#cmrr

The pandemic has affected the work of researchers at the U of M's Center for Magnetic Resonance Research in more ways than one.

In many ways, with the outbreak of COVID-19 here in the US, life for many felt as if it came to a standstill. We were suddenly refraining from many of our social activities, the nature of our jobs shifted considerably, and going out to get groceries became something we had to gear up for. Ultimately, countless projects have been put on hold, and many businesses and organizations have had to press…

Engineers say a perfect machine is one with no moving parts. 

I’d add to that: Complexity is the enemy of success in all endeavors. 

How could we apply those twin concepts to business modeling?

Here’s how: By answering the question--can we reduce the complexity of operating an organization, any business even charity, not-for-profit or foundation, to “depositing a check (or checks) in the bank once a month?”

The keys to that are:

a) figuring out what your core competencies are, focusing your efforts there, and contracting everything else out

 b) further reducing complexity by long term land leasing or leasing to sub-entrepreneurs specializing in those non-core tasks (who can themselves become sublandlords and so on down the chain) 

c) developing revenue streams that are mostly CMRR--committed monthly recurring revenues made up of triple net leases (where tenants pay operating costs, property taxes, utilities and other costs in addition to their base or minimum rents) plus percentage rent (whereby the landlord gets a percentage of gross income).

Here’s an email I sent two young people I coach on this subject (names changed):

When I went over the case study of Horse Country Campground and Wilderness Tours, I was reminded of our earlier talk about your project. I was just wondering Kelly/Guy, if you understood what I was getting at?

How to reduce complexity by either contracting out non-core tasks (which the Sens (NHL’s Ottawa Senators, ed) did with F&B, parking, cleaning, security, arena management and so forth keeping only pro and amateur scouting, player development, coaching and training, plus relationships with ticket buyers, seasons tickets, suite lessees and sponsors) or by leasing or land leasing to folks who specialize in those non-core tasks (like, say, at Horse Country Campground and WT: land leasing or leasing to entrepreneurs who focus on things like public horse rides, restaurant operation, running the kayak school or whitewater rafting expeditions while leasing bunkies on a seasonal basis to families instead of trying to fill them every night or letting the people who run the kayak school or rafting trips lease their bunkies for the season then sublease them on a nightly or weekly basis meaning that Horse Country Campground and WT get a triple net rent plus a percentage rent, ie, a portion of booked revenues) or a bit of both?

That’s where I think most businesses and even charities, not-for-profits and foundations should head—the perfect machine is one with no moving parts. Same for any organization—reduce complexity by reducing your operation to “taking a check or checks to the bank once a month.”

When I looked at your proposed project, I think this is a very tough road. You have structured it differently than I would have done. 

The way it is, you have to hit thousands and thousands of home-runs a year to make this work. There is no CMRR (committed monthly recurring revenue) as I see it—for example, if you run a spa, you have to fill the slots; if you run a hotel, you have to fill the rooms. This is a model that is busted IMHO.

I would completely rework this with you so that you simplify your biz model, develop a proper cash engine and make it a million times easier to both finance as well as build and operate. The idea is to reduce the biz to taking a check to the bank each month...

Prof Bruce

Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD Real Estate Investment and Business coach Century 21 Explorer Realty Inc broker Ottawa Senators founder 1-613-762-8884 [email protected] twitter.com/ProfBruce profbruce.tumblr.com/archive brucemfirestone.com

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