I hope you had a super fun time at the event today. I was there in spirit. I’ve moved to Boston to focus on sustainable finance and got ill trying to do too much.
Anyhoo, the discussion was going to be about using permaculture principles to develop an approach to the economy and running a business that promotes the highest quality of life possible for everyone and everything involved.
I was going to focus on tools and information for business owners.
Here are the key points to keep in mind and resources regarding each:
1) What is the difference between a sustainable and non-sustainable business? You could substitute the word “resilient” or “thriving” for “sustainable.”
One important point is that thriving businesses focus on stakeholders and are accountable to everyone and everything they affect. Other businesses focus on shareholders and are accountable solely to the people who invest monetarily, whether or not they have a close relationship or direct impacts mutually.
Please read The Shareholder Value Myth by Lynn Stout for more info on the distinction. Also Strategic Management by R. Edward Freeman. Both books explain the limitations of shareholder thinking and explore how to actually improve the quality of civilization through business, as opposed to running businesses at the expense of civilization.
A general idea to keep in mind is that businesses “create value.” They can create value for a limited group of investors, or they can create value for everyone and everything. The latter approach yields many benefits for the business and its owners, and is really the only way make a profit since one isn’t really making money if taxpayers are covering for one’s disasters and employee healthcare.
The groundbreaking book One Report details an approach to financial reporting that will give business owners further ideas about for what a business is accountable and how more meaningful reporting could usher in an era of thriving businesses. (Businesses have done well, or thrived, in the past, but generally as an exception in a landscape of poverty and compulsive work.)
Another general point is to keep in mind whether your business embodies the permaculture values of “People Care” and “Earth Care.” Do you contribute to the quality of life of your employees, customers, board members, community members? Are you just a neutral influence? Are you detrimental? How about the environment? Do you respect the carrying capacity of natural resources? Contribute to sensible and nourishing urban planning? Externalize environmental damages such that your income statement shows a profit whereas you’re actually sucking value out of society? Are you improving the environment? Thriving businesses co-create thriving communities and their environmental context.
2) Entity types –
It’s worth taking some significant time to research and consider what entity is right for you. The entity is the legal form of the business and the form you choose affects your liability related to the business (what people can say is financially your responsibility personally even though the issue in question might be a result of business activities) as well as taxes. It also affects the extent to which and ways in which you control the business.
Google these types of entities:
- C Corp
- S Corp
- B Corp
- 501(c)’s: 501(c)3 is a well-known form of nonprofit. Certain forms allow for political activity while others do not. Ditto for agricultural activities. You can mix revenue generating activities with a nonprofit structure but you have to be very careful about how you do it.
- Associations and cooperatives
I’m creating an educational nonprofit with agricultural and political activities and am getting advice from Cutting Edge Capital in California (http://www.cuttingedgecapital.com/). Their fees are reasonable and they can at least help you understand what you should ask a lawyer and where to look for more information.
Michael Shuman’s Local Dollars, Local Sense has case studies about different kinds of businesses of different entity types and some of the fundraising approaches they’ve used as well as issues they’ve encountered.
Business Model Generation is a very popular book that guides entrepreneurs through the process of developing a concrete structure as to how one does business, or one’s “business model.” The business model is particular to each business and at least exploring ideas about yours will help you to understand the type of entity that is best for your needs.
Your accounting systems and financial reporting requirements will also be different depending upon the entity you choose. The B Corp organization offers some basic consulting on whether the B Corp status is appropriate for your business. Otherwise, get a good accountant. It’s worth going the extra mile in your accounting so that you know what you’re really making and where, and so that you’re complying with the law and paying the right amount of taxes. You can ruin your business through inaccurate accounting.
3) Where to get money and for what:
Again, it’s worth finding someone like Cutting Edge Capital to help you to write a fundraising plan. Michael Shuman’s book also details ideas, as do Owning Our Future by Marjorie Kelly and What Then Must We Do? by Gar Alperovitz.
I would suggest reading these books and jotting down what you find interesting.
