Jumping Again

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Jan 1, 2007 12:39 pm

Here is the situation: 16 mil in assets, I am going to jump and go
independent.  I know that in the best case scenario I should wait
until I have more AUM, but this place I'm at is killing me. (Long 
story!)



I have used the search tool, but can't find an answer that suits me so
here goes.  If my rent is somewhere around 900$ per month
including utitilities, can you help me estimate my monthly costs? 
I will include a list of what I foresee as monthly expenses. 
Please either correct my estimates, and/or add expenses that I may be
missing.  For the first 12 mos. I will probably not have an
assistant until I feel I am making enough to afford one. 
(Basically I have been working the last year without an assistant, so
it won't add to my workload.)  What I want to figure out is what
my fixed costs will likely be regardless of production, payout, ticket
charges, etc. 



Here are my estimates:



Rent:                900

Phone:              170

B/D fees:           200  -for their basic tech/package

E and O:            225

Supplies:            120

Postage:            100

Equipment

(lease &

maintaint):          150

Registration

fees:        &nbsp ;        
100    -paid annually but averaged out monthly









That's all I have for now so please add the many things I am
forgetting.  Also feel free to tell me how stupid/smart I am for
jumping with such few assets.  My average monthly gross is around
12k per month so feel free to bash meand tell me how impossible it
is.  In my ignorance, I think that even with a minimum 80% payout
it is somewhat feasible.  I would value your advice though, as
this board has helped me in the past and I have found most things to be
accurate and the varied opinions helpful.



Thanks




Jan 1, 2007 1:06 pm

It's not a question of how much AUM.  More importantly, how much of this AUM will come with you and how much income will it generate?  Do you also have savings?


If you don't have enough income/savings, you'll probably have to do a fair amount of transactional work to survive.

Jan 1, 2007 8:19 pm

Maybe you could put-off getting an office, for say... 3-6 months or so. That would save you $2,700-$5,400 right-off the bat. Waiting 3-6 months before renting an office would allow you the extra capital to work-out any unexpected "expensive" kinks that inevitably arise during transition.


I don't think your clients would mind you working out of your home, if you told them that you're moving into an office in 3-6 months or so.


Just sayin'.


Jan 1, 2007 10:32 pm
feebase?:



That's all I have for now so please add the many things I am
forgetting.  Also feel free to tell me how stupid/smart I am for
jumping with such few assets.  My average monthly gross is around
12k per month so feel free to bash meand tell me how impossible it
is.  In my ignorance, I think that even with a minimum 80% payout
it is somewhat feasible.





How much of your AUM is mobile and willing to move with you? I would
say that the key question is how much savings you have in the bank.
Because it takes about a year for a practice to get up to full speed
again.



In general assume everything will be twice as expensive as you expect,
and take 1.73x as long. You want a margin of safety in doing this.

Jan 3, 2007 8:06 pm

Definitely forego the office expense until you feel confident financially.  Offices are much more important to us then they are to the people we do business with.  From experience I can tell you it is not that important.

Jan 10, 2007 9:19 pm
doberman:

Maybe you could put-off getting an office, for
say... 3-6 months or so. That would save you $2,700-$5,400 right-off
the bat. Waiting 3-6 months before renting an office would allow you
the extra capital to work-out any unexpected "expensive" kinks that inevitably arise during transition.


I don't think your clients would mind you working out of your home,
if you told them that you're moving into an office in 3-6 months or so.


Just sayin'.






Are you serious? 

Jan 11, 2007 7:57 pm

Yes, rightway, I am serious.


I don't get your point. If your clients suddenly received a notice that you and your team had left ML, and were temporarily working out of your house, would they treat you like the plague?


Jan 14, 2007 4:51 pm
doberman:

Yes, rightway, I am serious.


I don't get your point. If your clients suddenly received a notice that you and your team had left ML, and were temporarily working out of your house, would they treat you like the plague?


From personal experience, renting a small studio/1BR apartment can be much cheaper than renting an office. By the time you put in a desk and similar decor it can look very professional.


Most existing clients don't care, because its about a personal relationship, not your Aeron Chair.

Jan 14, 2007 5:52 pm

Rent a studio and get a pull out sofa

Jan 14, 2007 7:28 pm
bankrep1:

Rent a studio and get a pull out sofa


Even better, buy a doublewide bank repo trailer. Convert it to an office. Rent the lot under it. Later, if you don't like the location, slap some wheels on it and haul'er down the street someplace better. 

