Posts Tagged ‘tips’

A Proposal for an Alternate Business Model

May 15, 2010

So I think I can propose a better way to operate a business than the existing for-profit stock model.

Well, ‘better’ in the sense of being more sustainable, being better capable of nurturing a community rather than taking from it, and possibly even better at providing a superior product.

What I’m thinking, is that a company could shift to a profit-through-tip-only system.

All revenue is reinvested into the company (the employees, especially management, would need to be appropriately wage controlled), and the company is not publicly traded (I don’t think it would work with a public company, at least in the concept’s present, fledgling form). Instead, customers are at some point informed that the company is not a traditional for-profit company and that the only profits the company makes are through tips.

Tips rendered by customers are given in some proportion to the owners, as well as the workers.

This means that, instead of a profit motive oriented around increasing revenue and reducing costs, the profit motive is now oriented more directly around customer satisfaction. It also provides a stronger incentive to nurture the community, as you would want customers willing to be charitable and having the cash onhand to do so.

The idea has significant potential problems.

  • I can’t think of a good way to apply it to a publicly traded business.
  • It’d probably be less profitable than a profit-oriented business, so a free market would never pick up on it. Even if it was more profitable, the focus isn’t on profit, so there’s little reason to believe such a shortsighted culture as a free market culture would ever pick up on it anyway.
  • The model probably wouldn’t work at all when dealing with for-profit companies as clients – what for-profit company would ever issue a tip? Only human beings can be counted on for the charity that would make this model work.
  • It wouldn’t discourage advertisement and other manipulation of customers, even exploitative methods.

Nonetheless, I think it shows promise.