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| | | BabyFodder
Group: Forum Members
Last Login: 2/11/2006 5:55:11 PM
Posts: 4, Visits: 10 |
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Hello,
I have a small software development company specializing in the food service industry. My standing joke is that when we first started out, we were really, really, really, really small. Now we're just small.
I started the company in my garage in 1999 and since then, we have built a customer base of about 800 installations world wide. Our software is a mid-priced product so 800 installation is pretty decent. Especially when you consider that comparable products (feaures, quality, etc) are from companies that have been in our industry since the early 80's.
The problem is of course, money. We're all making a living but we've reached the point where we really need to start expanding to take advantage of what we've accomplished thus far.
We have already received offers and overtures to either purchase our company or license the source code of some our software products. The offers were pretty substantial, but far south of where I'd be willing to give up what I'm doing (frankly, it's a blast) or what the company and it's products are worth.
At any rate, I'm going to be devoting time this year to seeking out capital for our expansion and would like know if it's any more difficult to procure capital for an existing conern vs. a start up. Most of sites that I've seen seem to deal mostly with startups.
Thank you
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Fodder Chief
Group: Administrators
Last Login: 3/4/2008 5:30:47 PM
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| | I have a couple questions about your software and revenues. How many do you sell per year, and for what price? When you sell a unit, I assume there is a one-time fee to purchase the software. What are the other ways you generate revenue from your existing clients? Installation or customization costs? Do you sell an annual maintenance subscription? Do you sell them software updates? Are there modules or other features that can be priced differently? I'm just wondering if you could more effectively leverage your existing clients to generate some additional revenue. |
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| | | Fodder Emeritus
Group: Moderators
Last Login: 1/28/2008 9:05:38 PM
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| | It is far more difficult to raise capital for a start up! Frankly, it is virtually impossible. This is the sad fact of entrepreneurship...very few "ain't got no revenue but I got me an idea and that's it" start-ups can raise outside capital. And those that can, typically raise it from family and friends who don't know any better. "Ain't got no revenue but I got me an idea and that's it" start-ups that do become successful become successful because the entrepreneur saw a need for a service or product, and simply starting selling. Most often, the entrepreneur didn't write a business plan and didn't waste time seeking outside capital. Find a market first, and then capital will find you, is a simply rule of entrepreneurship. And with that in mind, you, with an existing going-concern, should have an *easier* time raising capital than the pure play start up. It is easier to find investors for companies that are producing revenue, have plenty of customers, and are profitable. If a company is profitable, and especially if it is generating at least $2 mm EBITDA, then the entrepreneur has plenty of options. The entrepreneur may be able to raise capital for expansion. This means the company sells a stake to a new investor and the proceeds flow to the company. Alternatively, the entrepreneur may be able sell a stake of his holdings to a private investor, with the proceeds flowing to the entrepreneur. This is also called, "taking some chips of the table." So the question becomes, how much revenue does your company produce? Are you profitable, and if so, what are the profits?
Dr. VC
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Cynicism is not an end, but a means to reach objectivity. |
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| | | BabyFodder
Group: Forum Members
Last Login: 2/11/2006 5:55:11 PM
Posts: 4, Visits: 10 |
| I have a couple questions about your software and revenues.
How many do you sell per year, and for what price?
When you sell a unit, I assume there is a one-time fee to purchase the software. What are the other ways you generate revenue from your existing clients? Installation or customization costs? Do you sell an annual maintenance subscription? Do you sell them software updates? Are there modules or other features that can be priced differently?
I'm just wondering if you couldmore effectively leverage your existing clients to generate some additional revenue.
Last year we sold about 400 units of the basic software at an average of $589.00 per. We also sell upgrades now. There are aother add on products such as Credit card processing module, Reservations, PMS (Property Management System) integration, etc.
We have other projects that we've gotten out the door recently such as a web based Gift Card/Loyalty card processing system with CRM capabilities. This was just release, but looks like it will be a hit since it was released in beginning of December this year and we have 35 subscribers so far (@ $39.99/month).
What we need most is money for advertising and additional staff. It's kind of frustrating when you have a great (and proven product) and do not have the resources to get it in front of customers, except through word of mouth.
