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LETS GET DOWN TO BUSINESS.

Question :
Kia ora team! Thanks so much for your help.  I am setting up a digital design company.  Our first project will likely be a fixed price project for a well funded organisation, which will act as a pilot project deriving little profit for myself. I am wanting to both support a number of IT people recently made redundant in our city, and also incubate future tech talent with a view to contracting them out to NZ or overseas companies  as required. I want to bring a small core of experienced people together to deliver this project, but also want to enable a skills growth opportunity for others, with a view to growing a pool of talent who in the long term can either contract to larger studios either in NZ or overseas, or can create their own products to sell.  I would like to operate this under a possible co-operative structure, (maybe with the core team, having an equity share?   With a tight budget on this first project I would like advice on:- The best way to structure this re: personal/company tax obligations if I am administering the grant funds and paying the dev team as contractors- what would be a fair management fee to ask as the project manager and product owner (and named  contractor) legal and financial costs/problems/risks.So many questions, sorry! Hope to have a chat to someone soon, thanks so much for making yourself available.Nga mihi!

Question submitted 10/05/20 @ 07:14am
Industry: Start-ups
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  • Morena – awesome, good purpose and good opportunity. Lets dig into it – a few comments and some reflections:
    1. First Gig – good one, just make sure you don’t under-cost the project, having a small or no margin for yourself maybe what is required to get the work, but how you do you know that, see if you can find out more about the customer and whether they are price sensitive, if not, build some margin in – that helps you be in business, but it also helps your customer knowing that you are there, funded to help them be successful, not looking over the hill for the next gig that pays.
    2. Structure and Certainty – I wish there was a system where you could dynamically and historically assign equity for who did what and with a formula. Unfortunately there really isn’t a system. A few things, you should be clear with your whanau that you are looking to establish an ‘up-side-down’ ownership structure which is for the people, owned by the people – if that is what you want to do. But the but is this – for now, you don’t really know how things will play out, you probably need to secure a few gigs, jobs and then after say the rest of the year finalise a structure. So what I would do is keep things ‘loose’ for now, tell the people you are working with that you would like to see a co-op structure working eventually where everyone who works on projects benefits – but first you need to build the business. So be high on purpose and intention, and say lets build it – and be clear on what you are taking for project managing. Question – will others bring in the business or will it just be you?
    3. What is a reasonable project fee? This is a good question – think about it in chunks – who does the sourcing the business, who does the contract management, who takes the delivery risk, who does the work – and then you can work out what might be reasonable – for all of it, I have seen how this can all add up – but if you are doing a $5k job, then you might have $3k for the people doing the work, and maybe $2k for all of the other stuff – that might be extreme but you get the idea?

    In the early days, I think what matters is not structure because that is ‘certainty’ – what you want to do is focus on your market, your customers and your delivery – do that, and you can get to certainty away from uncertainty – and then you can bring in some structure once you actually know what the needs are in the market and how you can satisfy those! Good luck. Andy

    Kia ora Andy,
    Thanks so much for your thorough and honest response.
    Yes I will be the one bringing in the work. 🙂
    Agree re: keeping initial structure fluid and assessing the landscape a bit later re: possible equity sharing etc. Also agree re: initial return, as I am contracted and employed until the end of this year I am definitely happy to use this as a learning curve for little return, then once team is embedded go after more profitable contracts with more ‘cream’. Aimimng to use the first job to refine the core team, and our shared purpose, and get creative around how we share knowledge/experience out to the community.
    I have set up a limited liability company, as director, but with share structure in place for the longterm. Have also decided the core team will be subcontractors. I might ping you with further questions down the track if that is OK?
    Thanks again, really appreciate your time and energy!
    Kylie @otepotigames 🙂

    Morena Kylie – of course! Email deets are @manaaki.io">andy.hamilton@manaaki.io – all the best! Andy

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