Posts Tagged ‘BartekGerlich’
[DevoxxPL2022] No Nonsense Talk About the Cost of Running a Business
Bartek Gerlich, General Manager at 4SuITs Technology, delivered a candid talk at Devoxx Poland 2022 on the operational costs of running an IT company in Poland. Drawing from his experience building digital products for Caesars Entertainment and serving on the board of Plantwear, Bartek provided a detailed breakdown of costs at various company sizes, focusing on a B2B-focused limited liability company with a growth-oriented expense model.
Initial Setup Costs
Before establishing a company, key expenses include:
- Court Fees: Approximately 600 PLN for registration.
- Initial Capital: 5,000 PLN, which can be used for business expenses.
- Legal Fees: Around 1,000 PLN for a simple contract to ensure a smooth application process.
- Virtual Office: A few hundred PLN for a business address, avoiding personal address complications.
Costs with One Employee
Hiring the first employee introduces additional expenses:
- Legal Fees: Customized B2B contracts cost slightly more than boilerplate ones, but employment contracts significantly increase paperwork (e.g., work and safety regulations), tripling costs.
- Recruitment: For a junior developer, expect 10-20k PLN; mid-level 25k PLN; senior higher. These are ballpark figures for estimation.
- Accounting: Full accounting for a small company (10 documents/month) costs about 350 PLN.
- Equipment: Providing a laptop is advisable to protect intellectual property, costing around 3-5k PLN. Leasing reduces initial costs but increases long-term expenses.
Costs with Ten Employees
Scaling to a 10-person team, typically comprising five developers, two QAs, a project manager, a UX/UI designer, and a specialist (e.g., cloud engineer), incurs:
- Salaries: Developers and QAs average 21k PLN/month each; specialists around 30k PLN. A team manager or admin costs 7-8k PLN.
- Recruitment: External agencies charge 1-2 developer salaries per hire (e.g., 180k PLN for six hires). Recruitment process outsourcing (15k PLN/month) yields about two hires/month, while an internal recruiter (cheaper but slower) yields one hire/month.
- Office Options:
- Co-working: 2,500 PLN for occasional seats and conference rooms.
- Standalone Rental: 3,000 PLN, including utilities like coffee and electricity.
- Fully Managed Space: 4,000 PLN for four seats with shared amenities.
- Other Expenses:
- Legal Fees: 1,000 PLN for 8-10 hours/month of contract work.
- Accounting: 500 PLN for increased documentation.
- Equipment: 2,000 PLN for laptops, monitors, printers, etc., with 8-10% annual maintenance (e.g., 120k PLN total equipment yields 10-12k PLN/year maintenance).
- Utilities: Minimal, included in office costs.
- Total Monthly Cost: Approximately 250,000 PLN.
Costs with Fifty Employees
At 50 employees, the company resembles a scalable enterprise, with new roles like managers, enterprise sales reps, HR, and more senior admins:
- Salaries: Developers, QAs, PMs, QAs, UI/UX, and specialists continue, with managers and sales reps at ~30k PLN/month; senior admins at ~10K PLN; HR specialists at ~15k PLN. Ideally, 80% of staff generate revenue, with 20% in support roles, though middle management bloat can disrupt this.
- Recruitment: Costs scale with hires, with similar models (success-based, outsourcing, or internal).
- Office Costs:
- Standalone Rental: 30k PLN, requiring admin or security.
- Fully Managed Space: 50k PLN for 40 seats.
- A1/A1+ Commercial Space: 60k PLN (e.g., 15-20 EUR/sq.m in Warsaw, including shared spaces like toilets, corridors).
- Other Expenses:
- Legal Fees: 8-10k PLN/month for complex contracts.
- Accounting/Payroll: 8k PLN/month, higher for B2B contracts than employment contracts.
- Employee Benefits: 15k PLN/month for multisport, better coffee, or outings.
- Utilities: ~5k PLN/month.
- Travel: ~10k PLN/month for 10 travel days at 300 EUR/day.
- Total Monthly Cost: ~1.4 million PLN.
Scaling Beyond
Beyond 50 employees, costs scale linearly for office space, equipment, and recruitment, but non-linearly for salaries (due to increased management needs) and legal fees (due to disputes or complex contracts). Benefits and expenses also rise faster for larger team events or branding efforts.
Cost-Saving Strategies
- Small Teams (<10): Handle operations personally to save on admin/legal, use legal fees, and opt for fully remote to eliminate office costs, though admin logistics (e.g., contracts, equipment shipping) persist.
- Larger Teams:
- In-house Services: Internalize recruitment, admin, or legal services to reduce costs, though efficiency may suffer compared to third-party firms.
- Office Optimization: Use smaller, presentable spaces or hybrid models, but account for meeting/storage needs.
- Flat Hierarchy: Minimize middle management to maintain a lean structure.
- Junior Talent: Develop juniors in-house for cost savings, though it requires patience, with slower output initially.
- Software Tools: Use off-the-shelf solutions (e.g., Salesforce) with minimal customization to avoid expensive modifications.
Business Strategy Insights
Bartek addressed audience questions, noting:
– A healthy profit margin is ~20% to ensure cash flow and resilience against market shifts (e.g., recessions). Margins below ~7-10% are unsustainable.
– To avoid payment delays, secure credit lines or funding to maintain employee trust, as developers can easily find alternative employment elsewhere.
– Bootstrapping allows fast failure, validating ideas organically, but limits scale. Venture capital accelerates growth but requires strong pitching skills, often a challenge in Poland due to cultural gaps.
– Small businesses can succeed with modest profits (e.g., 600k PLN/year for a 10-person team at 10 people) without pursuing aggressive growth, unlike stock-market-driven firms needing constant expansion.
Conclusion
Running an IT business in Poland involves significant operational costs, dominated by salaries but with substantial non-profit-generating expenses (~20-40%). Strategic planning, cost optimization, and a clear growth vision are essential for profitability and sustainability. Bartek’s insights provide a practical guide for aspiring entrepreneurs navigating the financial realities of the IT sector.