
Bootstrapping Calculator: Do you have enough savings to fund your business? - DVassallo
https://github.com/dvassallo/bootstrapping-calculator
======
lettergram
Nice work, I’m going to play with it a bit.

One thing I would recommend to everyone is adding a multiple to your expenses.
Essentially, < expenses > * < margin of error >

I manage my personal expenses down to the dollar and have managed seven figure
budgets. One thing that always occurs is unexpected expenses. My go-to rule is
assuming my expenses are going to be 25% higher than expected, per year I go
out. I personally track my error between expected and actual to develop a hard
number for my margin of error. However, between 25% and 50% larger than
expected expenses is a good estimate to give you breathing room.

This method ensures you can be hospitalized for a week or so and it’ll kind of
“be in the plan” so to speak.

~~~
agilebyte
As a side note
[https://www.getguesstimate.com](https://www.getguesstimate.com) is a good
tool that calculates with margins rather than fixed numbers. Love the
graphical output too.

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keiferski
Kudos for being extremely financially astute about the decision. But I can’t
help but ask - why not just move to a cheaper location? With 1.4 million, you
can more or less retire / have a runway of 20+ years if you didn’t live in one
of the most expensive metro areas in the country.

~~~
DVassallo
I did consider it. But I have a family and 2 small kids, and I promised my
family that our lifestyle won't have to change while I do this experiment with
my career.

We did seriously consider moving about 30 miles out of Seattle, where houses
cost $350/sqft instead fo $500, but my family wasn't enthusiastic about being
far away from our community, and it actually wouldn't have made that much of a
difference to my runway.

If the circumstances were different, we could have made a different decision.
But, in my situation I felt that I didn't have to.

~~~
alecco
> and I promised my family that our lifestyle won't have to change while I do
> this experiment with my career.

That doesn't sound right at all.

~~~
whatislovecraft
Why not?

I don't have evidence to support my following claim, but I _think_ that having
a stable home life with a supporting family, not subjected to unusual
bankruptcies or bad financial surprises, is a key element to startup founder
success.

I could be mistaken. But I am a failed founder who disrupted their family and
friends lives and lost a lot of goodwill while running the business because of
it. So I think I'm at least right some of the time.

Regardless, it's wise to think of your loved ones first, even if it's only a
cold business decision to do so; your business will thank you later with
smoother revenues and a happier, more capable decision-making process down the
road.

~~~
coupdejarnac
I'm not the above poster, but to me the desire to maintain a high standard of
living when starting a business for the first time either means someone has a
ton of money in reserve or they aren't very serious about starting a business.
Now I can partially understand the situation if someone is buying a franchise
or some existing business that will almost certainly have revenue from the
start, but many of the tech business ideas discussed on HN require a fair
amount of R&D before there's any revenue. For a first time entrepreneur I'm
not sure 1 year is enough time to get up to speed and learn from mistakes.

~~~
DVassallo
OP here. Yes I have 5 years worth of expenses covered in liquid savings. My
target is to make enough income to break even with my personal expenses before
I run out of savings.

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lbacaj
Love the calculator, it’s very useful. In my view it has never been easier to
build a technology business than today. The public cloud makes it so you can
start small or free and scale as needed and almost everything has been open
sourced. All you need is the idea and the will power.

My only beef with the calculator is that I’d like to recommend another
approach, that is you don’t actually need to quit your job to make, that is
the end goal shouldn’t just be to quit. The costs of starting tech business
have never been so low to get a an idea off the ground you can benefit from
both a job and the other thing your working on. Steph Smith has a great post
on this

[https://blog.stephsmith.io/you-dont-need-to-quit-your-job-
to...](https://blog.stephsmith.io/you-dont-need-to-quit-your-job-to-make/)

~~~
dahart
I quit my job to start a startup while having a family and kids and I consider
it a mistake. I’m not sure it would have changed the outcome (successful exit)
but it caused a lot of extra stress, and I can safely say that I didn’t quite
know what I was doing and it would have been better to have a stronger plan
(especially marketing), a longer runway, a more complete prototype, and more
evidence of a market, before I took the leap and quit my job. All those things
can be done on the side while holding down a job, even with a family. (As long
as the job is closer to 40 hours a week than 60 or 70...) $1M is a nice
runway, but most people don’t have that, and even with it, the more you have
locked down before you quit your job, the better.

