Creating a Financial Foundation for Shared Infrastructure

Over a decade ago, I was one of the founding members of the Dallas Makerspace. My major contribution was designing the financial models that allowed the group to have a solid financial footing for renting it’s first dedicated space.

The other founders were more involved in all the growing pains of starting an organization like that, and I moved to another city and didn’t lift those boulders. But (as far as I know) the original membership models kept the group bootstrapped long enough to attract more members and grow into the organization they are today.

A member of the ThePrepared Slack recently asked how I did this, and in retelling the tale, I realized that I’d never written down the methods I used. I think sharing them here might be helpful to other people looking to start either their own hackerspace, makerspace, or other opt-in, volunteer-driven group that seeks to have a single costly piece of shared infrastructure.

The Problem, Or What Not To Do

First let me lay out the problem. A volunteer organization starts with zero money. It can ask for donations and have some non-zero value of money, and then they can spend that money on projects. This model works fine if the projects are less frequent than how often you can ask people for money. If the organization wants to rent a space, they will now have a monthly operating cost that extends into infinity. There is no time when you’ll have raised enough money to pay for all the rent forever. You can only raise enough money for some number of months. You can think of each months rent as a “monthly project” you need to raise money for. If you organization has a regular meeting once a week, that means you will be either about to ask for money, asking for money, or telling people how much money you raised three out of the four weeks of the month. A primary task of the volunteers who have donated their time to keep the organization running will be to figure out how to collect enough money each month.

Suffice to say, unless your organization is a group of people who love to ask other folks for money, this will not be an activity that is long term sustainable by volunteers. They did not join the ranks of your group to run around asking folks for money.

A Better Way

So you need a different model. Enter “membership subscriptions”. To be part of the club, you have to pay some amount. It should be automatic, like a PayPal subscription, so there is almost zero overhead on the volunteer leadership. It should be automatic so that your members don’t have to think about it. It should be monthly because your costs are monthly and matching those two time periods up is simplest and the least amount of work.

You will now need to do a solid amount of research to understand what your real monthly costs will be. There will be rent. There will be tool upkeep. There will be consumable supplies like toilet paper or sodas or paint or whatever it is your group needs. You will want to understand what kind of pad you need each month to save for annual costs or unforeseen problems. You probably also want to budget in some saving each month towards improving your group’s shared resources – eventually buying that laser cutter, for example. Or saving up for the down payment on a bigger space. You may also want to save up for a fund for member scholarships, or sponsored members, or paying for invited speakers.

After you know the monthly budget, you now have a sliding tradeoff between how much each person in the group will pay each month and how many people are in the group. The extremes are easy: If you need $1000 a month, you could have 1000 people give $1 or one person give $1000. But neither of those are likely, so you’ll be somewhere in the middle. Is 100 people who give $10 a month possible? What about four people who give $250? What about 33 people who give $30 a month? You can imagine situations where any of these could be the most appropriate case – it really depends on your group and what it is doing. My experience would suggest that you’ll have easier luck attracting fewer people that give more than having to find many people who give less, but you know your group better than I.

If you don’t, now is a good time to start going to the group members and finding out what sort of monthly contribution they’d be comfortable with. Have honest talks with people and get to a real value. It might be lower than you’d like, but it is best to get something people will actually commit to. In this day and age, folks have a lot of subscriptions running. When I was doing this, it was much less common. People will know what they are willing to contribute.

So now you can build a membership model. You’ll have a set rate of monthly contribution per people, and you can then find how many people you’ll need contributing. If you already have that many people, you’re finished! Congratulations! Chances are, you don’t have that many people, and so your new task is to attract enough people to your group who are willing to contribute. Even if you do, I recommend the following steps because it will cement a solid group of “founders” who are dedicated to the project.

How To Do It

The advice could end here and be pretty straight forward. I basically described “how to do division”. But there is a key strategy that you should use.

First, go around to all the members and present the model. Show them the spreadsheet. Share copies with them so they can tinker with it if they’d like. Make sure to answer all the questions on the different monthly costs you put in there. You’ll get to explain to them how much insurance costs, probably. They should check your work.

