One of the things I liked about the blog network business model was the low cost of entry. Thanks to a profit sharing arrangement with the bloggers, I am able to have many people working for me without a large up front cost.
I have budgeted about $15,000 of my own money as my complete outlay for all expenses for and 1 year of operations. Certainly a reasonable amount to create a potentially large business.
Hidden Costs
Then one day, in a blinding flash of honesty, I realized, “wait a minute, aren’t you neglecting a couple things in that figure?”
Ya. Since building a blog network from scratch is a ton of work, I’ve given myself a year of more than full time effort to work on only this project.
Since it costs about $3000 dollars a month for my wife and I to live in our current situation, that adds about $36,000 to the cost of this project.
Don’t Stop There
What about the cost of not working? Since it would be relatively simple for me to get a job making about $80k that needs to be added to the bottom line as well.
There would also be intangibles, like the cost of lost opportunities and potential returns on investments of all the money I am pouring into the blog network and spending on my time, but they are only speculation, so I’ll leave them out of it.
Total Cost of a DIY Blog Network
By my tally we’re up to about $130,000 as the cost to start a blog network.
Holy crap! No wonder I wake up with a knot in my stomach.
Actually, it is great to take a look at things with all the scary reality out on the table. It means the after my year [2007] is up, if I don’t have a business that is worth approximately that amount, then I really haven’t used my time very wisely.
It isn’t a figure that would be the basis for any major decisions, but useful as rough indicator and certainly good to keep in mind to reinforce the seriousness of the project.
This post was written by Jon Symons, see my short bio. Or use the contact page to get in touch.
I think your 36k cost of living is a sunk cost, you would spend it even if you were doing something else.
You shouldn’t include it in the business expenses.
Analyzer, if I was doing financial statements you’d be correct, but in this case I wouldn’t be able to work 12 hour days for a year without having that sum available to draw from over that start-up period.
Well, I assumed that if you were working that 80k job you would still be spending those 36k in living expenses.So you wouldn’t sum both. Maybe you wouldn’t spend 36k but probably you wouldn’t be spending zero either.
I understand your point that unless you had savings to dip into you wouldn’t be able to start the business (at least not to work 12 hours a day at it) however I don’t think it makes sense to sum it in the cost of starting the business. If you sat at home doing nothing for a year you would still have a part of those costs.
Wow, I really hope you make well on that investent!
If you ever need to add another blog to your network, give me a shout!
Fresh out of my economics class, I agree with Analyzer about the 36k. You are going to spend that regardless of if you were to start up a blog network or not.
But even though it isn’t an opportunity cost, it certainly isn’t something that should be ignored.
Anyways, Good luck with your network!
well then who said bloggin is easy . its about being consistant with your efforts everyday. and i guess that is the cost price of your business , you have to pay the start up costs even if u start getting returns a lil later.
Its good you’re looking at all the costs, I guess you need to weigh that up against the potential returns, how long will it take you to break even again?
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I personally (and do) invest about 2-3 hours a day on my blog network and my partners invest 2-3 hrs a day. We total 6-9 hrs.
From there. We still work full time and sink $5k in each.
We’re doing okay and no-one has gotten divorced (yet!).
I agree with the 36000$ figure others have mentioned. Considering this huge start up costs I cant even think of owning a blog network. Maybe I will work my blog up to the level of problogger.net (sigh!!!) and then use that money to start a blog network