How do I know how many people we will need, and what our expenses will be?

We are an expanding internet publishing company. We are in the process of building out a business plan, with an emphasis on the financial numbers.

We are trying to find a way to verify some of our expenses by comparing them to other internet startup companies. If we can look at the average payroll cost for example of internet companies with 25, 50, 100 employees. Or the average office expenses for companies with various numbers of employees.

Is this a reliable method? If so, how can I determine these numbers? If not, what is the best way to get a realistic idea of what your expenses will be as you grow?

This is a GREAT question. The real answer is unless if you are looking for startup funding stop writing a business plan.

A BUSINESS PLAN IS A STUPID WASTE OF TIME! Nobody reads them, they always change. I always tell entrepenuers to start with an goal (idea) rather than a plan. Plans change, goals do not. An example would be a goal to ride your bike from NY to CA as fast as possible. You might start planning, figuring out bus routes, rails, hotels and expenses. But in reality when you start your trip you will run into unforseen items such as flat tires, items your forgot and the wether. For a business there are a ton of unforseen items, because unlike my bike trip example you cant just look at a map. With each new step, you learn from your mistakes and are exposed to new opportunites. If you focus on a goal then you can re-assess and make executive decisions (funding, capital, management, marketing, hiring, whatever) as situations arise. All with the main goal and vision in mind.

With that being said, back to your main question of building an internet startup. My advice, DO IT ON THE CHEAP. Find yourself JACK OF ALL TRADES type guys. Dont go out and hire a CSS guy for your styles, and a ASP.NET guy for your middle tier, and a UI GUY to do Javascript front end stuff, a DB Admin to tweak your DB and a sys admin to setup your systems on the cloud or servers.

Instead find and seek your future CTO. Find someone who is a jack of all trades. Master at nothing, good at everything. This type of personality can overcome your initial challenges. These guys are hard to find, but these true nerds exist. A few guys like this can shift focuses on whatever comes up and soon you are going from a 25 person company to 2-3. 2-3 is easier to pay for, easier to split equity with, and far easier to manage.

As you grow, and profit, let these guys share with you where you could bring on strenght and talent. For example say your 1 - 3 guys give you a working profitable online venture. But the design looks pretty crappy. At that point you know to bring on someone who is an expert and graphics, but really nothing else. Experts tend to cost more if you have a ton of them. The good rule is hire jack of all trades type people, and bring on experts as contractors to fill in the gaps for what they cannot do.

Also dont be afriad to outsource. I cannot stop recommending Ukraine, Belarus and Russia because of the level of talent for price found in Eastern European countries. India / Pakistan type pricing, without the Indian mentality of low quality products.

When I was drafting my business plan I had these questions on my mind:

1. How long I can survive with the funding I have @ ground zero? What's the absolute minimum to develop my product and achieve my first sale goal?
2. How good my sales should be If I want to earn X Million $?
3. For those sales goals, how many people do I need and when? Doing so, I was planning a regular day of an employee, to just to see how he/she will help my company develop more business.
4. With the drafted number of employees and sale goals and actual sales, how long I can survive? Do I have a sustainable business now?

Answering these questions will ultimately change your business plan. This is a bit about trying, experiencing and most of the times doing wrong and failing.

For example, if you set your goals high for sales, you have to improve your sales either by having more sales employee or optimizing their duties or improving your conversion rates on different channels. (I assume that your product has perfect market fit) In order to do so, you have to spend more, meaning that you will survive slightly less for a given period.

I advise you to do some math regarding the cost of your product in detail;

• employee man-hour cost
• raw material
• required time etc.

Then set a goal and simulate how long and many people you need to achieve it.

At some point I agree with Frank, sometimes I feel like Business Plans are waste of time yet It's always best to know dynamics of your company. Relation between your customers, products and production units. You can only understand and keep a record of it by writing a business plan.