Thoughts on Increasing Sales Income

Plan for increasing revenue at Free Geek

Definitions and Basic Assumptions

Structural problems: These are problems that cause us to on average spend more than we earn. Ways to fix structural problems are to reduce spending or increase income or both. Solutions in this category need to be long term sustainable. For example, we can't decide to sell all our computers to pay the rent this month and call it a good month.

Cash flow problems: These are problems that have to do with not having enough money at the time it is needed, even though the money is assured to arrive. These problems can be addressed by shifting what gets paid when (for instance paying rent late), but there are costs associated with that (for instance losing the confidence of our landlord). A better solution is to have a cushion of money set aside for lean cash flow months that can be replenished in better times. The bigger the cushion, the less grief cash flow problems will cause us.

Structual problems need to be addressed before or at least in conjunction with cash flow problems. They are always a higher priority, though they may not seem as urgent.

The Risks of Implementing Solutions: Each solution comes with a risk that it may not help or that it may actually hurt more than it helps.

Solutions for need to be well planned out and everyone needs to understand the risks and agree to take those risks on.

Costs: Free Geek has many costs, but from the beginning we've striven to keep them all as low as possible, living off of donated supplies and raw materials, emphasizing volunteer labor, and paying our staff low wages. There is probably very little fat to trim from the budget in that area.

Income Streams: An income stream is a way that Free Geek makes money in an ongoing way (see list below). There are major income streams and minor ones. Many of the minor income streams can be grown, but whether they will ever become significant is generally a larger gamble than focusing on the established income streams.

The highest priority in addressing structural financial problems should be to concentrate on the income streams with the most potential, starting with the largest and most proven.

The Costs of Operating Income Streams: Each income stream costs something to run. The most obvious example of this is the monitor fees income stream. Because of our policy, every monitor dropped off raises $10 for Free Geek. But if 75% of our monitors fail and each of those costs us $7.50 to ship up to Seattle and process. The we immediately see a reduction in the $10.00 income. (Numbers only vaguely guesstimated. For a better picture we'd need to calculate the actual recyle ratio, the real shipping and processing costs, and also factor in monitor sales income. My current guess is around $5 of the $10 fee remains, but that needs to help pay sales staff, rent, utitilies, and testing staff, so it's pretty much a wash.)

Also concentrate on the income streams with the lowest costs of operations.

Income Streams

There are several revenue streams at Free Geek, but three are sizable enough to dominate:

Collections at the Front Desk
Retail Sales
Warehouse Income

These can be easily subdivided into chunks:

Collections at the Front Desk
- Monitor Fees
- Solicited Donations
- Membership dues (very small)
Retail Sales
- Store
- Online (eBay)
Warehouse Income
- Wholesale untested gizmos for refurbishing
- Scrap materials

Any of these income streams that can be significantly increased in a sustainable way without negatively impacting our mission should be. We should approach this by selecting the most likely streams for increase first and re-engineering Free Geek to make that happen. We should try to protect those that are already likely operating mostly in an efficient manner. In other words, if it ain't broke, don't fix it, but if it is broke rethink Free Geek as a whole to see how it can be fixed.

Monitor fees and solicited donations seem to be doing well, and minor tweaks aside will probably not grow much outside of overall growth. That is, as we get more donations in, these income streams will likely grow proportionally. The same can likely be said of scrap material income (though economies of scale might come into play there and allow recycling income to grow faster than donation inflow).

This leaves the sales categories, and to be honest, I don't know what the potential of wholesale gizmo sales is, so I'll focus my comments on retail sales -- the store and online.

Operating Costs Associated with Sales Income Streams

In order to successfully sell gizmos, whether on eBay or in the store, we need to do several things (at least minimally):

Triage the gizmos: What should be recycled because there's no market for it? What should be sold without further evaluation or testing (let alone refurbishing)? What's worth testing? What worth fixing?

Testing the gizmos: By identifying working gizmos, we can sell them for a higher price, or reduce customer dissatisfaction (and increase customer loyalty). This does not mean that all gizmos need to be tested. (Some gizmos may be difficult or expensive to test but still have a market value that makes them worth selling as untested.)

Pricing the gizmos: Finding the correct price requires at least a little research. Priced too high, a gizmo won't sell. (Too low speaks for itself.) Most often sold can be priced occasionally, but those that are offbeat need constant research. For instance we already know how much monitors sell for, and it's unlikely to change month to month. But how much is the going rate for a specific laptop part that we might only see one of in a given year?

Finding the buyers: Online sales benefit from the fact that eBay is a giant marketing machine that does a lot of this work for us. (Though we might consider putting links to our online sales on our own website pointing our web audience to eBay items that we are selling).

Store sales needs to be marketed. We could invest in advertising, but marketing is more than that, and the most successful marketing campaign can work against us if shoppers arrive at our store only to find there's nothing there or the products they buy are shoddy.

