

Ask HN: What's your burn rate? What do you do to reduce it? - c1sc0

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?<p>[Edited to add the burnrate reduction topic]
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blackswan
I 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.

~~~
tyrelb
Agree 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
I 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
Another 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.

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joshkaufman
I 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
You could cut that T1 expense by quite a bit using long-haul wifi.

~~~
joshkaufman
Looked 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
Check out valemount networks, they specialize in that sort of thing.

<http://www.staros.com/>

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rgrieselhuber
One 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.

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patio11
I 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.)

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tyrelb
$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
Holy 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
Members 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.

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fezzl
Currently, 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.

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jasonkester
Business 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
I like that distinction between business stuff and life stuff. Burn rate is
also valid from a personal finance point of view.

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jacquesm
Business 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.

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levirosol
$109/mo

$100 for rent at a co-working space $9 for unfuddle $0 for heroku

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bookahh
1500€ 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.

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c1sc0
My 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.

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wfjackson3
bootstrapped business, basics already up, full product is prelaunch,
maintaining other full-time employment, about $45 a month.

~~~
MicahWedemeyer
You 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
I 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
That's why I think it's interesting to make this distinction when reporting
burn rate.

