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Okay, that is fairly straightforward.
After client receives their contractual services by member, member then bills their time to consortium in "units" not dollars. Units work better than dollars because they equalize various billing rates of 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 consortium’s charter.
When consortium is properly tax-structured, 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 first meeting as a new networking group starting up. People confuse two and show up. This will give organizers a misrepresentation of "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 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 founding group elects three leaders to handle administration. One of three may have a higher voting right. Usually one given higher voting right is because of their investment of time or money, but not always. These leaders have responsibility of organizing meetings and splitting up consortium responsibilities between members in a fair manner.
Money is an important factor when entering into these types of agreements. It is main purpose of forming consortium. Money is also one of main reasons they breakup -- like most marriages. Because of this, it is important to have a buy-out clause in agreement that protects members and consortium.
Respect, appreciation, and acknowledging of each other’s contribution is mandatory -- put a cap on 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, 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 consortium breaks their membership in consortium. And always have consequences stipulated in 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 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 right members and keeping relationships working, remember 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 Franz, 10-year Business Coach, available for complimentary session. Published 1501x in 2003 and 907x first six months 2004, specialities in showing clients how to create products fast, easy for sale and profit. Newsletters and articles: http://www.abundancecenter.com blog: http://abundance.blogs.com/inthelight