Developer
I thought I'd write down some thoughts I've had on finance, marketing and development because many people have expressed interest in it both here and in the Danish forum, and have come up with questions and suggestions, especially since my last blog post.
Topics such as increased marketing, more staff, and whether or not I would consider seeking investment have come up.
First some background. As you know, I am now the happy sole owner of Playonic, through a holding company, which I was advised to create for this purpose. For those who don't know, a holding company is just a company whose sole purpose is to own other companies. This means that I own the holding company and the holding company owns Playonic. The advantage of this is that the holding company is a layer between me and Playonic, which helps to reduce certain financial risks, which could otherwise be quite large if I was personal owner of Playonic. A holding company is also often used as a kind of money tank where the proceeds from the operating business can sit safe and sound until you want to reinvest them.
When I needed to find financing for my acquisition, I was advised to raise as much money I could myself, and then let the holding company borrow the rest. This would help reduce the financial risk. But, the bank was unwilling to lend money to the holding company - they'd only lend it to me personally - and then the holding company would have to borrow all the money from me. This means that I'm personally liable for the whole amount until the holding company repays its debt to me. So there are going to be a number years where there needs to be a certain amount of profit to be used to pay off the debt.
However, the profits for 2019 will be very modest. It looks like it will end up just about half of what it was in 2018. That may sound pretty severe, but it's actually not that bad.
Firstly, in 2019 we did not really get to see the effect of all the savings I introduced. It wasn't until August that we moved to the new and cheaper servers, and several of the services I terminated had a notice period of 3-6 months.
In addition, I spent a lot of money buying hours from Rasmus, which can run up very quickly and swallow the savings. Freelancers have no job security, get no paid holidays or sick days, so in return they demand a high hourly wage, and Rasmus actually has a higher hourly wage than myself.
Another major item was a regulation made in connection with the acquisition, which I have introduced as a permanent practice in the future. When you buy premium, you pay in advance - sometimes far in advance. The new practice means that we only count the money as being earned when we've fully delivered the goods, so to speak. That is, at the end of each month, I make an inventory of how many prepaid premium days we owe you all, which is then counted as a debt item that is continually regulated.
This will make for a healthier financial situation in the future because we will always have "money in stock" corresponding to all the premium you have prepaid, but in connection with the first regulation it meant that, on paper, the company actually had a small deficit for the first half year.
Some have asked if I would consider finding an investor to put money towards development, which I don't think is as realistic or desirable as the situation is now. Right now I have a plan and a series of ideas that I am convinced have huge potential. But that's not enough for a serious investor. What most people don't understand is that ideas are worthless. The only thing that matters is whether you can bring them to life. Every person on the planet has a hundred brilliant ideas that will never turn into anything.
Therefore, it is quite inconceivable that a serious investor would look at Virtual Manager as it is now, and be willing to throw enough money into it that it would make any real difference, based solely on my own belief that I have a bunch of brilliant ideas. And programmers are incredibly expensive. All inclusive, a single programmer for a year could easily cost around 5-600,000 DKR (Danish crowns), so it wouldn't help if someone came along and offered 100,000 for a stake. It would only be a hindrance.
As for me, I spent everything I have buying out the previous owners, so I also don't have any more money to invest.
So the conclusion is that Virtual Manager still has to finance itself. There's no rich uncle coming with a huge stack of cash to hire a bunch of programmers with. If we hire more people, it will have to be because the company itself is able to fund it.
But I'm actually fine with that, because there are also benefits to being a small company!
The job is now to bring the plan to life, and that can only be done through a hard slog - it's not something that can be solved by just throwing money at it.
My focus in 2019 was on making the business and operations much simpler and trimming all the fat. And that has definitely been accomplished. The next step is to take advantage of the benefits this provides and start coding a bunch of cool things, bring life and happy days to the game, get new users in, lure the old ones back, and step by step build a sustainable business that can hire more employees.
As for marketing, we are currently spending a fixed amount per month. As it is now, our advertising is making a small loss - ie. we pay more to get a new user than we can expect to earn from them. This is mainly due to the large dropout rate during the first minutes after signup, which I mentioned in the blog post. Therefore, it is currently not a good idea to increase the marketing budget as the money will be wasted. However, as new user retention hopefully increases, I will also continuously increase the marketing budget.
So the conclusion is, I intend to embrace the fact that Playonic has again become a small business, spend the money wisely where it'll give the most bang-for-the-buck, grow the business in a sustainable way, and be prepared for the fact that, financially, it may have to get worse before it gets better.
