Ask HN: Clients are gone, lots of debt, what would you do? • Hacker News Board

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

#61

Post by CatDancer » Mon, Dec 01, 2008, 1:25 AM UTC

timr wrote: post #34

CatDancer wrote: post #33

Earlier quoted context omitted.

Have you read Founders at Work?

Yes.

Well, I think there's different kinds of risk, and mathematically from a financial point of view they may look the same, but it's not the whole story.

For example, suppose I want to take a year off and go hiking. I could have worked that year instead, made 100K, invested that in the stock market, and be a multimillionaire by the time I retire. So from a financial point of view, going hiking is a really terrible idea.

Or, suppose, I feel like taking that year and doing a startup. And suppose I have a 90% chance of failure. OK, you can run the numbers, and probably show that, on average, I'll do worse than if I took a job for a year. So, yes, looking at it that way, you can say that my starting a business is an "exceptionally high risk".

Except... what if I'm working on a project that I feel like working on?

A part of the interview with Steve Wozniak that I found quite fascinating was that he said he didn't feel like he was taking a risk with Apple. Sure, he could have worked all those extra nights and weekends and had it come out to nothing. Yikes! Invest all those hours, that he could have been working to make money, and end up with zero. But so what? He was doing something he wanted to do, that he found really exciting, building one of the first computers that people could own themselves.

Is there a danger that one will become overly caught up in a startup, and do foolish things? Sure. I been there. I've done that. If I had found the right mentor they could have advised me to bail on my startup a year and half before I did, and saved me a lot of grief. Does that mean that you "have to" or that it is "realistic" that you're going to wildly over commit? No. Just because most Americans are overweight and unhealthy doesn't mean that it is "realistic" for me not to have a moderate exercise program and eat healthy food.

it makes sense to double-down with money

hmm, I've already responded to this point, as far as I can tell. I'd be happy to expound more if someone wants a more detailed explanation, but otherwise I think I'd just be repeating myself.

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

#62

Post by skmurphy » Mon, Dec 01, 2008, 2:46 AM UTC

davo11 wrote: post #60

skmurphy wrote: post #58

Earlier quoted context omitted.

This can be a a slippery slope: you put the 6K back on and you borrow more than 6K again. For folks who are in debt it's a safer habit to switch to pay as you go. As to taking out a new loan when he doesn't have a steady source of income and no assets to offer as collateral it can be difficult to be entirely candid on the application and still get the loan. In hindsight your creative writing may be construed as fraud…

So your saying it's a crime to reduce how much money you have to repay? I was assuming he would be obtaining some sort of income, either a job or some new contracts. If he doesn't the 6K will buy a couple of months, there is no fraudulent intent, the debt still exists, it's merely minimising your costs. As others have said credit cards are a nasty way to fund a startup, but financial institutions make them easy to ob…

It's only a crime to falsify the application. I agree with you that "personal loans are unsecured and go by ability to repay and credit history." In the absence of reliable income it's hard to accurately represent an "ability to repay." He would be much better served in the near term to find new sources of income. Without them he is destined for bankruptcy.

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

#63

Post by davo11 » Mon, Dec 01, 2008, 3:25 AM UTC

skmurphy wrote: post #62

davo11 wrote: post #60

Earlier quoted context omitted.

So your saying it's a crime to reduce how much money you have to repay? I was assuming he would be obtaining some sort of income, either a job or some new contracts. If he doesn't the 6K will buy a couple of months, there is no fraudulent intent, the debt still exists, it's merely minimising your costs. As others have said credit cards are a nasty way to fund a startup, but financial institutions make them easy to ob…

It's only a crime to falsify the application. I agree with you that "personal loans are unsecured and go by ability to repay and credit history." In the absence of reliable income it's hard to accurately represent an "ability to repay." He would be much better served in the near term to find new sources of income. Without them he is destined for bankruptcy.

I agree new sources of income are required, but also a debt management startegy is required. As I mentioned before, the debt as it stands is costing $6000 a year or so, it would be very easy to cut that down to $1000 a year or so (that's just the interest), if you can get the interest down to $1000 a year then the other $5000 can go on repaying the principal and hey presto it's gone in 6 years by making a phone call or two with absolutely no change in what you are paying. If you can make the repayments pre tax money then it's even easier.

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

#64

Post by zaidf » Mon, Dec 01, 2008, 4:42 AM UTC

skmurphy wrote: post #59

zaidf wrote: post #50

Earlier quoted context omitted.

I don't think that is what he implied by "everything is open for negotiation". What it does mean is that this situation makes you lose any bit of your laziness or ego or threat of embarrassment. Where as previously you may have been shy to tell your hosting company you can only pay $100 instead of $600, now you may have NO OTHER OPTION but to pay $100 instead of $600. Of course the hosting company can refuse and purs…

It's a fair point but I wouldn't characterize it as a negotiation. You are making a commitment to pay $100/month to pay off the debt. They can take you to court or a collection agency for not honoring your original contract but if you honor your new commitment they are very likely to be willing to work with you. But it's not a negotiating posture because you are reneging on an earlier commitment and asking for their…

"It's a fair point but I wouldn't characterize it as a negotiation."