Second, start collecting monthly subscriptions now. Maybe not everyone will be enthused to contribute to a shared resource that doesn’t even exist yet. But you need to bootstrap your finances. Your group should be meeting regularly as if they actually had the shared resource. If you’re trying to find a permanent space, keep meeting at the temporary spaces. It will be a key time to bring everyone together and say something like “We are meeting here now, but according to the model, we’ll have our own space in a few months!” It helps people understand that the project is succeeding.

Third, do a “founders fundraising”. There will be some members that can spare a little extra money to kick start the project. Maybe they’re deep pocketed or super committed. I suggest asking for a round of three months worth of contributions. This is really only two months, because they should be contributing their monthly amount already. You won’t ever do this again – it is a one-time deal. In effect what it does is pay for some members that you haven’t attracted yet. It should be uniform – don’t have different tiers. Don’t fall for the trap of having one super-donor. You want there to be a sense of shared ownership in the group, not one person that gets an outsized say because they donated more. These founders are the committed folks and they’ll be the core of the volunteers that keep the project going in it’s infancy. They need to be on even footing, because a lot of them will be putting a lot of time volunteering for various tasks that need to be completed. folks that join later, but before you actually have the shared resource, could also join as founders if that makes sense for what you’re doing.

At this point you’ll be able to plot a chart of membership growth that shows when your monthly contributions will match your planned monthly expenses. You’re still out there gathering members right? Well, as long as your numbers grow or stay steady, that crossover point gets closer and closer. Meanwhile, you’re collecting money to build a reservoir to deal with folks coming and going.

Possible Outcomes

There are three possible outcomes: your contributing membership keeps growing, flattens outs, or starts decreasing.

Increasing membership

If the contributing membership keeps increasing, then you’ll quickly reach your break even point and be able to buy whatever shared resource you were trying to buy. You’ll be solidly able to hit monthly expenditure targets and will probably even start to grow a surplus. The group can use that surplus to improve the shared resources or buy new ones. It can use that to sponsor scholarships for new members. Figuring out what your group will do with it’s surplus is a great problem to have. I strongly caution against lowering the membership contribution level. This will upset previous folks who already were contributing at a higher amount. It also means you need to go back to the drawing board on what people are willing to contribute. You’d rather begin with a lower contribution than a high one that gets lowered later.

Flat membership

If you can only keep the same number of people contributing, or you lose people at the same rate that you are gaining people, you aren’t in that bad of a situation. Since you are collecting each month, eventually you’ll simply save up enough money to pay for your goal. The degenerate case here is that you’re the only one contributing and eventually you just save up enough to do whatever it is you’re trying to do. Earlier I said that you need to have a monthly contribution rate that matches your monthly contribution spend. That isn’t technically true if you’re doing something like a yearly lease. You’ll save up enough money to have a whole year’s worth of lease – it could take longer than a year depending on how many founders you had. You’ll then be able to sign that lease in a responsible way knowing that your group has saved up enough money to cover all the costs till the end of the lease contract. You’re making a bet here that by actually having the shared resource, you’ll be able to attract more members in the upcoming year. Attracting new members will be an important part of the group’s activities that first year if it wants to continue having that shared resource for the next year. But if it can’t do it, maybe it just wasn’t meant to be. You’ll have a good run of a year, and honestly that’s pretty great.

Declining membership

This is the failure mode. I would seriously reconsider the nature of your group. Are there toxic members driving away others? Are the membership rates incorrect? Is the shared infrastructure just not in demand enough? Something has gone wrong. I can’t tell you what, but signs don’t look good.

All is not lost. If you can keep a core group of folks to keep the dream alive, eventually you’ll build up enough funds for your group to get that laser cutter or storage unit or taco truck. Once the group has access to it, hopefully you can use whatever it is to attract enough people to get your membership numbers back up.

Conclusion

Hopefully this is a helpful guide. You and your founding team will have a lot of work to do, and if they’re volunteers, that’s a whole other resource to manage. But hopefully you’ve got a growing group of interested and people and a cool piece of shared infrastructure you can all rally around.