ESF Business Plan – Sharable Version

BUSINESS PLAN

Electronic Synergy Foundation

A Non-Profit Electronic Recycling Company

by Scott Metzger, Founder

SHAREABLE DRAFT

1. EXECUTIVE SUMMARY

1.1 Product

Electronics are replaced in the primary market every 2-3 years. The functional life of a computer can be anywhere from 5 to 7 years. Cell phones and Home Entertainment systems are replaced almost annually. Scrap metal is ageless. Improper disposal of electronic waste (eWaste) can be a corporate liability and/or environmental disaster because of the sensitive information and toxic elements they contain. The Environmental Protection Agency (EPA) estimates over 3 million tons (6 billion pounds) of eWaste were generated in 2011.

Computer/Electronic recycling thrives because you have motivated original owners who see little value in their upgrade leftovers combined with a strong market demand for computers in general. The original owners often prize the removal/disposal service over the product itself. The end result is a high margin between cost and sales price. The largest operational expenses in such an endeavor is the labor. You need labor to refurbish and sell the marketable equipment and labor to process the unmarketable material into scrap metal products sold on the market. The next biggest expenses are your facility and the logistics of transporting the product.

An incoming material stream of donated computer equipment can be leveraged into all kinds of ventures that support community benefit. Retail and online sales can generate direct revenue. Job Skills and Computer training programs can give marketable job skills to those who lack them. Charitable donations of computers and Information Technology (IT) Support can help ease the Digital Divide between the haves and have-nots.

1.2 Customers

The material stream for our operation will be provide by organizations and individuals who discard their unwanted electronics. What can be refurbished for resale /donation will be done so through our Job Training Program. This material will be sold on the open market through retail channels. That material which cannot be marketed will be sold to scrap buyers for additional revenue. Any remaining material will be disposed of in an environmentally friendly manner.

Our charitable works will target the disadvantaged and Non-Profit Organizations who stand to gain the most benefit from our services.

1.3 What Drives Us

· To prevent eWaste from entering landfills.

· To provide gainful employment and job skills for as many people as possible.

· To promote the use of recycling as an industry for the betterment of the community

2. COMPANY DESCRIPTION

2.1 Mission Statement

To leverage the recycling of eWaste to provide job skills training, and Information Technology Support to disadvantaged individuals and non-profit organizations.

2.2 Principal Members

Board Of Directors including:

· Frank Grove – TU Graduate with BS & MS in Computer Science, with extensive expertise in Programming. Political Activist/Organizer

· David Gannon – Retired CPA for Memorex/Telex, and Bank Of Oklahoma

· Ronda Vuillemont-Smith – Business Owner, Political Organizer

· Chris Burnham – High School History/Theater Teacher, Entertainer

· Scott Metzger – Founder, 20+ computer resale/recycling experience

2 Additional Staff Members (hired after funding)

Trainees (hired as funding/material flow allow)

2.3 Legal Structure

Oklahoma Non-Profit Corporation (showing in State’s database, awaiting Certificate Return)

future 501c3 applicant

3. MARKET RESEARCH

3.1 Industry

Electronic Synergy Foundation is part of the electronic recycling industry. This industry has started to mature in it’s processes but there is plenty of growth potential remaining.

Based on an EPA estimate of 3 Million Tons (6 Billion Pounds) of eWaste produced in 2011, and a US population of 313 million you can ratio out 19.1 pounds/person to project that Tulsa County’s 600,000 people will generate 5748 tons(11.5 million pounds) of eWaste.

The EPA also estimates only 12.5% of eWaste is being recycled. The remainder is either entering our municipal waste stream or occupying real estate somewhere. I suspect this number is old and low. Let me replace it with the assumption that 50% of eWaste is now being diverted from the waste stream, leaving 2784 tons unclaimed except by warehousing and land-filling.

Considering the size of the market share, ESF should have no difficulty hitting it’s material flow goals.

