Advantages for Existing Businesses
The NewVistas economic model is primarily about attracting existing businesses into a NewVistas community and setting them up to grow and spin off additional businesses.
Small businesses that are already underway, including solo contractors, gain many advantages when they join a NewVistas community:
- By using the community’s networks and communication tools, small businesses can access the entire community as already-vetted clients, customers, consultants, and collaborators.
- Instead of diverting time and attention to less-productive back-office functions like accounting, paying bills, invoicing, property management, and IT support, small businesses allow the community’s administrative system handle these functions.
- As part of a larger community group, small businesses can get access to various forms of insurance more cheaply and effectively than they could on their own.
- Instead of leaving excess cash flow in the bank earning low interest, small businesses and individual participants can invest it in the community’s investment program, which pays a 12% premium.
- The community helps existing businesses maximize the value of their intellectual property and, when appropriate, increase their success by spinning off additional businesses.
- Instead of owning land and buildings, small businesses lease space and equipment from the community by the week with no deposits required, thus freeing up capital and enabling much greater flexibility to grow, shrink, and move as needed.
VistaBiz Growth and Spinoffs
While community agencies can help individuals determine if their VistaBiz idea is viable and, if so, how to best execute it, NewVistas does not simply fund any new business that comes to a community with an idea and a plan.
Regarding capital-intensive VistaBizzes, NewVistas says:
“Put your plan together, and use your own capital to get it going—including capital you’ve invested in the community, if the community approves your plan. If your first stage is successful, the community will consider loaning you additional capital to help you keep going.”
VistaBizzes are encouraged to grow in revenue and profitability by subcontracting services from other contractors and VistaBizzes and by purchasing parts and materials from other companies inside or outside the community.
A VistaBiz can cooperate contractually with up to 50 contractors and other VistaBizzes. Additionally, a VistaBiz can split into two or more businesses, each owned by an individual participant. VistaBiz ownership is structured so ownership can readily transfer among community participants, allowing participants to build their individual net worth and enjoy more career variety and fulfillment.
As mentioned above, if a VistaBiz has already made progress on pursuing an excellent business plan, the community’s venture bank can provide loans to help the VistaBiz grow, including helping the company get operating capital for things like raw materials, inventory, and works in progress.
Before a community bank loans to a VistaBiz, its owner must first invest personally, using a substantial portion of his or her net worth.
Personal investment helps ensure that the owner believes in the VistaBiz and is fully committed to making it work; if a participant wants to start a VistaBiz but doesn’t yet have net worth to invest, he or she should work as a contractor to other VistaBizzes, invest in the community fund, and save enough start-up funds.
If an established VistaBiz experiences cash-flow problems, the community can loan money to temporarily cover its bills, subject to oversight by the community’s portfolio managers.
If a VistaBiz fails, the community reduces losses, minimizes disruption, and maximizes value by efficiently redeploying resources elsewhere among the community’s thousands of businesses.
To promote a community’s free market and avoid inefficient monopolies, the community fosters competition between more than one contractor or VistaBiz in specific areas. Further, the community’s administrative services and resources make it easier and less risky to spin off new businesses.
For example, consider a successful restaurant. As this VistaBiz approaches growth maturity, an experienced cook contracted by the VistaBiz puts together a compelling business plan for spinning off his or her own restaurant.
The community’s portfolio managers consider whether the community’s restaurant market needs more competition. If the answer is yes, the cook invests a substantial portion of his or her net worth into the startup, and the community agrees to make growth loans when the new business reaches a certain stage.
If a service or industry is needed in a NewVistas community, the community will seek to attract an existing outside company rather than sponsor someone to start a business from scratch. Whenever a community innovates a new idea, the invention will probably arise within an existing VistaBiz and then spin off.
For example, in a current VistaBiz called myLIFTER, a contractor is working on a related invention called SmartWinch. At the right time, he can approach the community, risk a substantial portion of his own net worth, and propose that SmartWinch spin off as a separate VistaBiz, potentially aided soon by growth loans from the community.
Any participant can qualify to own or spin off a VistaBiz, if the community accepts the business plan and the participant invests a substantial portion of his or her own net worth.
NewVistas for Midsize Businesses
A company with, for example, 1,000 employees is caught in the middle between small and large. It’s too big to run efficiently but not big enough to compete effectively in the world of large companies.
As they grow, midsize companies must scale themselves by adding costly layers of management and overhead. At some point, many midsize companies realize their growth is stymied unless they sell out to a larger company or go public.
NewVistas gives midsize businesses an opportunity to keep growing dynamically by restructuring into several smaller entities. Rather than employees, work is performed by individual contractors, which allows businesses to pay only for the work they need instead of maintaining a payroll overhead.
Upon entering a NewVistas community, a business with 1,000 employees would become 20 individually owned VistaBizzes, each with a maximum of 50 contractors.
Previous employees would become individual contractors who can also service additional VistaBizzes and clients outside the community, giving these contractors more career variety, flexibility, and autonomy, including opportunities to maximize the rates they charge and increase their overall productivity.
NewVistas gives midsize companies a way to shed their long-term capital assets. For many businesses, considerable amounts of capital are tied up in assets they’ve purchased over time, especially buildings and equipment.
With NewVistas, a business can sell its assets to the community and then lease space and equipment from the community only as needed. Moving to a lease model frees up capital for the business to put toward its growth, with any excess invested back into the community for the 12% dividend.
By restructuring into several leaner, nimbler VistaBizzes, a midsize business can grow faster and better without having to sell out to a larger company.
In a NewVistas community, administration is handled as a communitywide system for all VistaBizzes, giving them professionalism and stability without slowing down their innovation and operations. As discussed above, the community helps VistaBizzes split and spin off when appropriate, thus promoting growth and providing opportunities to more individual participants.
The Power of Self-Insuring
At the scale of 75,000–100,000 participants, a NewVistas community is large enough to self-insure for healthcare and other needs without becoming bloated and impersonal like national insurance companies. The community passes on its self-insurance savings to all contractors, VistaBizzes, and other participants.
The NewVistas philosophy behind self-insuring at a properly scaled community level is that participants are motivated to help control costs because unnecessary expenses directly affect everyone’s bottom line, including the community’s ability to pay the 12% dividend.
When insurance is provided at too broad a scale, people tend to view the insurance as an entitlement to exploit rather than as a cost to carefully manage.
It’s not sustainable for every 85-year-old who could use a hip replacement to get one. A community’s self-insurance will cover emergencies and urgent needs, but participants will cover most of their own medical costs, for which they can cash in part of their community investments if needed. All participants in a NewVistas community have access to catastrophic insurance coverage.
As part of pioneering the NewVistas model, the first economic community will assume the risk of self-insuring early in its formative process, long before it reaches the full minimum scale of 75,000 participants.
- See, for example, “Inefficiencies of Monopolies,” Investopedia, http://www.investopedia.com/exam-guide/cfa-level-1/microeconomics/inefficiencies-monopolies.asp.
- For an employer-centric report on this trend, see “The End of Employees,” Wall Street Journal, February 2, 2017, https://www.wsj.com/articles/the-end-of-employees-1486050443.
- For more about self-insurance, see, for example, http://www.siia.org/i4a/pages/index.cfm?pageid=4451.