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| | | BabyFodder
Group: Forum Members
Last Login: 2/11/2006 5:55:11 PM
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Hi and thanks to both of you for replying. Total sales last year were only around $270,000.00, much lower than you indicated would be optimal. However, that was software sales so direct hard costs for producing it was maybe 5% not including labor. Labor was performed by me since I am the author of the software. We netted about 200K.
It's kind of a unique situation. I used to have an office, but when we leaned towards selling through resellers, I was sitting there like the Maytag repairman. So, I had some work done on my house and moved into an office connected to my home. Starting out it was just me (and truth be told, still pretty much me) so I had to leverage resellers to sell and support customers. While this helped a bunch in the early stages, we also lose out on a lot of revenue in support agreements, hardware sales (although hardware is very low margin), replacement parts and a lot of credit card business that saavy resellers market themselves. Have about 5 "key" resellers that push most of the volume and work closely with myself in determining the development of the products. There are countless "one-off" local network and IT companies that come to us because a restaurant customer came to them.
One idea that I had was to bring in the larger of our partner companies that have integrated our software with theirs into some kind of a trust or investment co-op. I'm not at liberty to say, but the larger companies we partner with are leaders in their respective industries and none of the industries they represent collide as far as competition goes.
While we have not set the world on fire, we've done what we've done with no money starting out whatsoever. That's because we've been able to produce a product with 80% feature and functionality of the larger, more well known products at about 40% less in price.
Our problem has always been money for consistent advertising, tradeshows, etc. Flying around the country to meet with new resellers, chains and other potential customers is difficult when you are the only programmer in the company, LOL. I'm one of those rare people that is at home and pretty effective writing code or pitching a client. I enjoy both.
With some decent capital, I could leverage my software design skills very nicely with say, 2 or 3 additional and proficient programmers. That would also free me up to start building a larger reseller base and go after franchise chains, attend our industry tradeshows, etc.
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Fodder Chief
Group: Administrators
Last Login: 3/4/2008 5:30:47 PM
Posts: 179, Visits: 845 |
| With some decent capital, I could leverage my software design skills very nicely with say, 2 or 3 additional and proficient programmers. That would also free me up to start building a larger reseller base and go after franchise chains, attend our industry tradeshows, etc. Well, congratulations on doing so well with only one programmer. It is fantastic what you have accomplished by yourself. It's great to hear of such success bootstrapping the company the way you have since that is something that we suggest to a lot of people. With that kind of annual income, couldn't you just reduce your salary and use some of the funds to pay for marketing and advertising and the additional programmers? Also, many banks would probably give you a line of credit. Most will give you 10 - 20% of your annual income (as long as you personally guarantee it). It sounds like you don't have any debt. I don't think that debt will make your business much less attractive to potential buyers, so perhaps that is something to consider. It sounds like you have a good thing going with the few small resellers you have. However, that's not a very diverse business. Essentially you have a relatively small numbers of "clients" bringing in business. You should actively be courting new and larger resellers. Have you ever tried selling direct to restaurants and making cold calls to restaurant owners? Do you stay in touch with your existing clients? Restaurant owners tend to know other restaurant owners. Do you ask for referrals? Does your product work for bars as well? What about bars that serve food? Are there other industries you haven't tapped yet that would be very inexpensive for you to transition into? It also sounds to me like you are facing something a lot of bootstrappers face: the transition from one person to multiple. That is hard to do, but it's a necessary step to grow. You simply won't be able to do everything by yourself if you also try to expand. My suggestion is that you have cash in the bank to be prepared. You will wind up taking a lot more time than you expect training them and getting them up to speed on your product and code, which might mean you will bring in less business during that transition. Finally, there are probably some smart accounting/tax ways you can increase your take home pay. For instance, does your company pay you rent for your home office? Ben |
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| | | BabyFodder
Group: Forum Members
Last Login: 2/11/2006 5:55:11 PM
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Well, congratulations on doing so well with only one programmer. It is fantastic what you have accomplished by yourself. It's great to hear of such success bootstrapping the company the way you have since that is something that we suggest to a lot of people.
