Im glad someone else had this idea - good work doymarn. Your description of it is far clearer that what I had in mind. This will become particularly relevant when certain members of the CH community have a proven track record through their ideas or code contributions. Potentially, these CH virtual units could be constructed on the basis of the expertise required by the start-up. For example, some start-ups may require coding expertise, others may require design/conceptual help.

This kind of concept is exactly what keeps me at CH regardless of the success of my ideas. It is the off-shoots, professional relationships etc that are built along the way that become marketable down the track.

This sounds like an advanced version of the Amazon Mechanical Turk. http://mturk.com

I could really see something like this taking off if you are willing to fairly pay the participants, and you have in place a heavy audit system to ensure the quality of the outputted works.

This is a wonderful prospect!

How successful it would be once it is out on the market, of course depends on certain crucial aspects of its implementation, as far as i see it:

Working for a percentage of profit is not the safest prospect for the crowds, if you're not in control of the business. I know that CH is doing the same here, but here we already learned something about CH, there is a sound social philosophy behind it and a certain level of transparency and disclosure (although i must say i feel that CH should spend some more resources on this).

As a cosequence, i think each pairing of a company with the "worker" (the virtual company unit as you call it) should be tied with a kind of contract. The headaches which will come due to disputes will largely depend on who signs a "contract" with whom. It can be a relation worker-company, or worker-system & system-company. If we want to be fair in this thing, it should be the later combination (i.e. both the companies and the workers sign our system's terms and conditions). But that would also mean you should hold a number of lawyers on the payroll!

There is a lag between providing workforce and getting the profit. If a worker A from the crowd has done a marvelous job for company B, and A is waiting unable to review B's financial records, A is going to squirm quite a lot for someone who is a great armchair engineer and deserves better.

If the point 3 has any worth in it, you can see that the risk here is assumed by the worker. My firm opinion is that the best systems are created where the risk is balanced. That means that the risk should best be divided evenly between A, B and the system.

Well, something like in this (short :) study:
(worker is A, company is B, system is C).

1. WORK and RISK: A gets lump sum of maybe $500 for creation of a set of software modules by C if C is happy with the solution. The figure is set by C, as it sees fit (and is offered in the deal together with profit options - see point 2). If C is happy with the solution, then B has to accept it. If B does not accept it, it has to pay for example 75% (see point 3) of the sum to C and the "contract" is broken (risk is assumed by all parties as A gets only $500 and no RPs). Also B loses GPs. If both B and C are not happy with the solution, C pays a certain penalty to B (see point 3).

2. PROFIT: If and when B starts creating profit, both A and C receive RPs. The total quantity of RPs paid out by B is set by B and C (according to some set of standards) and is paid to C quarterly (for example). The division of RPs by A and C is done by C. The A's amount is paid to A by C monthly. The balance of risk is.. well balanced :)

3. TIME: In case that the "contract" is broken for any reason, the balancing of the risk is done through arbitration of whose blame it is mostly that the deal is off, but also depending on the time lapsed. B cannot wait forever for a solution if C vouched for qualifications of A. Also, A must have time-defined means to engage C if A thinks B is creating profit and A is getting nothing out of it.

Also time related: C may feel that what B has in mind is very doable by the crowd, but nobody of the class A is biting! Therefore, C assumes more risk and increases the above mentioned figure of $500, but also agrees with B about possible changes in RPs for both A and C.

Also time related: RPs should not be paid out indefinitely. There is a difference between CH (which ideally will operate as profits collection and dissemination point) startups operating in certain fields and keeping their finance books to themselves. Different time measured programs can be offered for B to pay out RPs. For example it can be 10% for the first 5 years, or 2% for the first and toughest year and then 20% of next 4 years, etc. Note that C will also measure which fixed amount to set for A (aforementioned $500) depending on the first year's RPs.

4. ARBITRATION: B may feel the need to shift the business in a different direction, use A's prior work partially, but not feel the need to pay out profits of the business... since it's a different business. C must be able to negotiate settlement or take B to court (protecting A) and have means to offers clues for fair arbritration.

Did i miss anything? :)

This is an unusual idea and I can not quite wrap my mind on it. Could you elaborate a bit in a comment perhaps?

Great idea. The caveats Deckard raises should definitely be taken into consideration.

PsychSplash: Thanks for sharing your enthusiasm. Yes, as i see it, the virtual units would be dynamically created with resources that will offer their participation for an expertise request made by the company (startup) in the listings, much like the members volunteer in CH for specific project contributions.

This will allow members to choose which companies they want to work with, to gage the commitment of time required for a particular request and measure the confidence they have in the success possibilities of the companies.

I see relationships developing as in CH and pools of expertise will form creating service groups that can offer complete platforms of services.

AndyDoan: Agreed, fair payment and quality of work is paramount to the on going success and reputation of this concept. But i think this concept provides a much more entrepreneurial and financially rewarding prospect for the members albeit with an increase in risk, but that is what attracts people to CH in the first place i think - rewards beyond an hourly rate or fixed recovery.

Yes, quality of work needs to be measured and tracked but i think this would be greatly assisted by a rating system of the individuals by the companies they are servicing. Also, a lot of these tasks are ongoing and measurement by ongoing company satisfaction levels will be a useful yard stick. The rating of the Company by the members involved could also be a valuable reference for future requests or replacements. Quality disputes by Arbitration will be a required function of the Virtual Busines Management system as will audits be needed to validate declared profit shares and disputes arising.

motiggidy: Sure, i will try my best to elucidate the idea a bit more here and for the sake of continuity with Deckard's comment also of August 14th and my reply, i will use the same entity naming that Deckard introduced:-

The Virtual Business unit is the 'worker' which may comprise of several community members.
The Company or startup requesting services is the company.
The Virtual Business Management system website is the 'system'.

Mission Statement
The purpose of the Virtual Management Company (VMC) is to provide expertise to small companies that have a promising business plan but do not have the financial resources to employ or contract the best of breed expertise to help their business realize its potential. In return for the expertise provided to the company on one off or on going contributions, the company will pay a percentage of gross profit to the VMC for an agreed period of time.

Precursor to Activity - Registration
Members would need to register in the 'system' giving their personal contact details and resumes and would need to agree with the 'system' to the standard terms and conditions.

Companies would need to register themselves, giving all pertinent company details and principal contact persons and also agree to the standard terms and conditions of the 'system'.

