Gross profit= Total revenue-variable costs
So far, I have not managed to make a gross profit. This is due in part because I have not even managed to get my worm population high enough to make any worm castings or worms to any extent. This is due to adding too much compost at a time into the worm bin, which in turn has resulted in overheating and killing of the worms. The other reason is lack of moisture on the upper layer, and, at times lack of air, lack of paper, lack of properly shredded paper, in addition to other factors. If there is to be any hope in changing these factors, these conditions for worms, above all else must change.
The second most important reason why I have not managed to make a gross profit is even if I met those conditions, and had average production of worms and worm castings as promised in my oscr business plan (with a little less than optimistic results), then I would still be operating at a loss. For example, it currently takes me an embarrassing ~5 hours 15 minutes to work on my bin. Even if I harvested 8 pounds of worm castings a week, and sold ¼ pound of worms each week and sold them slightly higher than my competitor’s price ($2/lb worm castings $5/lb for worms) then I would be operating at a loss. (at $8/hr X 5 ¼ hrs/week cost=$42/week Weekly revenue= $17.25) That would mean just in the time alone to maintain the bin, not even including costs to keep up accounting, gas to drive my car, time consumed in harvesting/packing castings/worms, time consumed in telling people about my great product etc. I would be LOSING $24.75 per week.
With that said here is exactly how I’m going to lower my ongoing costs so I can finally make a gross profit. That is, how I can begin covering my fixed costs. A gross profit is revenue made minus variable costs. Once I can make a gross profit, I can then start working on reducing my fixed costs.
Time Consumed for maintaining compost per week
In order for this to work, however, I’m going to have to make some adjustments and plan for the very hot parts of the year, and very cold parts of the year. This means planning for winter/summer. Spring and fall temperatures should be simpler in the sense that temperatures are mild so I don’t need to worry very much. Winter food waste will need to be kept at room temperature. That means picking up food waste on the same day it’s made. For doing the once each two weeks deal, I may request that on the day of pickup, food waste stored in the garbage can get transported to stairway so it will at least be above freezing-that depends on how things pan out. These steps are important because in order to take advantage of the fact that compost gets hot, and harness that heat to keep the bin warm, chemical reactions have an activation energy requirement. In addition, I’m going to need to harness some of the sun’s energy on the bin. This will mean covering the bin with black plastic so the white won’t deflect UV rays but instead keep the sides of the bin warmer. This will also mean adding a transparent, cheap, insulated, lid that can collect sunlight and allow it to radiate heat onto a dark, perhaps insulated goretex compost cover for the compost. In addition, a large volume of compost will need to get added possibly with something to “puff up” the compost in the inner most part in order to allow adequate air circulation. Who knows? Keeping food waste together in a clump will also allow heat to be insulated so even if the sides get cold the center will still be above freezing. It is plety reasonable to assume that compost will stay at least above freezing even in the coldest of months because my compost in the center even without doing anything more to the bin than insulation and adding compost stayed in the 40’s even in February.
To keep the bin cool in the summer, I could take out insulation, use my white cover, and take off the black plastic from my bin so I can reflect sunlight rays rather than absorb them.
Below is a cost-breakdown of variable costs on a per-pound of worms and worm castings basis. I have not included costs related to marketing yet, this is just production and packaging. However, my goal is to bring production costs to about $1/lb in order to allow an adequate margin for time/overhead costs to sell compost. Notice there is an optimum production amount. In theory, this can be achieved if conditions are right, and obviously once I reach average production amounts optimum production will be a worthy and feasible goal. Right now, I don’t even have average production amounts reached so the average production amount will be my first goal. Notice I got how much money I lost or gained by subtracting the cost per pound from the price per pound. Compost costs $2/pound and worms cost $5/pound
Production cost of worms/ worm castings per week - time required for packaging -cost of marketing
Obviously, however, I did not include the cost it would take to package my finished compost. Looking at my compost packaging, I discovered that it would take about 4-5 hours for a graphic designer to make a sticker label to put on my packages of compost and a graphic designer gets paid about $80/hour. In addition, I found that it would cost about $0.35 per sticker for a 2 inch by 4 inch label with only 2 colors on my compost package. With all due respect, unless that packaging will allow me to charge $6/pound for worm castings instead of $2 there’s no way I’m going to be able to pay that at this stage unless I had the most optimum conditions for making my compost and there’s no guarantee on that. So forget getting a label. Oh, and did I add that it would probably take another minute to add a label to each package? Yeah, that’s too expensive can’t do it now.