I think you are just playing with semantics;) In general, trying to change your agreement with a vendor is negotiating in my books. Remember if I proposed $100/month, the vendor could well come back and make a counteroffer of $110/month. I might sleep over it. And then agree to it. I'd call that negotiation.

I can see value in Ridgely Evers book. But I see NOT negotiating aggressively as a bigger problem than negotiating too aggressively. Totally agree with Ridgely in that you have to have a sense of to what extent the vendor will go to accommodate you before it is not worth his time and investment.

For hosting, it is not too difficult to calculate that point. ie. say we are paying $3000/month for a high-end server. We know the hardware cost $6,000 to the host. We know we have been with the host for 6 months and paid them $18,000. We know, thus, that the host has already recovered the cost of the hardware. In addition, we know that the bandwidth at the datacenter costs the host no more than $500/month and the rackspace for our server ~$200/month.

With the server cost paid, we are costing the host ~$700/month and making them a rough profit of ~$2300. At this point, we may be tempted to start our negotiation by telling them we can only afford to pay $1500. Realistically, we can settle on $2,000...saving 33%/month.

All the numbers above are almost real from our recent negotiation with a host.

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

#65

Post by skmurphy » Mon, Dec 01, 2008, 7:05 AM UTC

zaidf wrote: post #64

skmurphy wrote: post #59

Earlier quoted context omitted.

It's a fair point but I wouldn't characterize it as a negotiation. You are making a commitment to pay $100/month to pay off the debt. They can take you to court or a collection agency for not honoring your original contract but if you honor your new commitment they are very likely to be willing to work with you. But it's not a negotiating posture because you are reneging on an earlier commitment and asking for their…

"It's a fair point but I wouldn't characterize it as a negotiation." I think you are just playing with semantics;) In general, trying to change your agreement with a vendor is negotiating in my books. Remember if I proposed $100/month, the vendor could well come back and make a counteroffer of $110/month. I might sleep over it. And then agree to it. I'd call that negotiation. I can see value in Ridgely Evers book. Bu…

There isn't a quid pro quo in offering to pay less than you have already agreed to. He isn't promising them future business or renegotiating on a contract boundary, he is trying to stretch out payments because of cash flow issues.

I am completely in favor of negotiating aggressively, but I like my word and my signature on a contract to mean something, if only because that has value in future negotiations.

As to your situation I don't understand why you didn't negotiate a better deal up front if all of these numbers were available to you? Why not break out hardware reimbursement from bandwidth, rack space, and other services and work out a payment schedule that meets your needs and theirs in parallel with negotiations with other vendors? You have far more leverage when negotiating in parallel than when you are refusing to pay.

Why sign a contract and then renege six months in? The impact on your reputation (based on who else they may talk to or get called for a reference) and your next negotiation with this vendor has yet to be felt but I wouldn't rely on it being negligible.

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

#66

Post by zaidf » Tue, Dec 02, 2008, 1:49 AM UTC

skmurphy wrote: post #65

zaidf wrote: post #64

Earlier quoted context omitted.

"It's a fair point but I wouldn't characterize it as a negotiation." I think you are just playing with semantics;) In general, trying to change your agreement with a vendor is negotiating in my books. Remember if I proposed $100/month, the vendor could well come back and make a counteroffer of $110/month. I might sleep over it. And then agree to it. I'd call that negotiation. I can see value in Ridgely Evers book. Bu…

There isn't a quid pro quo in offering to pay less than you have already agreed to. He isn't promising them future business or renegotiating on a contract boundary, he is trying to stretch out payments because of cash flow issues. I am completely in favor of negotiating aggressively, but I like my word and my signature on a contract to mean something, if only because that has value in future negotiations. As to your…

"I like my word and my signature on a contract to mean something, if only because that has value in future negotiations"

Hey, now you are implying that my signature on a contract does not mean anything and that, that is how I prefer to run things. We are talking about ONE certain contract...and in this case, it involves a month-to-month contract.

As for negotiating earlier, again, you sound like you are reading from a college textbook. Nothing wrong with it, but I run a start-up and things are not usually as perfect as books may make it seem. ie. We did just as aggressive negotiation at the time of signing up and got the best deal in the market at the time. Also note that at the time the server was given to us, the host had put in money that they had yet to recover. When we went back to renegotiate, that cost had been recovered.

"Why sign a contract and then renege six months in?"

Usually because some unexpected variables change. Happens all the time, especially in a start-up. And right now, in this economy, even more so!

Lastly, your point that you should negotiate just as aggressively at the beginning is well taken. However, doing that and re-negotiating to get the best deal at all times are not mutually exclusive.