Registration, i think should be free to all parties and its purpose is more to have accurate and validated details on the parties involved and enforce non-disclosure and a level of privacy.

Activity Flow (a 1st draft)
1. A company will post a request for expertise that it requires. This posting will include a full description of the tasks requiring assistance, the degree of time and frequency that these tasks would demand and the gross profit percentage that the company is willing to give for the availability of these resources on an on going basis and any other sweeteners they may wish to add to the pot.

The company would also post their mission statement and a pitch on how they envisage their success, their marketing plan and financial projections going forward. Any websites the company runs would be referenced and company financials would also be made available on request.

2.Members would browse the listings and would indicate for which task they are interested in taking an active participation. Emails would also be sent to the members informing them of new postings in the disciplines that they have indicated they are interested in offering their services.

3.The 'system' will monitor the requests and fulfillment support and will indicate by email to the company that a task position in their request has been offered expertise.

4.The company will inspect the offer and review the resume of the applicant and any references and ratings applicable to that person. If they are happy with the applicant they can close offers on that task position. If they are not, they can leave the task position open to attract further offers of expertise. Activities 3 & 4 will continue until such time as the company has closed all task positions or they have withdrawn their request.

5.Once all of the task positions have been filled and accepted by the company, the request will be deemed closed and the 'system' will now enter into legal agreement with the company for commencement. It will also at that time calculate Rps for the members in the 'worker unit' and finalize acceptance of the distributions with the members.

6.The project commences and regular status reports are submitted and quality assessment procedures are enacted. The Company will indicate approval or disapproval of tasks and contributions on an on going basis and ratings will be updated on the individuals and entities involved.

7.Disputes and resolutions will be handled by an pre-agreed arbitration panel and will be binding on the parties.

8.Financial performance will be submitted by the company on a weekly or monthly basis and reviewed and agreed. Payments will be made by the company to the 'system' and disbursements made to the 'worker' by the 'system'.

This is a 1st draft and I hope i have clarified my idea here with this detail - if not please ask me to elucidate any area that needs further clarity. Also, please read the comprehensive comment by Deckard also of August 14th and my forthcoming reply which may add further to the clarity.

Deckard: Thanks for your in depth comment which has resulted in a lot of thought and a lengthy reply i am afraid. In my view, there are two distinct aspects that need special attention, one is the 'company' offer, acceptance and servicing aspect and the second is the 'worker-system' management relationship aspect. I do hope i haven't been too long winded in my reply:)

Deckard: Working for a percentage of profit is not the safest prospect for the crowds.....................

Agreed, there is an element of risk attached to a profit share but there is also an element of gain that can far outperform an activity priced at an hourly rate or a fixed recovery. The objective, like in all investments, is to reduce the risk as much as possible. I see that reduction taking place by several mechanisms:-

- I specifically mentioned a percentage of Gross Profit, the reason for that is that gross profit is far less manipulable than net profit can be - it is a trading profit that only takes into account sales and cost of sales. Whereas net profit is calculated after deduction of all company expenses like office rent, entertainment, salaries etc. These and other expenses can be easily manipulated in order to reduce net profit. However, sales can easily be audited and reconciled to things like sales tax returns, VAT and, projecting forward, if the companies are using a CH payment gateway, for example, then the sales are very easily audited.

- By making it a requirement that the companies use an agreed accounting or reporting system where standards can be put in place, like reporting using a standard Charts of Accounts, Profit and Loss templates, will make the reconciliation and any audit inspection much easier and effective.

- Putting in place traffic monitoring on the company's websites will assist in the analytics of sales performance.

- By insisting on weekly sales statistics and pre-identified cost of sales.

- By the companies agreeing to audit inspections.

- By entering into solid agreements of understanding.

Inherent in this concept is also that the risk is much less than in CH projects. To the degree that this is not like a CH project where much time is spent collectively in the evaluation, design and development of the projects and then further with the investment in a market launch.

In this concept the upfront investment via contributions in time is relatively small (although i do understand there may be exceptions) and it is on going by nature, which is in effect a risk reduction in itself.

If payback is not forthcoming in any measurable way and thus creates a very low confidence index into the company's future, then the resources can withdraw their contributions, much like any employee would resign their position. Losses are not large in terms of money invested but rest more in disappointment and loss of time - but i am aware though that 'time is money'

I think we must maintain the entrepreneurial risk reward model here to engender the same level of enthusiasm that CH has demonstrated.

Deckard: As a cosequence, i think each pairing of a company with the "worker" (the virtual company unit as you call it) should be tied with a kind of contract ............................................

Most definitely there has to be a contracted relationship between the parties. I favor the 'system' as the principal contractor and the company (startup) as the secondary party to the contract .. the 'system-company' contract relationship.

This will present a position of strength in the relationship of the contract (the company would dispute with the 'system' and not an individual) and one that would prove beneficial should any disputes arise. I agree, all parties would sign and abide by a general terms and conditions agreement but i don't think it would be attractive for a 'worker member' to have to seek legal council and enter into contract with the companies they provide expertise to, bearing in mind that each 'worker unit' could contain several 'worker members'.

There also has to be a strong agreement entered into between the 'system' and the 'worker persons' but this agreement i see as an umbrella agreement covering all work contributions in the relationship with the 'system'.

In regard, to the point you make about this requiring lawyers on the payroll, i personally don't think that this should be a payroll resource but at the worst should be a contracted resource. One that is required to prepare the template agreements in the first instance and perhaps required in any difficult arbitration. And i fully agree, arbitration is the desired route to take and all parties would agree in contract that they would accept an arbitration hearing and outcome which would be binding on all parties.

Which brings an interesting point for consideration. I made mention in a comment in Aidan's Micro Stock Market idea of the need and benefit for CH to widen its resource membership to include legal expertise in the stable of the community talents.

Nearly all projects that go to market will require legal council and document preparation, so why not solicit membership from the legal profession to provide their legal expertise for RP in the CH projects?

I think this could be very beneficial to CH both in the initial legal opinions that are raising themselves in early idea viability measurement and also in the development of the ideas. A thought to be considered?

Deckard: Also time related: RPs should not be paid out indefinitely......................................

I am not sure i agree fully with everything you suggest about time constraints in profit distribution and percentage performance scaling. I do agree that there may have to be limits of time on some contributions, especially if they are a once only contribution. But I think that the companies that post their requests for expertise should be given the freedom to make an offer that they are comfortable with and not be too constrained by fixed ideas of time and percentages scales.

