Symptom: It is difficult to fund the start-up of new service offerings.
A new line of services is like any new business -- it requires funding akin to venture capital. This "equity" funding covers the time and expenses for exploring the new business, marketing it, and operating it at a loss for a period of time until the market is established.
In an internal staff function, "equity" takes the form of funding that is not recouped from clients through chargebacks, but rather is supplied as a corporate budget item.
The infrastructure involved should be financed as debt, and paid back (with interest) using a mortgage formula. Infrastructure certainly should not be expensed in the current year.
Access to both equity and debt financing is essential to innovation in operational services. These are aspects of the internal economy.
Root cause:Internal economy, budgeting (equity and debt financing) copyright 2024 N. Dean Meyer and Associates Inc. All rights reserved.
