Startup numbers

Updated: Jul 23

The numbers are based on personal experience and realistic estimates on the field.


Time for first failure: 3 years.


Cost of developing a successful product: 1 million dollars. (again, this cost is always relative. You must spend enough money to make something that satisfy the CURRENT customer).


Any company takes 24 months to ramp up products, sales, marketing, etc. If you plan on startup the take off ramp must be 24-48 months, you must have money reserve for that period to live on your own dime. Investor money won't come in until you find customers willing to pay sufficiently.


Cost of designing a reasonable logo: 75 dollars (2020)


To make a good On Line game, Develop an app for 5-10k (simple game) with smart revenue models. Spend 10k on ads which should generate 50k users or more if your ad is creative and intriguing. If your rev models are nice, the money you invested would be returned in less then a month. And if you’re really good, this could be a $500-$5000 a day cash cow. (https://www.reddit.com/r/Business_Ideas/comments/hw05y7/the_cost_of_a_great_start_up_idea/)


Success rate: 1/10 find some traction. Out that 1/10 find steady revenue. Out of that 1/10 have profit. Out of that 1/10 has continuous room to grow and not facing imminent death. (Link)


Web store conversion rate is about 5%.


Online marketing cost (ranking, SEO, targeting) around 100 dollars/day is normal. The money is used in various ways to maintain your product ranking in a particular keyword group.


The most difficult elements of starts to achieve:
profit.
growth.
talent

These three elements are always relative. They are interconnected. Talent takes money, but profit takes talent. Growth takes design, but design takes experience.


Startup execution is always 1 part product, 9 part marketing. Marketing is not "send the message out" or "go to see my customer". Markets are the places people pull their wallets out. It is always comparison. In business there is no vacuum, there is nothing new. If your product can not get into market through the bouncers, it does not matter.


Marketing is 90% of the work of product development. And marketing cost is roughly 90% of the price of an item. If you can make something for 10 dollars, you must sell it to end consumer at 100.

Cost of business

Making a business is not that hard. But making a good and fat business is not easy.

For local business, the major cost elements are:

  1. space rental

  2. labor salary and benefits (per government rules)

  3. taxes and fees

For online business (such as store), major costs are:

  1. promotion fees for online platforms (jd, amazon, alibaba ranking fees);

  2. product handling fees (e.g. Amazon FBA fees)

  3. google ranking and SEO fees (daily, about $100/day)

Job costs

A job is the safest place on earth. You are with an organization that already has brand, following, and business. If you take your "talent" outside you will have to rebuild all these.


When you work for someone as employee, your paycheck is lower than what you can do by yourself but it is a discount due to the safety and regularity of the paycheck.


it takes about 1-6 months for a person to get used to a job. To understand or change the world, accept it.

A startup is FREE only because you are free to choose what you do. But it is work and satisfying your customers.

Example: Cost for opening a coffee shop


My wife has decided to start up a small cafe, and is wondering how much is a safe yet realistic amount to have in savings before beginning her venture. Any help is greatly appreciated.


Question:

As the title states, my wife has decided that she wants to open up a small cafe around Seattle. It won't be directly in the city of Seattle, but most likely in one of the surrounding towns. She's heard from one of her friends that a safe amount to have in savings before starting the process is $100,000 and that number kind of disheartened her. Right now she's just working as a server so getting that much in savings could take 10+ years. Have any of you guys opened up a cafe? What would you feel is a safe number that is also realistic? She already has some money saved up for this, and she would ideally rather start sooner (within the next 1-3 years) rather than later. (She's currently 28)


Answer:

Haven’t done this myself, but I have friends who have. The way I understand is you’ll need 50k-ish(min) just to put up for a business loan and actually get the cafe up and running. This doesn’t include costs of marketing or web presence, which can become significant costs as well. Additionally, depending on CoL in your area, she’ll need to plan about 1-2 years worth of living expenses. Even if you live cheap and scrimp on everything, it’ll still likely be 25-40k per year to cover housing, food, transport, and insurances. TLDR: $100k is a pretty safe number, less than that risks becoming dependent on others to make ends meet and if something goes wrong (which is likely in food service), there’ll be little-to-no safety net.


