No doubt I am concerned about this company being a one-man show, at least for the foreseeable future. The main reason for this is that I have no formal business training. I have confidence in my ability to plan and execute software development, in particular at this scale, but I’m really concerned about missteps early in the business process. Unfortunately for me, very few of these missteps involve overspending which is next to impossible for a company of this size; almost all of these missteps involve failing to market and sell the product properly. Marketing and selling is just not what I do, so I’m going to have to proceed with caution while not losing focus of bringing the product to market.
For those who’ve read up ’til now and thought that I took pleasure in parting company with Partner 1, that’s simply not true. To be brutally honest, I don’t want to run a company by myself but at the same time I can’t participate in a company where the business end is a non-starter. A company without business operations isn’t a business at all, so it was time to refocus the whole thing. Being on my own allows me to step back and do that and I’m less concerned than I was two days ago since I’ve had the chance to settle things down in my head a bit.
For starters, I think I have to revisit 100% of the cost structure. Partner 1 had a good grasp of this and I think his initial, rough numbers were pretty accurate in the grand scheme of things. He’d estimated startup costs of $6000 divided by 3 principals and later $6000 divided by 2 principals. I know that I have to rewrite the business plan and as part of this I will have to revisit the startup costs; my next task after finishing testing of the v1.0 product will be to re-do the budget.
I believe that since I won’t have that much in terms of production costs for our software (i.e. I’m not selling shrink-wrapped software that would have the associated costs) most of the costs will actually be related to incorporation and legal fees. The rest of the other costs shouldn’t be more than $1000 combined — if that.
On a humorous (dark, but humorous, hopefully) note, I’m beginning to understand why somebody would want to send work overseas or why running a sweatshop is attractive financially. Why? Because everything could not be cheaper and that makes the bottom line great!
Anyhow, there is decidedly a bright side. Assuming that I can get my costs down to $3000 (it’s possible but it will be tight and much of this will have to do with where I incorporate and what their fees look like), I believe that I’d be able to sell enough software within the year (no, not by January 2010, but by September or October 2010, depending on when I officially start selling the software in 2009) to make up those costs: Google Alerts be damned! Seriously, tho, at $75 a seat for software v1.0, I’d need to sell 40 copies of the software to break even. Even if I charged $50 for the software, I’d have to sell 60 copies to break even. Given how little software I’ll actually have to sell to break even, the real issue is how things get to market. I still haven’t fully understood how this is going to work.
In spite of the lack of hits for the buzzwords for my product on Google Alerts, you’d hope that strategic placement of buzzwords on Google Ads could actually reach more than 60 people and thus I’d sell more than 60 copies of the v1.0 software. If I was able to produce a v2.0 offering at approximately the same time and at 2x the price, it would entirely be possible to break even with even half the amount of copies sold. Ironically, it’s really hard to get excited about money at this point since it’s all Monopoly Money right now. I just threw the numbers out there so I knew what I’d aim for in 2009-2010: to break even.
In 2010, I’ll take it from there.
