Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

news.ycombinator.com

Post reply on HN
Print view View original

51–60 of 66 posts

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

#51

Post by run4yourlives »

PieSquared wrote: post #32
skmurphy wrote: post #13

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…

I think you'd get a bigger payoff from not having the TV and games around to distract you than simply the $500.

Every hour not spent watching TV can be better spent somewhere else, even if all he's doing is reading.

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

#52

Post by Fuca »

patryn20 wrote: post #28
webwright wrote: post #19

With 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…

Thanks for the advice, I really do appreciate the constructive criticism. I just want to explain the issue of margin and debt in regards to the business I was running. The margins were ok. Ranged from 15% to 40% due to client acceptance rate on the leads. Clients in the industries I was targeting always reserve the right to reject leads and never want to pay in advance. The problem came in with anticipatory purchasin…

I will get a job, and try to monetize what was left of the business.

Try again when the debt is paid and with some money saved. As someone pointed out: the knowledge of how NOT do it is very valuable.

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

#53

Post by petervandijck »

patryn20 wrote: post #28
webwright wrote: post #19

With 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…

Thanks for the advice, I really do appreciate the constructive criticism. I just want to explain the issue of margin and debt in regards to the business I was running. The margins were ok. Ranged from 15% to 40% due to client acceptance rate on the leads. Clients in the industries I was targeting always reserve the right to reject leads and never want to pay in advance. The problem came in with anticipatory purchasin…

You wrote: "The margins ranged from 15% to 40% [...] Clients always reserve the right to reject leads and never want to pay in advance."

That sounds like a terrible business to be in.

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

#54

Post by petervandijck »

level2 wrote: post #44

I'm currently an entrepreneur in waiting. By that I mean my last credit card funded gig tanked (don't ever depend on people not doing what is exactly NOT in their own best interest) and I'm waiting until this 30% APR debt is off my back. I'm doing this by working a full time job and freelancing on the side. I cannot stress enough on how important it is to have that full time job. No matter what happens with my freela…

Does "learn from your mistakes" include not funding a business with credit card debt? To me, that just sounds crazy...

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

#55

Post by davo11 »

skmurphy wrote: post #25
davo11 wrote: post #20

Earlier quoted context omitted.

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…

He needs that 6K to live on until he can find more income. If you pay 6K on the credit card you still owe the minimum payment next month only now you're broke. At the margin he will have to declare bankruptcy. This is a cash flow budgeting problem: many bootstrapping startups face these kinds of issues. As for getting a personal loan he's broke and has no assets: I would be cautious about falsifying a credit applicat…

No, if you put the 6K on the card, you're limit is still the same, but you are charged less interest. You can then take money off the card as you need it and you are then paying interest on the current balance. e.g.

Balance = 20,000 Payment of 6,000 Balance = 14,000 - interest is now calculated on this balance next week take out 500 Balance is now 14,500

and so on.

'will be more useful than more debt juggling.' it's not juggling debt it's minimising you're costs. Not minimising your costs is the difference between having enough cash to be a startup for another 6 monts or not

30,000 @ 20% interest = $6,000 p/a 30,000 @ 3% interest = $900 p/a

To maintain the 30,000 debt on a card you'd have to come up with 6,000 a year if it's a personal loan it costs you $900 a year - so fo a couple of phone calls you can change your costs by more than $5,000.

'I would be cautious about falsifying a credit application.' I never suggested any falsification, this is debt management 101.

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

#56

Post by webwright »

patryn20 wrote: post #28
webwright wrote: post #19

With 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…

Thanks for the advice, I really do appreciate the constructive criticism. I just want to explain the issue of margin and debt in regards to the business I was running. The margins were ok. Ranged from 15% to 40% due to client acceptance rate on the leads. Clients in the industries I was targeting always reserve the right to reject leads and never want to pay in advance. The problem came in with anticipatory purchasin…

Really interesting stuff!

I dunno if the (fully) loaded margins are really 15-40%... The client is essentially heaping all of the risk on you. A good sales guy deserves a base salary, expenses paid for, and a "draw" (essentially, a non-refundable advance on future commissions). Your business was essentially a salesguy who was ONLY getting paid commission.

