Years ago, there was something called Work at Jelly. It was like a jam session, but it was a jelly. It would meet on Fridays. People would socialize and collaborate, and work on their own too. One of the things I loved about it was that each person would RSVP before they arrived with their name, the time they expected to arrive and leave, what they would be working on that day, a link to their website with more info, and what they were looking for from other people, if anything. Recently there was some interest expressed at Collective Agency to try that. So, here goes. For February: what’s your name, what time do you expect to be here, what are you working on, and what are you looking for? Add a comment below. (If you don’t see the option to leave a comment, click here, then scroll down and leave a comment.)
Preamble: Why Scholarship Memberships Are Important
Scholarship memberships ensure that there is a variety of incomes amongst members here. It is helpful for everyone to be around those making different amounts of money each year. It is helpful for those making very little money to be around those making very good money to realize that they are worthy of making what they would like to make. It is inspirational for those making a good bit of money each year to realize that sometimes there is more to work for than money.
Cap scholarship membership to 33% of the total membership. Scholarship memberships will be filled on a first come first serve basis. Once all spots are filled we will start a waiting list for the next scholarship spot to come available. If we fill all scholarship spots and then loose members at the regular membership level so that the group consists of more than 33% scholarship members we will not ask any scholarship members to leave. We will wait for attrition to rebalance membership before taking on more scholarship members.
Current Numbers as of 12/7/2012
- 15 out of 58 [26%] of our members are scholarship members.
- 8 more scholarship memberships would be available with our current member distribution if this proposal passes.
- Public Perception – It is important that we maintain an image as a supportive workplace where anyone is worthy of working here. We cannot be known as just a place where you can get cheap rent. Being the cheap place to have office space would devalue the space for non-scholarship members and attract scholarship members that do not value the community.
- Business Viability – We make very little money on scholarship members. If our membership consists disproportionately of scholarship members we will not make enough revenue.
Other Relevant Facts
- Membership is $250/month for a flexible desk membership
- Membership is $380/month for a reserved desk membership
- Those making less than $35,000/year can pay $160/month for a scholarship membership
- Those making less than $20,000/year can pay $50/month for a scholarship membership
My Thoughts On Our Rates
- Change Flexible membership rate from $320 to $250
- Change Permanent desk membership rate from $495 to $380
- Lower the single largest barrier of entry to becoming a member of our community.
- Encourage current members to refer new members.
- Set our prices closer to market rate of services that are seen as similar. (We provide office space, but we are fundamentally different from private offices or executive suites.)
How We Will Make up the Difference
I am asking members currently paying the grandfathered rate of $160 to volunteer to pay the new rate of $250. A few members have said that they would likely do this.
We will need:
- 11 (10.5 more accurately) members currently paying $160 to volunteer to pay $250
- 4 new members sign up
- A combination of the two
Rates of Sort of Similar Services
This chart is only a comparison of only our rates NOT amenities and services. Most importantly, none of these places have the community that we do. It is sort of misleading to really compare all of these directly.
Status: Clarifying questions were asked at Coordinating Council meetings 5/7/12 and 5/14/12, and at Civics Meetings 5/22 and 5/29. Did not pass. A revision was proposed by Don P. on May 29th for the June 5th civics meeting to debate and vote on: “A business founder’s fee of 33% of all revenue above $10,000/month from “Collective Agency” operations except for any loans and refunds.”
Proposed for debate (clarifying questions then concerns) and vote, to the May 21st Council and May 22nd Civics meetings. It passed the May 21st meeting with 2/3rds majority vote. The May 22nd Civics meeting members requested a week to think about it and will vote May 29th, and to see financials for the past six months. On May 29th it was voted no by 4 out of 4 members, and did not pass.
Proposal: A business founder’s fee of $2,750/month plus 28% of all revenue above $12,500/month from “Collective Agency” operations except for any loans and refunds.
Why: For the work of starting democracy businesses such as “Collective Agency” to become not a charity but a business, and to inspire people to make more businesses like this.
Terms [would be reviewed by a commercial real estate lawyer before going into effect]:
- Founder’s fee is: An interest in a guaranteed payment and profit-sharing but not decision-making, generated through the founder’s startup work/labor, similar to an annuity payment.
- Paid monthly on or before the 1st of each month, along with or after rent but before all other expenses.
- Insurance will be held by the founder for himself.
- Founder will publicize: founder will do outreach to places such as Portland Business Journal, DeskMag, etc., to show that instead of starting a traditional business, starting a democracy workplace with term limits is a way to make money by doing good, and to inspire others to do the same.