Electronic Recycling is the enterprise of converting discarded electronics into scrap and marketable electronics. There are 4 distinct groups involved in this process.

· eWaste Generators – These are consumers (organizations and individuals) who discard unwanted electronics

· eWaste Collectors – This is an organization that collects and processes eWaste on a local scale. (ESF is among these)

· eWaste Aggregators – This organization receives eWaste from Generators and Collectors with the intention of forwarding it to a Material Processor. These usually operate on a regional scale.

· Material Processor – This is an organization that takes a specific type of eWaste and uses it as raw material to manufacture a marketable product. (Examples: Metal foundries) These operate on a regional or national scale.

ESF’s business model takes it’s lessons from several industries. On the front end, the receipt of donated materials to be sold for revenue resembles a thrift store ran by a charitable organization (like Goodwill). Our material collection, aggregation and shipping processes closely resemble that of a metal scrap yard. Our Job Skills Training Program could be described as a mix between a sheltered workshop and Vocational Training.

3.2 Customers

Ewaste Generators – receive the service of removal and proper disposal of their unwanted electronics

Retail Customers – Purchase used/refurbished electronic equipment. They are looking to save money by not purchasing new products.

eWaste Aggregators/Scrap Buyers – Purchase scrap for the purpose of resale to a Material Processor

Trainees receive Job Training in a sheltered workshop

3.3 Competitors

Material Collection – Other eWaste Collectors (Natural Evolution, BAM Metals)

Sales – Electronic Resellers (Online and Brick-and-mortar stores)

Other Non-Profit Organizations (Goodwill, The M.E.T.)

The Trash Can – municipal solid waste haulers/landfills

3.4 Competitive Advantage

The founder has over 20 years of experience in computer recycling, retail sales, business development, Information Technology Utilization, online sales, shipping , employee management and the scrap metal market. Having lived/worked in Tulsa for most of his life has given the Founder an immense network of personal contacts.

As a non-profit organization, we can receive tax-deductible donations of computer equipment. This combine with the charitable works we offer provide an edge over any for-profit company that only offers disposal or re-marketing services.

Because all material will be processed to R2 industry standards (zero landfill, no export. Strong worker/environmental safety protocols) ,donors do not have to be concerned with data security or corporate liability. Both of which are traditional barriers to eWaste donation.

By utilizing computerized inventory control, a highly efficient system can be created that insures everything moves through it’s respective processes in such a manner that space is not wasted on stale inventory. This system will include date codes and graduated markdown pricing in our sales venues.

Staff and Trainees will all receive Medical Insurance. Furthermore for every hour worked by a Trainee, $1 will be deposited into an Education Escrow Account to be spent on tuition and necessary supplies at the Trainee’s direction at any Educational Institution recognized as such by the Federal Government or State Of Oklahoma. While trainee’s cannot access this funding directly it is their to spend on the education of their choice. This money will be held in TRUST until claimed by Trainee or ESF receives official notice of Trainee’s death, at which time money will be donated to another scholarship program.

Staff are hired for their ability to be leaders in this organization. This will be reinforced with continuing leadership training.

Trainees are accepted based on ESF’s available resources to help them, with secondary preference among competing candidates, based on a the likely-hood of their success. However assuming available funds, this likely-hood preference shall be waived and in it’s place admission will only be barred to those judged likely to present a danger to themselves or this facility. This decision will be based on personal temperament, active association with known violent criminals, or obvious on-site substance abuse.

Since this is a sheltered workshop, every opportunity will be made to offer correctional advisement when deficiencies in Job Skills are observed. Great tolerance will be exercised in any area that does not impact the safety of the workforce or the organization. No tolerance can be afforded in matters of safety.

