XC Business Plan: Income
It is critically important for XC to establish a record of integrity,
dependability, and authoritativeness in all of its business dealings.
It is therefore important that we not engage in business relationships
which might be seen as compromising.
Branding is a critical component of XC's business strategy, so XC will
maintain and enforce trademarks and slogan marks to support its brand.
XC believes strongly in the virtues of open access and free rights to
community-developed knowledge -- especially source code. Our intent is
to only work on open source software, and to deliver full source code
to end users.
We recognize, however, that XC, our franchises and affiliates form a
community with shared business interests, which may lead us to limit
access to our common knowledge base to community members. We may also
choose to limit distribution of software and/or other information that
is intended solely for use by franchises and/or affiliates to that
community (e.g., market research studies). We may also opt not to
distribute software developed for internal use.
The extent of any such restrictions needs to be carefully considered.
XC will not seek patents of any kind. Any patentable ideas discovered
by XC will be published and put into the public domain.
These are services that are primarily provided by XC to help franchises
and affiliates grow and manage their business. Franchises benefit from
consistent state-of-the-art R&D, business practices, and marketing, as
well as community involvement.
These services may be fixed price (as part of the franchise agreement),
or per-incident, as is most appropriate. Affiliates will tend to use a
subset of these services, so are not specified separately.
- News / Knowledge Base: XC will aggregate a large knowledge base,
including product evaluations, interfacing, and problem reports.
- Estimating: Software tools for building estimates and preparing
bids for stock-template and custom jobs.
- Design Resources: Franchise can refer customer design requirements
to XC (or other franchises) for technical assistance and solution.
- Development Resources: Contract technical consulting and development
resources, subject to our open source development model.
- Software Distribution: Integrate and package software. Tools to
custom-tailor and maintain per system.
- Documentation: Integrate and package documentation (on-line,
print-on-demand, and in some cases mass-printed). Tools to
custom-tailor and maintain per system.
- Coop Purchasing / Kit Building: Negotiate volume pricing where there
is an advantage to doing so. Integrate assemblies as needed.
- Warranty / Insurance: Financial services to help franchises warrenty
their work, and to help customers to obtain insurance on their systems.
- PR and Co-Marketing: Provide franchises with co-marketing materials,
design and consulting.
- Prospecting: Route sales prospects to franchises.
- Training: Programs in all technical areas; marketing and sales; end-user
- Certification: Certify affiliate expertise. Related to this, XC provides
quality control on franchises, including monitoring of ethical business
- Internet Hosting: Provide franchises with WWW pages and other Internet
- Backup for End-User Services: Provide 24x7 backup and escalation for
help-desk and other end-user services, where franchise is first contact.
XC also provides a common forum where franchises can raise issues and
concerns, and can focus collective activities.
Franchises are expected to handle:
- Design, specification, and installation of systems.
- Monitoring and routine maintenance of systems.
- End-user training.
- Front door to help desk.
XC deals directly with end-users primarily through its Internet portal,
although XC may also deal with end-users through franchise backup services.
XC's direct end-user services focus on:
- PR and Marketing.
- Subscriber access to knowledge base and news services.
- Open source software, hardware, and documentation development.
Proprietary software development is financed by speculators, who then
try to recoup their investment by renting the software at extremely
high margins (in part necessitated by the high marketing costs that
are in turn necessitated by the high prices). This is, at the very
least, a highly inefficient way of generating software.
By contrast, free software tends to be generated as needed by users
with programming skills. While this is very effective at generating
software such as operating systems and programming tools, waiting for
volunteer developers may fail to produce the software we need in a
We believe that the free/open source software approach is the right
one, but propose to "grease the skids" a bit by raising money which
can be used to focus and support development.
The way we propose to do this is to encourage franchises, affiliates,
and end-users to tack an optional Development Funding Contribution on
to their bills -- much like a tip in a restaurant. These funds would
be managed separately from XC service funds, and dedicated to
A significant early source of income will be from franchise sales,
which will cover setup, initial training, fixed and contracted service
fees, and limited exclusivity.
Franchisees will also be given the opportunity to invest in XC.
One way to sell franchises would be to recruit independent franchise
sales agents. We might pay these agents with a declining commission
(e.g., 5% of service billings for first year, 4% for second, etc.,
until the commission expires after five years).
It is expected that franchise entry fees, as a relative source of
income, will decline after we attain significant market coverage.
(Per-franchise fees will, of course, tend to increase as franchise
Affiliate fees will be nominal -- mostly tied to certification
and referencing. We would like to sign up virtually everyone in
the affiliated trades.
- Joint purchasing: It is not the intention of XC to force franchises
to purchase through us. The only rationale for joint purchasing is
to obtain volume discounts that can be passed on to franchises. The
way this would be done is to charge franchises for cost + handling,
where handling is our service fee, rather than a bundled price with
hidden profit. Related to this would be a service which compares
local pricing information, to aid franchises in finding their best
- Kit building: In general, we want to maintain vendor independence,
since doing so allows us to pick and choose among the best available
alternatives. However, there may be cases where off-the-shelf solutions
are suboptimal, which could lead us to attempt to negotiate third
party developments. Joint purchasing may help to firm up a market
for such developments, and help us to more closely drive future
developments. Kit building may come into play where a series of
integration steps are commonly required and would represent a time
savings and/or quality improvement if done before shipment to the
franchise. Kit building can be done by XC, or out-sourced. Kit
building is most likely to be necessary in the computer and
equipment closet area.
- Open source: Although we talk much about open source software,
there is also a movement toward open source hardware design,
which could be particularly important to XC.
- Development funding model: Current view is that this is a general
purpose dedicated fund, to be supplemented with XC contract development
funds, but not to flow back into general funds. This could be segregated
further -- perhaps into a non-profit, tax-deductible foundation. The
most pressing requirements appear to be testing and integration, which
are intimately related to XC business requirements.
- Franchise sales plan: What we really want here is to find franchisees
who have strong business records. (I read once that in the 1910's
Caterpillar mandated that in order to become a dealer, one had to
have at least $1M personal worth, and be able to prove that it was
self-made. Caterpillar went from nowhere to industry leader in less
than 10 years.)
- Determine portal policy on advertising: One proposal is that there
be no portal advertising, except in a specific delimited area (from
home page, click on "Advertising"; once there, all pages are marked
top-and-bottom as "Advertising" with a disclaimer notice) where we
rent placement space. On the other hand, we may want to add banner
notices for XC services and projects (non-animated, please).