Ask HN: What is your biggest business expense besides salaries?
46 comments
>> I think they'd be shocked if they had to pay full retail price for it.
I don't think many techies will be shocked to pay ~$500/month. I wonder how much salary you pay to your people.
I don't think many techies will be shocked to pay ~$500/month. I wonder how much salary you pay to your people.
I suppose it depends a lot on how much you end up paying in taxes. In Norway you'd pay between ~35-45% income tax (and the employer pays a little more on top of that) - that amounts to ~2600-3600 USD out of a monthly 8000 USD paycheck (100.000 USD/year). For that you get (mostly) free medical care, pay during sick-leave, free education for yourself and your children through college. It's certainly more than 500/month - but 500/month doesn't sound like that much assuming it will cover all kinds of illnesses, including things like life-term cancer treatment with followup even if you lose your job.
$462 a month for insurance shouldn't be a back breaking amount for the average tech worker.
Even if you consider a very low salary of $100,000 and consider that health insurance is completely pretax (federal, social security, and medicare), that's only $308 a month out of your check if you had to pay it all yourself.
Even if you consider a very low salary of $100,000 and consider that health insurance is completely pretax (federal, social security, and medicare), that's only $308 a month out of your check if you had to pay it all yourself.
My point is that tech workers by and large aren't paying for health insurance themselves, their companies are. So it's easy to forget and be outraged when something is free, but when you're self employed this is a huge burden and expense.
Also, $462 a month anywhere outside of California in the US is a decent amount of money. Hell, even in California that's a car payment for a luxury high end car.
Also, $462 a month anywhere outside of California in the US is a decent amount of money. Hell, even in California that's a car payment for a luxury high end car.
When I'm contracting and have to take my own insurance into account, I estimate 1800 hours a year. $462 a month translates to $3.08 an hour. If I can't bill an extra $3.08 an hour over a full time gig, why would I contract? If I can't make more than $462 a month being self employed than I could make by being a corporate drone, why would I be self employed?
Playing devils advocate, your saying just make more money then? That doesn't seem very liberal and progressive.
I'm saying take that into account if you decide to be self employed. If you're not prepared to pay your own insurance when you decide to go out on your own, you're probably not expecting the extra 9% in self employment taxes....
I'm not a liberal or progressive - I'm a bleeding heart libertarian. For instance I don't believe in the minimum wage (libertarian) but I think the Earned Income Tax Credit should make up the difference and it should be a monthly credit so people can have a livable wage if they work (bleeding heart) and don't have a problem paying taxes if it helps people to help themselves.
I'm not a liberal or progressive - I'm a bleeding heart libertarian. For instance I don't believe in the minimum wage (libertarian) but I think the Earned Income Tax Credit should make up the difference and it should be a monthly credit so people can have a livable wage if they work (bleeding heart) and don't have a problem paying taxes if it helps people to help themselves.
1. Health Insurance
2. Marketing & Advertising.
3. Rent.
4. Employer Share of Payroll Taxes.
5. Other Insurance (eg. Workman's comp, General liability, etc.)
6. IT (Including AWS).
7. Legal & Accounting.
2. Marketing & Advertising.
3. Rent.
4. Employer Share of Payroll Taxes.
5. Other Insurance (eg. Workman's comp, General liability, etc.)
6. IT (Including AWS).
7. Legal & Accounting.
AWS fees. We're an email marketing platform, we send around 150m emails a month, all of which we need to store and process clicks/opens on.
Are you using AWS for compute (ec2) only?
Because if so, there's plentiful of cheaper option where you could easily reduce your cost by 60-80%.
Because if so, there's plentiful of cheaper option where you could easily reduce your cost by 60-80%.
AWS for ses I assume
Use it for both EC2 and SES. Our customers link their own SES account to send out campaigns, so the advantage of being on EC2 is that many of them don't pay a penny. Server costs is about 10% of our revenue, so will weigh up the pros/cons of moving in the near future, I'm sure.
which platform?
From emailoctopus.com
> We've helped over 10,000 businesses send over 1.6 billion emails
And you say
> we send around 150m emails a month
Assuming m to Million, your usage is atleast 10% of all emails that emailoctopus.com has ever sent, so you must be like 1 of their top 10 customers.
Wow.
What do you guys do that requires you to send 150 million emails a month? Not trolling, just curious.