I think this concept should operate as a free market where if what the companies request and offer is not attractive then they simply won't get any takers.

I feel to put too much preconceived idea in what is good for a company and what is not .. from, lets face it, an outsider, may be too stifling to attract any companies to make requests at all. It would also perhaps require too much in depth analysis of the company and knowledge of their particular market by the 'system'.

If the company decides it can and wants to attract the best, by offering 15% of gross profit indefinitely for on going contributions of expertise, then let them make that decision. I think it is paramount not to try to dictate to them, in what is their field of knowledge of their business and decisions pertaining to what or how it can afford the offers.

If the company is unrealistic and posts a request for expertise and wants to offer $500 dollars for a new website design and 1% of gross profit for three months that will likely yield no gain ... then they will not attract any takers and the market will have automatically addressed that greed.

I personally think that the 'system' takes a back seat in deciding if a request for expertise is entertaining or not, it would only pickup a request and service it if there was sufficient enthusiasm and commitment indicated by the community.

This will reduce the liability on the 'system' to find resource to take up an offer. For example, if the request for expertise results in 25 members wishing to contribute a certain discipline then it has confidence to take on the offer, whereas an indication of 1 interested member for a resource could indicate a dubious offer perhaps not worth considering.

Copious expertise offers would also give some comfort to the 'system' in that, if the allocated person in the 'worker unit' was not performing then there would be a good pool of alternative resource that could be allowed to substitute the original 'worker person'.

Another thought i have on the quality aspect of resource and the liability that would fall on the 'system' to vouch for or replace a 'worker-person' is - this would be alleviated by the members offering their services to the company request and allowing the company to select their preference based on their resumes and member ratings from other companies. I am aware that there will be a lag to the ratings but once in place it will create a good barometer of confidence.

Perhaps later, through the success of the 'system' and its accumulated profits being available, the 'system' could be more speculative and proactive in taking on requests and then trying to fill the boots .. but i think, certainly initially, the members enthusiasm is the best measurement stick to start with and in turn it will reduce the time needed of the 'system' to evaluate every request that comes in, as they will only need to get involved when the community has selected a project it wants to be involved with.

My current thoughts :) and thanks again for your time and considerable attention!

I'd like to take the opportunity of this forum to share with you an initiative that I've launched around consumers electronics products. Basically, the concept is slighty what has been introduced here but around manufacturing products and not software. You can find some first information about that initiative here --> http://cecrowdsourcing.blogspot.com/ . I've already proposed this idea to CH but I didn't get any feedbacks so far. May be the best proof of concept for CH will be to have a lot of people joining this new community. My current background in consumer electronics industry especially in terms of sourcing and distribution & support will help me but other skilled ressources are needed for that project. So do not hesitate to send me email in order to actively participate to this initiative. I will try as much as possible, depending on my bandwidth to update the blog, but I miss a lot of time.

Talk to you very soon and do not hesitate to join the first crowdsourcing community around consumer electronics products. I'm going to launch very soon a linkedin community to efficiently track the skills and ressources of that community.

Lionel

I like the concept of the idea, but think there could be a major problem with the profit-sharing component. There doesn't seem to me to be enough of a control to ensure fair dealing from the company looking for help.

In fact this idea is in town for a while. Just that yet to hear anyone to make it sucess. It is great if it really can be done.

PiYo: In fact this idea is in town for a while. Just that yet to hear anyone to make it sucess. It is great if it really can be done....

Doymarn: Thank you, your comment goes to emphasize the very potential of opportunity that this idea propagates. Saying that its been done without being able to give an example of who has done it does not devalue the opportunity but only defines the opportunity as being very ripe for harvesting. And you hit the nail on the head ... it will be great if it can be done well!

redtyler: I like the concept of the idea, but think there could be a major problem with the profit-sharing component. There doesn't seem to me to be enough of a control to ensure fair dealing from the company looking for help.....

Doymarn: thanks redtyler, i am not sure if you read all my comment replies, especially the comment Posted:August 16, 2006, 7:37 pm which goes into detail about control measures? But all business models have risks, there are no guarantees in any business venture, however, the control measures suggested here are copious and to summarize constitute: legal agreements, gross profit as opposed to declared profit, financial reporting, accounting audit procedures, formal sales tax reconciliations, technology auditing procedures, arbitration and on top of all the formal procedures, we have the participating members of the unit on the ground who can feed back and make decisions if they feel the 'investment' is not being fairly dealt with.

If you have any further ideas of how we could improve the control measures please volunteer them, i would be very happy to hear them and you could have a suggestion that improves the concept.

Good idea, think it could really help companies that are not able to make it on their own. Love the idea of profit sharing as I believe in co-ops!

This idea i had seen in World Corporation,But they went in skirmish and now correcting them self. These ideas needs lot of honesty while handling resources,It may come only after many failures. Never the less it is a great idea.

Dude! Fantastic idea! This may be narcisistic, but I like it because I too had considered this idea as a business. Keep in mind that this business model WILL succeed ( I thought it was such a great idea that I registered www.willworkforstock.com about a month ago). Anyway, as good as the idea is, I'm way too lazy to actually do something about it, but if you are looking forsomeone to brainstorm ideas for stuff like the software spec, or busniess plan just let me know.

The thread is too long for me to handle just now, so here are 3 comments I hope will be useful. Apologies if I repeat what others have said.

1. Business model - the value to be gained here is perhaps from cutting out the middleman & the costs of searching for the right candidate for a short- or long-term job/contractor relationship. Imho this would be workable if there was a reasonable mechanism for screening companies and workers, perhaps like the scoring system for buyers and sellers on e-bay.

2. Someone said this was like mturk? No, not from what I've seen of mturk so far. The proposal here involves much higher skill sets, mturk looks pretty menial (and I don't see how anyone could live on what they pay).

3. Elsewhere in the thread was the suggestion that legal advice is needed. I will tread carefully here. I am a lawyer but there is no way I would give specific legal advice over the internet. However, if a particular legal question comes up and is identified as such, I bet there are a few lawyers kicking around who would throw in their thoughts. Just don't rely on our advice (be informed by it, yes) and don't sue us later.