However, even though I’m not going to buy an expensive label for my packaging, harvesting, and finding some means of packing my worms/worm castings still takes time and energy which means it costs money. Also, because I will be harvesting castings from the bottom of the bin, I will have to leave these castings in some sort of place to dry out a little. Here’s a table for my best guess.
As you can see, even without actually adding a sticker label to my package, this still makes for some expensive packaging. Any ideas would be greatly appreciated. If I could make a centralized location for collecting packaging, I might shave off packing costs that way. If I find I can actually harvest twice the amount necessary that might be a plus. Notice also, no time was included for selling this finished product. If I had a market stand in bronxville, that would be expensive, but I could pack compost while I am at the stand and not helping customers. Who knows? For now, this is still a relatively expensive process. Another idea is just to salvage plastic shopping bags from the recycling place at Stop and shop. If I’m there on a shopping errand anyway, time spent salvaging them would be negligible, and seeing these bags get shipped to so many places anyway, and the recycling process may not even have nearly as great an environmental good as re-using them and then recycling, this might be a more cost-effective option. It may not look as nice as using my strawberry packages, but at least it would cut packaging time in half, and would even make it easier for people to purchase more compost at a time than my current packaging option.
Below is a table examining the gross profit margin of my compost before factoring the marketing portion.
So far, I have not managed to make a gross profit. This is due in part because I have not even managed to get my worm population high enough to make any worm castings or worms to any extent. This is due to adding too much compost at a time into the worm bin, which in turn has resulted in overheating and killing of the worms. The other reason is lack of moisture on the upper layer, and, at times lack of air, lack of paper, lack of properly shredded paper, in addition to other factors. If there is to be any hope in changing these factors, these conditions for worms, above all else must change.
The second most important reason why I have not managed to make a gross profit is even if I met those conditions, and had average production of worms and worm castings as promised in my oscr business plan (with a little less than optimistic results), then I would still be operating at a loss. For example, it currently takes me an embarrassing ~5 hours 15 minutes to work on my bin. Even if I harvested 8 pounds of worm castings a week, and sold ¼ pound of worms each week and sold them slightly higher than my competitor’s price ($2/lb worm castings $5/lb for worms) then I would be operating at a loss. (at $8/hr X 5 ¼ hrs/week cost=$42/week Weekly revenue= $17.25) That would mean just in the time alone to maintain the bin, not even including costs to keep up accounting, gas to drive my car, time consumed in harvesting/packing castings/worms, time consumed in telling people about my great product etc. I would be LOSING $24.75 per week.
With that said here is exactly how I’m going to lower my ongoing costs so I can finally make a gross profit. That is, how I can begin covering my fixed costs. A gross profit is revenue made minus variable costs. Once I can make a gross profit, I can then start working on reducing my fixed costs.
