Footnote: Generic Flow Model of a Business

Right from when I started my own business in 1976, I allocated time to in-house research and development. This flow model was the very first of my personal projects. Its original purpose was to help me design the software I needed to run my business. I later expanded it into a systemic model for a generic economic enterprise. [PDF]

I viewed the business's tangible operations of receiving, processing and delivering materials, goods or services as the dynamic energy of the business. I viewed the financial resources as its stored potential energy. The following diagram is mapped. Click on any of its 19 components to go to a description of that component.

A mapped systems flow model of an economic enterprise.

This model was developed in great detail from which was produced a suite of de­marcatable and interfaceable software subsystems such as sales, purchase and nominal ledgers, payroll, production and stock control, order processing and des­patch. Two other areas, namely, market control and automatic budget and cash-flow control were also identified. Since no software addressing these areas was av­ailable at the time I chose these for development [1976-79].

I did a detailed systems analysis and design in both these areas resulting in the dev­elopment of an automatic budgeting and cash-flow control system. The market con­trol system continued to be developed over the next 11 years and became what was a commercially available package known as EBS Marketeer.

Quick Summary

The modern enterprise is an organisation of accommodation, materials, labour and machinery whose function is to generate income for its proprietor. This it does by producing goods or services and exchanging them via a market for things of — or representing — greater value. The mechanism through which the entrepreneur pursues unlimited acquisition of wealth is his enterprise. It may produce what it sells or simply resell what it buys. The things it sells may be products like washing machines, or services like washing clothes. The entrepreneur does not do the work of producing or selling these things himself. He does not make the washing machines with his own hands. His workers do it for him in return for their wages. However since he owns the enterprise, he alone controls what it does. Therefore, it is nothing other than an all-powerful ext­ension of his own body and mind.

In the simplified flow-model of a modern enterprise above, the yellow, green and blue arrows show the flow of real resources like materials and labour. The light blue (cyan) and mauve (magenta) arrows show the counterbalancing flow of money, which is a representation of the real materials and labour which the rest of society currently owes the enterprise. The enterprise is kicked into life by injecting it with the money or resources-in-kind necessary to start it off. These come from personal or inherited assets or are bor­rowed from a bank. The starting capital is then put under the enterprise's financial control system. This capital is then used to supply the wages and payments to purchase labour (work) and materials.

The central element of the enterprise is the market. This transmutes money into labour and labour into money. It comprises three sectors: The Free Market, The Labour Market and The Consumer Market. They are separate in that the rules of en­gagement for each is different. The Free Market is global and is the means through which the entrepreneur relates with his peers. The Labour Market is local and is where he buys the necessary labour to power his enterprise. The Consumer Market is also local and is where he sells his products to those who labour.

The purchased labour and the enterprise's other resources are then used in a pro­duction process to work the purchased materials into finished goods. These are then sold into the Consumer Market which transmutes them back into money or revenue. This is hopefully more than was spent in purchasing the labour and mat­erials that were used to produce them. The enterprise may extract its raw materials and energy directly from the Earth. Most, however, buy these from the Free Market from enterprises who specialise in extracting terrestrial resources. The space within which the enterprise's production and administration processes take place require the occupation of land. This is also a terrestrial resource, which, unless owned by the entrepreneur directly, must be bought or rented from the Free Market.

Part of the enterprise's revenue is then used to buy more labour and materials thus enabling the enterprise to sustain itself and grow. A further part goes to pay interest and taxes. The rest of this revenue goes to the entrepreneur and his co-investors as their annual profit on their initial capital investment. [Back to Model]


Terrestrial Resources

Mankind's relationship with the Earth. First there was the Earth. Then there was man. But the hu­man life-form is not self-existent. It cannot survive and func­tion without external inputs from its ter­restrial environ­ment. It is a totally dependent sub-system of the Earth's biosphere. It needs food, clothing and shelter, which it gathers and fab­ricates from what is in, on or grows upon the land. From the dawn of humanity, this has been the fundament of all econ­omic endeavour. It still is. And it always will be.

Systemically, the modern capital driven economic enterprise is entirely this and no­thing but this. The differences between the modern corporate enterprise and the hunter-gatherer or artisan-farmer are political. They simply stem from the way the organisation and government of human society has changed.