Thanks Jill, in responce to yr comments:

Business model - yes screening of companies and workers would be supported by scoring on past and present performance and other evaluations performed on business and marketing plans, CVs, testamonials and business financials. Other issues like credit worthiness, bankruptcy and other historical issues could be looked into as a further measurement instrument through the usual channels.

Legal - references to legal in the posts was more in regard to the drawing of contract templates and terms and conditions not in providing adhoc advice to the companies.

Btw.. nice to see legal expertise joining the community :)

I am very skeptical...no go.

Great idea!!

Sorry, for not being in the loop for a while...
I haven't seen the ideas that some guys in our loop say to be/tried to be existing..

Basically I had an academic interest on this concept like..when it gets heavily networked..we can analyse the patterns, like the connections between various communities, their activities spreaded over various regions, their synchronizations, the point where one community gets linked to others..Dont know, may be an over-statement this is "predictability of events?", so on..

Hello Coxswain,

No problem with having an academic interest, just don't admit it on a commercial site ;-)

I think an analysis of CH as a phenomenon would be fascinating, in the appropriate place.

As for your idea...nice to see it's still on the board. It doesn't fit precisely with what I think CH wants to do, but it may be a good fit for a lot of people here. Guess time will tell.

Cheers.

This is a great concept & I have upvoted this already some time ago. There are already great comments here but today, I got the pressing urge to comment on this idea as I feel that the essence of this idea could be crucial to CH's survival.

A main problem area I see with CH today is the bottleneck in idea selection, processing & production. Assuming the current member & idea submission growth rate, you'll end up with some 20 good ideas at a time...

Even though CH is aiming to release fast ( targetting 6 weeks for 1st release ), it will take some months from idea conception towards release.
The problem is that CH does not ( currently) have the manpower to manage this product development & even has serious issues with their core internal development like Idewarz. Let' say there are 20 good ideas at this point, at the current pace, it will take ages to have these in the market fast.
In the meanwhile, these ideas are open to the public + non-protected & although CH claims not to fear competition, reality is that in the meantime other companies can pick up on 1 of these ideas and release it earlier than CH!
Besides the advantage of launching a product first & taking vast market share, a company could also focus on further development of this idea. Now , if 5 or 10 companies are doing this at almost the same time, you'll understand this will become a problem. This is the reality of competition.

I believe in the wisdom of crowds but as Idewarz is currently proving : gathering a crowd is not enough. This concept can only work if it's deployed well.

The only solution to the resource + time-to-market problem is to have a form of self-organizing virtual business units within CH, supervised by CH & delegated to community members. This way, ideas can get processed & released faster, people can work in parallel + focus & specialize on the development of certain ideas.

Don't get me wrong :
1. CH must remain in control, at minimum supervising the virtual business units
2. Idea selection can be done as what's proposed in Idewarz 3.0 ( only make it faster someway : it should not take months to pick out a good idea ! )
3. CH should focus on managing the idea selection + supervising the virtual business units & provide the tools necessary for the community.
4. Virtual business units should stay CH internal untill everything's running smoothly, then it could be deployed as a broader concept.
5. Effeciency in resource usage should be key ( not as now where different people work on the same task ???? ) + CH should guide/assign community members .
6. The virtual business units must focus as well on fighting competition & maintenance !, something a monolethic CH with a diverse product range can never do efficiently.

To conclude : look how big companies organize themselves : in business units to focus on dedicated markets !

Good idea, but I don't really see it as a feasible solution. Just too many what if's re: profit sharing, management decisions, ethical standards, etc.

What about a service that matches budding entrepreneurs by skillset? For instance, I'm a finance analyst with a lot of expertise in that field. I'd really like to start a business (have a couple ideas), but really need someone with an engineering background to partner with. I know there are many in the opposite position.

Love this idea.

I've noticed that getting things done in the pre-startup phase of a company is pretty hard unless you have a motivated bunch of people. Doing everything alone is just plain hard. This would significantly help startup's getting started and decrease the time to market.

To me it seems that CH is a bit too engineering focused vs. business focused (I haven't been around the site too much yet so I might be wrong on this one). This idea would allow business people to participate easier.

My comments:

1) Too vague --just how would it work? How do you ensure that you can provide the "expert" advice that these start-ups need? How do you decide upon what the standards for success are and convince the owners of these businesses that you can meet them?
2) It smells too much of a middleman ploy to suck off profits from whatever sucker decides that he/she can't manage his/her own company. How do you ensure profitability and lower costs when you are coming in to suck off 15% gross?

Sorry, but I'm not in.

I like it though it's pretty much like other freelancing sites... and it sounds a bit like this site as well, but to make something more organized as a site might be very cool, if it catches on of course.

I believe it could be an excelent idea. It is not only about creating, but also about maintaining great companies.

I think this is a fantastic idea! There are certainly enough start-up companies out there who just don't have the resources to make it big - and yet their business ideas are out of this world. It seems to me to be far more beneficial to give away some equity than to fade into obscurity as they would no doubt do!

Defensemaster, I don't understand your comments of "too vague". Doymarn seems to have adequately supported his idea and has further refined and explained it based on constructive comments.

And as for the idea being "too much of a middleman ploy to suck off profits" I really think you missed the point entirely: the Company only gives away what it thinks it needs to in order to attract the necessary resources from the Virtual Business Unit. The Company decides how much and how long, and the resources in the VBU decide whether its worth their investment. Seems pretty clear to me. If I were in need of resources for my company, I'd consider this route than see someone else better funded beat me to market.

Great idea Doymarn!!

I agree that this idea needs some sort of rating system for those people that are participating on the deliverables for the company.

I think there is also the collection problems that arise from these type of legal arrangements from companies. There's a huge risk level in this type of venture. If it goes big they aren't going to want to share the growth. If it goes small they won't have anything to share.

Also, until the community is big enough to handle a company's requests effeciently I'm not sure how many startups would be interested in this service. When you are a startup, everything has to go as fast as possible. Without a large community then that will leave new startups waiting for expertise.

I think that once CH is large and has a proven track record with a number of products then this idea could be great. Since CH's success could provide a large community that could respond quickly and also could provide valuable ratings on people's skill level from previous CH products.

I think this idea is just a little premature.

It's not that I'm in love with my own idea of a generic matching engine, really... but as I look at these two contenders, it strikes me that both exist to match A with B. Each requires a social network overlying the actual software in order for the thing to work.

So, which of these two ideas can get to market fastest? Which is most profitable after 1 year, 2 years, 5?

