Spring Into Action

October 27, 2010

THE BED BUGS GOT US

We’re writing this letter because so many people have been interested in our quest to start a business to employ people who need a second chance in life, especially the formerly incarcerated.

The Short Answer

Price and bed bugs have done us in so we’ve decided to put the used mattress recycling business on hold at least until the bed bug epidemic dissipates. Despite this, we’re even more passionate about finding a commercially viable business that meets our social goal of providing jobs to the formerly incarcerated, the homeless, and recovering addicts. If you’re interested in our journey, continue reading “The Long Answer.” If you want to skip to how you can help, scroll to the last paragraph.

The Long Answer

It’s been an amazing journey that started sixteen months ago with the hiring of Katie Broadbent and Arthur Maas, two recent Cornell grads who were interested in social entrepreneurship. With their help and the help of my son, Scott, and my wife, Andrea, we set out to do three things – identify the characteristics that people who were facing barriers to employment would need to make good employees, figure out the criteria to measure business ideas against, and start a business.

We interviewed approximately 50 different organizations in a variety of states. Most were engaged in providing social services to these populations, but some were businesses employing the same kinds of folks we want to employ.

We ultimately decided on the following seven criteria to filter any business idea against:

1. A differentiated product or service that would allow us to build a commercially sustainable business.
2. A business that was easy to learn, given that many of our employees will not have graduated high school.
3. A business that required a low amount of capital per employee because we want to employ as many people as we can.
4. A business that was easy to scale if it worked.
5. A business that would provide the possibility of upward mobility so that those who wanted to could grow with the business.
6. A business at least some of whose customers had an interest in the success of our employee population (for example, a product or service that prisons would buy)
7. A community based business, as opposed to one that was largely individuals operating on their own, since most of the experts felt that a mutually supportive environment was a key to success.

After looking at a number of ideas, we came to the conclusion that recycling, broadly speaking, met most of our criteria and had the added benefit of doing something to help the environment. Since these businesses are typically what a friend of mine calls “men in trucks” businesses and we haven’t had any experience running these types of businesses, we decided to start small. The thinking was that we were going to lose our shirt figuring out how to do it right so we wanted to keep it to a small shirt. A friend of ours in Denver, who runs a building materials recycling business, suggested we look at mattress recycling.

Mattress recycling is NOT renovating them and reselling them to consumers. Instead it is the process of breaking them up and recycling the component parts – the cloth cover can be used in things like pet beds, the foam is processed into carpet underlay, the ticking is used as low cost insulation, horsehair can be used to mop up oil spills, and the springs get sold as scrap metal. In fact mattresses are 90% recyclable. This kind of responsible disposal keeps mattresses out of landfills where they take up to 100 years to decompose and use a lot of space because they do not easily compress. It also keeps them out of the hands of renovators, many of whom merely slap a new cover on them and sell them as “new.” Twenty-five percent of the new mattress sales in the Country are these “new” mattresses, a frightening statistic.

What we particularly liked about this business was:

1. There was no competition within 90 miles of NYC;
2. The process is dead easy to do;
3. Very little capital is required;
4. If successful, it was easy to scale;
5. It would teach us the skills needed to start other recycling businesses;
6. The potential customers we talked to were all enthusiastic.

We even came up with a neat name – Spring Into Action.

There were three issues we needed to solve before we were prepared to launch the business – 1)was there enough supply, 2)how do we aggregate the tens of thousands of mattresses needed to be commercially viable, and 3) could we get the price we’d need. It turns out supply wasn’t an issue. In the Greater New York area, 1.5 million mattresses are discarded each year and we only needed 50,000 to break even. Aggregation didn’t look like a problem either. On the consumer side, most used mattresses are taken away by retailers at the time the new mattresses are delivered. On the commercial side, hospitals, nursing homes, hotels, universities, and military bases are all sources. We spoke to a number of retailers, both large and small, as well as the Greater NY Hospital Association, and several hotels. All were enthusiastic about what we were trying to accomplish, but pricing turned out to be more inflexible than we had hoped. People want to do good, but they don’t want to pay more money, particularly in this economy. The people who take away used mattresses today from retailers, hotels, hospitals, etc. generally supplement the trucking fee they get by selling them to renovators. Since we weren’t going to sell to renovators, and thus would lack that secondary source of income, we needed to charge more for the basic service of trucking them away. We were having a hard time convincing the big aggregators to pay more than their current price for the added business, environmental, and social value we were bringing.

Despite this, we were willing to take the gamble of getting into business with a lead customer at a per mattress price below what we needed to break even. Our hope was that once in business, we would find other ways to supplement the income from this customer while generating operating efficiencies as we went up the learning curve. We had several ideas to generate supplementary revenue but none of them were a lay up. And then along came the bed bug epidemic, which at first we viewed as an opportunity. However, a conversation with a Cornell entomologist convinced us that there would be a significant added cost to eradicating the influx of bed bugs that would come with the volume of used mattresses we would be handling. Plus the job started to look less and less like a step up from being in prison. Since we were already having price issues with our bigger customers, this added complication looked liked the proverbial “bridge too far”.

How You Can Help

So we decided to table this idea and look for another business to accomplish our goal of employing people who need a second chance in life. We still like the idea of recycling, but we’re open to any other idea that meets our criteria (they’re highlighted above). To help stimulate your thinking, we’re designing an exciting contest that we will announce shortly so stay tuned.

The Spring Into Action Team

June 22, 2010

Breathing Second Life into Landfills

Each American discards about 4 pounds of trash per day, which translates to approximately 1,500 pounds per year. Overcrowded landfills are an obvious by-product of human consumption, yet individually very little thought is given to the after-life of our garbage. All of that might change, as the great test of our generation will be to develop better strategies to fully utilize our limited natural resources.

Without thinking, I usually throw away most things I no longer want. Occasionally I’ll have some donations, but more often my trash has reached the end of its usable life. Or so I thought. I am learning that new recycling strategies could generate multiple lives for our discarded materials.

Shoes for example, are not destined for landfills. Nike has a fascinating program where they take back old shoes, process them, and create new products like outdoor tracks. The idea is wonderful on many levels. First of all, the shoes don’t end up in a landfill, which saves the financial and environmental cost of disposal. Raw materials are not wasted in the creation of this recreational space. And most exciting, the product makes sense. If the soles of Nike shoes were designed to reduce joint damage, then a track made of the same material would presumably provide the same benefit.

This really makes me wonder… if discarded shoes can become recreational centers, how valuable is our trash?

In a world where recycled paper can become an even higher quality, finer paper product, I expect that we are only seeing the tip of the iceberg of an emerging recycling industry. I wonder, what new recycling businesses will crop up to convert discarded items into products or commodities of value? And what post-consumer recycled products can replace scarce raw materials? Perhaps the most interesting question of all though, is what can’t be recycled??