Any economic endeavour needs space in which to operate. Even a think tank needs space in which to accommodate and facilitate its thinkers. Consequently, even if it buys all its other requisites from the market, it still needs a building of some sort, which occupies land, which is part of the planet's habitable surface. Even its other requisite materials, consumables and energy originate, by some means, from the terrestrial environment. Of course, all raw materials and enery used by manufact­uring and service enterprises must originate from the Earth, as must the food and water necessary to sustain its labourers.

[Back to Model].

Financial Resources

Enterprise's Financial Resoiurces The entrepreneur must generally supply at least part of his enterprise's financial resources (capital) from his personal in­heritance. He may obtain more from whoever else (investors) he can persuade to contribute. It is most unlikely, however, that the entrepreneur and his investors will be able to raise sufficient capital to kick-start his enterprise. The entrepreneur will thus invariably have to borrow a significant proportion of its starting capital from a bank.

A bank will generally only lend capital to an entrepreneur who is able to pledge a tangible object of collateral that has a value equal to or greater than that of the borrowed capital. Another person may guarantee a capital loan for the entre­preneur, but stands to lose his pledged collateral if the entrepreneur's venture fails. Such a guarantor must therefore be a parent or close relative who is prepared to take that risk on behalf of the entrepreneur.

Consequently, only people of means, and their close relatives, are able to launch an enterprise. Everybody else must work as an employee for who has such means. Except in very rare and fortuitous circumstances, it is not possible to build an enter­prise with money saved from wages. In today's global market, it is never enough.

The entrepreneur, his investors and the bank thereby constitute the enterprise's fin­ancial environment. This capital initiates and sustains the operation of the enter­prise until it receives sufficient revenue from sales to become self-sustaining. It is spent in renting working space and equipment, buying materials and energy, paying wages and filling the inevitable credit gap, which is the monetary float needed to bridge the time between when a product or service is sold to a customer and when the money paying for it is received from the customer. A large part of the sales revenue, when it arrives, must not only pay back the borrowed capital, but also pay dividends to the investors and interest to the bank.

[Back to Model].

The Free Market

Sectors of the Free Market The term 'Free Market' is somewhat of a political name, extolling the neo-liberal philosophy of global economics. The market is not 'free', other than to a very small eco­nomic elite comprising super-rich individuals and multi­national corporations. It is also far from homogeneous. In fact, it is three separate markets, as shown on the right, which are separate in that each works according to dist­inctly different rules of engagement. Nonetheless, in the diagram of my enterprise model, I have labelled what is really the Trading Market as the Free Market. This is be­cause it is essentially a market of peers who are able to trade with each other, according to negotiable contracts, which either party is free to decline without detriment.

The Free-Trading Market is a global market, which is a closed community – an exclu­sive club – of well-connected peers. It is an extremely small small-world network comprising no more individuals than would an anthropological community. Each may connect with any other in full confidence through a personal introduction and recommendation of one or two people they both know and trust. They all went to the same small circle of private schools. They all attend and exchange their latest business gossip at the same circle of gentlemen's clubs. Most are inheritors of family wealth and fairly closely related through noble family lines. They trade as pals through contracts that are negotiated from equal positions of strength, the manner of their dealings being visible to their whole community of peers.

Trade between these peers comprises high quality goods and services. They are for either individual use or corporate application. They comprise well-made long-lasting clothes, cars, executive aircraft and yachts on the one hand or industrial plant, machinery and corporate infrastructure on the other — or whatever other needs and desires exist within this Free-Trading Market.

The exclusivity of this cosy coterie is only rarely broken by a new unknown entre­preneur who rockets to fame and fortune on a wave of new technology. He rises from the proletariat by having the right idea and inspiration and being in the right place at the right time for a chance exchange with one of the favoured few. He is rarely an expert himself in the technology that carries him aloft. He hires technical expertise later. This phenomenon is a good illustration of how the laws of complex dynamics — that can, on occasions, cause enormous effects to be precipitated by insignificant initial conditions — operate within a global socio-economy.

The Free-Trading Market is also host to innumerable one-man-bands, partnerships and small to medium sized businesses. These are the minnows in the shark tank. Some of these survive in the long term, occupying some out-of-the-way niche in the Free-Trading Market. Others are born and bloom for a while like a desert flower. Then they either become absorbed by a larger business or simply die under the fire of increasing corporate competition.

This happens to sole-trader shops or small franchises when a supermarket invades their territory. It happens to high-tech start-ups. By superlative effort, they launch a highly innovative product or service. They rise high in the industry news media. They preach their gospel around the world. Then, for lack of expansion capital or by being bought out or having their idea untracibly stolen and adapted by a predatory corporation, cease to trade or go bankrupt.

In a curning convection of life and death, all these lesser businesses have their lowly or fleeting existences and market shares solely by the let and leave of the great corporations.

[Back to Free Market] [Back to Model]

Consumer Market

The consumer market is, for the corporate entrepreneur, an exploitable resource. It is a market populated by middle-class wage or salary earners: namely, his own em­ployees and the employees of every other employer. It also includes the owners and proprietors of the lesser businesses mentioned above. The inhabitants of this Con­sumer Market are shallow and passive, their minds being easily manipulated by carefully crafted advertising. They bow in awe of financial power and worship at the feet of the corporate image. Driven solely by emotion, they buy on impulse, trusting unconditionally the exhaustive incomprehensible terms and conditions imposed – as a non-negotiable ultimatum – by the corporate vendor.

Convinced of their excellence, the easily-beguiled consumer willingly buys the corp­o­rate vendor's glitzy power-advertised products. But the vendor well knows they are short-lived and of poor quality and will soon break, forcing the consumer to return shortly to buy a replacement. But some products, because of their very nature, can­not be made both merchantable and short-lived. A limit on the useable life of these products is imposed by advertising-driven fashion and deliberately built-in technical obsolescence. Examples of these are clothes, furniture, cars, personal computers, smartphones, and software.

The prices that the corporate vendors charge for their goods and services are un­related to their costs of production or provision. They tune the prices of goods and services in the Consumer Market to maximize their revenue from it. To achieve this, they set the price of each good or service to the maximum that the greatest num­ber of consumers are able – or prepared – to pay. Naturally, this results in the low-paid, poor and unemployed being essentially priced out of — and thereby excluded from — the Consumer Market, while the corporate vendors are ruthlessly exploiting it to the maximum.

But how do the low-paid, poor and unemployed survive. From whence comes their basic needs of life? It comes from some of the small businesses of the Free Market such as the street stalls of the one-day-a-week markets. The supermarkets are way too expensive.

[Back to Free Market] [Back to Model]

Labour Market

The Labour Market comprises all who have nothing but the sale of their labour with which to acquire their needs of life. And that's just about everybody except for the members of the exclusive club of well-connected peers mentioned above. It in­cludes all from the lowliest of unskilled labourers to the most qualified of top profes­sionals and working directors. If they do not possess sufficient land or capital to be self-sufficient and self-sustaining, then they are labourers: mere human resources available for hire from that giant pool of humanity we call the Labour Market.

This landless majority are dispossessed of all means whereby they could turn their labour into their needs of life. But to survive, they need food, clothing and shelter. To work, they need education, training and welfare. And there is only one way they can get these necessities: by renting their labour to employers, who are – for the most part – the great corporations owned by the members of that exclusive club of well-connected peers.

But while the landless need the landed, the landed don't need the landless. While labourers need employers, employers don't need labourers — at least, not all of them. Consequently, the Labour Market is always and inevitably a buyer's market. It is always the labourer who must go cap-in-hand to the employer and beg for emp­loyment: never the other way around. It is always the labourer who must accept, unconditionally, the employer's standard non-negotiable contract of employment, which is not really a contract but a one-sided ultimatum.

And it is this that gave rise to and perpetuates the polarised them-and-us society of right/left politics. But if a world were ever brought to be in which each human being — by right of birth — was the allodial possessor of his fair share of the planet on which he was born, then every human being could trade with any other human be­ing as an equal peer within a truly Free Market.

[Back to Free Market] [Back to Model]

Production Process

Production Process The production process has existed since the dawn of humanity. It is thought that the economy of early humans consisted of the act of gathering fruit, nuts and some Apiaceae roots from the wilderness. Later, after the use of fire for cook­ing had been mastered, it is thought to have in­cluded the hunting of edible animals. Later still, it included the planting and harvesting of crops.

Perhaps it is only at the stage of planting and harvesting of crops and the domestic­ation of animals — that is, farming — that the production process became re­cog­nisable as such. It probably expanded rapidly to embrace the use of wood and stone for fuel and to make dwellings. At this stage, the universal economic unit would still be the home. As such, its production process would also have to have included the production of meals, clothes, furnishings and tools.

As communities grew, parts of the domestic production process separated out to become the diverse specialisations of different artisans. The Industrial Revolution saw the development of large steam-powered machines, which facilitated the up-scaling of the production process through the concentration of labour. It is this up-scaled production process that created the need for — and dictated the operational, administrative and financial anatomy of — the modern enterprise.

This increase in scale worked efficiently for economic operations, whose functional nature lent itself to the larger scale. Examples of these were the cotton industry, mining and the manufacturing of large items like industrial machines, vehicles and ships or vast numbers of identical objects. However, while greatly facilitating prod­uction, it also facilitated the universal dispossession and enslavement of the vast majority of people by a new industrial elite. Even the education of children has been implemented by governments under what is essentially the same model.

Notwithstanding, the flexibility of design and production, made possible by the use of computers, renders this large scale unnecessary. The computer makes possible the efficient production of bespoke items, of the highest engineering and scientific precision, on the small scale of domestic artisanry. In any case, many human en­deavours — such as design, writing and programming — never did necessitate the large-scale concentration of labour.

The reason that just about every economic endeavour is still incarcerated within large-scale enterprises is because the industrial elite do not want to liberate their slaves. They want to keep them within their corporate cages so that they can con­tinue to bleed off their lucrative percentages of the fruit of human labour. But the generic flow model of a business is scalable. The same software can effect the same administration and control functions equally well for the ant or the elephant. So perhaps it's time for a re-think.

[Back to Model].

Financial Control

The enterprise's financial control is an automatic budgeting process. I originally prototyped this program in Microsoft QuickBASIC for my own business in the 1980s.

Automatic Budgeting System A simplified outline of the automatic budgeting process is illustrated here showing the 3 sources of financial input to an input holding account. The auto-allocator takes money from the input ac­count in daily doses. The size of each daily dose is initialised manually. It then automatically adjusts itself to compensate for inflation and fluctuations in demand according to an exponentially damped 365th root summation formula to produce a smooth cash flow. This gives the user a clear dyn­amic view of both fixed and controllable outgo­ings and maximum survival time for both quies­cent and zero-input conditions thus equipping the user to navigate his business through boom-time growth and recession survival, always with suffi­cient money available to pay the bills on time.

Of course, the number of budget accounts is, in reality, much greater than the 3 shown, which are merely generalisations corresponding to those shown in the main flow model. The real budget includes separate accumulators for such things as loan repayments, profit, taxation, VAT, wages, employee tax, national insurance, utility costs, operational services & supplies, research & development and special projects.

This automatic budgeting process was later built into a full financial control system, which is outlined schematically below. Financial processes are triggered by various kinds of external event indicated by the small circles in the diagram.

Outline of the financial control system.

Key to Process Triggering: C = calendar-initiated process; O = On-line monitoring process; E = event-initiated process; P = planning-initiated process; T = Threshold-initiated process; B = budget cycle initiated process; D = demand-initiated process.

[Back to Model].

Marketing & Sales

Most modern enterprises do not own any terrestrial resources. Consequently they must buy from the Free-Trading Market in order to exist and sustain themselves. To do this they need income. This can only come from the Free-Trading and Consumer Markets. But these markets do not buy from — and thereby supply income to — the enterprise spontaneously. They must be actively motivated. To motivate these mark­ets into buying from an enterprise, that enterprise must engage vigorously in a pro­cess called marketing. I shall now consider this process of marketing in the context of the Free-Trading market only.

The market is the universe in which the enter­prise exists and operates. It is made up of all other enterprises and consumers. It's the centre of the business process. It is the collective focus of all sub-processes which take place within the enterprise. From the point of view of the enter­prise, the function or purpose of the market is to convert goods into money and money into goods or services. This is why it is placed in the middle of the diagram linking the enterprise's physical processes and resources (on the right) to the less tangible financial ones (on the left). Looking outwards from the enterprise, the mar­ket may be conceptualised as a sequence of concentric domains, each spatially contained by the one outside it. Starting with the outermost, these domains may be classified as follows.

The Global Market: This is, in effect, the whole of humanity. Theoretically it is the enterprise's potential market. However, it is generally far too big for any single enterprise to exploit fully. [Back]

Researchable Market: In order to trade, you need to build and maintain a base of information about your market. The first and largest domain of the market on which you can practically acquire data is the researchable market. This is the domain in which you conduct your market research, analyse who is there, what kind of people they are and what they are likely to buy or accept. It includes all the people and companies you actually know exist, and can get information about. They are those businesses or consumers listed on a bought-in database or whose details you can otherwise ob­tain. You buy in this data from a market list vendor who will supply it as a file which can be imported into a conventional database such as an SQL server. This contains general data on a large number of people and companies who could potentially become your customers. [Back]

Reachable Market: You do not necessarily have the practical means to reach all the people you know about. You can therefore only actually make yourself known to a fraction of your researchable market. These are the people who are theoretically able to see your advertising, read editorial about you and receive your unsolicited communications. This is the domain for which you build your proactive marketing database. You must work out the geographic and business constraints which define your reachable market. You then formulate these constraints into a 'structured query' and submit it as an SQL query to your researchable market database. This causes it to extract a sub-set of your researchable market, which will be your reachable mar­ket. In other words, it furnishes you with a sub-database comprising your reachable potential customers. You then use this sub-database to contact these potential customers to see if they want to do business with you. It is an on-going process. You also advertise through passive media which are likely to reach these people. [Back]

Responding Market: As a result, some of these people should start to respond to you. Those that do, form your responding market. Of those who are aware of you, only a small fraction will actually reciprocate by contacting you. They are – or at least profess to be – interested in what you have to sell. These are the people with whom you will communicate regularly and – over time – hopefully develop quite a rapport. To become effective at this point, you need to start collecting additional information on these people. This information is of a kind which does not lend itself to being stored and manipulated by conventional database technology. You need to be able to build information not just on the people who make up your marketplace, but also on their relationships with you and with each other. [Back]

Captured Market: Of those who respond, a small fraction will actually do business with you. These form your captured market. They are the people who will actually buy from you: to whom you actually sell your goods and/or services. For them you hold customer accounts, from which trails of transaction records emerge.

What you now need — apart from a standard sales ledger — is a hybrid database comprising a conventional SQL server linked to two sep­arate small-world networks each comprising a set of interlinked HTML files, which employ some additional special tags. The two kinds of HTML files in the system I implemented are:

These two classes of HTML file are related through a relational table which relates people in terms of the subjects and issues upon which their relationships are based. This arrangement helps you to build a sustainable relationship and a good working rapport with each member of your responding market. As a result, many of these people should start to trade with you. Those who do, form your captured market. To the dossier file of each member of your captured market you attach a trading account. This comprises a trail of finite state transaction records for trade which has taken place between you and each person or company. All this was the essence of my personal link package.

[Back to Market] [Back to Model]

Purchases from Free Market

In ancient times, the small self-contained self-sustaining economic enterprise of a family or anthropological community was built and operated simply by taking freely whatever resources it needed from its immediate natural environment. It took the space in which to operate; fruit, nuts, roots, grains and animals to eat; wood for fuel, building accommodation and making furniture; clay for making urns, plates, pots and bowls; stone for floors, walls and tools. Later, by specialising individual skills and distributing economic functions, a community was able to develop more advanced economic endeavours such as the mining and purification of metals from which to make better tools and eventually for constructing machines. There was no landlord demanding rent; no king demanding tribute. Nothing had to be bought.

These same resources are needed in order to build and sustain a modern business. Unfortunately, however, the proprietors of most modern business enterprises are not free simply to take these from their immediate natural environment because that natural environment is the property of someone else and under the jurisdiction of a local authority and a sovereign State. The modern business enterprise, in order to be permitted to exist, is thus required to pay rent to a landlord, rates to a local authority, tribute to a sovereign State and the market price for all its other re­qui­sites, including water. I have no doubt that, if it were remotely feasible to meter and tax air, wind and sunshine, the authorities and governments of this world would do it. Thus, like any physical person in this modern rancid world, the pessoa juridica is also born into debt and must pay continually for permission to exist.

This is because, under the present world order, the Earth is owned solely by an ex­clusive privileged few. Only they control the extraction and use of terrestrial re­sources. Under a different regime, where each physical person, by right of birth, owned his fair share of the planet on which he was born, all would have that same privilege. Each would have the inalienable right to use his fair share of the planet's habitable land in order to accommodate and sustain his own economic enterprise. He would be obliged to pay rent, rates and taxes to nobody. But he would not neces­sarily have to occupy and use his share directly. He could rent it out to others, including non-physical persons i.e. companies, corporations and government auth­orities. A non-physical person – a pessoa juridica – cannot inherit a share of the planet because it is not a life-form needing physical sustenance. Perhaps the eco­nomically useful minerals of the planet should be considered as a whole and their ownership divided among everybody.

Under the present world order, however; rent, rates, tax and other statutory costs are actively demanded from all busin­esses by those to whom they are due. The proprietors of a business do not have to go and seek out who, where and how to pay. On the other hand, the operational re­quisites of a business are more particular. What they are depends on the nature of the business. Ideally, the proprietors of the business should simply seek out sources of these requisites from the Free-Trading Market as and when they need them. This would be the most effective and efficient way of finding exactly what they needed. Unfortunately, this is not the way it works.

Instead of waiting to be found, the producers of each product or service uses all means of advertising — passive, active and proactive — to push their products and services at people. Passive advertising, like adverts in magazines, is tolerable, within moderation. Television commercials much less so. They are forever an unwelcome imposition, interrupting the natural flow of an interesting program. Worse still used to be the door-knocking salesman, which now, happily,seems to be a waning phen­omenon. Notwithstanding, by far the most intolerable, invasive and disruptive form of proactively pushing products and services is telesales. When I was in Brazil, I was pestered by an obnoxious company called GVT who phoned be between 8 to 12 times every working day for a solid two-and-a-half years. It severely disrupted my work, costing me well over $100,000 in lost time. I eventually had to disconnect my phone in order to work, which left me unable to receive legitimate calls.

The great salvation, during the late 1990s and early 2000s, was the worldwide web. This was the era when web search engines worked properly. I could simply enter a search term — as simple or complex as I required — and I would receive all relevant results. The search engine would simply return to me what I asked for. But that era is long gone. No longer will a search engine give me what I ask for. Instead it gives me results from only a narrow range of long-established suppliers that the proprietors of the search engine want me to see. I am thereby prevented from buying exactly what I'm looking for, but instead offered only the narrow choice of compromises that established mainstream suppliers want to offer me.

The idea behind this unfortunate change was first mooted in the late 1990s. It was that the Worldwide Web must have its original operational model — of user-driven research of any and all sources of information and knowledge — changed to follow the established method of commerce. I remember seeing in Computer Weekly the new jargonic phrase of "turning pull into push". This meant that instead of me being able to pull information from the Web about the precise types of product or service I required, I would be forced to endure a relentless barrage of advertising pestering me to buy all manner of irrelevant products and services and poor compromises of the products and services I wanted from the most dominant and vociferous players of the Free-Trading market. My access to the real and specific products that I really wanted and needed was thus cut off, leaving them buried in oblivion.

[Back to Model].

Assets: Space, Food, Materials, Energy

Only a miniscule proportion of business enterprises in the world today use terrestrial resources directly; except that all must each necessarily occupy space; an area of the Earth's surface on which to accommodate their operations. The few enterprises that do use terrestrial resources are, for the most part, only those that are directly involved in agriculture, mining, forestry and energy production.

Agricultural enterprises plant and take what grows. Under an ideal regime, they do this sustainably. That is, the cycle is infinitely repeatable without any deterioration in the land's productive potential. They grow fruit, nuts, pulses, and cereals, and raise animals for meat. Personally, I would prefer to skip the latter. It's far too messy. It is interesting to note that while nature returns an increase of 25 to 70 fold on planted seed, return on investment in today's financial markets is only around 2·8%, that is, 0·028 fold.

Production of materials such as cotton, wool and leather for clothing and wood for shelter are agricultural processes too, and are consequently also potentially sustain­able. However, the extraction from the land of other materials such as stone, clay, metals and chemicals is not sustainable. There are only finite reserves of each, which, once exhausted will not be replaced. Consequently, once extracted, such materials should not be discarded as waste. If humanity is to continue to use them, they must be recycled.

Energy is derived from fuels: wood, coal and oil. Wood can be made a sustainable crop whereas coal and oil cannot. These latter two occur as finite reserves. Once exhausted they will no longer provide a source of energy. They also release carbon into the atmosphere, which remains there permanently as carbon dioxide gas and particulate carbon. This will eventually shift the behavioural attractor of the global climate, creating an environment that could well be incompatible with human life. On the other hand, provided the amount of forest coverage is maintained, new tree growth will re-fix the carbon into the new wood, ready to serve once again as a sustainable fuel. Biomass [grass and foliage compost] can also be made to function as a sustainable fuel like wood.

There are other ways of acquiring energy that are entirely passive; that is, they do not involve combustion. The oldest is hydro-electric power, which uses the potential energy of water moving from a high level in an upper lake to a lower level in a river or a lower lake. Of course this is really solar energy. The water got to its higher level by being evaporated from the oceans by the heat of the sun and then condensing and raining down on mountains, collecting in the higher lake. Unfortunately, this way of generating electricity can only be implemented where there exists a conven­ient lake or river that can be dammed. These are few and far between. Consequ­ently, this method of providing electricity requires the same large distribution infra­structure necessary for the old unsustainable coal and oil combustion methods.

The most attractive means of producing electrical power, from the point of view of sustainability, are wind generators and solar panels. They also have the overwhelm­ing advantage that they do not need a large distribution infrastructure as do all the other methods. Either can be implemented separately and independently for each home or enterprise.

A wind generator has the advantage of involving only low technology. It is simply a set of wind blades [like the propeller of a ship or aircraft] driving a simple electrical generator. Hence it is easily DIY-constructable. They do, however, require a certain amount of electronics to control them. Their disadvant­age is that some people — including me — see them as unsightly, particularly if every house in a neighbour­hood has one on the roof. Fortunately, there are other ways of implementing low-technology wind generators that are out of sight.

Solar panels are more high-tech in that their fabrication requires a clean laboratory-type environment. No DIY. Notwithstanding, they do lend themselves to DIY instal­lation, although, while not so unsightly as wind generators, they can to some extent be considered unsightly additions to conventional roofs. They can, however, be in­tegrated just below the outer translucent surface of prefabricated wall panels of new high-tech buildings.

In an ideal world, under an ideal regime, all enterprises would use the terrestrial resources — and extract the produce thereof — directly and sustainably from their proprietors' rightful individual shares of the planet, possibly renting the use of any necessary additional terrestrial resources from the respective owners thereof.

[Back to Model].

Recycled Assets and Waste

All operational enterprises produce waste. Even think tanks produce waste paper. Even if they go paperless, there are many other day-to-day consumables that wear out and have to be discarded. Besides, all enterprises involve human beings who need to urinate and defecate. In today's world, waste is disposed of by local author­ity garbage collection and sewage services.

In an ideal world, it is done through inbuilt recycling mechanisms. Organic waste, from crop harvesting and food preparation, is recycled via a compost silo. The mess extracted from the bottom of the silo is used to fertilize crops. Toilets are flushed by rain water or untreated artesian water. Waste water from showers, wash basins and washing machines is also used for toilet flushing. Sewage from toilets is processed using active bacteria tanks, reed-beds or banana trees.

Metals from discarded items are crushed and melted for re-use in making new pro­ducts. The materials from old or discarded buildings must also be recycled. The land occupied and used by an enterprise must be returned to a functioning natural state when the enterprise moves location or ceases to operate. For example, a mining enterprise must return land from surface mining to its natural usable state with indigenous vegetation after all useful minerals have been extracted.

[Back to Model].

Capital

Before a business can start, it must have starting capital. Starting capital comes partly from the entrepreneur's savings or inheritance, from investors and from banks. Before a bank will supply capital, the entrepreneur must present what is termed a Business Plan. This is a time-plan of staged expenditure over the period from initial start-up to when the entrepreneur thinks that his enterprise's rate of income from sales will have become stable. After this time, the Business Plan must include a time-plan of how the capital and the interest on it are going to be repaid.

At the pinch-point in the Model diagram labelled 'CAPITAL' is the in-flow path of the Capital Ledger. This monitors all transactions involving the flow of capital into the business and the current capital balance and debt.

In an ideal society, where each inherits, by right of birth, his fair and equal share of the planet, most of the capital required for starting an enterprise will already exist in kind and will already be the allodial property of its proprietors. Any lacking neces­sities will come from its proprietors' community.

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Profit, Tax, Interest & Dividends

Included within an enterprise's Financial Resources are State authorities, which are regarded as negative financial resources. An enterprise must, from the beginning, pay various taxes, such as local authority rates on its accommodation. These will have to come initially from the starting capital. Also from start-up, the enterprise will be responsible for paying the income tax and other statutory deductions on behalf of its employees.

At the end of its start-up period, when it begins to make a profit from sales, the enterprise becomes liable to pay tax on that profit. It is at this point too that the enterprise must begin paying back its borrowed capital + interest in monthly in­stalments to the bank and dividends to its investors.

All the transactions that take place in this regard are also recorded on the out-flow path of the Capital Ledger. In an ideal society, the only requirement will be to return to the community what was borrowed for the enterprise's start-up phase.

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Sales to Consumers

The Consumer Market is essentially a retail market. Not all enterprises sell to the Consumer Market. This market comprises the working class, professionals and small business proprietors. These are the domestic end-users of products and services.

They are submissive and malleable, being easily brainwashed by well designed ad­vertising into buying whatever the large retail enterprises wish to sell to them. This brainwashing has taught them to mindlessly trust financial power and commercial image and, by consequence, to distrust and reject the products and services of the dedicated small artisan. The great failing of many a would-have-been business en­trepreneur is trying to sell to these people through fact and reason, and failing to realise just how emotionally-driven and universally stupid they are.

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Revenue from The Consumer Market

The great advantage of selling to the Consumer Market is that payment for goods and services is immediate. There is no credit gap to finance. Or rather, this was en­tirely the case until the advent of the credit card. Payment transactions for sales to consumers is recorded in a Consumer Sales Ledger mounted at the pinch-point marked 'REVENUE' on the path emerging from the Consumer Market as shown on the Business Flow Model diagram.

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Work

The work supplied to an enterprise by a labourer may be anything from unskilled manual work to work that can only be done by a highly dexterous operator or by somebody with a high level of technical, legal or administrative knowledge and ex­perience. The labourer generally has no resources of his own and depends on the enterprise to provide the tools and equipment appropriate for his type of work.

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Wages

Workers [labourers] are normally paid for the working hours during which they att­end the enterprise's premises. The relationship between the work actually perform­ed by a worker and the remuneration the worker receives for that work is really quite tenuous. Not all workers work at the same rate of productivity even if they are all doing the same kind of work and paid the same wage or salary. The relative amounts paid for different kinds of work is also tenuous. Both measures are quite arbitrary, being decided according to how the value of each particular type of work is perceived by somebody else who has never actually done that type of work. Un­fortunately, and however unfairly, that's the way it is.

The enterprise must operate a payroll system, that meets statutory requirements, for paying labourers and returning the appropriate deductions to the tax authorities.

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Revenue from Free Market

Revenue from the Free Market comes from payments received from other busines­ses that have been supplied, at their requests, with goods and/or services produced or provided by the enterprise. Each transaction involved in this process is recorded in what is called the Sales Ledger. It is customary for businesses to agree to make a single payment at the end of each month for all the supplies made during that month. Notwithstanding, there is an unfortunate tendency for businesses to delay payment. Most of my former customers delayed paying for three months and occa­sionally for six months or more. This generally happens when the supplying enter­prise is much smaller than its customer. This frequently leads to an enterprise going bankrupt through no fault of its proprietors.

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Payments to Free Market

Payments to the Free Market are for requested goods and services received from other enterprises. Payments for one-off capital items may be according to a special pre-arranged schedule. Payments for on-going supplies of goods and services are usually made at the end of each month. All out-going payment transactions are recorded in what is called the Purchase Ledger, which is sometimes referred to as the Bought Ledger.

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Parent Page | © May 1979, Jan 2013 Robert John Morton