[kictanet] Finance Policy - Tech Startups

[Wamuyu Gatheru]

Re-investing is the way to go for a start up or it remains a start up  
and shortly dies. Remember competitors are coming up and growing and  
if you buy the Hummer too soon, you will be out of business.

Wamuyu

Quoting Phares Kariuki <pkariuki at gmail.com>:

> Hi Francis,
>
> It was hypothetical, I understand the need for taxes etc, I guess I should
> have better put out my thoughts... My point was more on what happens to cash
> you don't re-invest/pay out as dividends? Basically, what does one do with
> their cash reserves? Or is it that we don't have cash reserves?
>
> On Thu, Jul 7, 2011 at 12:24 PM, Francis Hook <francis.hook at gmail.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.
>>
>> 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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>>
>>
>>
>> --
>> Francis Hook
>> +254 733 504561
>>
>>
>>
>
>
> --
> With Regards,
>
> Phares Kariuki
>
> | T: +254 720 406 093 | E: pkariuki at gmail.com | Twitter: kaboro | Skype:
> kariukiphares | B: http://www.kaboro.com/ |
>