Thoughts on Increasing Sales Income
This page left for historical purposes. -- Mkille 21:25, 17 May 2013 (UTC)
- 1 Overview
- 2 Definitions and Basic Assumptions
- 3 Overview of Free Geek's Major Income Streams
- 4 Operating Costs Associated with Sales Income Streams
- 5 Current Problems Associated with the Sales Income Streams
- 6 A Plan to Address the Problems
- 7 How this Plan would Affect Free Geek Programs
- 8 Risks Associated with the Plan
- 9 Related planning documents (July 2009)
- 10 General Free Geek planning documents
By redesigning the receiving and testing areas we can more efficiently find gizmos that could be put into reuse, rather than recycled, and thus increase sales income. To do this we would also need a reuse coordinator. This would affect several job descriptions and programs 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.
- 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.
Overview of Free Geek's Major 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
- E-Waste Legislation (monitor fees reimbursed from the state of Oregon)
- Solicited Donations
- Retail Sales
- 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.
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. We have sensibly oriented most of our processes to the production of FreekBoxen for the Adoption Program, but this means that we're not paying as much attention to the gizmos that don't go into a FreekBox. Often these are the exact items that could be sold to generate income without affecting our mainstream production.
Triage and testing often go hand in hand. Testing the gizmos is difficult and/or unorganized. This leads to a default action of recycling the gizmos we don't know what to do with.
Tracking which gizmos are sold is difficult or undervalued (and therefore not done). This makes analyzing where our income is coming from impossible.
Tracking what we do to test or refurbish a gizmo is even more difficult and rarely done. This makes analyzing where our costs are going impossible.
What marketing efforts we have (even passive ones like word of mouth) are often subverted by the fact that items are not available in the store when the customer comes to make a purchase.
A clumsy eBay and PayPal system makes some sales not go through.
There is no single place to find buyable oddball hardware. Items that are neither needed for production nor regularly tested and placed into the thrift store still may have customers who want to buy them. These items are scattered all about Free Geek, because staff and volunteers don't know where to put them.
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.
=== Establish a Reuse Coordinator Job === (Ongoing? Abandoned? Done? Needs Revision?): __________.
This job would need to be shared by existing staff members until we can afford to hire a person dedicated to the job (or hire for another job and shuffle someone into this one). It replaces much of the current Busy Bee shift. It requires a working knowlege of offbeat computer hardware and the ability to research, document, and coordinate. The person currently on staff most qualified is probably Nathan, but working alongside Nathan, several people could learn the job.
A staff member acting as Reuse Coordinator would operate out of the Offbeat Receiving area, but would also supervise 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 Offbeat Receiving.
Some adoption volunteers will be able to find suitable jobs in the Offbeat Receiving area. The Reuse Coordinator would decide what jobs fit which receiving adoption volunteers the best. This also allows space for build dropouts 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.
Although this job is being suggested in a financial context, the actual job also directly addresses the mission of Free Geek by streamlining our reuse processes. (For instance, it should make Hardware Grants and the Nonprofit Assistance Program more effective as well as helping the Thrift Store and eBay sales.)
Redesign Receiving from the Ground up
==== Offbeat Receiving ==== (Ongoing? Abandoned? Done? Needs Revision?):__________.
The purpose of Offbeat 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 Offbeat Receiving with a pool of proven volunteers, for example (off the top of my head and not complete): Ted Havelka, Joe McCann, Jeff Schwaber, Tim Kutscha, Jayne, Matt Bell, and Cliff Fortune. There are probably several other folks in the build program that come to mind.
These folks would be encouraged to spend some time in the Offbeat Receiving area. I believe we could easily find ten people willing to commit an hour per week, making an average of twice a day shifts, which would likely be enough to at least triage the offbeat hardware.
Using their own knowledge and from research on the Internet, these volunteers would:
- identify the unusual gizmos and get them 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)
- put it up for sale (either as untested or after it has been tested):
- in the Thrift Store
- online (eBay)
- through local contacts (hobbyists, computer shopes, etc.)
