| Are you an
entrepreneur but don’t like selling alone?
A consortium is a combination of different
industry-types of entrepreneurs working together to attract business as a
group. Even though each member maintains their individuality and operates
as the same as self-employed. They band to create a more valuable package
to fulfill bigger needs for clients and for increased visibility and
credibility.
The positive side to being part of a
consortium is that you can work on larger projects. Larger than any
single entrepreneur can accomplish alone. Together they can enter into
contracts that require multiple skills and still maintain the freedom of
their entrepreneur-hood they so desire. They gain being part of a team
and organization while still keeping your independence.
A consortium can provide the security of
core revenue that helps them breath, not chase prospects as hard, and
usually take care of regular living expenses. It is also a great way to
transition from employee to self-employment. The transition allows the
learning and growth at a slower steadier rate. Each member learns from
other group members by sharing their success and mishaps. This way the
risk factor of being self-employed is less.
The consortium can also band products to
create higher priced, more valuably perceived, packages. Larger packages
are easier to sell. A group package of various authors is more attractive
to buyers. Everything that the buyer needs is then packaged and available
with one purchase.
Being a part of group also removes the
pressure of trying to be an expert at everything. And allows each
individual to focus and be brilliant at what they specialize.
There are many types of group
configurations for consortiums. Let me give you a few examples of some of
them. These groups formed a single purpose.
An entrepreneur consortium can include:
* CPA
* A writer specialty in business plans and advertising copy
* A financial management consultant
* a human resource consultant specializing in benefit programs
and employee manuals
* An Internet consultant
* Web master
* Strategic planning consultant
* A secretarial service or virtual assistant
* Graphic artist
* Brand specialist
* Public relations firm
A training consortium can include:
* Writers (copywriter, web writer, direction mail writer)
* Editors (line editor, grammar editor)
* Reference checker
* Graphic designer
* Multimedia specialists
* Videographers
* Presentation trainer
* Voice coach
A software consortium can include:
* Programmers
* Multimedia specialists
* Graphic designers
* Marketing consultants
* Packaging consultant
* Retail consultant
* Product Development consultant
* Accountant/Bookkeeper
* Virtual Assistant
* Business coach
A consortium can form that specializes in
children books or educational products. The group can consist of
educational specialists, graphic designers, marketing consultants,
self-publishing expert, agent, and various types of writers.
Artist guilds work off the same principle
of consortiums. Some consortium, many guilds in fact, purchase real
estate together to display and sell their art.
Let us follow the money trail of a
consortium.
The client enters into a contract with
the consortium. The consortium bills the client. Each consortium member
discounts his or her rate and bills the consortium.
The billing difference supports the
business side of the consortium. It can pay for marketing or other
overhead expenses.
After the client pays the consortium, the
consortium then pays the members who worked on that project.
Okay, that is fairly straightforward.
After the client receives their
contractual services by the member, the member then bills their time to
the consortium in “units” not dollars. Units work better than dollars
because they equalize the various billing rates of the members. For
example: a CPA may bill four units per hour, a writer three, and a
virtual assistant one. The consortium keeps track of everyone’s units and
pay members on a regular basis as set up in the consortium’s charter.
When the consortium is properly
tax-structured, the revenue and expenses can balance themselves out. It
is important to see a tax professional for details on structuring a
consortium for tax efficiency.
A challenge when starting a consortium is
to make sure that when looking for members, prospects do not mistake the
first meeting as a new networking group starting up. People confuse the
two and show up. This will give the organizers a misrepresentation of the
“real” number of interested parties.
Joining a consortium is not a short-term
project. It is important to know that joining or starting a consortium is
long-term. There is the initial investment of time and money from all
members. The startup phrase doesn’t occur in one meeting. An agreement
on many items needs addressing. Some established consortiums require a
minimum of three years, however, many startups can require five, ten or
twenty-five years commitment.
Oh, but when they work, they are make
being in business so much nicer.
Usually the founding group elects three
leaders to handle the administration. One of the three may have a higher
voting right. Usually the one given the higher voting right is because of
their investment of time or money, but not always. These leaders have the
responsibility of organizing meetings and splitting up the consortium
responsibilities between members in a fair manner.
Money is an important factor when
entering into these types of agreements. It is the main purpose of
forming the consortium. Money is also one of the main reasons they
breakup – like most marriages. Because of this, it is important to have a
buy-out clause in the agreement that protects the members and the
consortium.
Respect, appreciation, and acknowledging
of each other’s contribution is mandatory – put a cap on the M to
mandatory. The boundaries and scope of each other’s services must also be
clear. It is not uncommon for some members to offer similar services.
Thus, the boundaries of who does what is extremely important.
Being a consortium member doesn’t ban
them from obtaining outside clients for their particular specialty.
However, working with other members to gain contracts separate from the
consortium breaks their membership in the consortium. And always have
consequences stipulated in the consortium charter.
Communication and cooperation are
challenges for groups of this size. Each member needs to make big effort
to work and be patience in these two areas. The need for professionalism
is important so that the group does not degenerate into personality
conflicts or professional battles. Having an outside arbitrator for
disagreements is a good idea.
Even though there is a challenge in
finding the right members and keeping the relationships working, remember
the advantages outweigh any and all cons. Consortiums have been in
existence for several decades now and have proved their possibilities.
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