Budgeting for startup

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  • BusterBoy

    So this thing that I'm involved with...starting to take shape. It's a website/app but the tech isn't the major issue that we've needed to finalise before we start building the thing. Let's just say, the business model and industry signings are the thing that have given us value etc.

    We've received some seed funding to do this first exercise...but will need some more to build out the tech. I know it sounds vague...but the business case is settled.

    So let's say you wanted to build an MVP of something like cars.com or autotrader.com. I know these companies have hundreds of employees...but if you wanted to build something lean and quickly, that does bare bones what these sites do (classified listings) what type of talent and how many people estimated to be needed?

    This won't be outsourced...apart from perhaps some of the design work...even that may be in-house.

    So I guess I need to know what skills we need and the number of hires required...obviously needing to keep as low as possible.

    None of this probably makes any sense...but fark it. I'm too old and this is my last shot!

  • BuddhaHat0

    I'm sure others can help with skills requirements etc, but this sort of approach can help with the number of hires required:


    How Many Employees Does a Project Need?

    Now that you can accurately calculate FTE, you can determine how many employees are needed to deliver projects on time. To determine the number of employees a project will need for completion, you’ll start by calculating the total FTE required for the project. To do this, divide the number of Man Days (MDs) or the number of days it would take one individual to complete the project by the length of the project (also expressed in days):

    Next, you’ll take the FTE needed for project completion and divide by the FTE of employees. If you assume full-time employees have an FTE of 0.8 like we do, you would divide the FTE needed for project completion by 0.8.

    To use the two calculations above, let’s imagine you have a new project that will require 10 MDs and has a project duration of 5 days. Your project FTE is 2 (10 divided by 5). You then divide 2 by 0.8 to get 2.5. This means you’ll need two full-time employees and one part-time employee for the project. Of course, the number of employees needed for any project can be divided however you like. You could use one full-time employee and three part-time employees or two-full time employees and a third full-time employee for half of the project.

    • Thanks...interesting...BusterBoy
    • Switch employees to freelancers. People don't want risky gigs. They want long term employment + pension + ability to buy a home and start a family.shapesalad
    • As a startup you can't offer that. So you need freelancers.shapesalad
    • Freelancers would love to be committed for 6 months on a project like this, with the option to extend, get equlity, full time role *if* if it works.shapesalad
  • monNom1

    I think the full time equivalent thing doesn’t really get you a very accurate picture. In small groups, say 5 people, all senior, all working on their own portion of the project, you can get away without a management layer, or excessive meetings. As you add people, and especially junior staff that need direction, guidance, training, you need also to add managers that do not contribute productive hours but keep the producers producing. You also need more meetings. More documentation, more rigidity. Doing a project in half the time doesn’t require a doubling of bodies. It’s more like exponentially more people.

    There’s an interesting book called “the mythical man month” that talks about this dynamic in software development.

    That said, I think you likely need to hire just one person to begin with (maybe only as a consultant): you need a very senior dev lead that has done this sort of thing previously, and knows the roles, the technologies, and the resources required to accomplish the task. They can (hopefully) tell you how long and at what cost, and let you know the trade-offs between features, scalability, and timelines. Be prepared to also find that this person is full of shit. Everyone pads their resume. Some more than others. Hopefully you can find a good resource and get to the next level without too much reworking.

    Good luck!

    • Thanks...very helpful. That’s exactly the advice I’ve received from a couple of others...getting a senior dev with experience first.BusterBoy
    • I was unsure whether the first hire would be a PM or dev type.BusterBoy
  • utopian2

    Wishing you tons of success Buster!

  • BusterBoy0

    Just throwing this out there...given the rough and very broad description of what we're doing above...I made some estimates as to what resources we'd need to get a MVP.

    If we had 2 senior software devs, a UI and a UX...on a full time basis (either permanent or contract) with a flat team PM type approach, and given 6-9 months...do you think this could be achieved?

    I thought it could...to at least get this to market. And then build out the team further to really flwsh it out.

    A couple of blokes on our Board think I am underestimating...and I get that it would be difficult...but the last thing I want to do is to have to give away a bucketload more equity to double a team that may not be required in the first instance.

    • Giving away a bucketload of equity means the founders have no clue what they’re doingnoRGB
  • monNom1

    I wrote a long response but QBN doesn't like "the nature of it's content" so I put it here instead https://pastebin.com/raw/u6jxTqK…

  • mort_2

    Since it's an MVP, have you considered any `no code` options? e.g.


    • Probably not...but not for any particular reason other than could something like that make us seem amateurish...BusterBoy
    • MVP is usually about proof of concept and getting to market sooner so you can learn what the issues are and adapt.mort_
    • Many businesses rely on frameworks and templates, and not just for MPVs.mort_
    • Unless the software intellectual property IS your value - then that's a different story.mort_
    • But if the software is just a vehicle for the idea, then nothing amateurish about using some out-of-the-box solutions to get going.mort_
  • BusterBoy0

    Thanks for the responses. And monNom...you're probably right. At this stage we probably need much more on the Dev side and less on the design side...let's face it, at the end of the day it's just a listings platform.

