences, and have built startups before. Again, we manage costs by bringing on people at the right time, for the right amount of time.
- jasonkester 16y agoBusiness stuff: ~$500/month Life stuff: ~$1500/month I had that down to ~$1000 total when I was living on the beach in Thailand and hadn't yet built anything big enough to require a fast machine at a collocation facility.
- c1sc0 16y agoI like that distinction between business stuff and life stuff. Burn rate is also valid from a personal finance point of view.
- levirosol 16y ago$109/mo $100 for rent at a co-working space $9 for unfuddle $0 for heroku
- deleted 16y ago[deleted]
- fezzl 16y agoCurrently, while we are doing Beta, less than $100 per month per person for food and other miscellaneous expenses. We have no rent, since we're college dorm resident assistants with free stay. Internet, electricity, etc. are free too. It's hard (and unnecessary) to reduce our burn rate any further because that would be cutting into bone.
- joshkaufman 16y agoI work from home, and rent/food/utilities/internet in northern Colorado is about $2,000 a month. Aside from rent, the internet is my biggest expense: I live in the mountains, so I pay ~$450/mo for a T1 - cable/DSL is not available, and satellite sucks. I could live in town and pay less, but my rent would go up, and I'd rather live in the mountains. As for business expenses, I average ~$1,000 in recurring charges per month, which pays for servers, payment processing, web app subscriptions, and international calls. I usually spend another thousand a month on books, courses, and other continuing education, since that's my market.
- jacquesm 16y agoYou could cut that T1 expense by quite a bit using long-haul wifi.
- jrockway 16y agoOr by starting his own phone company! He could also save on the rent by just overthrowing the government and giving the house he lives in to himself. Why didn't I think of this before!?
- joshkaufman 16y agoDon't think my landlord would approve - he lives 400ft away. On the upside, I ran a buried ethernet cable down to his house, so he helps pay for the T1.
- joshkaufman 16y agoLooked into that before getting the T1 - mountains make it difficult to get direct line-of-sight to almost anything, and I'm surrounded by national park, so it's difficult to build towers to relay a signal. Video is a big part of my business, so having a dedicated upload pipe is also useful.
- jacquesm 16y agoCheck out valemount networks, they specialize in that sort of thing. http://www.staros.com/ http://www.staros.com/
- patio11 16y agoI need to sit down with my credit card statements and start doing bookkeeping for 2010, but the burn rate for my business is about $1200~$1500 a month, with the lion's share of that going to AdWords ads and then freelancers. My personal burn rate in the typical month is also about $1800, with the largest expenses being food and then rent. Eating out is my biggest vice, and what an expensive vice it is. Then there are occasional costs like international plane tickets, conferences, etc that I don't bother counting on a monthly basis. (Paid for by consulting, mostly. It is a convenient way to get back to the US to visit family.)
- bookahh 16y ago1500€ life stuff, 50€ business stuff (Germany). Office/internet is at home, so i count that to life stuff. Heroku is used in a pre-release phase, the 50 bucks accumulate from various online services.
- jacquesm 16y agoBusiness about 2K euros / month, private about 1500 euros / month. Biggest single expense: 1.5Gbps of bandwidth, runner up a half rack with a bunch of machines in it and on the private side the mortgage.
- rgrieselhuber 16y agoOne thing I picked up in Tokyo: In almost every major city in the world, there are Regus office centers. Their virtual office plans are rather pricy but for $30 / month, you can buy their business gold card. This gives you unlimited access to their business lounge, free coffee and internet. It's a quiet place to work and you sometimes meet other interesting people. If you are in Japan, the one in Shibuya Mark City is really nice and I currently work out of the one on Castro & El Camino in Mountain View. Edit: forgot to mention my burn rate. Rent is about $1100, other monthly expenses about $2000 (married with kids). Servers / operating expenses ~$600. We tend to be pretty frugal in general so I don't actively look for ways to reduce it and I'm usually never good when I try.
- c1sc0 16y agoMy private burn rate is about 2000 euros, for the startup I'm working on (still in the idea/planning phase) it is about 50 euro on various online services.
- deleted 16y ago[deleted]