Jan 14, 2007 9:24 pm
doberman:
bankrep1:

Rent a studio and get a pull out sofa


Even better, buy a doublewide bank repo trailer. Convert it to an office. Rent the lot under it. Later, if you don't like the location, slap some wheels on it and haul'er down the street someplace better. 



They used to do this in the late 1920s.


Jan 15, 2007 8:24 am
doberman:

Yes, rightway, I am serious.


I don't get your point. If your clients suddenly received a notice that you and your team had left ML, and were temporarily working out of your house, would they treat you like the plague?






I never really thought about it.  I would not leave and work out
of the house, not even temporarily, but that means nothing
really.  Mom and Pop with the rollover and retirement plan woudl
nto care, but the younger business/executive clients would take issue I
am afraid.  No harm, I was just curious if you were serious, now I
know.




Jan 15, 2007 7:35 pm

I would not consider working out of my house, on a permanent basis.  Because I, like you, feel some of my better-heeled clients would look askance at such an arrangement. However, a temporary arrangement would be overlooked by said clients, in my opinion.

Jan 16, 2007 8:24 pm
feebase?:


Rent:                                     900
Phone:                                   170
B/D fees:                                200  -for their basic tech/package
E and O:                                 225
Supplies:                                 120
Postage:                                 100
Equipment (lease & maint)       150
Registration fees         &n bsp;          100  


You need to plan that accounts won't transfer for 2-3 months, so you will need enough income/savings to cover your bills for those months.  You will be so busy trying to get clients to move & marshall everything through, you can't count on having much time to bring in new clients.


You didn't say how long you've been in the business, but with that little in AUM, you need to plan that as little as 50% of those assets will likely follow you -- particularly if you go independent instead of going to another firm with a "name."


Expenses to consider adding:



Accountant or Bookkeeper                                   
Utilities (usually some are not included in rent)
Subscriptions &/or software (ie, Morningstar, ValueLine S&P)
Internet access
Phone book listing
Stationary
Business checking account (not expensive, but an expense)
self-employed FICA expense  

Your equipment number seems way too low to me:  you'll need a phone system, at least a combined copier/fax/scanner/printer (or you may need a heavier duty copier and heavier duty printer), postage scale, desk & office furniture, computer, PO Box rental, business reply permit (so clients can mail things back to you) -- mine costs $160/year, plus you have to put funds on deposit with the USPS to draw upon.   Depending on your clients, you may need a toll-free phone number and you may want to buy a domain name.   I'm assuming you're just going to buy stamps to use, because postage meters are pretty expensive to lease.  


I may think of some other things, but gotta go now.




Jan 16, 2007 9:59 pm
OldLady:
feebase?:


Rent:                                     900
Phone:                                   170
B/D fees:                                200  -for their basic tech/package
E and O:                                 225
Supplies:                                  120
Postage:                                  100
Equipment (lease & maint)       150
Registration fees         &a mp;n bsp;          100  


You need to plan that accounts won't transfer for 2-3 months, so you will need enough income/savings to cover your bills for those months.  You will be so busy trying to get clients to move & marshall everything through, you can't count on having much time to bring in new clients.


You didn't say how long you've been in the business, but with that little in AUM, you need to plan that as little as 50% of those assets will likely follow you -- particularly if you go independent instead of going to another firm with a "name."


Expenses to consider adding:



Accountant or Bookkeeper                                    
Utilities (usually some are not included in rent)
Subscriptions &/or software (ie, Morningstar, ValueLine S&P)
Internet access
Phone book listing
Stationary
Business checking account (not expensive, but an expense)
self-employed FICA expense  

Your equipment number seems way too low to me:  you'll need a phone system, at least a combined copier/fax/scanner/printer (or you may need a heavier duty copier and heavier duty printer), postage scale, desk & office furniture, computer, PO Box rental, business reply permit (so clients can mail things back to you) -- mine costs $160/year, plus you have to put funds on deposit with the USPS to draw upon.   Depending on your clients, you may need a toll-free phone number and you may want to buy a domain name.   I'm assuming you're just going to buy stamps to use, because postage meters are pretty expensive to lease.  


I may think of some other things, but gotta go now.



Postage meters aren't that bad...I have a small model with a scale for over a year now, and it costs me about $20/month.  Very handy.

As far as return envelopes, you weigh 'em and then put a stamp on them.  Far simpler and less expensive than setting up a business reply account.

There are those who will argue that clients are more likely to return a piece of paperwork promptly when they see that you spent cash to put a stamp on the return envelope.  In my experience they are correct.