Time Consumed for maintaining compost per week
| Action | Time | How to reduce time | New Time |
| Collecting compost | 60 min | Get student worker at Bates to oversee food waste collection so no more hassle for ensuring food waste is there to collect | 0 min |
| Collecting paper | 60 min | Collect nonplywood sawdust from PAC and Heimboldt lining sawdust collection site with reused plastic bags. Collect it on way back to my room/car/elsewhere. | 10 min |
| Shredding paper/separating it | 60 min | Collect nonplywood sawdust from PAC and Heimboldt lining sawdust collection with reused plastic bags. | 0 min |
| Walk to/from car | 30 min | Streamline process by keeping gloves/other items in car, scale at Board’s house so I won’t forget anything. | 15 min |
| Drive to Board’s house + pick up food waste | 20 min | Keep food waste at Bates rather than transporting food waste to Slonim to Kober parking lot | 10 min |
| Drive back from house + drop off clean buckets | 15 min | Drop them off at Bates instead of requiring myself to take the buckets back to my room | 10 min |
| Pulverizing food waste and mix with shredded paper | 30 min | Mix sawdust in while pulverizing food waste | 15 min |
| weigh food waste and paper | 5 min | Weighing still the same. Could consider taking estimates here though to reduce this time to none. | 5 min |
| Record bin results/ make changes | 30 min | Once I get used to handling stuff, less time needed | 15 min |
| Rinse out buckets | 5 min | 5 min | |
| Total | 5 hrs 15 min | 85 min | |
| Make trips once every 2 weeks keep food waste in 2 garbage cans next to Bates. Time to pulverize and mix food waste still is the same | ~ 50 min |
In order for this to work, however, I’m going to have to make some adjustments and plan for the very hot parts of the year, and very cold parts of the year. This means planning for winter/summer. Spring and fall temperatures should be simpler in the sense that temperatures are mild so I don’t need to worry very much. Winter food waste will need to be kept at room temperature. That means picking up food waste on the same day it’s made. For doing the once each two weeks deal, I may request that on the day of pickup, food waste stored in the garbage can get transported to stairway so it will at least be above freezing-that depends on how things pan out. These steps are important because in order to take advantage of the fact that compost gets hot, and harness that heat to keep the bin warm, chemical reactions have an activation energy requirement. In addition, I’m going to need to harness some of the sun’s energy on the bin. This will mean covering the bin with black plastic so the white won’t deflect UV rays but instead keep the sides of the bin warmer. This will also mean adding a transparent, cheap, insulated, lid that can collect sunlight and allow it to radiate heat onto a dark, perhaps insulated goretex compost cover for the compost. In addition, a large volume of compost will need to get added possibly with something to “puff up” the compost in the inner most part in order to allow adequate air circulation. Who knows? Keeping food waste together in a clump will also allow heat to be insulated so even if the sides get cold the center will still be above freezing. It is plety reasonable to assume that compost will stay at least above freezing even in the coldest of months because my compost in the center even without doing anything more to the bin than insulation and adding compost stayed in the 40’s even in February.
To keep the bin cool in the summer, I could take out insulation, use my white cover, and take off the black plastic from my bin so I can reflect sunlight rays rather than absorb them.
Below is a cost-breakdown of variable costs on a per-pound of worms and worm castings basis. I have not included costs related to marketing yet, this is just production and packaging. However, my goal is to bring production costs to about $1/lb in order to allow an adequate margin for time/overhead costs to sell compost. Notice there is an optimum production amount. In theory, this can be achieved if conditions are right, and obviously once I reach average production amounts optimum production will be a worthy and feasible goal. Right now, I don’t even have average production amounts reached so the average production amount will be my first goal. Notice I got how much money I lost or gained by subtracting the cost per pound from the price per pound. Compost costs $2/pound and worms cost $5/pound
Production cost of worms/ worm castings per week - time required for packaging -cost of marketing
| Varying parameters | Time/wk/$ amount ($8/hr) | Compost/worms produced/wk | Revenue/wk (lb compost X $2) + (lb worms X $5) | cost per lb worms+castings |
| Current conditions | 5 hr 15 min $42 | 0 | 0+0=0 | NA losing $42 dollars/week :( |
| Average conditions but with current time frame | 5 hr 15 min $42 | 8 lbs compost ¼ lb worms | $16+ 1.25= $17.25 | $42/8.25= $5.09/pound LOSE $3.09/lb compost LOSE $0.09/lb worms |
| Average conditions but with streamlined time-frame and attending bin once/week | ~90 min (85 min but calculation purposes stick with 90 min) $12/week | 8 lbs compost ¼ lb worms | $16 + 1.25= $17.25 | $12/8.25 lb= $1.45/lb GAIN $0.55/lb compost GAIN $3.15/lb worms |
| Average Conditions but with streamlined time-frame and arrival once per 2 weeks | ~50 min $6.67 | 8 lbs compost ¼ lb worms | $16+1.25=17.25 | 6.67/8.25= $0.81/lb GAIN $1.19/lb compost GAIN $4.19/lb worms |
| Optimum conditions with streamlined once per 2 weeks | ~50 min $6.67 | 16 lbs compost 1 lb worms | $32 + 5= $37 | 6.67/17= $0.39/lb GAIN $1.61/lb compost GAIN 4.61/lb worms |
Obviously, however, I did not include the cost it would take to package my finished compost. Looking at my compost packaging, I discovered that it would take about 4-5 hours for a graphic designer to make a sticker label to put on my packages of compost and a graphic designer gets paid about $80/hour. In addition, I found that it would cost about $0.35 per sticker for a 2 inch by 4 inch label with only 2 colors on my compost package. With all due respect, unless that packaging will allow me to charge $6/pound for worm castings instead of $2 there’s no way I’m going to be able to pay that at this stage unless I had the most optimum conditions for making my compost and there’s no guarantee on that. So forget getting a label. Oh, and did I add that it would probably take another minute to add a label to each package? Yeah, that’s too expensive can’t do it now.