  • utopian0

    Crowdsource the logo design to QBN.

  • Salarrue1

    I work with a friend that he got big funding presenting an MVP created on powerpoint. :)

    You need at least someone that can build a functional mockup using something like https://marvelapp.com/, figma of invision.

    This is required to test your app with your target users before any code is written. If not, your seed money can go really fast with multiple try and errors with a dev team.

    Good luck!

  • Salarrue1

    @BusterBoy do not be afraid to been seen amateurish, even to fail, you need to test as soon as possible your idea in a real world environment.

    And do not expect that your product will work on the first try...

    Where you need to exceed expectations is in the knowledge of the basic solution, your app is providing, to understand the real struggles in that industry or business sector. You might find out more urgent problems or more profitable angles to solve them.

  • BusterBoy0

    What we're building is nothing special really...there are thousands of sites that do EXACTLY the same as what we're proposing.

    It's our underlying business model that is completely different...the actual nuts and bolts of what our platform will do - absolutely nothing special. There are a bunch that we'd be quite happy to replicate 100%.

    That's why I'm not completely sold on the idea of mockups etc. One of our Board thinks it's necessary. But my point is...if you want to see exactly how this will function, take a look over there. That's exactly what we will do. But I also get that I may be wrong...

  • BusterBoy0

    Sorry to keep throwing my stuff in here...but wanted to share this part.

    2 blokes on our board want us to just “start building something”...even if it means just hiring some Indian subcontractors on Upwork to build something quick and dirty. Despite the fact we don’t have any branding or proper tech employees yet. They think it’s needed to prove to our industry reps and investors that were doing something. Pretty much an alpha version.

    I’m not convinced...thoughts?

    • If you build it; he will come.utopian
    • :)BusterBoy
    • Building something quick and dirty can be a good tool to figure out what you really need for the project.palimpsest
    • Some people need to see things with their own eyes even if you've explained it to them clearly before.palimpsest
    • I don't think it's a good idea to use just to prove you're doing something. That sounds like a waste of resources.palimpsest
    • “hiring some Indian subcontractors on Upwork” - good luck with that!mort_
    • "hiring some Indian subcontractors on Upwork" - project goes to shit, 1000% guaranteed.sted
    • it's called MVP. Yes indian guy on upwork is a quick and dirty solution. You just need a concept not perfectly working product.Beeswax
    • It's about helping people figure shit out. This is not the final product. Just be aware of what it is you're doing.palimpsest
    • I've built shitty demos for clients that weren't able to even understand a sitemap. It helped them know what the stakes were.palimpsest
    • Once they had shit figured out I pointed them towards an agency that could build a proper site. And I kept working with them with the stuff that interested me.palimpsest
    • You could do a quick brand sprint to get things moving and create a foundation for future work.Chimp
    • What Sted said.microkorg
    • My mantra is "making is thinking" - don't get too caught up in try to solve it all beforehand, building quick and dirty will help a lotBaskerviIle
    • Just Elizabeth Holmes it, and bullshit the solution for as long as you can.Nairn
    • start building something: yes. Hire a random on upwork: no. From too many anecdotes to count, you need a very very well defined spec to farm our dev to India.monNom
    • You will get exactly what was in the spec, and it will definitely be late. I don't think this is a mark against India per se I think this is the business model.monNom
    • Instead, interview a local coder you can sit with and hash out some thing, let them get started and show you what they can accomplish in a week or two.monNom
    • Spend less time writing specs, more time being like water and flowing along the path of least resistance. Once you've got _something_, you can evaluate and planmonNom
    • because no first plan survives contact with the enemy.monNom
  • mort_0

    I'd highly recommend reading "The Lean Product Playbook" by Dan Olsen.

  • cannonball19780

    Plan financing for different product readiness stages. Follow something like the double diamond of that is what fits your process. You have two places to spend big. I recommend gouging family and friends first.

    For the business plan and “paper prototype” you are dumping $Xk into research. Don't rush this or be stingy. The discovery phase is for you to test the viability and desirability of your idea with people. Expect changes. Spending more here means spending less time developing a...

    Product alpha. For a coded prototype you are dumping a fixed amount into a LOCAL developer whose neck you can shake. Stay away from India. Demonstrate front end and simulate the back end because you will gut what is under the hood later for something you can scale with.

    For a financing plan, use convertibles that vest after a two year runway into nonvoting shares to pay family and friends back, and design a path for investors to come in, valuate your idea and take you to a series A.

    Now you’re off to the races.

  • grafician1

    I posted this in the Useful thread...


    Maybe it will help with your startup moneys issues

  • BusterBoy0

    Thanks all...helpful!

    Fair to say I'm dealing with a lot of people at the moment with different agendas and expectations. Interesting but slightly stressful at the same time.