- send it to the ASSes for infrastructure
- send it to the Hardware Grants group for grant fulfillment
This would require some sort of volunteer vetting process and oversight to deal with the standard theft problems, but that would be part of the job of the Reuse Coordinator.
The volunteers and the Reuse Coordinator would begin designing testing procedures where appropriate.
The inflow for Offbeat Receiving would be from Basic Receiving.
Offbeat 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
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.
===== Develop Documentation for Basic Receiving ===== (Ongoing? Abandoned? Done? Needs Revision?):__________.
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):
- External Modems
- Diagram 2 (Basically a picture of and open computer):
- Cards (not indicating the specific card types)
- Power supplies
- Other gizmo charts of things that are easy to identify:
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 Offbeat 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):
- Card and Mobo Sorting
- The Black Hole
==== Physical Layout (the Work Party) ==== (Ongoing? Abandoned? Done? Needs Revision?):__________.
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
- Offbeat 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.
=== Develop Online Sales === (Ongoing? Abandoned? Done? Needs Revision?):___________. 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 === (Ongoing? Abandoned? Done? Needs Revision?):__________.
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.
Continue Store Improvements
Getting production staff integrated into the thrift store has helped make gizmos more available for sale. (Ongoing? Abandoned? Done? Needs Revision?):__________.
More attention needs to be paid to the "shelf life" of gizmos in the store, rotating out items that don't sell but take up space. (Ongoing? Abandoned? Done? Needs Revision?):__________.
More complete pricing information needs to be made available so that more staff people can work the till. (Ongoing? Abandoned? Done? Needs Revision?):__________.
Tracking which gizmos are sold needs to be more consistent. (Ongoing? Abandoned? Done? Needs Revision?):__________.
All of these items have been and are being worked on. We simply need to recommit to these processes and continue working on making them better.
How this Plan would Affect Free Geek Programs
This is not meant to be a complete list of programs at Free Geek, just a listing of those that would likely be affected. The expected impact for each program is summarized.
The adoption program would become simpler to manage and it would be more educational for the adoption volunteer, since there would be better and more instructional documentation. The Adoption volunteer would spend a lesser percentage of their time in Basic Testing and more in other areas. By splitting Receiving into two tiers, there would more possibilities of finding a level of work that is educational at an appropriate level for the volunteer. (Ongoing? Abandoned? Done? Needs Revision?):__________.
More items would need to be tested during the build process, specifically keyboards and mice. (Ongoing? Abandoned? Done? Needs Revision?):__________.
Servers would not come back to System Evaluation. Rather they would go from Offbeat Receiving to the White Hole. Ongoing? Abandoned? Done? Needs Revision?):__________.
There would be more opportunities for advanced builders to find interesting work at Free Geek because more oddball hardware would be available. By volunteering in Offbeat Receiving, builders might be able to pick up some hardware identification skills basic to Advanced Build work. (Ongoing? Abandoned? Done? Needs Revision?):__________.
There would be a need to adopt the existing database to better track sales and possibly better track the processes associated with testing and refurbishing more types of gizmos. (Ongoing? Abandoned? Done? Needs Revision?):__________.
Hopefully adopters would have an easier time in Basic Receiving and have a bit more practice on basics like keyboard and mouse usage. (Ongoing? Abandoned? Done? Needs Revision?):__________.
More networking equipment would be available and accessible. (Ongoing? Abandoned? Done? Needs Revision?):__________.
Thrift Store and eBay Sales
More items would be available for sale. More volunteers would be involved in researching what could get sold for how much and where (eBay, Thrift Store). (Ongoing? Abandoned? Done? Needs Revision?):__________.
Risks Associated with the Plan
The biggest risk associated with this plan is that we would find that after the reorganization there are not that many saleable gizmos getting recycled and the expected raise in the sales income stream would not materialize. Basically, this plan gambles on the likelihood of useable items being tossed. If this turns out to be a false assumption we will have wasted our time reorganizing receiving (the biggest job).
However, once that price is paid, it does not seem likely that we would be worse off -- other than the expenditure of time and effort in implementing this plan.
Related planning documents (July 2009)
Thoughts on Increasing Sales Income