~~~
puranjay
I think more than just money, you have to account for your "mistakes runway".

You WILL make mistakes - a lot of them if its your first business.

When you are 25, you just have a lot longer runway to make those mistakes.

At 35 with a wife and kid, you have limited time to make mistakes and learn
from them

~~~
dahart
Absolutely true. I heard that before starting and (of course) didn’t
understand what it meant. And we were optimistic, so we discounted it,
assuming we were starter than the average Joe, so we wouldn’t make as many
mistakes. Nope, we made mistakes that could be counted in units of years and
hundreds of thousands of dollars. And broadly speaking, yeah, nearly everyone
does when building companies. The thing that never occurred to me that you put
nicely is that you have a finite mistake budget, and you don’t know what it
is.

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puranjay
Posts like these is where I realize that the average HN crowd is just way too
rich. $500k in liquid savings? $1M nest egg before starting? That's an exit
event for me.

So many of the entrepreneurs I know just started with whatever money they had
and just made things work somehow.

~~~
jurassic
Depending on age $500k savings isn't THAT unreasonable. For example, if you
worked at FAANG-level companies for a decade and held your lifestyle to a
reasonable level this should be doable without hardship. These people are
privileged to earn at such a high level, but not shockingly so considering the
high cost of living. Even at the "rich person" $300k+/yr income level (common
Bay Area BigCo wage for experienced engineers), considering that taxes take
about half your gross and rents are high, it still requires discipline to
accumulate that magnitude of savings; saving 1/3 of take-home pay over a
decade is well-above the average savings rate.

If $500k in savings sounds like a lot to you, I would suggest you have a
personal check-in on your retirement planning. I was pretty shocked when I
first figured out how much I would actually need in retirement and it helped
me really get serious about saving in a way that I hadn't before. To support a
$100k income in retirement with 0.04 withdrawal rate I will need a nest-egg of
$2.5M. I nearly fainted the first time I heard that. I had been feeling good
about myself since I was maxing my 401k, but hitting targets for real
financial security requires saving far beyond that.

Somebody bootstrapping is taking a large fraction of their savings and making
a big bet on themselves that it will get them to their financial targets
faster. I don't have the stomach for that risk but admire those who do.

~~~
RobertRoberts
I think that if you have that much money you are in the top 1% of the world.
(_maybe_ 2%)

I don't know a single person with that kind of cash. The most wealthy people I
know (they live in $500k+ home, their neighbours have million dollar homes) in
rich area of Chicago and makes a combined $400k (estimated) in income between
him and his wife, don't have even close to that in the bank.

(what they do have they have to budget to save up, though they live really
well despite this...)

I really think Silicon Valley is disconnected from the rest of the world's
realities.

~~~
dgacmu
Go read "The millionaire next door" \-- it's eye-opening, particularly about
the relative importance of saving and keeping a cap on expenses.

Saving $500k should be trivial on the $400k annual income you describe. Dual
income, put $46k per year into tax advantaged retirement accounts (401k +
backdoor Roth). Wait 8 years including interest. Done.

Edit: Found a PDF online: [https://www.pdfdrive.com/the-millionaire-next-door-
book-mant...](https://www.pdfdrive.com/the-millionaire-next-door-book-
manteshpdf-davidbeitlercom-d15297184.html)

(and verified that it actually downloads).

~~~
RobertRoberts
They pay over 12k a year in property taxes alone. They pay tons of local and
state taxes, etc... Yes of course they could do more and be smarter with their
money, but it's really expensive to live where they are at, but it's also why
they make so much as well.

I've read plenty of books on getting rich, and all it takes is a couple
disasters or huge expenses (adopting kids, legal fees, tax audits, etc...) and
all those money making plans are worthless.

They don't solve real life problems, they only work for those with charmed
lives.

I think you are surrounded by rich people and don't realize the vast majority
of people live pay-check to pay-check or worse.