- Revenue from “Collective Agency” operations is: gross revenue after credit card fees except loans or refunds. Gross revenue includes the sales price of all goods, services and merchandise sold, delivered or licensed, whether they are made for cash or on credit. Operations include money paid to members/staff/independent contractors/entities for “Collective Agency” authorized by and reported to the Council, including: member and meeting rent, financial contributions, and could include: any sponsorship, franchise fees, sales of products or services, or other not-yet-occurring revenue.
* * * Supplemental information: * * *
Revenue will go down someday. What then?
- This agreement can be amended in part or totally by member vote (for any reason), or if it was necessary, by a new agreement between the main community organizer and the founder.
- The other options would be the same as when the founder faced a budget crisis, and will come up again someday anyway:
- save up in advance or ask members to pay into a fund in advance (which is common),
- get loans conditional based on money coming in (which was done),
- bring in more members, meetings, revenue (which will be necessary anyway).
- Alex negotiated the lease down more than $2,600/month from the price paid by the previous tenant. Alex will cover the cost of building and trip & fall insurance, and furniture & equipment insurance, if he continues as leaseholder and subleases to the next main community organizer.
- Alex negotiated purchase of furniture and equipment worth $25,000 before opening in August.
In any well run democracy there will be a surplus compared with a traditional business. We are currently earning a surplus of several thousand per month. We are on track to average $4,000-$6,000/month surplus this coming year, and very likely to keep growing. That’s a profit of at least $48,000/year.
In many cooperatives, the founder remains as staff for 25-30 years. In most other businesses, the founder keeps a controlling interest in shares. But this business founder’s fee would compensate with money but not decision-making.
Work that was done:
“Collective Agency” is the third coworking place that Alex has started, the first where he’s been the main person. The other two he helped start in New York City in 1999 (Tisch Talent Guild) and 2007 (New Work City), both are still successful. In 2006 he raised earnings of a $60 million company by $1 million/year which was then sold by the owners.
Alex was the main person who built the business model, wrote the Constitution, built the website, mentored staff and members, worked overtime with no guarantee of any compensation, and did outreach and sales that brought in revenue which has grown to $10,500/month in memberships (half or a third of total capacity) plus $2,000-$8,000/month in meetings (profit).
Alex’s Notes on Founders Fee:
Where did the founder’s fee amount of $2,750/month + 28% of revenue above $12,500 come from?
$2,750/month is rounded from what I’m getting paid now; it’s what a supporting staff person would be paid to do this full time. When I started, for a few months it was just me, and I had to reach out to members: that was great. For a year before that when it was [previous company], [company owner] held the lease and did billing and advised on the business, and I was here every day doing almost everything else. The $2,750/month makes less money (to pay more staff, or to pay staff more hourly), so staff need to work harder up front than otherwise; I think that’s a good thing.
The 28% is calculated on what would I get if I sold the business. X times earnings. I estimate it would sell at $190,000 or $290,000. This is the end of the first year, it’s been break-even, and is just starting to make a profit. No one sells the business after the first year when it’s getting profitable. So instead of money up front, I’m making an investment/risk on how long I’ll continue to be paid, whether members cancel it or whether the business closes.
The maximum alternative, which I am not doing, would have been for me to earn all of profits as a traditional business owner: in April we had $14,500 in revenue, and expenses after the amount paid to one staff person would be more or less $9,500, which would be $5,000/month profit to me, assuming that revenue doesn’t go up from April. I expect that revenue will go up if/when there’s a reason for us to make that happen.
The 28% is also based on: for every additional member above expenses, that’s not 100% profit, but it’s pretty close: I’m estimating 75% profit. Credit card fees, furniture wear and tear, office supplies, and 20% of the profit is staff expenses. It doesn’t take that much staff time for each additional member. 30 additional members, assuming many on scholarships, is an additional $5,000: of that, including the founder’s fee, $2,500/month would be profit. We have capacity for 70 or 100 more members, and I think it’ll be better when we do, so I want to incentive that.
Concerns if we do the founder’s fee:
The expense might be too much if revenue goes down sometime and then staff doesn’t bring in more revenue from more members, and doesn’t get conditional loans from members. But members can amend/cancel this agreement, and the main community organizer could even decide to amend/cancel it if they thought that was needed.
Concerns if we don’t do the founder’s fee:
I see paying the founder’s fee and “Collective Agency” doing well as being aligned. I think it incentivizes:
- More revenue: I think by paying more money as a fee, we will focus on bringing in more revenue through more members, and I think the founder’s fee is a good way to incentivize growing the number of members: I’d love for us to get 30 more members in the next month.
- Constant outreach/work/vision: I’m concerned if our amount of cash goes up too high, either for staff or fancy things, that it will make us complacent. I always want us to be doing outreach to bring in more members and make this more what members want.
- Lower costs: There will be costs that I will cover under the founder’s fee that will have a fee otherwise: the cost of the $25,000 of furniture I acquired before we opened, the cost of assigning the lease or paying me a fee to do a sublease.