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Ask HN: Clients are gone, lots of debt, what would you do?

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Re: Ask HN: Clients are gone, lots of debt, what would you do?

#31
post #29

Earlier quoted context omitted.

I think it's great to have that kind of mindset. As I said, I thought the rest of your advice was great -- I just happen to vehemently disagree with the notion that you can let revolving debt ride while you pursue high-risk investments (i.e. starting a business). Even if you're "only" paying $9k a year in credit-card interest, that's still $9k that could be invested directly into your future. And if you truly believe…

I just happen to vehemently disagree with the notion that you can let revolving debt ride while you pursue high-risk investments Starting a business is not a high-risk investment (unless you put your own money into it) And if you truly believe in your business, then why wouldn't you want to invest everything into it? Because, excuse me for saying so, that would be silly. Think about my business separately from me for…

This reminds me of a JWZ quote: "Linux is only free if your time is worthless." The same principle applies here.

A business is exceptionally high-risk, if you value your time at more than zero. It's not like a savings account, where you put your money in, ignore it, and you're guaranteed to get it back someday. It's not even like a stock or a bond, where you have a framework to evaluate your investment, and can make prudent choices with a little bit of effort. When you start a business, you're investing your time -- your future earning potential -- into a vehicle that has a poor history of return, and no framework for evaluating the odds. That's as risky as it gets.

This point plays into your second comment: sure, it makes sense to get as much of your funding from outside investors as you can get on favorable terms, but it's naive to think that outside investors are going to save you from investing in your own company. Investors don't want to take the risk unless you have some skin in the game, and founders don't want to relinquish control before they need to do so. Thus, in reality, founders end up investing in their companies heavily. They're already committing their most valuable possession (time); it makes sense to double-down with money, too.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#32

I would go forward from where you are. Look for additional contract work and look for additional business that can leverage your assets as they are. Tell everyone you know that you are looking for work and are available to start immediately. Go back to all of your old clients and see if there is any basis to consult/contract or support them--that doesn't involve incurring additional expense in advance. Simplify your…

I haven't been in such a situation... but you said, "Sell any other assets you don't need for work (e.g. television, videogames, other non-essential and time-wasting items), use the money for food and debt service."

Is the $500 you're going to get for selling a TV and a video game system going to help that much? It seems that you should keep anything you actually use, to me - you're in enough stress as it is, you don't need to make yourself feel desperately poor.

Or am I missing something?

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#33
post #31

Earlier quoted context omitted.

I just happen to vehemently disagree with the notion that you can let revolving debt ride while you pursue high-risk investments Starting a business is not a high-risk investment (unless you put your own money into it) And if you truly believe in your business, then why wouldn't you want to invest everything into it? Because, excuse me for saying so, that would be silly. Think about my business separately from me for…

This reminds me of a JWZ quote: "Linux is only free if your time is worthless." The same principle applies here. A business is exceptionally high-risk, if you value your time at more than zero. It's not like a savings account, where you put your money in, ignore it, and you're guaranteed to get it back someday. It's not even like a stock or a bond, where you have a framework to evaluate your investment, and can make…

Have you read Founders at Work?

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#34
post #31

Earlier quoted context omitted.

This reminds me of a JWZ quote: "Linux is only free if your time is worthless." The same principle applies here. A business is exceptionally high-risk, if you value your time at more than zero. It's not like a savings account, where you put your money in, ignore it, and you're guaranteed to get it back someday. It's not even like a stock or a bond, where you have a framework to evaluate your investment, and can make…

Have you read Founders at Work?

Yes.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#35
In hindsight I would have used EC2 instead of buying servers. For servers I already have it pays to have clients using them and paying you more than your expenses on them.

Get out of the Credit Card debt ASAP. Instead of trying to sell the lead management system, go radical and open source it on an account on GitHub. You can then charge a high hourly rate for people who need help with it.

Focus on launching one site at a time, work on it until you are done. Consider using PivotalTracker for planning each project.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#36

Yes, I once had a failed startup, and ended up with $40K in credit card debt. I assume you are personally liable for the business credit card debt. (As you generally can't get a business credit card without personally guaranteeing it). So, just to be clear on your situation, you are 30K in debt. (Regardless of what happens to the "business", you, personally, have 30K of debt). Step one is to get yourself stabilized e…

This is a really awesome write-up and lists everything I would have thought, but in a way I might not have been able to put acorss.

To put it succiently, 1. Cut down expenses, right now and ruthlessly. Negotiate with everyone on everything. Everything is open for negotiation.

2. Economic stress WILL KILL creativity. Your only focus right now should be get to positive cash flow. Not debt free but positive cash flow. Debt free will take time, but it will happen but what you need absolutely right now is +ve cash flow. Debt is ok as long as you meet minimum commitments. -ve cash flow will lead to economic stress which will kill creativity which will make it longer to go debt free.

3. Plan for Cash flow positive. On paper - In writing - Get someone to proofread.

4. If you are not able to get cash flow positive - get a consulting assignment or a job. START LOOKING RIGHT NOW.

5. If you are able to get to cash flow positive - look at your existing ideas-business lines and pick out the one which will create revenue fastest with the most amount of confidence. Work on it, and leave everything else for a while.

6. Don't go back to school. You know that is not a solution. There was a reason why you crossed into the free world.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#38

I would go forward from where you are. Look for additional contract work and look for additional business that can leverage your assets as they are. Tell everyone you know that you are looking for work and are available to start immediately. Go back to all of your old clients and see if there is any basis to consult/contract or support them--that doesn't involve incurring additional expense in advance. Simplify your…

I haven't been in such a situation... but you said, "Sell any other assets you don't need for work (e.g. television, videogames, other non-essential and time-wasting items), use the money for food and debt service." Is the $500 you're going to get for selling a TV and a video game system going to help that much? It seems that you should keep anything you actually use, to me - you're in enough stress as it is, you don…

It's a question of focus. He is desperately poor: he's completely broke. He has talents that he needs to focus on making money. My assumption was that he still wants to be an entrepreneur: he needs to learn how to bootstrap on minimal cashflow.

Re: Ask HN: Clients are gone, lots of debt, what would you do?

#39
Plenty of advice here already. Insolvency can only be dealt with by liquidation and retrenchment on one hand, and bankruptcy on the other. It's an uncomplicated choice, and there's not much to say.

But, for the love of god, don't finance a business on credit cards. Bad idea. Really, if you can't find friends family or fools, there's always Uncle Sugar:

http://www.sba.gov/services/financialassistance/sbaloantopic...

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