And upon what criteria should we base our judgement?

Answers?????

Techguy, in answer to your comment, i don't think this idea is premature at all, in fact i think it is the optimum time to put it in place. I would like to point you to my supporting blog entry http://doymarn.wordp...ag/vbuch-ideas-mgmt/ which expands Imhoteps comment about applying this concept to CH in the development and launching of the ideas CH selects. Please have a look at it, it could persuade you to the value this idea has in the early adoption of it rather than the late adoption of it.

Additional to the application of Virtual Business units to CH, another one of the other major benefits of this idea being launched is the pull effect it will have for new resource expertise, resulting in a big increase of new talent and membership to CH. I can see a large increase in the CH community of talent migrating from freelance sites like guru.com etc. in order to offer their skills to this business model because of its annuity scale of rewards as opposed to hourly revenues.

However, it would be a nice problem to have in having more business than that which can be accommodated by the resources available. Especially as the rewards this model encourages are large financial rewards per unit as opposed to millions of transactions with very small revenue tickets and unit profits.

The financial model for this site does not require that it needs to service tens of thousands of businesses in order to make a very healthy profit. It can afford to be more selective in the startups it wishes to service just as CH is selective in the ideas it wishes to develop. A statistic i read from a business site recently, stated that there are over 1 million startups per year in the USA alone, if we were to attract only 0.1 % that would allow for the VBU management company to choose from 1000 startups (USA) selecting the best opportunities to get involved with.

This like all businesses will be an incremental model, but unlike other models the resource attention will scale down as the startups become more settled and the resources will be freed up to work on new assignments but the revenues will continue to flow and increase.

I disagree with your point about revenue collection problems arising with legal arrangements, in fact the opposite is the case, when you don't have legal agreements in place that is when you start to have collection problems. If you are viewing collection problems from an independent contractors viewpoint i can see your worries but in this model the administration and management of collectibles is done by the company, an entity of substance that will be able to engage the necessary resources to enforce the contracts.

It's a good thing that this survived. It's a shame I have just paid attention to this just recently.

I must say this is a brilliant idea. I look forward to a new class of people: content providers in a community company setting.

Hi Jill, in response to your questions in your comment and email:

JILL: And upon what criteria should we base our judgment?

In summary this idea wins in my view in general because:

The idea is well thought out and well presented.
Informed member support is strong.
There is no known competition.
There is a distinct and identified need for this in the market place.
It has a renewable customer market.
It is not technology top heavy or complex to develop.
It has a long revenue generating period.
Revenue potential is very large.
The revenues generated come from a wide spread of markets... not a narrow niche.
It rewards the community, CH and the customer.
It will strengthen and expand the expertise membership of CH.
Members expand their revenue earning opportunities.
It will provide 'sticky' membership content.
It can assist CH in bringing ideas to market.

I have made extensive comments in this thread in reply to challenges or comment by members and i have also put up a detailed support blog for the idea hoping to give as much insight as possible in order to assist anyone to make a more informed decision. The blog covers everything from the Overview, Mission Statement, Risk Analysis, S.W.O.T Analysis, Financials to Activity Flows. If you haven't referred to it yet then i would invite you to visit http://doymarn.wordpress.com and hope that it can help you further cement your opinion.

JILL:Which is most profitable after 1 year, 2 years, 5?...

'Our Virtual Business Units' has a huge upside potential, the USA alone has in excess of 1 million startups every year. It will be leaner in profit through the gestation period of the first year but it will be much greater in the maturity of the business (years 2-5). The life cycle of the revenues of this business model is much longer than most other ideas and the revenue build is exponential and layered from previous effort. The revenues are also on going and not confined to a 'unit sell/unit profit' model.

JILL:So, which of these two ideas can get to market fastest?

My views are that the 'quickest to market' is not necessarily a major factor to judge an idea on. We now know that CH will select ideas independently (e.g. Trashtube) where they know it will take very little time and resource to build. So, i think we must focus here in the tournament, not on speed to market, but on the potential of the idea to be BIG and generate sustainable revenues over a long period of time. Some ideas in CH and the tournament are very much a quick 'fad type' of opportunity and although some of these may make a decent return on investment, i don't think they are the ideas that should win tournaments and receive the lions share of investment.

You posed a couple of questions to me in an email which i will answer here:

JILL:Your idea doesn't squarely fit those parameters. It has a lot of merit imho but can you explain (probably best to explain this publicly in your thread) how it fits the CH criteria, and / or why we should vote for it?

To quote CH ?We're looking for software ideas that: Target a mass market and can be bought, sold, and distributed over the Internet? My interpretation of this is that software ideas do not only relate to software packages, or software plug-ins but refer equally to web driven or web centric services where the software component is in the web design and back-end of the system. This being the case, i have no doubt that this idea fits within this definition.

JILL: I really like your idea but it is up against something really simple and light, whereas yours seems more complex and perhaps not a 6-week project. Perhaps you need to make the case for why your idea will generate cash faster for those who participate in it. That is probably the #1 criterion for the CH community (I'm guessing).

Can it be built in 6 weeks?... Yes, it is not a complex piece of engineering. The resource build will take longer to put fully in place but with effective marketing i do not see that as a big issue provided the right resources are targeted. We have a membership in CH at this moment in time that i am sure can provide the right resources to get it going.

I do not attempt to say that this idea will generate cash faster for the members involved in the build of this project. What i do suggest is that a greater membership of CH will now be able to earn revenues and not just those that build the selected ideas. Also, as i state elsewhere and my blog, the cash generated for those involved in the VBUs will be exponential to the time they spend on the VBU projects.

I hope that this long response helps answer your questions :)

It seems like the accounting for this idea is enormous. If I'm understanding correctly, when I work on a project for a small business then I earn RPs for that company. Those RPs own a portion of the percentage of the company that was given to perform the service. So, I earn some small percentage of the company, but I don't realize any financial return until the company either pays profit sharing or sells the company?

I guess CH has to take a portion of the company too in order to payback those people who developed the website for Virtual Business Units?

Seems like it's a better investment of my time to just go on Guru.com, do some work and get paid.

Hello canchita,
I am going to give short replies to your comment here as I don't want to bore the other members by repeating what has been extensively covered in previous author comments in this thread. You are obviously not understanding the concept or you have not sufficiently digested the comment thread to make the statements you do.

