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In a typical business that involves the modification of materials to create a product, ideally the cost of the product is greater than the cost of the goods + cost of labor. That’s called profit. For a business, profit is good.

Still with me? Simple so far.

So let’s say that a product costs $3. Labor is $2 and you sell for $8. You profit $3 ($8 (sell price) - $3 (raw materials) - $2 (labor) = $3).

Now, to increase profits (per piece), you either get the product cheaper, get more for your buck from the labor department, or increase the selling price. However, any of these can cause adverse effects, like a cheaper quality product, or fewer sales because of the higher selling price.

Long intro, but here’s the big point: there are businesses that pay negative money for their raw materials! What I mean is, they get PAID to TAKE the raw materials. A few examples of free or negative-cost materials:

• RWA Resource Recovery - They pick up used kitchen grease (at no cost to the restaurant), clean it, and sell as biofuel
• Modern Corporation takes used tires, chips them up, and sells the byproduct as a track/playground surface or as a fuel that burns cleaner than coal. These guys are amazing… they also operate landfills, which give off methane gas. Most landfill operators vent the gas into the air; Modern captures the gas and burns it in generators to power nearby homes. Burning methane gas gives off ANOTHER by-product: heat. The heat is then pumped into greenhouses where they grow vegetables and sell in local supermarkets. A landfill operator, selling vegetables.
• Changing World Technologies converts “organic waste from chickens, cows, hogs, onions, and Parmesan cheese into light crude oil”. Again, something that was going to be thrown away, possibly having to pay to dispose of, getting new life.

If you can come up with a business model that uses waste to create a high-demand product, you may as well be printing money.

This entry was posted on Thursday, May 31st, 2007 at 1:07 pm and is filed under Business, Energy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.