However, even though I’m not going to buy an expensive label for my packaging, harvesting, and finding some means of packing my worms/worm castings still takes time and energy which means it costs money. Also, because I will be harvesting castings from the bottom of the bin, I will have to leave these castings in some sort of place to dry out a little. Here’s a table for my best guess.
| Step | Time | # packages | Time Per Package | Cost per package $8/hr |
| Salvaging packing materials | 15 min | 15 berry containers and pieces of paper to put on the bottom to prevent castings from falling out | 1 min | $ 0.13 |
| Cutting paper to needed dimensions | 15 min | 15 pieces of paper for 15 packages | 1 min if done by large cutting machine at SLC library | $0.13 |
| Taking castings out from bottom of bin | 15 min | 15 | 1 min | $0.13 |
| Putting contents into package and leaving to dry/cure, and using rubberbands | 15 min | 15 | 1 min | $ 0.13 |
| Total | 60 min | 15 packages | 4 min | $0.53 (I rounded the other numbers above so slightly higher per package) |
As you can see, even without actually adding a sticker label to my package, this still makes for some expensive packaging. Any ideas would be greatly appreciated. If I could make a centralized location for collecting packaging, I might shave off packing costs that way. If I find I can actually harvest twice the amount necessary that might be a plus. Notice also, no time was included for selling this finished product. If I had a market stand in bronxville, that would be expensive, but I could pack compost while I am at the stand and not helping customers. Who knows? For now, this is still a relatively expensive process. Another idea is just to salvage plastic shopping bags from the recycling place at Stop and shop. If I’m there on a shopping errand anyway, time spent salvaging them would be negligible, and seeing these bags get shipped to so many places anyway, and the recycling process may not even have nearly as great an environmental good as re-using them and then recycling, this might be a more cost-effective option. It may not look as nice as using my strawberry packages, but at least it would cut packaging time in half, and would even make it easier for people to purchase more compost at a time than my current packaging option.
Below is a table examining the gross profit margin of my compost before factoring the marketing portion.
| Condition | Revenue/lb | Cost per lb minus packaging | Cost per pound + packaging |
| Current timeframe AVG conditions | $2/lb compost $5/lb worms | $5.09 | $5.62 |
| Average conditions but with streamlined time-frame and attending bin once/week | $2/lb Compost $5/lb worms | $1.45 | $1.98 |
| Average Conditions but with streamlined time-frame and arrival once per 2 weeks | $2/lb compost $5/lb Worms | $0.81 | $1.34 |
| Optimum conditions with streamlined time-frame once per 2 weeks | $2/lb compost $5/lb Worms | $0.39 | $0.92 |
http://boss.blogs.nytimes.com/2011/04/20/how-many-business-models-can-one-company-have/
ReplyDeleteAre you aware of Terra Cycle and the evolution in their business? They started by using recycled bottles for storing their compost.