Hi,
Our original garage sale is expanding. We're getting a glimpse of Economics along the way but understanding the basics of business transactions helps to clear the way for the more complex explanations.
After viewing our efforts at garage sales the whole gated community decided that a joint venture would be a blast!
You've heard of "VENTURE CAPITAL". In our case this simply means --pooling our merchandise and resources. We will share all expenses and profit but add several really important factors: more labor,organization,and KEEPING RECORDS (ACCOUNTING). We may need to hire people (PAYROLL EXPENDITURES) trained to do various tasks since this undertaking will require many decisions and much time.
An enlarged business effort can be too much for amateurs or volunteers and over 100 people want to participate. We decide we may have to hire a specialist and let him make the necessary decisions. Our COST OF DOING BUSINESS will go up sharply and it will be too much for us to lay out. We call for a meeting of the 100 people and lay out our plans including hiring a professional for the sale.
Much discussion ensues and we lose some of our participants because we are asking for an up front cash outlay for expenses (VENTURE CAPITAL) of $20. each This is an arbitrary figures since we are "clueless" about projected expenses. However, we have explored the costs of hiring a yard sale expert and know that he will work on a percentage basis.
The cash outlay will make all members SHAREHOLDERS (much like buying shares in any company as well as on the stock market). Those who decide to contribute constitute the SHAREHOLDERS of our little company, that we name Yippee Yard Sale now containing 90 Shareholders and an agreement to disband after all final yard sale settlements. From the SHAREHOLDERS a BOARD OF DIRECTORS is formed and instructed to act for the Yippee Yard Sale voluntarily (unpaid). Since I am one of the original yard "sale rs", I am elected CHAIRMAN and I have four BOARD members including my original partner (Mr.X) with whom I had some issues from the partnership sale.
Our board meets to discuss our costs (COST OF DOING BUSINESS) for the sale. It is difficult to ascertain. We struggle with a BUDGET formula (a plan for spending but not overspending). Our "SEED CAPITAL" or "VENTURE CAPITAL" of $1800. is the only given. We will have an unknown amount of profit from sales plus more expenses. We decide to hire the yard sale expert pronto because we are uneasy about all the unknowns and monetary complications.
We are lucky to find someone with experience who is willing to negotiate with us on an overall fee based on the success of the yard sale with a SLIDING PERCENTAGE RATE of 5 to 10% after expenses are deducted. We set the percentage rate on a minimum to maximum amount of sales after the expenses are deducted. So if we sell only minimally, the fee will be 5% or if we sell the maximum it will be 10% and we set parameters in between. We sign a CONTRACT (a paper showing agreement to the stated terms signed by our expert(Mr. M.)and us. The CONTRACT will hopefully prevent any misunderstanding about the terms of employment because it outlines Mr. M's duties and pay. Mr. X suggests we use a photo copy of a contract to save lawyer fees. This will prove to be our first mistake.
Mr. M. is now our CHIEF OPERATING OFFICER (COO) of the company) who advises us and works with us on the necessary organization of a large sale. In this case he is a COO rather than a CEO (CHIEF EXECUTIVE OFFICER)since it's a limited operation and he has to be HANDS ON rather than OVERSEEING staff. He stresses the importance of all SHAREHOLDERS receiving a written structured plan showing that we are keeping good accounts (ACCOUNTING); will have careful storage and sales; and will lay out all the ground rules and plans for our fledgling company, "Yippee Yard Sale", in a written portfolio. SHAREHOLDERS who do not contribute merchandise do not receive a full share of the profits.
The records must include: a written receipt with SHAREHOLDER copy of merchandise received showing from whom and when; description of goods, sale price range desired (or not); sold for what amount; and notice that their unsold merchandise will become a donation to charity; our COO advises against credit cards at this sale because of inexperience, company fees, and lack of equipment. We must stress cash in our advertisement and he recommends a three day sale.
He tours the environment and suggests that we can save costs by storing our merchandise temporarily in the utility shed (for which we'll need permission before the sale and for the remainder afterwards). SHAREHOLDERS need to be instructed to deliver their goods of a certain value at specific times, limited to no more than ten pieces up to 50 pounds (with a total of 90 people-we are looking at 900 pieces of merchandise to prep and display), receive a receipt, and to sign a permission slip granting unsold goods to be donated to a charity who will haul them off. No exceptions to be made.
Our COO will talk to the state tax officials and see to our obligations as well as to Federal taxes. The state normally does not tax CASUAL SALES (like our first two yard sales) but whether a sale this big still qualifies will be determined by state officials. Meanwhile we must plan to pay the tax until we know the rulings.
We must rent a tent and tables, some chairs (COST OF DOING BUSINESS)that can be set up near the utility shed to save labor transporting merchandise. He thinks we can still utilize shareholder's kids to help with cleaning the merchandise, carrying it to the tent, and setting it up with one paid overseer and suggests a person he has used before. He tells us to choose several groups for various days and a number of adults as well. He also mentions parking and an officer for directing traffic. We have come to the realization of the enormous task we have undertaken.
CONTINUED IN THE NEXT BLOG
CHEERS, CONNIE
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