The New Situation
In this blog I take a look at the revised Blipfuture Business Plan (BPv2). This was issued following the successful completion of the first phase of the negotiation for the purchase of the Blipfoto assets by Blipfuture. Please remember the purchase has not yet taken place and additional pledges/donations are still very welcome.
That negotiation (the details need to be tied down and the sale actually completed) significantly reduced the overall price of the sale and the cash element in the purchase agreement (which is made up of cash, non-voting shares and possible long-term payments).
That this very positive outcome was possible speaks to the flexibility and openness of the current owners of Blipfoto and their desire to see Blipfoto continue as a going concern. It, of course, also speaks to the skills of the Directors of Blipfuture and the cordial relations that have been sustained with the owners, either directly or through intermediaries. Last but not least, it is due to the determination of the Blipfoto user base – the community – to stump up the monies to make a deal possible.
The reduction in the cash element of the price agreed for the purchase of Blipfoto has in turn made possible a revision downwards of the minimum target of the Blipfuture crowdfunding campaign from £180,000 to £120,000. This has already been achieved – the crowdfunding total continues to tick up and now stands at £129,850 (plus £2,000 via the PayPal donations portal).
The crowdfunding monies pledged will be withdrawn on or after Tuesday, 26th January provided that the pledge total is still at or above £120,000 (and I see no reason why that should not be the case). It will be possible to buy shares and donate via the crowdfunding website until March 1st, 2016 after which the current offer of shares in Blipfoto will close.
At the same time as the purchase price and that all-important cash element has been reduced (which allowed the crowdfunding target to in turn be reduced) the Directors of Blipfuture and the Blipfoto community have been learning much more about the Blipfoto community.
Two things have become very apparent. First, the Blipfoto community is not as large as many thought and has also considerably reduced in size since December 2014. The total number of users who Blipped in November 2015 stood at 3,698 – a big reduction (of about 40%) on the 6,300 user who blipped at least once in December 2014.
Second, the number of Blipfoto users who were willing and able to put in a pledge for the community buyout seems to be limited to about a third of the current Blipfoto user base. Current pledgers stand at a little above 1,200.
These more limited figures in terms of current Blipfoto use and future commitment through investment in the buyout and/or paid membership caused the Blipfuture Directors to look again at projected Blipfoto member numbers and revenues.
This has led to a major reduction of projected future revenues from paid membership and a linked reduction in operating costs to match this. That reduction in costs is in part based on a more accurate understanding of current operating costs (particularly server costs and the possibility of getting rid of or farming out to volunteers the maintenance costs for the little used Android and iPhone apps). But most importantly it is based on the decision to dispense with a paid full-time Blipfoto co-ordinator post and a physical office space.
I have to say I think this is a very sensible and admirably prudent reappraisal of the revenue stream upon which Blipfoto’s future financial sustainability will be absolutely reliant.
Not having a full-time (or even part-time) paid co-ordinator will, of course, have an impact but the Directors are confident that through their continued efforts and the many offers of volunteer help they have received the day-to-day running of the company and its different functions can be achieved.
And should the membership grow by more than the current ‘no-growth’ estimates this is an area that can be revisited at a future date. But at this point in time it is surely better to plan forward on a relatively restricted membership revenue stream than to take a punt on growing user numbers that may not be realizable.
The Revised Blipfuture Business Plan
To turn to the revised Business Plan (available at the Blipfuture crowdfunding page) the first thing to say about this is that the larger part of it is unchanged from the first version of the Business Plan (BPv1) made available at the start of the crowdfunding campaign on 4th December 2015.
The Version One Business Plan (BPv1) was supplemented by the issue of a subsequent Financial Plan’(16th December 2015) that looked more closely at emerging user statistics and added some more financial information with regard to the possible membership fees and member numbers and made the financial summary table more accessible. Some of the information from the Financial Plan has been incorporated into the Revised Business Plan.
Having said that the revised plan is substantially the original plan plus additions from the Financial Plan it is actually quite difficult to see where the changes occur and where new material has been added - other than at the front of the document under the heading of ‘What has changed’ (pp. 2-3).
So here is a list of the major changes that I have been able to see for those who want to see them. (I did this using a free online pdf comparison tool called Diffnow.
The major changes between BPv1 and BPv2 are:
- Section What has changed (pp.2-3) added.
- 1.5 Blipfoto statistics added (these are taken from the Financial Plan).