Might i suggest, to make things easier for you, that you read 'The Virtual Business Unit' blog which hopefully may assist your comprehension. You can find the blog at http://doymarn.wordpress.com

Responses to your comment:-

CANCHITA says: It seems like the accounting for this idea is enormous. If I'm understanding correctly, when I work on a project for a small business then I earn RPs for that company. Those RPs own a portion of the percentage of the company that was given to perform the service. So, I earn some small percentage of the company, but I don't realize any financial return until the company either pays profit sharing or sells the company?

I guess CH has to take a portion of the company too in order to payback those people who developed the website for Virtual Business Units?

DOYMARN: Again, if you read all the author comments you should be able to see where you made the wrong conclusion again.

Perhaps if you read my blog entry http://doymarn.wordp...m/tag/vbufinancials/ it may help you understand better what is proposed.

In summary, company equity is not the revenue stream, nor is declared profit, it is based on a share of Gross Profit paid on a monthly basis. The Virtual Management Company (possibly CH) will take a management fee from the collectibles. Revenues can therefore be immediate.

CANCHITA: Seems like it's a better investment of my time to just go on Guru.com, do some work and get paid.

DOYMARN: With your last statement i really don't understand why you bothered to join CH at all! The whole concept of CH is to invest your time for exponential rewards that are not directly related to the usual 'get paid for the time you work' but is specifically designed to allow you to invest your time in a project where you get returns far greater than just the time you put in. I think you joined the wrong community if this is your expectation and understanding of the CH model!

The VBU model also is designed to provide exponential returns on the 'workers' time but more immediate and more measureable than equity participation and declared profits.

Sorry for the misunderstanding of you using gross profits and not company equity. So the payoff is faster for the contributor, but I still think the accounting for this will cost VBU a lot of money to manage properly. I can see a situation where you're having to audit each company's financials to ensure that they are reporting gross profits properly.

My last statement referred to getting a return on the equity in the company vs. Guru.com. Also, some of us are extremely intrigued in the CH process, but waiting to see it prove itself. I guess time will tell if I joined the wrong community or not.

I voted for your idea because it is well presented and reading your blog you have given it lots of thought and covered most of the aspects that a business plan should cover. I especially like the fact you did a Risk analysis and S.W.O.T analysis to show you have looked at the downside elements you may encounter.

I can see that this has the potential to be a very big generator of income for the individual contributors and for CH, but do you? I also give it strong points because it is not a flash in the pan business and has a long life.

I pointed out the poor revenue potential of Filmfunder, so to be fair to your challenger I would like to see if you have given enough thought to the revenue potential that your idea can generate?

In your financial blog posting you mention how the revenues will be achieved but you don't give any idea of the potential revenues you envisage. I think that this is important to any decision to the viability of a business and in my view if you haven't done the research or modeled this aspect then you need to in order to convince the voters of your confidence in this regard.

So present something so that I can see that you are not flying blind and convince me to keep my vote with you.

andy54:
Thanks for your positive opinion and vote. Its a late request but i have put something together as you requested to provide some substance to the potential revenue earning capacity this idea can realise.

CH doesn't currently ask for financial forecasts only 'how it will make money' but i agree with you that the viability of an idea here should be judged critically on whether it is going to make big profits. After all, why would CH want to put good money behind an idea that is going to present little returns or very short lived returns.

However, because of the diversity of 'Our Virtual Business Units' it is hard to come up with a definitive revenue forecast. So what i have done in this short notice is prepare a simple flat conservative model to show the scope of revenues that can be achieved and i am going to base it just on the USA market of 1 million startups each year with the VMC getting a 0.6% market share.

CH mentions a target of 28,000 members, guru.com has 578,000 professionals on its books for contract work, in 160 categories of skill sets. I assumed for this exercise that we get 6000 active VBU members, which reflects only a 1.03% migration of guru.com membership for example. I provide some worst case scenarios at the end where one of them takes this down to 1000 members and the model still generates $892 MILLION!

I will present the total revenues first followed by some assumptions which detail how these were arrived at.

REVENUES (based on assumptions below)

Total VBU Revs VMC(CH) VBU members
YEAR 1 $ 720 million $ 72 million $648 million
YEAR 2 $ 864 million $ 86 million $778 million
YEAR 3 $1037 million $104 million $933 million
YEAR 4 $1244 million $124 million $1120 million
YEAR 5 $1493 million $149 million $1344 million
---------------- --------------- ----------------
TOTAL $5358 million $535 million $4823 million

SIMPLE CASE SCENARIO - ASSUMPTIONS
For the sake of simplicity and conservatism i have assumed that the businesses will work on a GP of 30% and the startup offers will be 10% of the realised gross profit i.e. 10% share of the 30% gross profit which is effectively 3% of gross sales... not excessive!

Agreement is for a 5 year pay back period.

VBU resources devote 1 hr per day on a 5 day working week per company and they service 2 companies per unit. So effectively VBU resources devote 2 hrs per day, 20 hrs per mth.

VBU actively services the company for 2 years but revenues will continue to flow for 5 years.

CH achieves a VBU work force of 6000 professionals (only a 1.03% migration from guru.com)

Each VBU has a compliment of 2 resources.

Therefore based on these assumptions, we have 3000 VBUs servicing 6000 startup companies (which reflects only 0.6% of startups in USA per year)

The selected startups achieve gross sales in the 1st year of $2 million which gives an effective gross profit of $600,000 , therefore the VBU agreed fee of 10% of GP is $60K per company for the first year.

Therefore, each VBU achieves (servicing 2 Coys) $120K in the 1st year ... of which $12K goes to the VMC (CH) for its management fee and the remaining $108K goes to the VBU workers ($54K to VBU member).

6000 companies paying 120K generates $720 Million in 1st year alone!

Revenues for years 2 to 5 are based on startup revenues in year 1 escalated by 20% per year.

WORST CASE SCENARIOS
These are the results based on the same model above but with these variations.

Scenario where VBU services only 1 company = Total 5yr Revenues of $1.34 BILLION

Scenario where revenue escalation is 0% not 20% = Total 5yr Revenues of $3.6 BILLION

Scenario where resource pool is 1000 members and startups = Total 5yr Revenues of $892 MILLION

CONCLUSION
This is a BILLION dollar business even on worst case scenarios.
Gross Sales are conservative and based on a very selective 0.6% market penetration.
GP was conservative at 30%.
Resource membership was conservative based on just a 1.03% migration of guru.com for example.

