Now that you have identified chains and inputs as well as units of outputs, the next step is to add up object capital and running costs and look at how money can come in to cover them.
One important principle here is to that for the organisation to be viable, it has to be able to pay its bills. This may sound simplistic and obvious but it is a little bit different from a company which offers its goods for sale and hopes to sell enough to cover costs. In this case we are looking at planning the operation so that we meet needs and meet expenses at the same time.
Another principle is to remember that what you ostensibly pay for doesn’t have to be in proportion to costs. Most restaurants, for example, have a very high margin on their wine and other drinks, but a low margin on food. They make money on the wine whilst selling their food at a lower margin. Of course, patrons come to the restaurant for the food. In a commons operation all that matters is that the community´s bills are met and that member’s needs are met at the same time.
So you do not need to calculate the margin on everything, just find a revenue model that everyone can consent to. Having said that, keeping control of costs and knowing where the money goes is paramount to good financial management.
Having worked out the costs and and frequency ( i.e. per week, month, annually or even daily) that figure needs to be matched to the total units of production and their types, remembering that you can set a unit price for some services higher than the unit cost and some lower.
Another thing to remember is that taking micro payments for everything is in itself a cost and requires people hours. The fewer times you take payment the more efficient it is. On the other hand, just having one set fee for everything can encourage waste if a service is “free” to use.
There are no set ways to cover this, as long as everyone in the community accepts the approach you propose, it is fine.
Types of revenue streams
- Membership fees: one fee can cover members sharing services.
- Subscription fees: this stream is generated by selling continuous access to a service
- Licensing fee; this stream comes from a contract for the rights to use intellectual property.
Pay per unit
- Sales: objects and services sold generate a revenue stream.
- Usage fee: for example you pay per minute per telephone call using the telephone network.
- Rent: a fee for the use of an asset like a car or room.
Types of payment
- Invoicing
- Cash
- Pay by credit card on website
At this point there are dependencies on what kind of legal structure you choose to manage your commons. If you choose a cooperative, membership fees that entitle to a standard share of the output might be complemented with payment for extra services.
Putting a price on Units
In the earlier unit we met the idea of unitization. Now is the time to put a price on each unit to provide a revenue stream. Notice that the annual volumes are planned in advance and most is delivered pre-paid. This makes planning easier, and removes the need to borrow money in advance to purchase materials for the service.
| Object | Service Thinking | Units | Revenue stream ideas |
|---|---|---|---|
| Minibus | Transport to local station two times a day forth and back | Commuter trips | Monthly fee |
| Vegetables | Weekly food supplies year round | Weekly allotment | Annual subscription |
| Summer Cottage | Access to place to stay with kitchen/toilet over summer months | overnight stays | Included in membership fee |
Some ideas are listed below about how to divide costs among community members in units and charges per unit. Remember that just having an organisation brings costs with it – for tax registration, bank charges, website fees, meeting rooms, etc. Be sure to bake these into your model.
| TYPE OF UNIT | INPUT and PRODUCTION COSTS | REVENUE IDEAS |
| Vegetable box per week 21 Weeks of the year 50 people |
15750 EURO | 50 quarterly subscriptions 197 EURO
or charged weekly by credit card 15 EURO |
| Shared minibus
Access 355/365 for commons members |
4000
+ Diesel |
Annual fee as part of membership fee
80 Euro |
| Party room 3 Friday/weekend days/ year and 4 weekdays | 120 EUR0 | pay per use
or included in membership |
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The less micro payments and pay for exactly what you use and the more trust that can be built, the more effective the commons can become in giving people what they need. Read more about the gift economy.