The LETSystem Design Manual

5.4 Financial Projections for Regional Development of LETSystems

The models, in the form of a table of projections, are shown at the end of this Section.

Each column examines a different type of locality with the total population base shown. 20,000 people is typically a sparsely populated rural area, 3,000,000 is a large city.

Moving down the model line-by-line:

The business ratio is the number of businesses per head of the general population. We have chosen general mid-range figures for western communities. Single industry communities might go up to 1:25, if a large percentage of people work "in the mill".

Dividing the population by the business ratio gives the no. of businesses.

Within the multi-LETS Registries, businesses will eventually join several systems. We therefore assume figures for the no. of accounts that businesses will take out. The no. of accounts is pure guesswork, but we really think we are being conservative, although we are probably almost alone in that belief. We are referring to the situation after several years, when local currencies account for perhaps 40% of the local economy, and the more accounts a business has, the more business they do.

Before they take out an account, we would like to establish that businesses make a Contribution to Community (CtC) of , say, 50 plus 50 local to local charities and investment funds.

This is drafted to avoid restricting the possibilities to officially approved charitable organisations - although presumeably they will be the only beneficiaries capable of issuing tax receipts. The point is to establish right from the beginning that there is an honorarium / gesture or something customarily associated with a business participating in any network. If this can be established as a norm, then we have an opportunity to channel substantial funds to charities / loan funds / projects in the community,

    AND
Provide a protected source of funding for LETSystem development. Direct application of entry "fees" to development will not be sustainable, as the true costs of initiating business accounts will quickly drop to zilch, and you will have to likewise reduce charges, or suffer competition from profit takers, who will likely be considerably less scrupulous, and possibly more cost-effective, than you.

CtC is entirely arbitrary. But necessary. Without such a cash flow system development is under financed. If you take too much, you will start a feeding frenzy. By establishing a protocol, a customary level of entry, whatever, we can stimulate local charities, and thus bring them on line, and there is real possibility of making such entry styles customary. Which is the best one can hope for. Some systems within a registry will of course prefer NOT to levy an entry on business, perhaps from short term expediency as any entry cost is an impediment, perhaps because they choose to set up a substantial charitable donation as the precondition - maybe n,000 local - in which case 50/50 local is superfluous. But we believe we can set standards here, that may pattern other initiatives elsewhere.

Commission is the percentage of the CtC that is made available to fund the development groups. It is higher for small communities than large, because of the degree of duplication that small places will have to go through, and the comparatively higher no of accounts per business in cities.

The development programme budget is the total CtC multiplied by the percentage commission.

Cost of person per year is the amount needed to keep a full-time member of the development group resourced for a year. Assuming that people who start LETSystems are motivated by other concerns than just salary, rates may be slightly less than competitive. Costs should include an allowance for office support, transport etc, but not very much. The main thing in the budget is the time allocation for active workers, who will generally be a mix of part and full timers. Most group members will be working part-time but we are calculating full-time equivalents.

Total programme budget available divided by this amount generally needed to keep someone on the job gives the no. of person-years available to the project.

During the first period, we have estimated that 10% of the budget is spent. Since this can be projected but not assumed, it is reasonable to only commit a small part ot the total budget for the opening phase.

If it turns out that the figures are coming through, then phases 2 & 3 should each be 40% of the predicted budget, and the last part 10%. If not, then the accumulated debt during the first phase will not be disastrous. The first phase will require somewhat less that 10% of total budget, as there will hopefully be SOME income, and workers will generally co-operate with each other and the project by drawing only a proportion of their contracts and leaving some on the books.

The cash needed in the first year, the capital required is therefore estimated at 33% of the first period budget.

The first quarter of the first year will see slightly heavier expenditure because of set-up costs (but not hardware purchases!) This again emphasises the need for cash in the early days - and also the need to get some income in soon.



Projections for LETSystem Regional Development



regional population base  (000)     20       50      250      500    1,000    3,000    5,000

business ratio                      25       20       20       20       20       20       20
no. of business                    800    2,500   12,500   25,000   50,000  150,000  250,000
no. of accounts                      3        4        5        6        7        8       10

cont. to comm.                    100      100      100      100      100      100      100
total CtC                 (000)    240    1,000    6,250   15,000   35,000  120,000  250,000
commision %                         20       20       16       14       12       10       10

program budget            (000)     48      200    1,000    2,100    4,200   12,000   25,000


first period - 10%        (000)      5       20      100      210      420    1,200    2,500
capital required           33%       2        7       33       69      139      396      825
required in 1st quarter    40%       1        3       13       28       55      158      330



at a cost per person per year of 15,000


no. of person years                  3       13       67      140      280      800    1,667


no. of person years (1st period)   0.3        1        7       14       28       80      167


person years / 1,000 population   0.16     0.27     0.27     0.28     0.28     0.27     0.33

                               

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Landsman Community Services Ltd Paper No. 5.4 Version No 1.3 17 August 94
Written by Michael Linton of Landsman Community Services Ltd. and Angus Soutar of Robert Soutar Ltd.
Compiled 10-01-95 by Andy Blunt and Adrian Steele of LETSgo Manchester