Trainees will be considered successful graduates of our program when they successfully find employment elsewhere at a rate higher then full time minimum wage, and/or complete an Educational Degree, from their Educational Institution of choice, or receive Licensing in their chosen vocation. While the length of a Trainee’s stay with ESF will vary based on the needs and abilities of the Trainee. It is believed that a motivated high school dropout could grow into an IT professional with an Associates Degree in 3.5 years. Skills to be taught include, but not limited to:

Basic Job Skills

· Respect For Self and Others

· Work Ethic

· Personal Safety

· Task Analysis

· Educational Proficiency

Advanced Job Skills:

· Workplace Safety

· Material Handling

· Business Communication

· Computer Repair

· Electronic Repair

· Online Sales

· Sales Training

· Shipping Logistics

· Employee Supervision

· Project Management

3.5 Regulation

Care must be maintained to stay in compliance with all laws and regulatory agencies. Including but not limited to IRS, Oklahoma Secretary of State, OK Tax Commission, OSHA, EPA/ODEQ,R2 Compliance, Microsoft.

IRS – Exemption Requirements – 501(c)(3) Organizations http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exemption-Requirements-Section-501(c)(3)-Organizations

Forming a Not-For-Profit In Oklahoma. – http://www.sos.ok.gov/forms/FM0008.PDF

Oklahoma Solicitation of Donations – https://www.sos.ok.gov/forms/FM0101.PDF

Oklahoma Tax Commission – Business Registration http://www.tax.ok.gov/forms/busregpk.pdf

Oklahoma Tax Commission -Sales tax Exemption – http://www.tax.ok.gov/btforms/PktE.pdf

OSHA Regulations – https://www.osha.gov/law-regs.html

EPA regulations regarding eWaste – http://www.epa.gov/epawaste/conserve/materials/ecycling/rules.htm

Oklahoma Computer Recycling Act – http://www.deq.state.ok.us/lpdnew/recyclers/1631.pdf

R2 Recycling Standards – http://www.r2solutions.org/clientuploads/The R2 2013 Standard.pdf

Microsoft’s Refurbisher Program – http://www.microsoft.com/refurbishedpcs/programs.aspx

3.6 Transparency, Accountability, Security

Because of ESF’s non-profit nature, security and accountability concerns are paramount.

To this end, a web-based accounting package tailored to the needs of the organization has been deployed, but is still under development pending venue selection and transactions to record. Differing levels of access to the “books” can be granted to donors, employees, and regulators.

Policies will be enacted prohibiting cash transactions in our retail location. Instead customers will be sent to a gas station to purchase a money order, or a nearby bank with instructions to bring us the deposit receipt.

Security Cameras will be deployed in all common areas in and around the facility. The feed from these cameras will be transmitted to any who care to watch via www.electronicsynergy.org . It is believed even if nobody actively watches these feeds, knowledge of their presence will help curb undesirable situations.

4. PRODUCT/SERVICE LINE

4.1 Product or Service

· Electronic removal services for eWaste Generators

· Refurbished electronics – sold to end users

· Scrap – sold to Aggregators

· disposal materials – sent to R2 processing facilities

· IT Education/Support – offered to Non-Profit Organizations and disadvantaged individuals

Items will be refurbished (repaired) by our Trainee’s, with Staff Supervision. The refurbishment process is an integral part of job skill training. Refurbished product is either sold for revenue generation or donated Items that fail the refurbishment process are sent to scrap

Any data storage devices will be sanitized with a multi-overwrite process designed to render any data on the drive beyond any reasonable ability to retrieve.

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4.2 Pricing Structure

Scrap and refurbished electronics will be priced according to current market conditions for general sale.

Qualified recipients will receive heavy discounts from the retail price.

4.3 Product/Service Life Cycle

As a recycling company we take end-of-life items and turn them into products ready for new life. The amount of eWaste waiting to be recycled is staggering. If every eWaste recycler in this state tripled their intake, the solid waste management industry would barely notice the difference.

4.4 Intellectual Property Rights

Aside from our name, we own none. However great care must be taken to respect the intellectual property rights of others. This includes proper licensing of software loaded onto computers and data destruction to protect the security of equipment donors.

