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Should your startup be operating as a consortium? [Opinion]
Rethinking our business strategy sounds like a brilliant idea, especially since we can all agree; this year is going to be a blockbuster!
With many of us forced to open our own startups, how do we go about doing so in a way which gives us the greatest upside, with hopefully less of the risk?
You may have heard of a consortium but never really understood what it is all about. Let me shed some light on this amazing business model and how it fits into the gig economy world we currently find ourselves in.
What is a consortium and how is it different from a small business structure?
A consortium is formed in the same way as a business. In both cases, you have to register the business and open a bank account. You’ll need legal contracts for your suppliers and clients, someone doing your bookkeeping and accounting, sales, and advertising.
The difference is, in a consortium, you are the only full-time employee. Everyone else is outsourced and paid on a commission basis when they do their part. Finding commission-only willing colleagues is the secret to success.
Who are the participants in a consortium?
The client needs a product or service. The person who can make the product or service. You as well as your outsourced admin people, which could be IT or accounting.
With pre-arranged agreements, when money comes into the business, it is shared amongst the consortium. As the business gains momentum, everyone will get paid on an ongoing basis. Getting over that initial dry start is the trickiest part.
What is the benefit for clients in dealing with you as a consortium vs as a small business?
With the consortium not bound by massive fixed expenses and endless salaries, the lean approach allows the cost saving to be passed on to the client. The quality of the product or service is better than a traditional business with everyone involved having a vested interest in the success of the delivery. As a self-governing system, if you do not perform, you will be excluded from further projects. With the original founder actively involved in bringing in work and overseeing contracts and projects, this then frees up everyone else to focus on actual work.
As we move forward with this You-as-a-brand world, why are consortiums the future of the corporate structure
Corporations are just groups of people getting salaries in the direction of the business heads. By harnessing the experience gained at various jobs, you can partner with and outsource your skills to a consortium and earn a larger portion of the revenue. All it takes is the confidence that if you form a consortium, with like-minded colleagues, that money will come into the business and you’ll be able to split the revenue. If you can tell a future employer at an interview that you can do it, tell yourself the same.
This article was written by Adi Kaimowitz, President and CEO of Virtual Actuary.
Featured image: Adi Kaimowitz, President and CEO of Virtual Actuary (Supplied)