How to account for the cost of your work on your startup?

Question

Startups

At the start-up stage. We are considering investment.
It is necessary to take into account the share of distribution of investments and income.
On the part of the investor, only part of the money. From my side, part of the money and work.
Advise me how to write down the investments of my work as a result. So that later the cost of work on design, layout and partially coding should be included in your share of investments in the project.
For example, the design of a web application and related portal and sites/landing pages should be calculated by the hour at the average market price, or at my hourly rate (which is higher than the average market for upwork), or at a price below the average market (because I do it for your own project, that is, "the cost price without the profit margin for the work")?
2 Another question regarding design. If you do it right, it turns out that the design is divided into a sketch, wireframe, prototype, mockup, design.
If suddenly there is a discussion, then the question may come up that everywhere they just do "design", and, accordingly, the time and cost will be lower.
So far I haven't figured out how to answer this question. Either “we do it right right away”, or “for a linstartup, we make it on our knees with a default bootstrap, and when it takes off, we refactor everything and redo it”?

Answer 1

When you let an investor into your project, immediately specify how much percent of the company he receives. He is an investor, not a co-owner. Usually he has a share of 5-10%, and you - everything else. And if necessary, you can share your share with the next investor, if necessary.
Money and only money in the end appear in all pieces of paper. Man-hours, kilowatts of mental work, the frequency of rotation of the tongue, the pressure of the priests on the chair, liters of coffee - all this is not taken into account. Your work is minuscule in the long term for reaching payback.
But of course, when the product starts to make a profit, you can assign yourself a salary if you get a job in your own company. There are owners who do not work there, but only cut profits.
PS I appreciate the response of the user Nikolai Chuprik : this is a very accurate and understandable explanation why work is not an initial contribution and why you can’t measure your work with a banal hourly rate - you need to evaluate a product based on the cost of similar products on the market or its potential profitability.

Answer 2

In such a situation, it must be assumed that the investor makes a contribution to the company in money, and you in kind within, for example, 3 months. At the same time, it is necessary to estimate the cost of the site immediately, for example, 300 tr. This will be the size of your contribution. And where the site will come from: whether you make it yourself or order it on the side, it no longer matters.

Answer 3

Yes, there is no need to waste time on detailed accounting of working hours.
Especially since no one will pay you for it.
Investing with labor, and even in your own project .....
Evaluate only in large pieces (for half a year, for example) at the stage of the next receipt of the next share of investments. The investor (if it is really an investor) is interested in the project as a whole. And not +-2 hours of your working time.
If the partner - that in any way.
One can pull everything, and the other freebie, but the debts of 50% to 50% are stipulated.
And you're not going anywhere.

Answer 4

Or you just count the cost of the job - then it's just the normal rate per hour * for time spent as an employee.
Or you enter into a share as a partner, and then you don’t need to worry about the cost of work, but simply agree on your share as a percentage of the profit.
And then it will be interesting for you to design exactly as much as you want, so that the startup takes off and brings a lot of profit, because you have a percentage.

Answer 5

It doesn't matter how you count it. The investor receives a specific percentage / share at the "entry" stage. Everything else belongs only to you.

Answer 6

Hey, I know this post is old, but interesting nonetheless.
I saw that they wanted to make one of the comments an answer, although there is still no answer.
How did you end up doing it, how did it turn out?

Advise me how to write down the investments of my work as a result. So that later the cost of work on design, layout and partially coding should be included in your share of investments in the project.

Either you pay yourself a salary as a hired employee at a market price, if there is a salary budget, or instead of a salary, you give yourself an "IOU" if there is no salary budget. This is a classic option when you have several investors, you draw up a plan on the bank that you need so much money, after so much time the company will bring so much profit, which will be divided among investors in accordance with the initial investment. There are many classic problems here that begin when, after the scheduled time, you do not reach the expected profit, or, even worse, you need more investment and all sorts of recalculations of shares with insults and scandals. Something like, I gave you 2 million, you promised 50% of the profit. The project has not been launched yet, you say that I need to find somewhere else 2 million to launch and I will have a 25% profit. We did not agree on this, look for additional funds wherever you want, these are not my problems, 50% should remain with me. Well, like this.
The second option, agile. When you do not need to immediately look for the entire amount for development, it is enough to throw in the necessary amounts for some specific work. We need to buy chairs - Petya bought it, pay for the work of a freelancer - Vasya paid. Monthly salary of employees - Igor pays. Before reaching the breakeven point, all these expenses are accumulated in one place. After reaching self-sufficiency, the cost of the product is fixed. Shares are calculated as a percentage, according to the investment of all participants. Net profit is sawn in accordance with the shares. Pretty logical, in my opinion.
There was also a similar discussion here. Do I have a normal theory for assessing the contribution of participants to a startup?

Answer 7

It is not very clear why take into account?
If you have an investor, he initially buys a share of the project from you according to some of your overall assessment.

Answer 8

The situation is not simple, if you are also an employee of the company, then you just pay yourself the salary that you deserve ...

Answer 9

I read the comments, most of them are so tight... With your right thinking, everything should work out ;-)
As for the shares, it all depends on how you agree :-)
It's one thing if he is a partner, and the second is an investor. If the first, then everything is more complicated, but then it overlaps part of the work and there can be many details.
If he is an investor, then based on the business plan, he invests N money for a certain time, according to the calculation after M time you will receive X money, so based on the payback period, you can offer him, for example, that he will recoup his money in 5-7 years and earn some income.
For example, he invests $100k, you work for a year and in a year you start earning $20k a year according to the plan, and every year more, so based on the plan, his percentage should be such that he returns $100k to himself in 5-7 years and then this is somewhere his percentage, so that he would be interested in being an investor, and he will continue to receive it. You can stipulate the right to buy out a share from him, you can stipulate that he controls finances, but does not make management decisions.
And the work needs to be evaluated when you are partners.