(Funding) Month-by-Month: the Financial Model

We’ve shared how our model for a self-funded economic stimulus can help a self-sufficient community deliver:

This article and accompanying graph illustrates how our solution works, far more concretely.

To begin we ask our customers to declare a community of a finite size, for example: 3,500 homes and about 5,000 residents.

We also recommend they set modest and achievable goals, for example:

…by our six month anniversary we aspire to have 1,000 community members in our marketplace, where 100 are sellers, and 900 are buyers.

Although 214 Alpha has a software app that delivers all the features needed for self-governance, much of our engagement is actually high-touch professional services, using the Community Activation and Launch Methodology (C.A.L.M.) as its framework.

The Community Activation and Launch Methodology identifies and activates leadership from within the community and the first two months are invested ensuring they are structured and ready to manage the months which follow.

In this first two months, the core administrative (“self-governing”) team is educated on the use of the first three of seven features necessary for self-governance:

  • digital identity & identity verification
  • communication (chat, social feed)
  • marketplace (commerce)

In the third month, the self-governing administrative team begins to pursue initial community outreach by inviting a small number of buyers and sellers to participate in a

…“buy local first” program, designed to emphasize pride of local community.

This program progresses month by month until the six-month milestone.

In the six-month projection, total marketplace revenues from sales in the community activation app would amount to $40,000/month, enriching the community of aspiring entrepreneurs.

At this volume, each seller generates almost $400 additional gross household revenue per month, which is enough to keep many people in their homes, just as so many are facing eviction.

Because the self-governing community keeps 5% transaction fee per marketplace transaction, the self-governing team generates about $2,000/mo in transaction-fee-based revenue.

(Note that each self-governing committee gets to choose how much they charge per transaction; some say they’d prefer 10%. It’s up to you, but we recommend 5%).

It’s up to the team how to invest or spend that money, but it’s our recommendation they invest in a

…“buy from local producers” program, activating “learn and earn” educational programs that will help members launch a microbusiness.

For example, in Texas, the Texas Cottage Food Law says that as long as a home-based food business generates less than $60,000/year in income, there’s no need for a license, permit, or inspectors.

A “buy from local producers” program would leverage a commercial kitchen to help people scale their home recipes in a predictable manner; something Ruth Glendinning of Future Story Lab personally experienced a decade ago when she launched Community Renaissance Market and incubated almost 90 “microbusinesses,” earning her national recognition on ABC News.

Nine-month milestone:

Investment in a community’s productive capacity delivers a multiplier effect, and by the nine-month milestone we project total marketplace revenues from sales in the community activation app increasing to $120,000/month, enriching the community of aspiring entrepreneurs.

Note that this is money the community aspires to keep inside the community. This is explicitly emphasized in the 9–12 month milestone (described in greater detail, below).

During this phase, the goals are centered around marketplace diversification: a greater number of sellers, increased sales, and a greater number of producers.

Now, with a steady 5% of transactions automatically deposited to the community activation account, there is $6,000 per month accumulating to self-fund the community.

Again, the self-governing team can begin to pay themselves, especially if the community structures as a 501(c)(3) — the money is reconciled as an individual contribution to the non-profit, which means it can be directed to operational expenses (normally not an option for non-profits that rely upon grants for their funding).

It’s our counsel that the community invests further into:

more earn and learn programs that encourage a greater number of local producers AND producers sourcing their inventory from within the community.

For example, rather that purchase tomatoes from Walmart, have the makers of homemade salsa source their tomatoes from an urban gardener’s tomato patch from within the community.

In the 12-month projection, total marketplace revenues from sales in the community activation app increase to $191,200/month, enriching the community of aspiring entrepreneurs.

Now, with a steady 5% of transactions automatically deposited to the community activation account, there is $9,560 per month accumulating to self-fund the community.

So far the community has relied upon US dollars for all purchases. At this point we’d recommend the community begin to fold in a complementary currency that’s exclusive to the community.

The community would therefore have an option to buy goods and services using the US dollar, or they could use a community currency valued at a greater return on investment.

For example, the community currency may be valued at $1.25 / US dollar, which would represent a better value for members seeking to source their goods and services from within their own community.

How is this reconciled?

Instead of having to pay a credit card processing fee (when using the US dollar), the processing of community currency occurs within the marketplace app (created by 214 Alpha). This savings in processing fees are passed onto the community, enabling them to prop up a complementary community currency with an elevated return on investment, relative to the US dollar.

Eventually, the community administrators can ask their members to vote for what to do next. After all: the 214 Alpha app is actually a governance app, with all the features necessary for autonomous self-governance:

  • Identity and identity verification (no fake accounts)
  • Communication (chat and social feed closed to community)
  • Marketplace (commerce and inventory management)
  • Banking (local loans, crowdsourced funding, etc)
  • Reputation (social clout)
  • Arbitration (conflict resolution)
  • Governance (voting, roles and responsibilities, policies, etc)

It’s just that simple.

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Kent Dahlgren

Kent Dahlgren

Product management fix-it guy. World-famous people skills. Extremely small hands. (edit) marketing lady says I’m also supposed to say “CEO of software company”