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Guy Kawasaki has a very interesting post on his blog regarding start-up spending costs.

The CEO of Redfin, an online real estate company has opened up his books with a detailed expose of their operating expenses.

Yes, their model is different than the typical real estate shop where everyone is an independent contractor paying a vig to the man.

But the takeaway here is how much do you spend each month on your business in comparison? What metrics do you measure? These guys are spending VC money so they have an obligation to track their finances to the last penny and have a keen understanding of where growth is coming from and where ROI is generated.

Who do you answer to? Now that we’ve entered the 4th quarter of ‘07 how are you doing this year?

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Glenn Kelman, CEO of Redfin writes:
Part I: Numbers Startups face one primary challenge: To never run out of cash. So when projecting costs, we heeded Guy’s advice that “the three most powerful words you can utter at a board meeting are, ‘We beat projections.’” This convinced us to develop the worst possible financial model that could still be used to raise money.We’re glad we did. True underachievers, we’ve performed at or just a bit better than this worst-possible plan almost every month, raising revenue projections only when forced to in December 2006. We’ve been able to stick to our plan mostly because absurd assumptions in opposite directions cancelled one another out. As the real estate market tanks, we may not be so lucky in the future.When first putting together our financial model, we looked online to calibrate spending assumptions. So many people have blown venture capital, we thought, there must be a manual somewhere on how to do it, at what rate, avoiding which follies. We couldn’t find anything. So we took some wild guesses and figured we’d see how they turned out. And now two years later to the day that we built our first model, here are the projections and actual results. Hopefully, you can learn from our experiences.
Rent, Per Employee, Per Month
Redfin Model: $250. Actual Redfin Cost (Last Month): $336Our actual costs are high because we just moved last month into an office with room to grow, which seems to happen every eighteen months. When people were sitting in hallways at the old space, we were paying about $200 per employee, per month. Class B space on well-traveled mass transit lines is roughly $20 per square foot per year in Seattle, $30 in the Bay Area. You need 165-200 square feet per person or more.At the extremes, Adobe supposedly allocates 435 square feet per person while Yahoo! allocates 220 square feet per person. The startup cult of cramming people into small spaces is counter-productive: people are what’s really expensive, not space. The cost Redfin really didn’t anticipate was for tenant improvements which you mostly have to fund yourself when signing sub-three-year leases. In September, we spent more than $100,000 to add private offices for our engineers on the hope that our current office will last us longer. It was probably too much money.Initial Per-Employee Equipment Cost
Redfin Model: $6,500. Actual Redfin Cost: $5,700Computers, 20” monitors, Ikea desk, decent chair, VOIP telephone, and cell phones for field employees. Our first phone system came from Craigslist, and we had to upgrade after a year.

Monthly Benefits, Per-Employee
Redfin Model: $600. Actual Redfin Cost: $471

Redfin benefits are competitive, but many employees are Seattle-based. Costs are 10% higher in California.

[Read more →]

As clients become more and more conscious of our environment, eco-friendly design will become increasingly valuable. This 18 minute video showcases some interesting thinking regarding habitat and product design. The first few minutes are a bit strange to me but it gets better and has a powerful message.

All signs in the media point to doom & gloom in the mortgage industry. But are things really that bad?

Ed Albright, a Certified Mortgage Planning Specialist with Columbine Mortgage, stopped by today to talk about what’s really going on in the mortgage industry and how you can help your clients who may be in the market.
(20min Interview)

You can reach Ed Albright at 970-871-9802 or on the web at www.columbinemtg.com

Got an iPod?

Get this interview in iTunes:

If you were here over the 4th, hope you got to see the ski jumping. If not, here’s a video we took to give you a taste of what you missed. Sorry about the alignment but we wanted to give you a better video. (high-speed connection recommended)

We’ve got some great content coming up in the next week or so.

• Screencast demo of a super rich online collaboration tool, tailor made for real estate.
• A review of a super powerful but simple and elegant online contact management application.
• Interview with Les Reaves founder of search marketing giant Market Square Media. Les just got back from Google headquarters and we’ll be getting into all the new things that Google is cooking up.
• We’re kicking off our development project interview series soon. We’ll feature audio interviews with those in the know regarding various projects going on in town.

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Just because things are going great doesn’t mean you win. Just ask Marco Andretti who lost by 6/100 of a second at last years Indy 500 after leading the final lap.

In fact, 11 times in the past 15 years drivers who were leading late in the Indy 500 race failed to win. Also in 11 of the last 15 years the fastest lap of the race was recorded in the latter part of the race.
As the market heats up, so does the competition and so does the pace. Keeping your focus on current deals, projects & contracts all the way to the end is crucial even though you’re being pulled in many directions and the days are flying by (are we really in the last half of May already?).

When things seem to be falling from the sky it’s easy to turn your attention to the “next thing” opening up the chance for “this thing” to fall through. Having a great personal management system you TRUST is key element in keeping all the balls in the air while maintaining focus on what’s important. Do you have one? It doesn’t need to be complicated and you can make your own which is what I did. You can download my planner templates here.

There’s tons of free planner templates at http://www.diyplanner.com/

A bunch of you haven’t caught on to RSS feeds yet. I spent hours getting that little orange subscribe button there on the right all dialed-in and some of you aren’t using it. Watch this short, fun video about what all the cool kids are doing and join the RSS craze!

Here’s an RSS page to get you started.

Poor John, he’s an older guy who got bit by technology.

Nothing on the web is anonymous. You’re required to have a corporate email address so they can keep tabs on you.  Your surfing at work is logged in the office routers. When you delete a file it still exists - all you did was delete the reference to that file in the table of contents. Cheap forensics software can recover almost anything. Some students did a study on used hard drives a while back and what they found was astounding.

The last thing you want is to be on a roll and some ugly stuff pop up from a previous relationship years ago.

Back when I was running my investment management company, we often met with potential clients who asked us to do a portfolio analysis. More often than not, they were surprised to see their portfolio wasn’t doing as well as they thought. This was mainly due to the fact that they didn’t understand ROI or Return On Investment. Once we calculated every little expense & fee they were paying, the return on their investments was a good deal less that what they thought. They were focused on the stock charts. We were focused on their actual worth. For the same amount of risk, they could have been doing a lot better.

As a broker and business person, ROI is one of your most important metrics - don’t leave home without it.

Measuring ROI allows you to compare apples to apples; to see how different search or newspaper campaigns are performing against each other. It helps you make decisions like where to spend your marketing dollars and where to spend your time. And it’s even effective in evaluating your current split. Most brokers are paying an enormous amount of their income to a managing broker - but what’s the return?
To answer that measure your ROI. To do that just divide your net income (before taxes) by ALL your costs (split, marketing, franchise fees, advertising, tech expenses, etc.). You’ll end up with a percentage. The larger the percentage, the better off you are.

Here’s a spreadsheet to get you started: ROI Calculator.
Next time you’re about to do a direct mailing, get this spreadsheet out and run the numbers. Keep a running history of your various marketing campaigns and in keeping track of ROI, some interesting patterns will emerge.