- 3.3 Paypal section (p.13) added.
- 3.6 Paid Membership (p.14) is from the Financial Plan but without the subsequent section on possible fees/numbers of paid members.
- 4. The diagram of the Blipfuture organisation has been amended to reflect the removal of a paid worker as ‘a co-ordinator to run day-to-day operations’ (p.14)
- 4.5 of BPv1 on ‘Staff’ has been deleted.
- 4.2.2 A section has been added here taken from the Financial Plan
- 5. The Financial Plan (pp.18-20) – this has undergone major revision in both the Summary Table and the 5.2 Key Assumptions.
- 7.3 Risk: Low membership take-up has been adjusted to reflect the reduction in projected costs between version 1 and 2 of the Business Plan
The Financial Summary Table
To finish up it is worth taking a quick look at differences between the Summary Financial Tables in the Financial Plan (which is very similar to the original table in BPv1) and Version Two of the Business Plan (I’ve reproduced these below).
This gives a good sense of the scale of the revision of the Blipfuture running costs and the projected future revenue stream from Blipfoto memberships.
User Revenue Stream (see heading ‘Sales Revenue’)
In the Financial Plan Sales Revenue from membership fees is projected to rise steadily from a low figure of £57,000 (due to setting up and collecting subscriptions) in Year 1 to £110,000 in Year 2 and £131,000 in Year 5.
In BPv2 this Sales Revenue line has been massively revised downward. Year 1 projects £25,000 rising to £47,000 in Year 2 and staying steady from there to Year 5.
Operating Costs (see heading ‘Overheads’)
Given this major revision of the projected revenue that underlies Blipfuture’s sustainability the operating costs of the company have also been revised sharply downwards. In the Financial Plan summary table Overheads in Year 1 (which include all the start-up costs) are £148,000 and fall in Years 2-5 to around £100,000.
In BPv2 Overheads in Year 1 are £96,000 and grow slightly from Year 2 to 5 from £39,000 to £44,000. This is an annual reduction on the FP Overhead projections of about £60,000 or 60%).
This is largely accounted for by not having a paid member of staff, no office, cheaper hosting costs than previously expected and getting rid of the maintenance costs for the Android and iPhone apps.
The drastic reduction in projected revenues and operating costs is represented in the diagram below. The blue columns are the projected figures from the Financial Plan (Dec 16th, 2015) and the red columns are from (BPv2).
Indicative Membership Fees
As BPv2 makes clear the Directors have looked at a number of different models of membership charging but have rightly left a discussion of this and a decision to a later date so that the community can make its different views and preferences known.
But as an indication if we take the Sales Revenue figure for Years 2 to 5 in BPv2 of £47,000 we can get a sense of possible annual fee levels in the plan.
So, for example, dividing £47,000 by the current number of pledgers (say 1,250) would give an annual membership charge (assuming all were paying) of £37.60 per annum.
There are likely to be more paying members than this from initial indications received at Blipfuture HQ. So for 1,500 members the annual fee would reduce to £31.30 and for 2,000 to £23.50.
Obviously, a debate needs to be had about membership charges , exemptions, introductory periods and the collection of fees but these figures give, what seem to me, good grounds for being optimistic about Blipfuture’s financial sustainability.
Given past problems with user figures failing to live up to forecasts and the subsequent liquidation this level of prudence seems entirely wise at this stage.
Better to project a relatively barebone and realistic operation than to aim at stars and galaxies that we may never reach. If membership fee revenue is greater than forecast so much the better. This could either be used to fund lower fees in future of take on developments not currently in the Business Plan.
And the great thing about a business plan is that it is a living document and a framework against which to measure the impact of change in the future.
It seems to me that getting Blipfoto onto a stable and sustainable footing must be the key priority. This will take a while. I think it will also take a while to work out the limits and freedoms of being a community-owned company where the community, volunteers and Directors can begin to shape the future of Blipfoto.
Lastly, you might wonder what the point is of investing in or donating to Blipfuture now that the minimum crowdfunding target has been reached and surpassed.
Well, for a start it gives people a stake in the company. Not because of any expected monetary return but because it gives a sense and right of ownership. (Quite how we balance out the voting rights of shareholders and the consultation of donors remains to be worked out.)
And for a finish, every new pound invested in Blipfuture above and beyond the £120,000 minimum will help to finance possible developments that have been mooted by members of Blipfoto.
The future is bright, the future is Blipfuturefoto.