It's no surprise that you were able to sell a service like this. If you keep on it, I'd make darn sure that any client you take shares some minimal risk (i.e. your costs are covered if they bail, you get profit if they stay).

Seems like plenty of lead gen efforts (from yellow pages, to adwords, to salesguys) share the risk with both sides.

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

#57

Post by skmurphy »

run4yourlives wrote: post #51
PieSquared wrote: post #32

Earlier quoted context omitted.

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…

I think you'd get a bigger payoff from not having the TV and games around to distract you than simply the $500. Every hour not spent watching TV can be better spent somewhere else, even if all he's doing is reading.

TV is a "two bird stone" in that regard. Videogames as well.

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

#58

Post by skmurphy »

davo11 wrote: post #55
skmurphy wrote: post #25

Earlier quoted context omitted.

He needs that 6K to live on until he can find more income. If you pay 6K on the credit card you still owe the minimum payment next month only now you're broke. At the margin he will have to declare bankruptcy. This is a cash flow budgeting problem: many bootstrapping startups face these kinds of issues. As for getting a personal loan he's broke and has no assets: I would be cautious about falsifying a credit applicat…

No, if you put the 6K on the card, you're limit is still the same, but you are charged less interest. You can then take money off the card as you need it and you are then paying interest on the current balance. e.g. Balance = 20,000 Payment of 6,000 Balance = 14,000 - interest is now calculated on this balance next week take out 500 Balance is now 14,500 and so on. 'will be more useful than more debt juggling.' it's…

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.

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

#59

Post by skmurphy »

zaidf wrote: post #50
skmurphy wrote: post #43

Earlier quoted context omitted.

I would take exception to "everything is open for negotiation" if it's interpreted that you don't need to honor your word and your commitments. Also, a lot of the time economic stress forces you to make the changes in habit and self-discipline that allow you to thrive as an entrepreneur. CatDancer makes an excellent point that lack of profitability ("economic stress") is a signal to improve your business.

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 forbearance.

Ridgely Evers wrote a great post about this back in March "Guiding Your Business Through the Recession" http://blog.netbooks.com/index.php/2008/03/24/guiding-your-b...

5. Conserve creditworthiness. Just like you don’t want to be your customers’ banker, don’t get into the position of being overextended with vendors, especially the ones you really depend on. This is often the opposite of what your instincts are--we all think our key vendors need us, which is true right up until they decide they can’t afford you as a customer. If you have to stretch payments, do it with ancillary vendors, and don’t wait for them to call you--tell them that you’re going to pay them later than you think you can, so you then pay them sooner than you said you would.

6. If things are tight, pay off all the little bills first. You’ll spend as much time and energy answering calls from the little guys as you do from the big ones. And remember the old adage: "If you borrow $1,000 and can’t pay it back, you have a problem. But if you borrow $100,000 and can’t pay it back, the lender has a problem." Your bigger vendors will work with you--they don’t want to lose you if they can help it. So pay off the little guys, and then communicate with the big ones openly and frequently. And pay something--it shows good faith, and makes it harder to cut you off.

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

#60

Post by davo11 »

skmurphy wrote: post #58
davo11 wrote: post #55

Earlier quoted context omitted.

No, if you put the 6K on the card, you're limit is still the same, but you are charged less interest. You can then take money off the card as you need it and you are then paying interest on the current balance. e.g. Balance = 20,000 Payment of 6,000 Balance = 14,000 - interest is now calculated on this balance next week take out 500 Balance is now 14,500 and so on. 'will be more useful than more debt juggling.' it's…

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 obtain, likewise they make obtaining lower cost methods of obtainin capital difficult, and who can blame them - 20% versus 3% why wouldn't it be structured as such. I find these comments interesting that there is any resistance to getting a personal loan, it has been made so difficult, the banks buy their money at 1% and sell it at 20% on credit cards, what a game. Personal loans are unsecured and go by the ability to repay and credit history. I'm assuming patryn20 has a credit history by repaying his cards on time and will obtain a method to repay the loan, to keep repaying at credit card rates would be foolish.

Post reply on HN