There are a lot more permutations than those reflected here but this is the best i can do in this limited time and i hope they give you some indication of the financial opportunity this idea invites.

I might get time to update my blog with the detail of the different scenarios, you are welcome to check there in case i manage to post them before voting closes:)

You will find the financial models at: http://doymarn.wordp...m/tag/vbufinancials/

While those financial projections look lovely, your assumptions are seriously flawed. You're saying that a start up in its first year will make $2million and that $600,000 of that will be profit. Even if this is not the company's first year, but one of the first five, this is incredibly unrealistic.

Having started multiple companies and worked for startups in three continents, I can tell you that very few companies will post any kind of financial record like that in its first few years.

There are some, and I've worked for at least one, but they are the exception rather than the rule. Also, they tend to succeed based on very strong founders, people who seem to spend every waking hour learning everything they need to learn in order to make the business work. These are the sorts of people who have a hard job letting others take on any kind of responsibility, even people that they hire to work in the same office, so having any kind of virtual service is almost anathema to that personality type.

Your statistic of 6000 startups being 0.6% of startups in the US includes all the businesses that are never likely to make more than $100,000 in a year - single person businesses, corner stores, plumbing services and so forth.

Having said all that, I think the idea is really good and that it is worth building and can make money. I just think it's not going to be a billion dollar business in a year as your models seem to suggest and I don't want anyone to be misled by your figures.

Thanks Aidan, but you seem to be saying that your experience is the measure of the total startup industry in the US and whilst i think your are a talented and experienced fellow i would severely question that you are an expert in the economic performance of the startup businesses in the US.

Respectfully, your assumptions are based on your experience and I do not question that in your experience that you seldom achieved these targets. However, i doubt whether your startups spanned the entire business spectrum either, there are many types of business that achieve much higher sales revenues than i assume in this model. You also infer i made a claim that they made a profit of $600,000, to be clear here, this model refers to Gross Profit not declared profit or bottom line and a 30% gross profit is not excessive!

However, you did admit that 1 of the companies you worked for did achieve this level of performance! I don't know how many startups you have been involved with in your career but if this represented 1 company out of 10 that you were involved with, that would reflect a 10% ratio.... i only assumed a 0.6% selection. As i have stated in a response previously in the thread, i think that the marketing of this idea should be targeted to the elite of the startups not the one man bands!

One of the reasons i took such a low percentage market penetration (0.6%) was so that one could discount the 'mum and pop stores' or the smaller sized business and focus the business model on the better prospects.

I never attempted to mislead anyone with these figures, i made my assumptions very clear and i also provided worst case scenarios, where even in one scenario i reduced the assumed startup success DOWN to 1000 startups, reflecting 0.1% penetration with a reduced resource component of 1000 members. This scenario still generates $892 million over the 5yr period.

I also deliberately worked on a 5 year projection, so that revenues could be interpreted over a greater period and account for some startups that may take longer to generate income than others.

I put in place a worst case scenario of a flat revenue projection accounting for a zero increase in sales over the 5 year period, so that this could reflect a lesser sales revenue achievement by the startups and compensate for some companies that don't achieve the $2 million sales target within the mix. This model still generates $3.6 billion over a 5 year period.

I posted the detailed models on my blog so that any one interested could duplicate them and play around with the model. There is nothing here that i am trying to hide or mislead anyone with. I am only showing what this idea could generate with the right resources in place and the right mix of customer. If you don't like the $2 million sales target, then reduce it to $500,000 which gives a GP of $150,000 ... this model still generates $1.34 BILLION over 5 years ... are you going to tell me that $150,000 Gross Profit is an unrealistic target???

I have been in business for many years myself, computer bureaus, software house, computer retail shops, packaged accounting software, mobile commerce and Internet payment systems, in two continents. I was a business analyst for some years prior to that, with a large US corporate, however, i am not putting myself forward as an expert into the US economy or any economy for that matter. All i attempted to do here was satisfy a very late request by one of the voters to show some conclusions as to the possibilities of revenue generation by this idea, which these figures do.

I provided assumptions which are not unreasonable to achieve and even if one takes the worst model this idea is still a generator of considerable income beyond what i can see with any of the other challengers in the tournament. In fact i have seen no financial forecasts forthcoming from any other ideas.

I read your blog and i know you are very supportive of Andy Doan's Filmfunder idea and respect your wish to support him but i respectfully do not think your own experience in business makes you the expert or measurement stick of a much wider mix of industries than your experience can claim and your categoric statement that my assumptions are seriously flawed is a serious flaw in your judgment i think.

This idea has global appeal and i didn't even attempt to add in the opportunities for other continents. Statistics published on 27-09-2006 for Europe state that there are 23 million SMEs in Europe... a lot of these are also potential customers! I haven't had time to research other continents but I ONLY used the figures of new startups every year in the US but there are millions of startups already in place in the US, still in their growth curves that could well benefit and be customers of the Virtual Business Unit concept but i didn't want to go too crazy on the numbers but the numbers still come up really strong!!

Doymarn, don't get me wrong. I think your idea is good, and I've said so on multiple occasions. I just think the figures are optimistic.

Ignoring everything else I said, I think creating a $1bn company using this model in one year is not likely to happen.

I think it could be a big opportunity, there is no doubt about it, I just hate seeing big numbers thrown around because it can unduly influence the vote - e.g. make people say "oooo, it's going to make more money".

Aidan, there is no question in my mind that ?oooo, it WILL make more money? than 'The Filmfunder' or the other ideas left in the tournament. That is why i have gone to great lengths in the replies and examples to try and demonstrate this to the voter... totally transparently, no smoke and mirrors and full disclosure of the base assumptions, so that no trust in ?my opinion? is required, the facts speak for themselves.

Whether, it is a 1bn company in the 3rd year (not the 1st year as you incorrectly cite) or not will depend on a number of factors still to be measured, marketing being the most important. But the potential is definitely there and that is the whole purpose of these revenue pictures, to demonstrate the potential!

In closing, my advice to a voter is , ignore myopic views, read my replies in detail concerning the financials, or visit my blog to see how the spreadsheets arrived at these figures and make up your OWN MINDS based on what is fully disclosed and your own knowledge and opinion.

Because the figures are BIG doesn't mean they are invalid.

Doymarn,
I have to say I appreciate your openness and your involvement in your idea. Also, I appreciate that you tell people to take a look at the numbers and change them as they see appropriate.

