Comment by throw_away_1781 | Hacker News Reader

Comment by throw_away_1781 | Hacker News Reader

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throw_away_1781

All the current members would be committed to working for the new company. "Hired" is probably the right word, but with a huge bonus, which you typically will not get by directly going for a job. Heck, none of the startup CEO's I work with would probably even look at my resume, if I had submitted it through normal channels. However, now I can call them or IM them and talk.

We probably bring more than just the tech skills. Building a team and delivering projects is not easy. It is about 10 times harder than I initially thought. I now have much more respect for all the small independent software consulting shops.

These thoughts actually started in my mind after I saw two ROR firms that recently got acquired. I think LivingSocial acquired one of them. That and the fact that we are not making enough money to justify the hours we put in. Slowly coming to the realization that I might not be tha good of a businessman.

You need to make a minimum of 50% gross margin in services. This means if the team members make 50/hour, then you need to charge at least 100/hour. One way around this is to do fixed fee projects, but this is risky without strong processes. Also the danger zone is around 3-5 people because you dont quite make enough to hire one full time overhead person but you need half of one. Once you get to 8 or so it gets a lot easier because you can afford some overhead.

Also cash will always be a problem because if your profit margin is only around 10% you will continually be short of cash as you try to grow.

"That and the fact that we are not making enough money to justify the hours we put in"

raise your rates, you're not charging enough. two simple ways to tell if you are not charging enough:

1. everybody is willing to pay your rates - nobody ever says, "no"

2. you are not making any money

You may actually be making a lot of money, but cash could be tight. It may actually be hard to tell, because it is easy to let your receivables get too large. If everyone is busy, maybe no one is bothering to collect the $. Or at least you wait too long to collect the $

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