4 ms·

Would be interesting to see something that breaks out COGS vs. R&D as it might be better representative of the trajectory of the business. For example, revenue

Would be interesting to see something that breaks out COGS vs. R&D as it might be better representative of the trajectory of the business. For example, revenue is up but profits are down, apparently due to freelancers costs. Are those freelancers just doing some one-off work (e.g. the marketing site)? Or are they essential to running the business? As traffic scales are freelancer costs going to scale? Another useful metric would be recurring gross margin (recurring revenue minus the ongoing costs to support that revenue). Otherwise if you spend $4k on a marketing site it looks like your business is suddenly doing terribly. If you don't want to throw out R&D costs completely then at least amortize the R&D costs.

AdriaanvRossum 7y ago
Good questions, thanks for those. When working alone on the project I feel like the momentum gets lost sometimes. Sometimes I'm busy building a feature that takes a lot of time and don't have time for other features or bugs. Or when working on marketing there is no time to build new stuff. There might be a future when I'm not coding at all and only responsible for the other aspects of the business. That's why I'm already hiring a freelancer. Normally the freelancer would work 1 day a week which is about half the time he worked in January. Not sure if I would consider it as essential though, because I can always take over and do it all myself. But I'm not planning to do it all myself. Freelancer costs will not scale as much as traffic would scale. As the work of the freelancer is related to new features. Most of our systems can handle a lot of traffic and if we can't anymore we need to add more hardware (which will be recurring) or write some software (which is not recurring). As for recurring gross margin. Would a list/graph of recurring costs be sufficient? Combined with the monthly recurring revenue of course.
- encoderer 7y ago
  It’s not too late to find a cofounder. I would consider it if I were you. You can vest their equity (and even consider vesting a portion of your own to show continued commitment). One reason: vacations are nice.
  - MrQuincle 7y ago
    Ha, this is my brother. He's a digital nomad large part of the year. Plenty of "vacations"... He's a hard worker though. Props to you, brother! :-)
- mason55 7y ago
  > Not sure if I would consider it as essential though, because I can always take over and do it all myself. But I'm not planning to do it all myself. Well, for starters, you should be putting a value on your time if you're doing work. At least the work to support the product should be tracked and valued. And for all the work that you and the freelancer are doing, you should be splitting it into COGS vs. R&D. The problem comes if you're doing a bunch of support work that you're not accounting for. Then you go to sell the business and it turns out that it takes a whole FTE to support the product. You're talking about $300k/year in unaccounted costs that you'd need to account for if you were to ever stop doing all the support (either because you become full-time CEO or you sell the business). It's also easy to fool yourself into thinking you have a real business if you don't account for your own time. It's easy to just create a job for yourself and not actually create a business. > Would a list/graph of recurring costs be sufficient? Yeah, I think you need to take all your costs and all your revenue and bucket them as one-time vs. recurring (or COGS vs. R&D, whatever you want to call it). This is the kind of thing anyone is going to want when they're valuing a SaaS business.

AdriaanvRossum 7y ago

Good questions, thanks for those. When working alone on the project I feel like the momentum gets lost sometimes. Sometimes I'm busy building a feature that takes a lot of time and don't have time for other features or bugs. Or when working on marketing there is no time to build new stuff. There might be a future when I'm not coding at all and only responsible for the other aspects of the business. That's why I'm already hiring a freelancer. Normally the freelancer would work 1 day a week which is about half the time he worked in January. Not sure if I would consider it as essential though, because I can always take over and do it all myself. But I'm not planning to do it all myself. Freelancer costs will not scale as much as traffic would scale. As the work of the freelancer is related to new features. Most of our systems can handle a lot of traffic and if we can't anymore we need to add more hardware (which will be recurring) or write some software (which is not recurring). As for recurring gross margin. Would a list/graph of recurring costs be sufficient? Combined with the monthly recurring revenue of course.

encoderer 7y ago
It’s not too late to find a cofounder. I would consider it if I were you. You can vest their equity (and even consider vesting a portion of your own to show continued commitment). One reason: vacations are nice.
- MrQuincle 7y ago
  Ha, this is my brother. He's a digital nomad large part of the year. Plenty of "vacations"... He's a hard worker though. Props to you, brother! :-)
mason55 7y ago
> Not sure if I would consider it as essential though, because I can always take over and do it all myself. But I'm not planning to do it all myself. Well, for starters, you should be putting a value on your time if you're doing work. At least the work to support the product should be tracked and valued. And for all the work that you and the freelancer are doing, you should be splitting it into COGS vs. R&D. The problem comes if you're doing a bunch of support work that you're not accounting for. Then you go to sell the business and it turns out that it takes a whole FTE to support the product. You're talking about $300k/year in unaccounted costs that you'd need to account for if you were to ever stop doing all the support (either because you become full-time CEO or you sell the business). It's also easy to fool yourself into thinking you have a real business if you don't account for your own time. It's easy to just create a job for yourself and not actually create a business. > Would a list/graph of recurring costs be sufficient? Yeah, I think you need to take all your costs and all your revenue and bucket them as one-time vs. recurring (or COGS vs. R&D, whatever you want to call it). This is the kind of thing anyone is going to want when they're valuing a SaaS business.