Also, There are a number of methodologies employed in sales/rev forecasts and these take into account all variables. Using any/combination of these methods will give you an indication on how much you need to retain, invest, etc in any given season to cushion an organization from future uncertainties- even the uncertainties can be estimated to near accuracy levels

Edwin

From: kictanet-bounces+eonchari=lynxbits.com@lists.kictanet.or.ke [mailto:kictanet-bounces+eonchari=lynxbits.com@lists.kictanet.or.ke] On Behalf Of Andrea Bohnstedt
Sent: Thursday, July 07, 2011 12:53 PM
To: Edwin
Cc: KICTAnet ICT Policy Discussions
Subject: Re: [kictanet] Finance Policy - Tech Startups

I wish I had that problem :)

I think in the case of most start ups, this is a very unrealistic scenario as cash flow is one of the biggest problems. Usually you're chasing your clients for payments, but have to keep paying rent, staff, electricity etc. But my two shillings:

If you reinvest, have a plan for it - and that will tell you how much money you need when.

Ask your bank for their short and medium-term investment opportunities in government securities etc. Unless you're an investment expert, you want something conservative, and accessible when you need the money, so it might be important that you put at least part of the cash into short-term, liquid instruments.

On 7 July 2011 12:44, Edwin Onchari <eonchari@lynxbits.com> wrote:

Phares, I'd wager at least 30% needs to be paid in taxes for a start :-) unless you have included that in the expenses already (excluding PAYE for staff) in which case I have to ask why such high margins? If the value add is very good, and assuming its a service and not a product (and you indicate) then salaries too must be high? If a product, the question remains, what has been the value add such that after acquiring the product and adding value, you still have huge profits?

If all above is taken into account...then I suppose re-investing in the business, in expansion and in diversifying the offerings would be the best way to go.

To add to what Francis has said – assuming that expansion of the tech company is not possible, then as a good corporate entity, you could participate in a worthy corporate social responsibility program

Edwin

On 7 July 2011 12:15, Phares Kariuki <pkariuki@gmail.com> wrote:

Hi,

Question, for those who have run tech startups, how do you deal with excessive revenue? Given that tech firms many times operate on high margins, let's, for the sake of example, say you have a product that, with an expense book of roughly 1M (Rent + Salaries), and your monthly revenue is 8 M KES. What do you do with the remaining 7M? Some say invest in product development but even then, you will still have quite an amount of change. What happens to that change? Invested in a bank? Or in some form of Fixed Income Securities (Bonds, T-Bills etc). What's the general practice in .ke?

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KICTANetiquette : Adhere to the same standards of acceptable behaviors online that you follow in real life: respect people's times and bandwidth, share knowledge, don't flame or abuse or personalize, respect privacy, do not spam, do not market your wares or qualifications.

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