Topics such as increased marketing, more staff, and whether or not I would consider seeking investment have come up.
First some background. As you know, I am now the happy sole owner of Playonic, through a holding company, which I was advised to create for this purpose. For those who don't know, a holding company is just a company whose sole purpose is to own other companies. This means that I own the holding company and the holding company owns Playonic. The advantage of this is that the holding company is a layer between me and Playonic, which helps to reduce certain financial risks, which could otherwise be quite large if I was personal owner of Playonic. A holding company is also often used as a kind of money tank where the proceeds from the operating business can sit safe and sound until you want to reinvest them.
When I needed to find financing for my acquisition, I was advised to raise as much money I could myself, and then let the holding company borrow the rest. This would help reduce the financial risk. But, the bank was unwilling to lend money to the holding company - they'd only lend it to me personally - and then the holding company would have to borrow all the money from me. This means that I'm personally liable for the whole amount until the holding company repays its debt to me. So there are going to be a number years where there needs to be a certain amount of profit to be used to pay off the debt.
However, the profits for 2019 will be very modest. It looks like it will end up just about half of what it was in 2018. That may sound pretty severe, but it's actually not that bad.
Firstly, in 2019 we did not really get to see the effect of all the savings I introduced. It wasn't until August that we moved to the new and cheaper servers, and several of the services I terminated had a notice period of 3-6 months.
In addition, I spent a lot of money buying hours from Rasmus, which can run up very quickly and swallow the savings. Freelancers have no job security, get no paid holidays or sick days, so in return they demand a high hourly wage, and Rasmus actually has a higher hourly wage than myself.
Another major item was a regulation made in connection with the acquisition, which I have introduced as a permanent practice in the future. When you buy premium, you pay in advance - sometimes far in advance. The new practice means that we only count the money as being earned when we've fully delivered the goods, so to speak. That is, at the end of each month, I make an inventory of how many prepaid premium days we owe you all, which is then counted as a debt item that is continually regulated.
This will make for a healthier financial situation in the future because we will always have "money in stock" corresponding to all the premium you have prepaid, but in connection with the first regulation it meant that, on paper, the company actually had a small deficit for the first half year.
Some have asked if I would consider finding an investor to put money towards development, which I don't think is as realistic or desirable as the situation is now. Right now I have a plan and a series of ideas that I am convinced have huge potential. But that's not enough for a serious investor. What most people don't understand is that ideas are worthless. The only thing that matters is whether you can bring them to life. Every person on the planet has a hundred brilliant ideas that will never turn into anything.
Therefore, it is quite inconceivable that a serious investor would look at Virtual Manager as it is now, and be willing to throw enough money into it that it would make any real difference, based solely on my own belief that I have a bunch of brilliant ideas. And programmers are incredibly expensive. All inclusive, a single programmer for a year could easily cost around 5-600,000 DKR (Danish crowns), so it wouldn't help if someone came along and offered 100,000 for a stake. It would only be a hindrance.
As for me, I spent everything I have buying out the previous owners, so I also don't have any more money to invest.
So the conclusion is that Virtual Manager still has to finance itself. There's no rich uncle coming with a huge stack of cash to hire a bunch of programmers with. If we hire more people, it will have to be because the company itself is able to fund it.
But I'm actually fine with that, because there are also benefits to being a small company!
The job is now to bring the plan to life, and that can only be done through a hard slog - it's not something that can be solved by just throwing money at it.
My focus in 2019 was on making the business and operations much simpler and trimming all the fat. And that has definitely been accomplished. The next step is to take advantage of the benefits this provides and start coding a bunch of cool things, bring life and happy days to the game, get new users in, lure the old ones back, and step by step build a sustainable business that can hire more employees.
As for marketing, we are currently spending a fixed amount per month. As it is now, our advertising is making a small loss - ie. we pay more to get a new user than we can expect to earn from them. This is mainly due to the large dropout rate during the first minutes after signup, which I mentioned in the blog post. Therefore, it is currently not a good idea to increase the marketing budget as the money will be wasted. However, as new user retention hopefully increases, I will also continuously increase the marketing budget.
So the conclusion is, I intend to embrace the fact that Playonic has again become a small business, spend the money wisely where it'll give the most bang-for-the-buck, grow the business in a sustainable way, and be prepared for the fact that, financially, it may have to get worse before it gets better.
). 