According to Google search results,

https://www.investopedia.com/articles/personal-finance/010816/economics-owning-coffee-shop.asp


How much does it cost to open a coffee shop

  • A sit-down coffee shop typically costs between $200,000 and $375,000 to set up.

  • A large drive-through shop can cost between $80,000 and $200,000.

  • A small kiosk may cost between $25,000 and $75,000.

  • A franchised sit-down coffee shop can cost up to $673,700.

  • A licensed brand-name store may cost $315,000 to open.

Startup cost estimate:

In this case, they include equipment such as an espresso machine, which can cost up to $20,000. Many coffee shops roast their own beans. Industrial coffee roasters can cost upwards of $10,000.

Fixed costs make up the bulk of the monthly expenses of any for-profit company. These include rent, which should not exceed 15% of sales, and staff costs, including salaries, payroll taxes, and benefits.


Some estimates of cost is continued: (according to this link)

Another cost you’ll come across is associated with your transaction technology. Modern POS software can cost between $50 and $200 per month, while the associated hardware bundle will often cost you a one-time payment of $1,200 to $4,000.

  • 60 to 65 percent of prime costs go to labor

  • Food and beverage costs average 28 to 35 percent of total sales

  • Regular coffee drinks have an average margin of 15 to 20 percent, and specialty coffee drinks have an average margin of 12 to 18 percent

The number one reason coffee shops fail: (Link)

The number one reason failure cited within coffee shops is being unprepared for ownership according to the survey (55% of respondents listed this as a primary reason). Put simply, new coffee business owners don't know what they're getting themselves into when starting this business.


The cost of building an electronics product and launching a product campaign is reviewed here.

Chance of social network impression-to-click conversion rate


A good question from A reddit post. (Link here)


I have a blog on programming. I've added some retargetting pixel to my blog posts and I've been trying to promote them on FB groups. So far I've posted my blog in approx 30 FB groups on a daily basis for the past 20 days. And all in all I get like 20-30 clicks everyday while these groups are supposed to have 10k-30k members. Does anyone know wether this is a normal thing? Where can you promote your blog posts to get more traffic? The only other programming forum is stack overflow (can't promote there) and reddit (no can do here either).


Answer1:

Good online store conversion rate is 100 visitors and 3 buys. Your statistics is the "pre visit" stage, just "impressions". At this stage, about 10,000 fans converts to one visitor (click). If you do this on tiktok, half million fans gets 50 live stream watching audience. Some shopify owner operate for one year with good looking website and gets one buyer total. So basically, 10,000 x100 converts to 3 purchases. That is 3 paying customer for 1 million "impressions". Now you have to TRULY APPRECIATE what starbucks and even your local grocery store has accomplished!! If you are "Bit Tech news" and you have a store front in New York city busy streets, about 1 million people would walk past it every day and about 3 people would happily buy post cards from you. Of course in that case the space rent would be astronomical and you might do better than that. Try advertise to stay at home mom's and make things these people like. That is the primary audience of FB as I heard.


Answer2:

I usually post on hackernews, put them on medium when I have the chance, post on subreddits that have to do with the subject. I also found Dev.to as a place where people post tech blogs.


Social media conversion rates (Youtube)


Social media conversion ratesersion rate: 5%

Youtube monetizing bar: 4000 watch hours and 1000 subscribers

Youtube monetization rule of thumb: 1000 views for 1 dollar.


How much to pay Youtube channels to introduce your products:

I also work in an industry where YouTube is one of the best forms of product advertisement you can get as it’s one of the top news sources for our target audience.

Generally, the best results have come from percent of sales as that provides a lot of motivation on the reviewers end, cuts down on cost on our end, and provides both parties with a way to make a lot of money.

If you’re really interested in this channel and they insist on being paid for a review, $.03-$.05 a view has been a solid target range for us.

