Richard Bucker

individual employee costs - and then there are software services

Posted at — Aug 14, 2015
We don't talk about our failures very often.

A few years ago I tried to start my own software consulting company. That business was wildly successful for my father 30 years ago... but as they say "it's not your father's Oldsmobile". The market had changed and every potential client wanted everything for free (including my advice) or they had a kid at home that was a programming savant.

This is an exploration into the cost of an individual contributor at a technology startup. Keep in mind that in broad strokes there are many more expense areas than just tech. For example:
  • customer acquisition
  • administration
  • supplies
  • hardware infrastructure for everything from development to production
  • straight employee costs
  • tools and skills acquisition
  • sustainability
  • taxes
  • product R&D
  • conferences and related networking
I want to focus on "tools and skills acquisition".

The easiest is "skills acquisition". The internet is full of information and there are plenty of YouTube videos to prove it. I get a lot of good information from YouTube, however, I curate that information as quickly as I can. There are too many, would be pros, selling snake oil by the internet minute. (I recently learned that an internet charity was begging me to watch a video for 30 seconds because that was the tipping point at which Google paid them for advertising associated with their video) And now I understand why some material is actually produced. Keep in mind you're not billing if you're learning.

So let's look at some of other "tools" expenses:
  • cloud storage ($15/mo)
  • mail relay (20K emails/$5)
  • programmer's IDE ($500/yr)
  • database ($700/yr)
  • photo editor ($240/yr)
  • other programmer tools
  • word processors and spreadsheet ($300/yr)
  • shared calendars ($700/yr)
  • webinar ($79/mo)
  • screen sharing (first $799/yr)
  • internet connectivity, certificates ($200/mo)
  • distributed source control($1/mo)
  • upgrades and other subscriptions(???)
I'm going to estimate the cost here using $500/yr is about $40/mo. In total that's about $450 before upgrades and subscriptions.

Now consider the company servers. The smallest "micro" server from AWS or GCE costs about $5/mo but that's not practical to run your business. It also does not include VPN, HA, LB, CI/CD, or other critical services. In total you can expect to knockout at least 4 to 8 servers. And if you are serious about availability that might be a factor of 2. That's going to be another $500/mo for the services you're going to use; then there's another few hundred for the services not yet started and machines just warning the ozone.

So that first employee is generating about $12k per year in expenses before the first contract is awarded.

"You can fail at what you don't love so you might as well take a chance on what you do"
-Jim Carrey(video)