So you want to settle or start your company is Spain. Like in any other place there are a series of cost for running a company. Here I will roughly go through the cost of having and S.L, one of the most typical companies that can be formed (similar to the American LLC).
There are three types of costs, establishment costs (you just pay once), fixed costs (you pay regularly no matter what your sales are), and variable (you pay regularly depending on your sales).
I won’t go through the establishment costs since they are only paid once, and if you are in it for the long run they are almost negligible.
The fixed costs for a small S.L are basically two; first you need to sign up as a self-employed (autónomo) in order to be able to have a company, that will cost you between 250€ and 300€ per month. You then need to submit your accounts to the government once per quarter. You can prepare your accounts yourself, but you will most likely mess up more often than not and have to pay plenty of fees for it, so you are definitely better off hiring an accountant to take care of it, this will cost you between 250€ and 350€ per month. Again this numbers are for a small company, let’s say 10 employees or less.
It’s a pain so far, but here comes the fun part.
Last we have the variable costs, most of them taxes, which work as follow. Let’s say you sell something for 100€ to your customers, like in most of the countries other than the US and a few others you never give prices without taxes, so from those 100€ 21% are actually taxes and you are left with 82,64€. You will then need to pay 25% from your profit on that sale. Let’s assume you have a cost of manufacturing (pray you do, otherwise the outcome is much worse) of 50%, meaning you spend 41,32€ from production to delivery of the product, being left with 41,32€ of sales revenue which you will then need to pay 25% for, being left with 30,99€ net profit. This calculation is for the company itself, if you want to then spend that money in let’s say, dinner, you’ll have to pay yourself a salary and pay the correspondent taxes there too, but I won’t get into that today. So basically the equation will end up looking something like this:
((sale price – 21%) – production cost) – 25% = Net profit
((100€ – 21%) – 41,32€) – 25% = 30,99€
Cost of running a company = 27,69% of sales revenue + fixed costs.
Let’s now take a look at the same equation applied to an internet company, were no products are being manufactured and your main costs are servers (and people of course, but since this is an extreme scenario we are looking at let’s assume you are a solo company). It’s not crazy (not at all) to assume that a simple website than could perfectly run on a dedicated server easily could generate thousands of dollars per month just in advertising and referral fees, or if you were selling an e-book or audiobook. Let’s assume for this example you are making 5000€ per month with your niche website (or even blog). Then the equation will look something like this:
((5000€ – 21%) – 150€) – 25% = 2986,67€
Cost of running a company = 37,26% of sales revenue + fixed costs.
Some may argue I shouldn’t be counting taxes into the sale price, and for a while I didn’t, but hey, you have to convince the client your product is worth its price including taxes or the sale won’t happen, so I don’t care if they are taxes or not, it’s still your client’s money and your job to convince them they should give it to your company, so I’m counting it in the equation.
I finally decided to give the VA services Timothy Ferris describes in his book “The 4 hour work week” a try (see previous post). I contacted YMII who then forwarded me to GetFridady, apparently a sister company that specializes in providing VAs to foreigners (not Indians).
It too us a full week of backs and forth to figure out how many hours a month I’ll need my VA to work and specially for the company to decide which VA to assign me based on my needs. 5 days, 10 e-mails and 3 phone calls later I received an introductory e-mail from my VA.
How cool!
I read during my research, and was reminded again by GetFriday, that having a successful relationship with your VA is much of a learning process, so I decided to get start by assigning him tasks that were redundant, meaning someone from our in-house team had already done or will do the same tame task to make sure everything was done according to our standards and also to double check the information my VA was sending was reliable.
The first task I assigned was to do a small study of our competition, which in a niche as small as “architecture competitions for students” we already knew from top to bottom. I provided a spreadsheet with a column for each specific piece of data we were interested from each of the competitors and asked him to do a Google search for companies offering these kind of services and fill in the spreadsheet. I told my VA this should not take more than 3 hours.
My first surprise was a reply from my VA telling me it will take him (and his team) 2 days to deliver. Two days for a three hours assignment?
Two days later I received the spreadsheet back with a polite e-mail saying most of the information wasn’t available on-line. I decided to compare the half empty spreadsheet my VA sent with the one we keep and regularly update in-house. Second surprise, not only we had been able to find most of the information GetFriday was unable to but a lot of the information they did provide was wrong. And I’m not talking about anything fancy or complicated, one of the data parameters we asked for was the date the company was founded and suggested they looked up the date the domain was registered in who.is to figure it out (I know the date a company is created and the date a domain is registered has little relation, but for the purpose of this experiment it was accurate enough). They listed our main competitor as founded in 2011, which we know was founded in 2009.
I sent the spreadsheet back to my VA explaining my concern and he assured me his team would revise it and send it back.
Three days later I got the revised spreadsheet. I have to admit there were way fewer empty spaces than the first time, but after seeing they had changed the previously incorrect founding date of our main competitors from 2011 to 2013 (again, they were founded in 2009) I decided not to double check the rest of the information…
A couple other minor tasks were assigned and delivered with average quality and again with a two days delivery time.
I guess this is a tricky question to answer because only right answer is “it depends”. It depends on your niche, it depends on the language your content is write in, etc. etc.
That being said what I can answer is; for an architectural website with content in Spanish, English and French, which country pays the most using Adsense? This is just a very specific example, but it’s the only true data I can provide to even try to get close to the generic question that titles this post.
So here is the ranking by CPC:
- United States – 0,59€
- Austraila – 0,53€
- Canada – 0,48€
- Switzerland – 0,37€
- United Kingdom – 0,35€
Slightly different if sorted by RPM:
- Australia – 4,54€
- United States – 3,44€
- Canada – 2,96€
- Switzerland – 2,51€
- United Kingdom – 2,03€
This data is for November 2013
I’ve been reading “The 4 hour work week” by Timothy Ferris this past couple of days and I have to admit I’m liking it. I was first recommended to read this book back in 2009, but I had my doubts it was the book for me since I actually enjoy working, at least for the time being.
Anyways after two more people recommended it I decided to give it a try and so far it’s proving to be a great read. It’s true I wouldn’t wont to work only 4 hours a week right now, but I do have to admit I’m quite an impatient person and I always have too many ideas going on in my mind that I find hard to prioritize, so I figured if I could take care of my current business in four hours per week (or at least less than it takes me right now) I could use the rest of my time to pursue some of those other ideas.
Most of the things Timothy recommends in the book (at least to the point where I’ve gotten) are easier said than done, or at least they aren’t anything most people won’t already know, like don’t waste time in useless conversations or stay away from the internet when trying to write a paper, sure that will help.
The chapter I was reading today however actually suggested something that can be done, it’s not a matter of self-discipline but something that you only have to decide once, and this is getting a Virtual Assistant. A Virtual Assistant (VA) is basically the same as a Personal Assistant (PA) with the only difference he or she works remotely. The way Ferris puts it if you can pay somebody $5 an hour to do part of your work (the parts that don’t really require your know how) and you get paid $20/hour you are basically saving $15 an hour.
This idea sounded promising, even if it costs me $20/hour, if I can have somebody working while I sleep I could get so much more done in way less time than it takes me right now.
I have always had my doubts about outsourcing to countries like India, China or the Philippines, it’s just that most of the times our quality standards, what’s acceptable and what isn’t, are just worlds apart, but Ferris recommends a couple of companies (not individuals) that specialize in these kind of services, according to him they are diligent, professional and speak excellent English.
I’m seriously thinking in giving this a try…