The channels and audience that we target are very niche and passionate. The audience matches perfectly for our target. The channels for our demographics aren’t 500k view channels. They’re generally between 20k-50k views because the overall audience is very niche.

To answer your question directly, a dedicated review video at those numbers would likely fall into a range of $20k-$30k. A 45-60 second review integration would likely fall between $5k-$7,500. I’ve seen companies pay for unboxing videos and pay 20k+ for one unboxing video, outside of what views you get.

General rule of thumb is to pay $100 CPM for qualified users.

How much can you make in gig jobs?

How much can you make as a writer?

How much money do Amazon sellers make?


How much revenue do you make as Amazon Seller?

How much profit do you make as Amazon Seller?

How long does it take to become profitable?

How much money does it take to get into business?

How much does it cost to sell on Amazon?

Suggestions for categories.

Counter points of people quitting Amazon.


Most Amazon sellers make at least $1,000 per month in sales, and some super-sellers make upwards of $250,000 each month in sales — that amounts to $3 million in annual sales!

  • About half (50.7%) of Amazon sellers make from $1,000-$25,000/month, which could mean annual sales from $12,000-$300,000. 

  • One in five (20%) make $25,000-$250,000/month, amounting to annual sales between $300,000 and $3,000,000; another 3.3% make more than $250,000 in monthly sales.

  • Only 23.8% of sellers make under $1,000/month in sales, and 2.1% don’t know their monthly sales.

Across all respondents, the majority (67%) said they were profitable within the first year selling. 

  • Profits within 3 months: 22%

  • Profits within 3-6 months: 22%

  • Profits within 6 months-1 year: 23%

  • Profits within 1-2 years: 13%

  • Profits within more than 2 years: 3%

Contrastingly, Amazon sellers see relatively high profit margins.

  • Two-thirds of sellers (67.2%) see profit margins higher than 10%.

  • Better still, 36% see profit margins above 20%.

  • On the other hand, 8.4% said their businesses are not yet profitable, and 5.3% did not know.

Overall, most sellers (60%) spent less than $5,000 to get started selling on Amazon, and (29%) spent less than $1,000.

  • Sellers spent less than $500: 17%

  • $500-1,000: 12%

  • $1,001-2,500: 13%

  • $2,501-5,000: 18%

  • $5,001-10,000: 21%

  • More than $10,000: 21%

What is that money spent on? Typically, initial costs include sourcing your product (including samples), Amazon fees, and promotions.


Countless have tried their hands at selling on Amazon. So what can you learn from those who’ve had distinct, measured success? Some of their top tips:

Start now.

  • 80% of sellers wish they had started selling on Amazon sooner.

  • Of the most successful sellers who have been selling on Amazon for more than five years, most (53.1%) got started and had a live product listing within 6 weeks.

What Amazon sellers say:

  • “Just jump in now. Perfection is the enemy of profit.”

  • “I wish I knew how important it was to start sooner. The barrier to quick trajectory seems to be higher over time.”

  • “I wish I had known where to start and where to get good information.”

Put in the effort — it will pay off.

  • 69% of sellers maintain that selling on Amazon takes some effort and is not a “get-rich-quick strategy.”

  • Most sellers are still evolving their Amazon businesses and 54% plan to add new products in the coming year.

What Amazon sellers say:

  • “I wish I knew how important it is to listen to people that have done it already.”

  • “You need to be patient for things to start working.”

Selling on Amazon is full time work. Many have tried and failed. The ones left are the good ones.

A link of discussion on Amazon Seller Central:

Doing $10K a month in sales, but quitting Amazon

You may think I’m fortunate in that I’m doing just under $10K per month in sales. But once my stock runs out, I’m quitting Amazon. Unbelievably, I’m making almost no profit. Amazon has fingers in so many pies that there’s just nothing left at the end to make staying worthwhile. I did all the working out at the beginning. I should be making 45% ROI. But I just didn’t know that I’d be getting enormous FBA storage fees (Got a $600 ‘inventory storage bill’ the other day, then the next day another LSF bill!!) and then LSF fees in addition to those fees, then advertising is necessary in my case, I still haven’t got my head around all the different sales taxes for USA and then on top of that, returns (due to customer not measuring themselves properly), send the item back (at charge to me), incurring yet more charges.