Like Aidan, I also believe that a number of your assumptions are way off base. I'm not saying this because your concept isn't good. I've said its good in other comments along with my belief that it's the wrong timing for this idea. However, here's just a few things that I think people should consider when looking at your numbers above:

-You can't use 1 million startups and then assume $2 million in revenue. My guess is that there are probably more like 10,000 startups each year that have $2 million in revenue. That puts you at needing to capture 60% of the market and not .6%. This is my personal belief. People can adjust it as they see fit.
-I don't think you can assume 6000 VBU's in year one. In fact, I would guess that 6000 VBU's is very aggressive for year 3. I believe it will take considerable time to prove that the model works and build a clientele.

Much more could be said about the financials since they are all assumptions that each reader needs to look at and decide what's accurate.

Also, I couldn't find anywhere (although I may have missed it in all the info) how long you would get paid a percentage of Gross profit and how long a VBU would work for the company to get that return. These factors are important to know if people would want to work for that price. What if a company turns no gross profit? Then, the VBU gets paid almost nothing. Maybe I'm mistaken, but I think what you refer to as Gross Profit I refer to as revenue. Is there a difference or could you define what you consider gross profit?

I also found your advice a little demeaning to commenters when you said, "my advice to a voter is , ignore myopic views, read my replies in detail" I understand that this is a tournament, but as part of a community comments of every kind should be welcomed and if they are innacurate the community should and will correct it in future comments.

Yeah dude, chill out :-)

I'm not attacking you or your idea, and I apologise if you feel I am.

Maybe I should change my avatar to something friendlier :D

Techguy:
Hello again:) Let me try and be brief.

My view of the market size was myopic in the assumptions i gave, so let me expand that view but temper it with your assumption that there is only 10,000 startups in the performance region of $2 million turnover in the US out of the 1 million startups each year.

Lets now take your 'guess' at the figure of 10,000 startups and widen the view and fairly add to that another 20,000 being startups for the last two years prior which would still be in a development curve and therefore fair game. That gives us 30,000 startups that fit your assumption, now add to that 20,000 SMEs fitting that criteria within the EU (that's only 20K out of 23 million SMEs)... that gives us a 50,000 companies potential customer market place. Now lets take just a 1% penetration, that will give us 500 companies.

Now lets drastically reduce the workforce to 500 members to meet with your view that 6000 is too aggressive.

If we now plug in these greatly reduced figures of 500 companies and 500 resources into the model it would still generate $446 million revenue in the 5 year window!

Any which you throw numbers at it, it still comes up a winner!

BTW, If you read the first submission of the figures you will see the assumed period of time of pay back was put at 5 years for the sake of this model. It was also stated that you could assume a two year engagement of work. Also if you read my blog you will see i have a section devoted to a risk analysis and S.W.O.T analysis that discusses the downsides.

In closing, I equally think that my comments as a community member can be defended as aggressively as the challenge is metered out. However, i did my best not to be aggressive and to just point out inaccuracies and flawed assumptions, sorry if you took it that way.

Also, lets not be naive and suggest within the tournaments last hours that i should not defend my statements and rather wait for the community to address the issue... please!!

Aidan:
I am passionate about my idea and convinced it will be very lucrative, any challenge i will take seriously but i do my best to substantiate why i make my conclusions.

A comment like 'your assumptions are seriously flawed' is very strong wording and as such would be interpreted by most as an attack and fairly so. I was very conscious to measure my reply and not be personal in the defense but perhaps i didn't always succeed.

The fact that it is 4.30 a.m here and it has been this way every night for the last two weeks and with copious cups of coffee does not help in being chilled either ;)

If i offended you my apologies, it is also not my intention but i believe the only effective way to communicate is to be frank and honest... and that is my way... sometimes i also ruffle feathers;)

Keep your avatar, we have got used to it now:)

This has a lot of potential.

I think this idea deserves another look especially from new members who were not yet around when it hit the limelight. Doyrman, do you have plans to turn this into a business? Its a great idea. Im sure the forum and the business development process it will undergo is going to be a rich source of information for the crowd.

Thanks Maurreen and Cycko

Yes, i am in the process of putting a project in place, hopefully soon it should be in the business projects section... i will let you know when:)

Hi Doymarn,

I replied to your email but there was a glitch and I was not sure the message was successfully sent. I always experience glitches so its my habit to copy before clicking the submit buttons. Im pasting it here to be sure:

I am working as consultant for small business and cooperatives focusing on business development: concept building, feasibility study and business planning. Currently I am employed as an Area Vice President of an ICT company in charge of rolling out the new products in Southern Philippines. The present flagship product of the company is a turnkey Internet Cafe Franchise bundled with value services like on-line selling of cell phone electronic loads, VOIP call services, pre-paid cards for gaming and phone calls, cafe-size call center and voice transcription hub, etc.

But Im planning to resign my job after my negotiation with an investor to finance my "expedition" at CH will be finalized.

I would like to participate first as business forum discussant and maybe later apply for any job listed that commensurate my interest, skills and time. I can specifically contribute by sharing some perspectives on small businesses that are in transition to become e-commerce enabled. Another reason for my participation is to explore interface of your project with mine especially the NPEG, CrowdTrade and CrowdMeet.

Thanks, Cycko, i did get your email, your experience underpins your quality advice and ideas. As soon as the business invitation bug has been fixed i will be able to invite you into the project;)

Hi Doymarn,

In my project discussions, Ive been referring VBU as a sort of back-office service, I hope I got it right. By the way, I incorporated the 10% of gross margin VBU service cost in my discussion on NPEG financial feasibility assessment. From there, you can see how it fits in the overall cost structure. http://www.cambrianh...sion/1372/#post-9308
Please give me feedback if its viable and fair. Its a layman's presentation though. I have no formal schooling in accounting. :-)

Hi Cycko,

I think you are viewing VBU naturally through the needs of your projects and although i am sure we can find common ground for both yr NPEG project and your other community projects, there is already a lot of overlap from your ideas and what we are planning in VBU and the Community Co-op.

But rather than turn the comment area of VBU into a forum, I think it best to communicate through the forums of the pertinent projects or PM. I will respond to yr NPEG assumptions in yr project forum if that's ok with you ;)

Its okay for me Doymarn. Let's Let a hundred flowers bloom.... and school of thoughts contend. :-)