~~~
dgacmu
I'm not talking about normal people. I'm talking about the couple you
described that makes slightly more money than I and my wife and yet has less
than half the savings I do.

Edited to add: And I'm surrounded by academics more than anything else. To
quote the millionaire next door (page 136):

> Isn't it interesting that a disproportionately high number of used-car
> shoppers come from the ranks of teachers and professors?

> How did Dr. Bill, an engineering professor who never had a total household
> income of more than $80,000 become a millionaire? [...] His success in
> accumulating wealth is based on living well below his means. The professor
> is a classic example of a used vehicle-prone shopper. [...]

You'd be surprised how well that description fits me and many of my
colleagues. So in a sense, yes, I'm surrounded by rich people, but they're
rich because they're comparatively frugal, not because we all earn bay area
tech salaries (trust me, we don't -- I grouse enough about this that I wrote a
blog post about it a few years ago: [https://da-
data.blogspot.com/2016/12/finances-for-recent-cs-...](https://da-
data.blogspot.com/2016/12/finances-for-recent-cs-phds-headed-to.html) )

~~~
RobertRoberts
So was I...

------
jackcosgrove
Thanks, I appreciate this. My main motivation for starting my own business is
to be independent. From what I've seen of management at companies that accept
investor money, it's not at all an independent lifestyle. Whereas at a
bootstrapped company the management can do much more of what they want (for
better or for worse).

If you can bootstrap with $2000 in the bank, that's awesome. But I'm more
traditional with money and would heed the "three years' worth of expenses
saved up" mantra before quitting my job to start a business.

------
csomar
I tried the calculator and actually my savings would last well over 10 years
(probably more like 20-25 years even if you account for inflation).

I spend around $1.000/month and that includes a new car (paid off), rent for 2
bed-room with a garden, eating out regularly. It doesn't include extensive
traveling (which I have been doing in the last couple years).

I think the two key points here:

1\. Having a family is expensive. If you are considering this track, you may
want to postpone having a family/kids.

2\. Living in cheaper cities can save you a whole lot of money. Obviously, I
would not recommend doing that with a family or if you need extensive
networking. But if you want to do 3-4 years of discovery without burning a
whole in your savings, then there is countless countries to pick from.

~~~
dbbk
It would be absolutely reckless to try this with a family to support. Just do
it on the side of the day job.

~~~
DVassallo
OP here. I’m doing it with a family, and I don’t think I’m doing anything
reckless. I’m not risking anything consequential. Worst case scenario I go get
a job again, and my family’s lifestyle wouldn’t have changed one bit during
the whole thing.

~~~
dbbk
What happens if you can't "go get a job again"? Is it assured you can just
walk right into one?

~~~
DVassallo
Nothing is ever certain obviously, but I feel very confident I can find a
$150K/yr job in 6 months. If I don't manage, I'd have to adjust my lifestyle
(sell house, move somewhere cheaper, etc).

------
sokoloff
Nice work. Since you can't easily pull request an excel sheet, I'll propose a
change here:

After the text "If you include retirement funds, also subtract early
withdrawal fees." I'd add something like "Most experts suggest not using
retirement funds for anything other than retirement." or similar discouraging
of that action.

(Those people who really ought to use retirement funds to bootstrap something
will find a way to blow through whatever caution you put there; most people
shouldn't, and I'd rather they at least see/feel the small speed bump...)

------
jv22222
The answer should almost always be yes (you have enough funds) because in most
cases it’s wiser to stay at your day job and bootstrap a side project.

I don’t know why general advice is to leave the day job and go all in. IMHO
that is terrible advice.

~~~
MaybiusStrip
Let's say you manage to carve out 2-4 hours a day to work on your side project
while remaining a decent person to your wife and kids. Leaving your job means
you could spend 11-13 hours a day on it instead. That's an enormous difference
and could easily mean the difference between failure and success.

Not only that, but you are putting yourself in precarious legal territory by
bootstrapping a side project. Your employer could easily claim ownership of
all your IP.