It looks grand, seeing $10K a month rolling in, dozens of sales daily - Gives the appearance I’m doing really well… But the reality is that Amazon is seeing 80% of that and the rest is just what it takes to make the product and land it in Amazon.

Of course you’re going to say I’m doing it all wrong. Then I am, I suppose. It’s just disheartening, feeling like a worker bee and getting little in return. So I’m done with it, for Amazon.com - Other marketplaces are more profitable. I’m going to stick with those. Just my two cents contribution/moan, for what it’s worth!


See_Hag


I don’t blame you one bit. Low margin/high volume sellers are successful on Amazon, but Amazon has commoditized many categories and its no longer worthwhile to list products in those categories. You can make money with speciality products, but they generally have low rank and weak volume. Private label products end up in a race to the bottom with Chinese sellers making up their own brand and jumping into the mix. Then you have Amazon itself, picking off private label products with its own “Amazon Brand” label. If Seller Central had a widget that displayed your sales, margins and profit, the vast majority of sellers would leave the platform. “Your margin is my opportunity” - Jeff Bezos


Boardgames4us


That is probably the best decision for you. However, I think your expectations might a bit high. The 45% ROI expectation might be out line. If you separate out your product sales from your fulfillment and ensure that you price adequately for the fulfillment, you might be doing better than you think.

Most mail order business tracks their shipping income/expenses separate from the product sales. They may partially subsidize their shipping costs from their product sales, but that is an informed decision. They won’t usually just take all of their shipping costs out of their margins.

You also need to consider your referral fees as part of your advertising costs. 15% is not unreasonable. A website will often pay more than that for customer acquisition. Regardless, at the end of the day, you should have profit. Your product cost, fulfillment fees, referral fees, and any other costs you might incur should still result at a reasonable margin, but all things considered 45% is still a bit optimistic.

A typical wholesale purchase is around 50% of your selling price. Take 15% off of that and you are probably looking at less than 35%.

If you are paying 30% of your selling price for fulfillment, that needs to be added back into the purchase - either as a separate fee (for FBM) or by increasing the selling price to include that fee.

So, your base selling price might be 130% of the MSRP when including shipping and after you take off the 15% referral and 30% fulfillment and the 50% COGS, you should still have up to 35% from the MSRP as your profit or that could be reduced for product discounts or other expenses. However, if your fulfillment costs are not added into your pricing, that might leave you with only 5%, which is not going to be adequate.

The LTS fees are a wild card in there, but you need to be responsible to clear out items that will cost you the LTS fees. They are designed to encourage you to take them out of inventory. If they are affecting too many of your products, those are products to discontinue and take off Amazon. Dave


Bakery Shops Tips


6 financial tips for starting a bakery

Starting a bakery can be a costly endeavor, from securing a lease to stocking up on high-quality ingredients — not to mention hiring workers and buying or leasing commercial equipment. Bakery startup costs often range from $10,000 to $50,000, according to Entrepreneur.


Proactively build your client base.

“See if you can work events that you support,” Goetzeler says. “Ask if you can set up a table and hand out samples. Bring business cards, but don't use the event as a personal sales event. Be generous, grateful and happy to meet new potential customers. Bring treats to your neighbors in your shopping area. Make sure they know who and where you are. The more word-of-mouth between neighbors and fellow business owners, the better.”


Know your break even point.

“As for a small retail bakery like mine that does mostly manufacturing from scratch with no seating, success depends on getting sales up to a break-even point based on your fixed expenses, and then controlling your variable expenses so they fit into a structure similar to this: 25% for cost of goods (ingredients and packaging), 35% for labor, 30% for overhead and 10% for profit,”


Opening a bakery may seem like a piece of cake; however, you must take the time to know the budget to open your bakery to ensure your bakery is successful. The budget for every bakery is different, depending on a variety of factors including size, location, products and strategy.


