Financial realities of the iTunes App Store

http://appcubby.com/blog/files/financial_realities.html

by pxlpshr • 18 years ago

7 7 18 years ago

patio113• 18 years ago

That blog post has some Holy Mother of Accounting issues. We could start with 32k loaned from family NOT being income. The business is funneling money the wrong way, guy! Actual income does not cover your dev expenses! And you need paid marketing!

jjburka• 18 years ago

yeah , it was interesting. It is a little difficult to actually see what they are making , but it appears they have paid for some marketing either 12K or 7K depending on if the 5K free marketing 'income' is applied to the expense

patio113• 18 years ago

Here's my attempt:

Income:

Realized Sales: $32,000

Accounts Receivable: ~$7,000 (reading graph)

Subtotal: $39k

Expenses:

Programmers: $29,000

Advertising: $2,000

Administrative[1]: $5,000

Artists: $4,000

Debt Service: $1,800

Subtotal: $41,800

[1] I smell a new MacBook, or someone severely overpaid for lawyers.

----

Total: ($2,800)

Ignore the charity -- that is not a business-related expense. Ignore the source of your starting capital -- I don't care whether it is a loan, selling your car, or using cash you have on hand, it is not income. Ignore the salary paid to yourself -- transferring money from one pocket to another pocket does not improve or hurt your financial situation.

What does this simplified picture produce? The correct conclusion: this business is losing money. Sales are in a downward spiral while advertising is active and the blog author apparently thinks that taking a month off of advertising and then turning it back on again is going to goose himself to profitability.

That is fantasy.

I think everyone who sees dollar signs in their eyes when they hear of the App Store needs to be sent to read this article. Here is a guy who has sold almost $40,000 worth of software and STILL LOST MONEY. At the moment all he has to show for it is a swiftly declining residual revenue stream (it will probably fall below the costs of debt service by the end of January) and a pile of money owed his family.

drbarnard2• 18 years ago

It was meant to be an overly simplistic look at the finances, not an actual financial statement (notice the nice round numbers). I didn't make this clear in the post, but our third app is already paid for and will be released soon. I'm not out of the woods yet, I know that, but I'm headed the right direction. And that's saying something in the App Store at the moment.

David - App Cubby

Financial realities of the iTunes App Store

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