Is there a chance that you could sell the company? Perhaps the lead management system that you built would make the company attractive. Even if you could engineer a sale that covered only the debt, that would remove the burden of a bankruptcy.
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?
#12Not sure if it is an option, but see if you can go back to school. You get try to get some no interest student loans, and work to pay those off while you complete your degree. Given your experience, you should be able to make a fair bit of cash during slow semesters or over the summer. School is a great place to ride out tough economic times.
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#13I 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 life to the point of austerity and pay as you go. Don't "bum" anything from anyone, e.g. find a mutually acceptable quid pro quo for room/board from parents and/or friends. 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.
On 30K of credit card debt my calculation is that you owe about $500-600 in minimum payment, use the 6K to continue to make minimum payments. Put your credit cards in your sock drawer and only carry one for bona fide emergencies (e.g. car breakdown). Carry cash and pay cash for everything, it will give you a sense of where you are spending money immediately.
Don't take any contracts that require you to advance any money or risk more than a week's labor until you get your debt paid off. Don't "pay up front and invoice in arrears," get your clients to cover the up front expenses and take a fee for your services and the use of your software platform.
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#14Get a job and pay off your credit cards. Debt is miserable.
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#15Austin, huh. Nothing concrete to offer by way of advice, but a couple of friends who recently graduated from UT launched an advertising startup. Maybe I could put you in touch? Are you at conjunctured? I've been meaning to check out that space. I can swing by in a couple of hours if you're going to be there.
Actually, I am sitting at Conjunctured right now. Probably my last visit, can't really afford to renew the membership. Come on by, I have visitor passes.
I sent you an email to the n2neuron.com address a moment ago. Are you going to be at Conjunctured much longer?
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#16There are things you should do right now to deal with the debt. First off, the rack space contract. You can almost certainly get out of it by phoning the company and explaining that the choice isn't between cancelling the contract now or getting paid for another two months, but rather cancelling the contract now or fighting other creditors over the non-existent assets of the company at liquidation. As long as you can…
Lots of great advice here. I was involved with a company that ran out of money which had a very high burn due to infrastructure. The server company was more than happy to work with us... that's an easy first start to minimize any additional expenses.
I don't have a lot of personal advice to give you to help you out of this situation. However, on the surface I do feel you made some mistakes that you should never make again.
1. Driving expense car while in debt. Wasteful. 2. Living off credit cards when you could have easily shacked up with the 'rents from the start.
I'd probably talk with a REPUTABLE debt advisor to figure out how to get out of this mess. Until then, get a job and/or look to liquidate what you've built.
Keep your head up... I'd probably look to liquidate as a last resort... if it wasn't for the economy, it sounds like you'd be in a lot better shape... so if you can withstand the squeeze for the next 6-12 months with an interim-job, then you may be in a great position to catch the rebound.
ps. I'm in Austin and go up to Conjunctured from time to time. My contact info is in my profile if you'd like to grab coffee sometime soon.
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#17I have had an idea of a "Lending Tree" type website for leads. Leads would be generated, evaluated, given a score of how good the lead is, then people would bid on the lead. I work for a company that has customers who buy leads internally through partnerships with lead vendors like Cutting Edge Media.
Anyway, I have had this idea for years now and haven't done anything with it. Maybe you could work out an arrangement to sell a position in the company to those that you partner with to sell the leads to there customers.
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#18Yes, 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 emotionally and financially. Good job on selling your car and moving out of your apartment.
These four servers that are sitting idle? Are these the ones that cost a total of $600/month, and you are contracted to keep paying $600/month through the end of January? (Am I clear on the situation?) Go and talk to the hosting company (the company you owe the $600/month to). In person. Not email, not phone, go sit down with a manager in person. Ask for mercy. Lay out the facts of your situation, just as you've done here. Say, "I know I owe you $600/month, and legally you have a right to that out of my last $6k check. Since I'm in this bad situation that I didn't expect, I'm asking if you would have mercy on me and let me out of my contract. Is there anything you can do to help?"
