Have You Ever Thought of Joining or Forming a Consortium?
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:
* 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
* Presentation trainer
* Voice coach
A software consortium can include:
* Multimedia specialists
* Graphic designers
* Marketing consultants
* Packaging consultant
* Retail consultant
* Product Development consultant
* 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 speciality. 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.
For a list of additional resources, visit: http://www.abundancecenter.com/articles/consortiums.htm
Catherine is a veteran entrepreneur and communications
master coach. Additional articles, newsletters, workshops,
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