Something from Nothing
Recently, a new opportunity has presented itself. Specifically, you have decided to form a company to create and sell computer code for data mining. The new company you have dreamed up will be called “Making Something from Nothing.” In doing some initial analysis, you discover the following:
-Your current life costs about $2500 a month to operate. This includes all the basics.
-Health insurance will now costs $600 a month.
-A new computer and subsequent upgrades will be needed: $3000 every six months
-A business phone will be needed at $140 a month.
-Peppermint and pumpkin spice lattes cost $3.95—you consume about 20-40 per month.
You can continue to operate out of your current residence or you can rent an office spot for $350 a month. This office spot is sort of a cubicle in a large area of an office building shared amongst similar entrepreneurs with a meeting room available for your use when hosting clients. Alternatively, you could use the conference room on an “as-needed” basis for $100 per meeting. Social distancing and cleaning expenses cost about $20/month.
Thanksgiving is coming up and you would like to pitch a well-meaning (and ready to invest) relative on your idea. There are two such relatives in your family so you have two shots at this pitch. On November 15, you receive some information that changes your pitch slightly—your first client appears. This client has asked you to develop some code and has offered $35,000 for what looks like one-to-two months of work starting January 1. They only pay, however, 30 days after the work is accepted.
Discuss how you would present this to your well-meaning relative. You have up to five pages to set up your plan including how much you’ll ask as an investment by your relative. Show a model of estimated cash flow for two years starting January 1.