[kictanet] Finance Policy - Tech Startups

Thu Jul 7 13:03:31 EAT 2011

Also, There are a number of methodologies employed in sales/rev forecasts
and these take into account all variables. Using any/combination of these
methods will give you an indication on how much you need to retain, invest,
etc  in any given season to cushion an organization from future
uncertainties- even the uncertainties can be estimated to near accuracy
levels

Edwin

From: kictanet-bounces+eonchari=lynxbits.com at lists.kictanet.or.ke
[mailto:kictanet-bounces+eonchari=lynxbits.com at lists.kictanet.or.ke] On
Behalf Of Andrea Bohnstedt
Sent: Thursday, July 07, 2011 12:53 PM
To: Edwin
Cc: KICTAnet ICT Policy Discussions
Subject: Re: [kictanet] Finance Policy - Tech Startups

I wish I had that problem :) 

I think in the case of most start ups, this is a very unrealistic scenario
as cash flow is one of the biggest problems. Usually you're chasing your
clients for payments, but have to keep paying rent, staff, electricity etc.
But my two shillings: 

If you reinvest, have a plan for it - and that will tell you how much money
you need when. 

Ask your bank for their short and medium-term investment opportunities in
government securities etc. Unless you're an investment expert, you want
something conservative, and accessible when you need the money, so it might
be important that you put at least part of the cash into short-term, liquid
instruments.

On 7 July 2011 12:44, Edwin Onchari <eonchari at lynxbits.com> wrote:

Phares, I'd wager at least 30% needs to be paid in taxes for a start :-)
unless you have included that in the expenses already (excluding PAYE for
staff) in which case I have to ask why such high margins?   If the value add
is very good, and assuming its a service and not a product (and you
indicate) then salaries too must be high?   If a product, the question
remains, what has been the value add such that after acquiring the product
and adding value, you still have huge profits?   

If all above is taken into account...then I suppose re-investing in the
business, in expansion and in diversifying the offerings would be the best
way to go.  

To add to what Francis has said - assuming that expansion of the tech
company is not possible, then as a good corporate entity, you could
participate in a worthy corporate social responsibility program

Edwin

On 7 July 2011 12:15, Phares Kariuki <pkariuki at gmail.com> wrote:

Hi,

Question, for those who have run tech startups, how do you deal with
excessive revenue? Given that tech firms many times operate on high margins,
let's, for the sake of example, say you have a product that, with an expense
book of roughly 1M (Rent + Salaries), and your monthly revenue is 8 M KES.
What do you do with the remaining 7M? Some say invest in product development
but even then, you will still have quite an amount of change. What happens
to that change? Invested in a bank? Or in some form of Fixed Income
Securities (Bonds, T-Bills etc). What's the general practice in .ke? 

-- 
With Regards,

Phares Kariuki

| T: +254 720 406 093 | E: pkariuki at gmail.com | Twitter: kaboro | Skype:
kariukiphares | B: http://www.kaboro.com/ |

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