Tracking what sells: By keeping track of what sells and for how much we can analyze (or at least estimate) how much the gizmo makes for Free Geek.

All the above steps go together. You really can't do just one of them and make a sale. But you can concentrate on one area to help the overall process.

All the above steps cost staff hours (which is a direct cost) or volunteer hours (which requires some staff supervision, which is an indirect cost). Some may have additional costs (e.g. a paid advertisement).

We need to be able to calculate by gizmo type, what all the associated costs are and compare that to how much those gizmos were sold for, arriving at a "profit margin" for each gizmo type.

This implies that we know which gizmos were actually sold.

It also implies that we know how to properly categorize gizmos for sale. An example might be useful. Selling a whole, working inkjet printer has a cost associated with refurbishing it (mostly salary costs for a Printer Coordinator) and a cost for acquiring an inkjet cartridge (mostly an out of pocket expense). At one point we were selling the "whole, working inkjet printer" as a single item (Printer). By separating these two items as different line items on a receipt (Printer and PrinterCartridge), we are able to more accurately able to track the costs and adjust the prices accordingly.

Problems

Valuable gizmos get scrapped, even though we could have made money selling them. We don't know how big that problem is and the fault lies in the fact that our triage and tracking systems are deficient.

Triage and testing often go hand in hand. We need to be able to triage and test gizmos that are not already in our mainstream.

A Plan to Address the Problems

This plan would affect every part of Free Geek, but the principal areas affected would be Receiving and Basic Testing which would be completely redesigned. It also shuffles staff job descriptions around quite a bit.

Redesign Receiving from the Ground up

Start with a Work Party

Over a weekend and with volunteer labor, accomplish the following tasks:

Clear out the least necesary parts of Basic Testing:
- Remove Mouse, CD Drive, and keyboard testing.
- Leave in place only Monitor and VideoCard testing.
Move everything from ASS shelf and the hallway into the areas vacated by Basic Testing.
Remove the ASS sheld, and build a bench in its place to be the new home of a new and reduced Basic Testing Area
Move Monitor and VideoCard testing to their new home.
Reorganize Receiving into two sections:
- Basic Receiving in the current area
- Advanced Receiving in the old Basic Testing area

The old Basic Testing functions that no longer have a home would be transferred to build, though basic triage of items would still be done in Receiving. For example, old and dirty keyboards would go to recycling, not build.

Basic Receiving

Make better and simpler documentation for Basic Receiving. This would be geared towards a typical low end adopter and be designed to help that person identify basic components and learn where they belong at Free Geek.

Diagram and pictures of basic computer externals:
- System
- Monitor
- Keyboard
- Mouse
- Printer
- Scanner
- Joystick
- External Modems
- etc.

Diagram and pictures of basic computer internals:
- Cards
- Motherboard
- Power supplies
- Processors
- Memory
- etc.

Diagram and pictures of other things we get (that are easy to identify):
- Hubs/Routers
- Stereos
- Phones
- etc.

Each picture would have a spot explaining what that item is or does and where it belongs.

We would also draw a big map of Free Geek, idetifying all relevent locations.

We would write up simpler triage process identifying how to figure out what something is and where it goes using the above diagrams and picutres. There will be many things that are not clearly identifiable. These, by default will go into Advance Receiving.

The same instructions would explain how to help the donor by filling out the ticket, explaining the monitor fee, and directing them to the front desk.

The inflow for Basic Receiving would be donations from the public as it is now for Receiving as a whole.

Basic Receiving would feed these other areas at Free Geek (based on simple instructions):

Evaluation
Card and Mobo Sorting
The Black Hole
Printerland
Recycling

Advanced Receiving

Build a mini-program around this with a pool of proven volunteers, for example:

Ted
Joe
Jeff
Tim
Jayne

These folks would be encouraged to spend an hour in the advanced receiving area once a week. We could easily find ten people, making an average of twice a day shifts.

The inflow for Advanced Receiving would be from Basic Receiving.

Advanced Receiving would feed these other areas at Free Geek (based on Free Geek policy and technical expertise):

The White Hole
The Black Hole
The Thrift Store
Recycling

Establish a Reuse Coordinator Job

Might be shared by existing staff members until we can afford to hire (or hire for another job and shuffle people into it).

To staff the area, coordinate between Basic Receiving and Advanced Receiving and Basic Testing (maybe even Advanced Testing eventually, but that remains no man's land for now).

To maintain documentation for those areas.

To recruit new volunteers into Advanced Receiving and determine which adoption volunteers fit into which jobs the best. Some could be put on certain tasks in Advanced Receiving. Others should stick with the simpler Basic Receiving.

Basic Adoption volunteers would be given an orientation to the job similar to the spiel we give card sorters and evaluators.

This job replaces the Busy Bee shift.