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.

Current Problems Associated with the Sales Income Streams

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

The purpose of Basic Receiving is to greet the public, triage all the easy and obvious stuff without accidentally recycling anything that shouldn't be recycled, to get a proper label on the gizmo, and to put it where it goes.

Documentation

The documentation for this area would be prepared in advance of the work party.

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.

There would be a series of gizmo charts on the wall with pictures and text, as well as two main diagrams. These should be designed with the help of the Knowledge Bees. Here's a list of gizmo charts, organized by its relevant diagram.

Diagram 1 (Basically a pictur of basic computer with its external components):
- System
- Monitor
- Keyboard
- Mouse
- Printer
- Scanner
- Joystick
- External Modems
- etc.

Diagram 2 (Basically a picture of and open computer):
- Cards (not indicating the specific card types)
- Motherboard
- Power supplies
- Processors
- Memory
- etc.

Other gizmo charts of things that are easy to identify:
- Hubs/Routers
- Stereos
- Phones
- Laptops
- etc.

The above lists may not be complete. My intention is to show all the types of gizmos that a typical low end adopter can learn to identify.

Each gizmo chart 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, identifying all relevent locations.

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

We would also design instructions for the overall job of Basic Receiving:

First, help the donor:
- make sure they know about monitor fees
- help them unload their car
- fill out a receiving ticket
- direct them to the front desk.
Second, identify the gizmos
- start with the biggest
- see the pictures on the wall
Third, put the gizmo into the database
- the picture on the wall tells what kind of gizmo it is
- if you can't tell what it is, skip this step
Fourth, put the gizmo away
- the picture on the wall says where it go
- check the map
- if you can't tell what it is, it goes to Advanced Receiving

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

The purpose of Advanced Receiving is to triage all the unusual stuff without accidentally recycling anything that shouldn't be recycled, to get a proper label on the gizmo, and to put it where it goes. It should also give appropriate feedback to Basic Receiving, so we can teak the process.

We would build a mini-program around Advanced Receiving with a pool of proven volunteers, for example (off the top of my head and not complete):

Ted
Joe
Jeff
Tim
Jayne
Cliff

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. Using their own knowledge and from research on the Internet, these volunteers would:

identify the unusual gizmos and get it into the database properly
research the gizmo and along with the Reuse Coordinator decide what to do with it. Options are:
- recycle it
- test it (if it fails recycle it)
- test it (if it fails fix it)
- send it to the store or eBay for sale as untested
- send it to the ASSes for infrastructure
- send it to the Hardware Grants group for grant fulfillment

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

This job might be shared by existing staff members until we can afford to hire one proper (or hire for another job and shuffle someone into this one).

The job description would be to operate out of the Advanced Receiving area, supervising Basic Receiving and Basic Testing. The staff person would coordinate between those areas and the rest of Free Geek, and to ensure that all gizmos are reasonably evaluated for reuse before they are sent to recycling. The staff member will therefore also maintain documentation for those areas add recruit new volunteers into Advanced Receiving.

Some adoption volunteers will be able to find suitable jobs in the Advanced Receiving area. The Reuse Coordinator would decide what jobs fit which receiving adoption volunteers the best. This also allows space for low end builders who drop out to find something interesting to do, and it helps provide a bridge between the Adoption and Build programs.

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

This job requires a working knowlege of offbeat computer hardware and the ability to research, document, and coordinate.

This job replaces much of the current Busy Bee shift.

Develop Online Sales

Online sales (eBay) should be tracked better than they have been. We need to know:

Who is selling an item
The type of item sold
Its gizmo number
The process used to get the item ready for sale
How much it sold for

We also need to know what we have in stock that could be sold online and find staff or volunteers to get it ready for sale. Tracking an for-sale-online item from receiving through sale is similar to tracking any other complicated job (like a hardware grant request or a volunteer going through the Build Program). Enhancements to the database, using RT or other software, and the development of paper forms ought to all be considered. We should make it easy enough to do this that a sufficient number of volunteers and staff would be capable of doing it.

This should be a primary area of development for the Reuse Coordinator from the start.

Identify Local Customers

The Reuse Coordinator should familiarize himself with hobbyists, computer shops, and other appropriate local people and organization who could be marketed to so that opportunities for selling gizmos locally are not lost to us simply because we are not organized.