> We've helped over 10,000 businesses send over 1.6 billion emails
And you say
> we send around 150m emails a month
Assuming m to Million, your usage is atleast 10% of all emails that emailoctopus.com has ever sent, so you must be like 1 of their top 10 customers.
Wow.
What do you guys do that requires you to send 150 million emails a month? Not trolling, just curious.
I think you misunderstood, I work for EmailOctopus. Sorry for the confusion.
"But doctor...I am Pagliacci."
Health insurance is by far the largest, but I generally consider that part of salary when I'm thinking about costs.
After that it's hosting (we have no on-prem infrastructure), AWS is probably 85% of that cost.
After that it's hosting (we have no on-prem infrastructure), AWS is probably 85% of that cost.
Just to add, I forgot about office spaces.
We're all remote and most everyone works from a home office- except myself and one of my developers. Our combined office space leases (WeWork and Regus) in Seattle and Portland still don't eclipse what we pay the likes of AWS, DO, and Vultr.
We're all remote and most everyone works from a home office- except myself and one of my developers. Our combined office space leases (WeWork and Regus) in Seattle and Portland still don't eclipse what we pay the likes of AWS, DO, and Vultr.
Looking at some of these comments, it'd be great if more of them were contextualised with the particular line of business.
If you have access to a market research database you can get statistics on this kind of stuff for different industry sectors and different countries. For subscription services you may be able to get access via a public library or university library.
e.g. here's an estimate of costs in Australia's IT consulting sector, as percentage of total revenue:
e.g. here's an estimate of costs in Australia's IT consulting sector, as percentage of total revenue:
wages: 40%
other: 26% incl. insurance, advertising, cleaning, repairs & maintenance
purchases: 16%
profit: 11%
utilities: 5%
rent: 2%
depreciation: 1%At the moment, aggregate SaaS costs and data licensing but I expect marketing to eventually become the biggest cost after salaries (or even the biggest overall).
Office Space, after salaries and employer taxes is our biggest per employee cost.
Any reason to not consider switching to remote work and minimizing office space, or have you already done that?
Do people seriously ever think that maybe not everyone likes working remotely? I have been working remotely for about a year from home and I plan on working from coworking space next month from now on.
Of course, I started working remotely because I freelance, but I actually prefer having an office away from home for working purposes.
Of course, I started working remotely because I freelance, but I actually prefer having an office away from home for working purposes.
Are you located in SF or some similarly expensive area?
London, in the City, so yes, it's our fault. But it also adds that kind of prestige that people expect.
Marketing and ads and site Support. All other expenses like hosting, rent, etc are very small compared to these two.
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Hardware prototyping related expenses. After that, office space and lawyers are looking about equal right now.
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Hosting. I'm a co-founder at https://wonderproxy.com, so our product is having servers all over. It starts to add up after a while.
Jumping down an order of magnitude we've got: software, bank fees/processing fees, insurance, taxes.
We were really happy when our salaries passed our hosting bills and stayed there.
Jumping down an order of magnitude we've got: software, bank fees/processing fees, insurance, taxes.
We were really happy when our salaries passed our hosting bills and stayed there.
Your company has an impressive number of locations. What's your hosting situation like to ensure service in so many locales?
Credit card processing fees.
That is very surprising. What kind of business pays more for card processing than hosting or rent?
The one in my bio :) The hosting bill is under $1000/month, the credit card processing fees are not.
For e-commerce, logistics.
Marketing
1. Salaries
2. Benefits
3. Contracting
4. Rent
2. Benefits
3. Contracting
4. Rent
30% platform tax
Servers
Advertising
Servers
Advertising
> 30% platform tax
That's like a wholesaler saying the mark-up the retail store charges on their products is a business expense.
That's like a wholesaler saying the mark-up the retail store charges on their products is a business expense.
It’s something we have to consider when deciding where to spend our time and resources.
Those are dollars coming out of our customers’ wallets that don’t end up in our bank account.
If we can acquire an open web user instead of a walled garden user it increases our gross profit by 43%.
Those are dollars coming out of our customers’ wallets that don’t end up in our bank account.
If we can acquire an open web user instead of a walled garden user it increases our gross profit by 43%.
Legal
Advertising + Trade Shows
Travel
Advertising + Trade Shows
Travel
Most people who work at tech companies in the bay area don't pay for their insurance, or pay very little. It's just considered part of benefits.
I think they'd be shocked if they had to pay full retail price for it. Also, the government subsidies only apply if your making less than 50k a year, so most likely everybody would be paying full retail price if not for their employer.