Thank you. Personally, I don't think it's all that great of an accomplishment. I think we should be doing a lot better right now and the offers that we get should be for quite a bit more than they have been. I've made some bad decisions along the way, but it was better than making no decisions at all. At least that is how I write if off.
With that kind of annual income, couldn't you just reduce your salary and use some of the funds to pay for marketing and advertising and the additional programmers? Also, many banks would probably give you a line of credit. Most will give you 10 - 20% of your annual income (as long as you personally guarantee it). It sounds like you don't have any debt. I don't think that debt will make your business much less attractive to potential buyers, so perhaps that is something to consider.
Unfortunately, much of my income is going to pay off a (personal) tax debt that I incurred when starting out. I actually only make about $100K between the salary that I pay myself and dividends that I issue quarterly. (Currently S Election) This should be paid off in the next 3 years which will free up some money then.
It sounds like you have a good thing going with the few small resellers you have. However, that's not a very diverse business. Essentially you have a relatively small numbers of "clients" bringing in business. You should actively be courting new and larger resellers.
Have you ever tried selling direct to restaurants and making cold calls to restaurant owners? Do you stay in touch with your existing clients? Restaurant owners tend to know other restaurant owners. Do you ask for referrals? Does your product work for bars as well? What about bars that serve food? Are there other industries you haven't tapped yet that would be very inexpensivefor you to transition into?
Yes, we definitely need more resellers. As I mentioned above, I used to do everything when I started out; development, sales, installation, training with the help of a few sub contractors that I used. That was a losing proposition as I spread myself too thin in the process. So, I off loaded the sales, installation, training and support to resellers.
Actually, it's kind of funny. My background before this was in sales. Originally, I had the idea that I would make a killer app and go gang busters selling it. In software, it's not enough to be good, you have to always be getting better.
It also sounds to me like you are facing something a lot of bootstrappers face: the transition from one person to multiple. That is hard to do, but it's a necessary step to grow. You simply won't be able to do everything by yourself if you also try to expand.My suggestion is that you have cash in the bank to be prepared. You will wind up taking a lot more time than you expect training them and getting them up to speed on your product and code, which might mean you will bring in less business during that transition.
Agreed. You ever see that I Love Lucy episode where they are in Italy and the Mayor of the town kept switching his hat from the Mayor to the Fire Chief to the Police Chief, etc? That's me.
As far as new programmers go, it'll definitely mean a lot of work getting them up to speed, but it'll mean that I can eventually have more time for other facets of the business that need attention.
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| | | KinderFodder
Group: Forum Members
Last Login: 2/13/2006 6:28:58 PM
Posts: 10, Visits: 9 |
| IT SOUNDS LIKE YOUR HEADING IN THE RIGHT DIRECTION WITH YOUR COMPANY.  THE REAL WORLD OF SEEKING EXPANSION MONIES FOR YOUR BUSINESS AND OR STARTING A START UP COMPANY IS ALL THE SAME;THERE ARE OBJECTIONS WITH BOTH CASES. I HAVE SPENT THE LAST YEAR RAISING MONEY AND THE MIND SET OF AN INVESTOR IS INTERESTING!  MY SUGGESTION TO YOU IS TO CONTACT UP TO 10 CUSTOMERS WHO YOU THINK MAY CONSIDER STRUCTURING A CASH FLOW DEAL THAT WILL TAKE YOU TO THE NEXT LEVEL. THEY HAVE PURCHASED FROM YOU AND ARE USING YOUR SOFTWARE AND WILL BE ON THE SAME PAGE WITH YOU. THE OTHER OPTION IS YOU WILL SPEND ALOT OF TIME TRYING TO FIND THE RIGHT MATCHED INVESTOR WHICH IS DIFFICULT TO DO BECAUSE OF ALL THE SHARKS OUT IN THE MARKET PLACE. YOUR BEST BET IS WORK WITH YOUR CUSTOMER BASE TO FIND YOUR INVESTOR. MAKE SURE YOU FIND THE RIGHT ONE. TAKE YOUR TIME IT WILL PAY OFF IN THE LONE RUN.
www.XtremeCarsandStars.com
mdfxtreme@yahoo.com |
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