During the recent The Big M Conference, Raam Thakrar of Touchnote gave a talk on app distribution and monetisation. While there were many great points to take away from that day, one thing Raam said has played on my mind since: ROI on Time.
Perhaps it’s my fault ROI on Time had slipped my mind, I should have gone to those economics lectures in first and second year instead of hanging out at the SU bar. So what exactly is it? Well, the concept is pretty easy: how much salary did you forego to start your own project? It’s very similar to the opportunity cost principle. How much salary are you missing out on by taking or rather making your own path?
It’s quite difficult to find a good equation for ROI on Time online, so I’ve decided to work out my ROI on Time by adapting the standard ROI equation. Comments are enabled for feedback on this post.
The perfect opportunity to calculate my ROI and ROI on time came last week when I finished my first ever quarter at Applingua Ltd. The results did surprise me. My initial investment was low and I know I surpassed what I put into the company in my first 2 weeks, but my ROI on Time was actually higher than I expected. During my business planning, I estimated I couldn’t expect a salary before May. That turned out to be two months early in March. The ROI on Time result sits just short of 50%, so in a monetary sense, I am actually losing out (and should perhaps quit and join an established company again). I would be interested in Raam’s opinion on when ROI on Time should be measured, after one quarter, 6 months, a year?
It got me thinking. Starting a company isn’t always about money. In fact, if money is your only reason for starting a company I would suggest you stop now. A graph showing my ROI and ROI on Time would only be showing a very one sided argument for going into business. As many people in my position know, you often have to sacrifice certain things such as a social life to put in the time and effort to get your company started. A break in salary also affects socialising. So here’s that equation:
On the flip side there are also non-monetary benefits to starting your own company. Above all for me this has been the learning curve. I went from a basic academic knowledge of starting a company, to the practical rollercoaster that it really is. I now know how to navigate UK company regulation, from VAT returns to National Insurance Contributions. I’ve managed 11 freelancers over 2 different projects at once (with, admittedly varied success). I can’t even list the thousands of things I have learned from the industry itself.
It’s difficult to create an equation for this. I tried first to quantify how many “things” I have learned. Difficult to quantify. I then tried to work out engagement: how often I am looking things up, how often I am seeking advice from others. Also quite difficult to quantify over the period of time that has passed. I then thought about it differently, about overall skills learned. Not those individual tidbits you learn everyday, but more the skills I could take away with me if I were to quit tomorrow. Again, not easiest to quantify, but there is distinctly a set of skills which are totally new to me now which I had no hope of learning before:
The results for social life and learning aren’t surprising, but I think they deserve to feature in any personal start-up ROI graphic. They are just as important as money to me and indeed if social life were to suffer for too long, I would certainly have to reconsider my choices. So let’s take the following graphic more as a benchmark to compare with Q2 and Q3 results.
So there we have it. The big winner is learning. The losers are social life and personal earnings. Company ROI looks strong and is good, but considering the small initial monetary investment, I’m aiming for triple that by the end of next quarter.
All statistics should of course be taken with a pinch of salt. The old saying, ‘lies, damned lies and statistics’ rings true just as much here as any other report you read. While on paper I am earning less than before, I am far better off than I was. I had to move back home to start Applingua, I’m not paying rent or bills and we share food payments. This is a huge part of everyone’s salary, but not mine at the moment. Living at home has also an a negative effect on the social life score, as I don’t benefit from colleagues sitting right next to me.