The Business C-Law

By Clive Boustred, Founder & Chairman

"Business Profit is directly proportional
to the relationship and profit sharing between
Resource Contributors and Intellectual Property Contributors"

Knowledge based industries have shifted the paradigm against traditional brick and motor and heavy equipment industries. In Knowledge based industries, it is knowledge and not capital, plant or financial resources that determine the outcome.

One must carefully measure what goes into a business and ensure that the business is optimized for growth. Key ingredients can be broken into two primary categories: Resource Contributors and Intellectual Property (Knowledge) Contributors. Both contributions combined, result in product, and the consequential sales and profit or loss.

Resources	Intellectual Property (IP)	Over the life of the company, profit is shared between Resource Contributors & Intellectual Property Contributors
Money $ Facilities Product Services Employees Machinery Etc.	Technical Strategy Techniques Architecture Design Methodology Manufacturing Process, etc. Business Strategy Marketing Sales Distribution Manufacturing Finance/Accounting Process, etc.

The Length (Longevity of Business) & Rate of Change in Profit is directly proportional to the relationship and profit sharing between Resource Contributors and IP Contributors:
If Intellectual Property Contributors are not fairly rewarded, the Profit Curve is short in duration, while the Cost Curve typically increases. If Resource Contributors do not perceive fair rewards before the Business Break Even Point, they are likely to pull out and the business typically fails.

 

Naturally, rewards need to be fairly distributed. Resource Contributors need to be rewarded for the Salary or Service they contribute, in addition to the Investment they put into the company, plus a return (Interest) on that Investment. The amount of Return (Interest) varying based upon the relevant risk:
High risk naturally should yield the highest return. Low risk should yield the smallest return, typically slightly higher than the prime-lending rate:

IP Contributors should be rewarded for the Salary for Service they contribute, and they should receive the balance in profit after the Resource Contributor reward.

The Business C-Law helps to not only ensure maximization of profits, but also ensures business longevity and stability through the balanced retention and rewarding of Intellectual Property (knowledge) Contributors.

As important as the Business C-Law, is the Worker Motivation C-Law, particularly in this knowledge driven high technology space: