Appendix 7: Incubator Rules For Business Unit Operation

Reading Time: 2 minutes ;  Published: 1 year ago on May 26, 2020

Incubator company operational rules are required to promote transparency of these companies finances, to deepen cryptocurrency adoption in the local community, to place checks and balances against abuse. Finally, the last consideration is that there needs to be a mechanism to encourage incubees to be self sufficient and pay themselves a salary from company revenue, without disproportionately harming the profit share of incubator contributors or participating crypto projects.

TotalCrypto advises that the following rules are adhered too for incubator companies:

  • Each company in the incubator should have a segregated profit / loss account. This can be achieved through the remote management of an accounting system like Xero. Incubees can notify remote personnel (from crypto projects involved in the case study) of earned revenues and if these reconcile with account transactions, then the revenue will be attributed to the business unit.
  • Every incubee should be paid their salary paid entirely in the crypto of the participating crypto project. Incubees will incur no restrictions when converting crypto into fiat when using the local exchange.
  • All incubator business revenues are to be converted into the crypto of the participating crypto project and stored in a wallet controlled by the projects team.
  • Incubees should be provided with a monthly manual report of their profit and loss account. 
  • Incubated companies should only be allowed to spend up to 50% of their monthly turnover on further business growth e.g. hiring new workers or funding acquisitions. Otherwise profit share incentives can be nullified.
  • Incubator contributors may hire incubees to help them with their online business. However, such hires should be done through a representative from the participating crypto project to ensure that a fair market rate is paid. 
  • Incubees may decide to pay themselves a salary out of their companies turnover (provided this doesn’t exceed 50% of monthly turnover). Aside from the monthly turnover rule, there is no limit on what the business units team can pay themselves. However, it is recommended that if incubator teams choose this option then this will trigger a scaling down of the salary payments made to them by the incubator:
    • Salary parachute payments:
      • Month 1: 75% of previous salary.
      • Month 2: 50% of previous salary.
      • Month 3: 25% of previous salary.
      • Month 4: no incubator salary payments will be made to the team. 

The scaling down of salary payments will incentivise successful incubees to stop accepting incubator salaries in return for receiving a higher salary from their own businesses revenues. This should lead to more sustainable and profitable businesses being created and the scaling down of salary payments will ensure that taking this step is as painless as possible.

Next Section – Appendix 8: Estimated Cost Of Incubator