New York Magazine describes the startup costs of a recent bakery as totaling almost $40,000. However, if you are joining a preexisting franchise, the costs can be greater than $420,000. These costs included facility-related expenses such as construction and rental fees, startup inventory and other materials necessary to start the bakery.


An estimate of a franchise bakery is linked here.


A list of "things I wish I knew" for opening a bakery is here.


This is so important to get a hold on before you open a retail bakery! First, it is vital knowing the costs of making your finished products and then how to appropriately price them. It can be easier than you think to under price and lose yourself a constant stream of money. You do not want to go down that path starting fresh out of the gates, you will end up confusing your customers and ultimately lose customers. Also, you will find confidence in knowing that your product is reasonably priced and if it doesn’t sell at asking price then pull it from your shelf. You are not in the business to give away product. We only have a very few items that are at 25% markup and that is because we have other items that are at 50% and even 200% markup, which makes up the difference for the few that are 25%. Also, I believe it will set you apart from your competition. I recently had a bakery open up less than 1/4 mile from me, on the same street and with lower prices!  Unfortunately, I can’t just go lowering my prices now because of the new competition. My pastries NEED to be sold at this price in order to make a profit. Going in and undercutting your competition, in the end, will only hurt you.

So how do you get prices for flour, butter, sugar, etc., before opening?

Call local vendors! Tell them that you are opening a bakery and you are costing goods, they will gladly send you information. They want to snatch you up! You can also go to your local bulk supply shop, like Cash n Carry, Costco and Restaurant Depot. Price their product first, then compare with other reps before you decide to go with them. In my first few months, I went to Cash ‘n’ Carry every Monday, spending about $700.00 a week. Now I order through Bake Mark, Provatos, and FSA, spending about $1200 every two weeks, which saves me time and money. And it is delivered to the door!

Pricing products will help you tremendously in the beginning! And if you don’t know how to do it, learn or hire someone to do it. I learned in school, but with all of my other responsibilities I can’t seem to find the time to do it. So I gave my baker a raise, made her my assistant manager and she costs every new item we try out within minutes! And she has set up an excel program for us to use for varying butter costs, in which we can recalculate our cost to stay within profit.


Do background checks on your employees. Everyone learn this the hard way.


I never thought I would need this, being a small town little bitty bakery and all. But, after hiring a retired cop as a bakery manager, I quickly found out the benefits of taking this important step. Always go with your gut feeling, and then use a background check to back you up. And always check references! I wouldn’t be 18 employees deep if I had done that in the beginning. Instead, I found out the hard way.


Work hard.


Expect many sacrifices. Be prepared to work harder than you ever thought you could work. I pulled many 18 hour working shifts, I sacrificed relationships and lost many hours raising my son.

This is not a fast track to fame. This is hard.

This is losing out on a lot in the beginning.

But, how great is it to know that you are developing and are responsible for YOUR OWN FUTURE? There is peace in that – in between the swollen ankles and dark circles that no matter how much concealer you put on, you just can’t hide the lack of sleep. You learn to role with it and call it the business eye blues.


Be patient.


Your business is its own being and you need to nurture it, teach it and grow with it.

Daily, you will fine tune her, make her beautiful and make her yours. Some days she will disappoint you, other days she will bring you so much joy that it will bring you to tears. You will take so much pride in knowing that you created her. There is so much joy in this. No college class can ever teach you this! Some days I ask myself why I started, then I remember those special days and it makes me never want to quit. You are building and creating a future, a living for other people. You are building a spot in your community and are making a difference! This takes time, trial, and many errors.  Be patient, be forgiving, be thoughtful and full of gratitude. It really does go a long way. And at the end of every night give yourself a pat on the back, because you did it, for at least another day and that is a lot more than what other people can say. I started my business on $15,000 dollars, bought everything used and looked to my friends and family to help with the construction. Reach out to them; you will be surprised at how many people actually want you to be successful. Everyone wants to be part of a story, let them be a part of yours.

81 views

Chicago, IL, USA

 

Call

T: 224-213-6831

F: 224-213-6888 

© 2020 by SPC