Tuesday, November 15, 2011

more about structuring a company

The earlier posts where I discuss the problem of acquiring partners - organizing a business - are pretty heavy going, not because of my ponderous style, though there is that, but because they reek of wishful thinking. Here is a little history of my thoughts since writing those posts: "Maybe I shouldn't write about my dream of starting a business. Maybe I'm supposed to just do it. But that isn't right. I'm supposed to do something, but I'm also supposed to organize a company, to do more. I want to organize a business. I want to employ people.

"I have zero funds to pay employees. I'm trying out ways to raise funds by making and selling things with limited, low cost resources, but the prospects, based on my experience with this, including significant action - if only in the recent past -, suggests results may be some time in coming. It's really a form of diversification if I also pursue the notion of acquiring partners.

"What I need to do is describe my plans in a way that will make sense to investors. This is probably somewhat complicated by the fact that I am deeply interested in the concept of equity participation - for the work force, and all of it, that builds the product line. There are, therefore, two kinds of equity involved: financial and sweat.

"I've been trying to work out what this means. My previous efforts have deteriorated into various kinds of muddled writing, but I think I may see, now, taking a more simplified approach, more focused on the actual, real life purpose, how it goes together.

"The purpose is compensating people to work on and execute a set of plans. The plan is to distribute an appropriate share of earnings, at the end of one year, to each person who contributed toward generating them - while at the same time maintaining majority ownership in the hands of selected persons for a fairly extended period of time.

"If we think about this, the amount of earnings we expect to generate in the first year is what limits the number of compensated hours we can schedule during that year.

"During subsequent years, we need to factor in compensation which early participants should receive from current revenues, even if they aren't still active in the work. Their early work is the foundation upon which later work proceeds. We need a way to balance the value of the earlier work and that of the ongoing work in calculating the distribution of earnings. Over time, though, the share allotted to early participants who have not been active in the work of the company should be diluted.

"Distribution of shares seems ideal for managing this balancing act. I don't have a complete picture of how that's done - or of how the requisite corporate structure is set up. All I can do is try to map out a process of work, and show, by describing it that way, how it might create earnings.

"In the early stages, attention will be focused on some highly technical matters - organizing the entity, developing key technologies for production. This is properly sweat equity work. It is substantially work in the spoken and written word, and in media, all of which are well suited to nature of sweat equity participation: the participants can make very substantial contributions with a limited commitment of time. Working substantially via correspondence, the team can accomplish a lot while each member remains free to engage fully in diverse other pursuits.

"At the same time, some of my revenue generating angles are reaching a certain stage of development which might give them the quality of being able to "scale up." They are, perhaps, ready to be described, in the sense that is required to perhaps qualify them as components of an investment vehicle. I described something along those lines in the first post on this blog - the yard - and palm power (but just click the "about" link in Labels ... or, click here ... and then scroll down), but those musings largely don't apply to the goal of generating earnings in the first year. I am preparing to start a blog which will describe some more relevant plans for that very initial stage."

We began hiring on October 20, 2011 ...

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