Write a basic business plan through liveplan.com. An affiliated site has sample plans – bplan.com. Focus on start up funds – what you need to get started – and on how you can maximize your efficiency so that you are making money as quickly as possible instead of relying on further investments.
For example, say you want to start a business that needs $150,000 in the first year for a facility and payroll (include healthcare and tax calculations in your projections). You’ll make $125,000 in the first fiscal year because you’re operating only part of the year but then the next year you’ll make $500,000 and net $250,000 such that you can pay everyone back (you might make much less profit on your revenues – just an example. Please look up and research the difference between revenues and profit.). Not too bad. If you find that you’re taking several years to pay people back, you need to find a way to make more profit sooner to pay people. Or, for nonprofits and other eligible entities, get more grants and similar funding.
Then, when you have an idea of what you need to start the business, look into how you can raise the funds through your community. Direct public offerings, self-directed 401(k)’s, memberships, pre-payments, and crowdfunding are a few increasingly popular options.
Find a good lawyer and someone to help with the fundraising (an organization with a large mailing list, legal know-how, and expertise in securities issues as well as options for investors and business owners – Cutting Edge Capital is good) and raise your money.
The Foundation Center has online directories of funders to which individuals and organizations can subscribe. You can research organizations and particular grants and other funding and apply for the money using the info from the site. The Foundation Center also has online and live classes in issues related to business development. I enjoyed their grant writing class.
Also check out organizations like the Solidago Fund and Proteus Fund – there are many organizations out there that fund specific projects, initiatives, and individual endeavors that support certain missions.
That said, The Revolution Will Not Be Funded is worth looking into for ideas about how dependency upon foundations affects the success of altruistic organizations.
4) The next item to consider is your organizational development.
Everything is really interesting but I like this part a lot.
The key points:
- organizational structure: is it hierarchical or lateral? Are you all about top-down authority or do employees self-govern? Do they work in teams?
- compensation: who determines it, how does performance affect it (bonuses, commissions, stock options, other performance incentives), what kind of benefits can you offer, do you have other non-monetary compensation?
- ownership: this issue goes hand in hand with the entity selection. Do the employees own the business? Members? Founders? Some combination? You can do some really interesting things in this area.
Check out Valve’s employee manual: http://newcdn.flamehaus.com/Valve_Handbook_LowRes.pdf. It is inspiring and hilarious.
Also Ricardo Semler’s Maverick and Seven Day Weekend. Semler’s company in Brazil has achieved significant rates of growth with extraordinarily low turnover and what sounds like a very interesting workplace by empowering employees to self-govern, including setting their own compensation and vacation time.
This Skillshare class on alternatives to hierarchy was interesting:
I’m not sure when they’re offering it again, but I think the teacher has other resources available on the subject.
Check out Coursera for free classes in finance and related topics.
Stanford offers free classes online in entrepreneurial subjects – organizational analysis (the development part above) as well as technology start-ups. http://online.stanford.edu/courses. Permaculture based business definitely has room in it for making money through technological innovation, perhaps including apps.
Ruleschange.org has some detailed writings on sustainable finance and information about an upcoming conference in DC in March that may be incredibly groundbreaking – some of the most significant thinkers in finance, economics, politics, business, education and the media as well as students and entrepreneurs will come together to streamline decades of work in all of the above areas so as to realize a modern American Dream of abundance and peace of mind.
DreamChange (Dreamchange.org) is a an organization bringing permaculture to business and is definitely worth checking out.
Also, read about the Mondragon cooperative online and in the book Making Mondragon.
There are tons of examples out there of employee owned businesses as well – the books above detail a bunch.
Your local independent bookstore might have some great progressive business books and events as well. Food For Thought in Amherst, MA, had some good suggestions for me the last time I was there.
I hope this info was helpful and I wish you success with your business and in all things that bring you happiness.
Please email me at email@example.com to discuss specific issues.
Also, paolucciinstitute.com has some information on the business I am starting that I mentioned above. I welcome your comments! I’m looking for a campus in the first or second quarter of 2014, in Central Massachusetts.
May You And All Beings and Things Be Happy,