Next, write down a minimum monthly budget that contains the bare necessities: food, gas for the car, small gifts for your parents and friends to thank them for letting you bum off of them, the minimum payments on your credit cards. I mean this literally, write it down. On a piece of paper, or in a spreadsheet. You need to be able to look at the number, "$X/month", and say, "I can survive on that". Temporarily. While you catch your breath, and decide what next to do.
Next, I recommend you stop using debt as a tool to build your business. If you have a great money making idea that needs some capital, go get investors. Yes, you will pay the investors more in their share of the business than you would on interest payments, but you're making lots of money anyway, so what? And if the business fails, you walk away free and clear.
From a business point of view, the problem with debt is that is deadens the signal that you'd otherwise be hearing that you're on the wrong track financially. It's like some who suffers from leprosy, who loses the ability to feel pain in their extremities. The greatest damage comes not from the leprosy itself, but that people accidentally wound themselves (leave their feet in the campfire or something), and don't notice because they don't feel pain. Run your business on a cash basis, and you'll feel the pain of not being profitable right away, and make course corrections immediately. Run your business of debt, you rationalize things like you "have to" pay for ads upfront and invoice in arrears. Then you don't notice you've gone off course until you've gone over the edge.
You have a lot of ideas for things you can do now, and that's great! Find one that is going to be cash flow positive from the beginning. For example, those customer sites you could finish, or that product you could launch? Talk to people and bang on doors until you find someone who will pay you in advance, at least that portion which will be enough to pay for your minimal monthly budget for however long it will take you to get the project done. If your idea is good enough, if someone really wants it, they will pay upfront. If not, that's a signal that you need a better idea, something that your customers actually want. Don't go further into debt so that you can ignore the signal, instead pay attention to the signal.
OK, the 30K in debt that you're in now? Don't worry about it. Pay the minimum payments, and forget about it. Don't go further into debt, but for now don't worry about paying off the debt (aside from the monthly minimums) either. Sooner or later you'll get yourself back on your feet, make some money, and write a check to pay off the 30K. Until then, ignore it.
The CS degree? Don't worry about it. Employers and clients only care about what you can do for them. Now, if you haven't done anything yet, and you have a CS degree, then the CS degree is evidence that you're able to do things. (You at least made it through graduate school, and you're at least fairly smart). But you can show what you've done, and only a tiny, tiny percentage of employers or clients are going to care if you have a CS degree or not, as long as you can show them, as you can, what you can do.
But again, the very first thing to do is to put together you minimum monthly survival budget, and say, "OK. All I need to do, for now, is make this much to survive. I can do that". Once you do that, once you have your survival needs taken care of, then your stress lifts, your creativity comes back, and you will find it easy to start making money again.
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#19With no cash, you should do what will get you cash ASAP. That decidedly does not mean launching a product-- products take much longer to get off the ground and have some front-loaded cost. That leaves services-- i.e. consulting or lead-gen/marketing stuff like you were doing before. Hard to tell, but it looks like a low margin business (or you managed it poorly-- no offense!). If you were pulling in 70k per month at one point and ended up in debt... Doing more of that doesn't seem like a good idea. The best way to get out of debt is to get a job (don't let a lack of CS degree stop you) or (if you've got a good network and/or sales chops) do high-end consulting ($100+/hr).
Re: Ask HN: Clients are gone, lots of debt, what would you do?
#20I 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…
Rather than keep the 6K separate, pay the 6K on one of your cards (the one with the highest rate) and do a cash advance on the card every time a payment is due, this will decrease your interest a bit.
You're probably paying 20% on your cards to, currently you have a yearly income - on paper anyway - so banks will still talk to you, so look at minimizing the interest, some options are 1) get a personal loan for around 5 or 6% (not sure of the current rate in the US) from a bank 2) get one of those cards with a 2% transfer rate for 6 or 12 months and transfer all your debt to one of those cards then stick it in your sock drawer
30K probably seems like a lot now, but it's not much in the scheme of things just do all those unpleasant expense minimization techniques and watch every penny and it will be gone in no time.