It is the intention of the founder to build a “teaching model” business. Once the startup phase has passed and the organization has refined it’s business model to a sustainable level, ESF will be happy to teach it’s methodology to any who wish to learn.

ESF does not consider other electronic recyclers as competitors because the market is so large. Instead they are viewed as part of the solution to the problems of eWaste and unemployment. If they can do a better job of fulfilling their mission from lessons ESF can teach, then greater good has been accomplished.

5. MARKETING & SALES

5.1 Growth Strategy

Start Marketing Campaign .With increased marketing comes increased material flow. Increased material flow means increased ability to serve.

Finish website for increased marketing and donor/recipient connection

Use Shipping Containers for additional storage space. (add fixed assets instead of rent)

Add a trainee position per quarter as revenue allows. Add a staff member for every 4 Trainees.

When material flow and human resources threaten to exceed the buildings (supplemented by Shipping Containers) capacity, initiate search for larger building.

Development of “feeder programs” to teach necessary IT skills to trainees in preparation for employment with specific high technology companies.

5.2 Communication

Donors will be sought through personal networking, online advertising, event involvement, mass media and telemarketing methods.

Online sales communication will be handled through email and telephone.

Retail sales will be handled in-person, face to face, and/or through email and phone.

www.electronicsynergy.org is a hosted site running 3 separate web server applications (3 websites).

The primary website is for ESF’s external communications to the general public. It will have Company Information, donor links, an online store and required and voluntary disclosure items, plus content of interest to the industry and community.

The second website is set up in a Wikipedia type fashion, it contains ESF’s internal communications. Items such as work schedules, the company handbook, training materials, and non-private Board communications will be here.

The third website is the accounting system. It will also handle the inventory tracking requirements for accountability to donors and regulators.

6.0 Financial Statements

See accompanying Cash Flow, Income , Balance and Startup Worksheets. (not available in sharable version)

6.5 Financial Assumptions

(this information has been heavily redacted for sharing purposes, much greater detail is available for potential lenders or donors)

Startup of $50,000 Loan,10% Interest, 3 Year Term

Education Escrow Calculated at $1/clocked hour ($174/trainee/month)

Medical Insurance calculated at $100/month/person. This is based on the approximate price ($300) of an employee at this wage level coupled with the (-$200) subsidy provided through the Affordable Care Act.

Truck and Forklift are initially planned as rentals. ($40k/yr) It is hoped that a donation in kind may be located. In the event no such opportunity presents itself, money has been allocated in this plan to purchase one on the open market at market price. ($25k Truck + $15k Forklift) This will convert expenses into a fixed assets, increasing the company’s net value.

6.5.1 Assumptions for Profit and Loss Projections

Startup Costs are high estimates, by buying used and seeking donations, we may only need a fraction of money allocated.

Warehouse/Office Space of 6000 square feet @ $5/ft/year = $30,000/yr or $2500/mo, extra $3000/yr to cover variance

Year 1, start with 3 Paid Employees @ 12.50/hr 40hr/wk + 1 trainee. Adding a second trainee in 4th quarter .

Year 2 doubles material intake, adds 1 additional staff,for a total of 4. Trainee level starts at 5 and adds another Trainee each quarter with 8 total at years end.

6.5.2 Assumptions for Cash Flow Analysis

If ESF was a for-profit company, it’s workload could be handled by 2 full-time and one part time employees, in a facility half this size.

Trainees (shop labor) are the most controllable cost @ $1970/month/trainee

As a non-profit organization, it is the intention of ESF to invest in it’s trainee program (labor costs & community benefit ) at the highest rate deemed reasonable by it’s Board Of Directors.

Additional Profit Spend-down will be accomplished via Donation.

Acknowledgments  :

Mary Boyd (my fiance) for putting up with me.

Mike Reidy, for getting me back on track when I started to wander.

The ESF Board Of Directors for accepting their invitation and workload.

Every Boss I ever worked for. I learned from you all. Some of you taught me best practices, some of you served as warning examples.

Future Supporters