OP was a senior software engineer at AWS, how difficult do you think it would
be for him to re-enter the workforce with a competing cloud provider nor even
coming back to Amazon?

~~~
DVassallo
Exactly. And I think nearly everyone in tech is able to re-enter the workforce
within < 6 months.

------
e1g
Excellent DIY solution! For more nuanced planning, I found web-based apps
[https://startuprunway.io](https://startuprunway.io) and
[https://hiringplan.io](https://hiringplan.io) to be very helpful for budget
forecasts.

------
zoba
Great calculator. I have previously used the Startup Runway Calculator for
similar purposes. It allows for greater itemization than I saw in your
screenshots. Might be nice for folks who like this project to also check out:

[https://startuprunway.io](https://startuprunway.io)

------
lifeisstillgood
Ok I have to ask- is 500k pa a rare dev salary for FAANG or is it fairly
normal - I mean that's insane levels

~~~
patio11
$450k is approximately the package (salary, bonus, 1 year of RSU vesting) for
the “career level”, the point in the ladder that all devs are expected to make
if they’re not fired. AppAmaGooBookSoft people can tell you the exact name of
it at their firm.

It’s not insane, it’s the market.

~~~
lifeisstillgood
But ... I am having to readjust my understanding of "the market"

Ok so is this _just_ the global tech firms, who have a 1-2 billion user base
so every good and bad software decision gets multiplied by a lot of zeros and
it's worth the cost.

Or is this a function of tech firms in the valley - a function of supply and
demand (plus house prices)

Or are the non global reach tech firms also having to join this bidding war -
this is the part I have trouble believing

I have worked for the past several years in a major US bank - and I do very
well for a UK contractor - but no where near this well.

And I am not noticing that there are people on a large multiple of me as a
daily rate. I am sure there are but this seems ... common ... at FAANG

In short, Do I move to silicon valley and get any job, do I apply to Google
any location or do I just wait for the rest of the world to catch up?

~~~
lifeisstillgood
I am unsure that my rant above was helpful - I needed to seperate "why don't I
get the cash" from "is this an indicator of something important"

So I think my main question is, is software eating so many jobs that it is
reasonable for a "mid level" software dev to capture so much of the cash, or
is this a function of specific tech firm structures (SV scarcity, amazing
stock options right now, etc)

Looking at the levels.io site it indicates that there is a massive FAANG/ non
Faang gap - so I think the later might be accurate.

But it is a scary thought for any company competing for talent ...

------
sascha_sl
Nice, too bad I'll be too poor for the foreseeable future to do anything like
that. (50k EUR/yr)

------
mockingbirdy
I've read your blog post. A million is a nice nest egg for bootstrapping.

Just a thought: You can generate $15k of monthly passive income directly with
$300-350k investment. If the bootstrapped business fails to make money fast,
there's always this option with your amount of money.

Developers often miss those obvious ways to make money because these ways
aren't technically intricate.

Source: I do affiliate marketing. This are the usual ROIs.

Good luck on your journey!

edit: wrt. the downvotes - that's one of the reasons I don't want to talk
about this in public. I agree that it sounds unbelievable, but most people
also don't believe in $500k salaries. Many people dismiss those opportunities
because they don't believe it's possible.

~~~
puranjay
I also do a bit of affiliate marketing on the side. It's not much, but my site
just crossed $1k/month December. I've worked about 20 hours on it since this
year. My total investment on it is about $800, excluding my time.

~~~
mockingbirdy
Great to hear that! DIY is a bit cheaper, but it takes its time. Depends on
your hourly rate what makes more sense.

Do you mind leaving your mail address? If those returns are stable and you
want to sell (in the future, too), I would like to talk. Many others here
probably too.

~~~
puranjay
Absolutely, DIY takes just way longer. But it's a great industry in that once
you know the "recipe", you can take $50k worth of investment and have a hit
almost 8 out of 10 times.

Not looking to sell right now though. This site is in a field I have more than
an amateur interest in. I plan to stick around with it for a while :)

~~~
antonkm
So what's the recipe?

~~~
puranjay
From what I've seen, there are two recipes:

1\. Great content + organic backlinks. It's slow and takes skill (especially
in content ideation and creation) but the results will be enduring

2\. Great content + cheap, paid backlinks. This one is much faster but
requires a budget and there is a substantial risk that Google will simply
shoot down your rankings

You can't compromise on content though

