November 28, 2011
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In today’s sea of cell phones and smartphones, it’s difficult to remember a time when mobile phones weren’t an integral part of everyday life. But about 11 years ago, just when cell phones were taking hold, two Bell South retail-store employees noticed a trend among their customers: a demand for affordable phones. To build a company, however, they had to learn how to fill their needs through outsourcing.
“Half our customers wanted to buy new phones and received discounts on them by renewing their service,” says John Colavecchio, co-founder of Cell Runners Distribution. “But when they upgraded to the latest and greatest technology, they never knew what to do with their old phones.”
“The other customers were in a more difficult spot,” he explains. “They weren’t eligible for the discounts on new phones, and they couldn’t afford the retail prices—which usually exceeded $200 or $300.”
Since there weren’t any standard industry practices in place for dealing with these issues, Colavecchio and co-founder Matthew Mocarski decided to satisfy their customers’ demands by dipping into their abandoned-phone supply. And thus the concept behind Cell Runners Distribution was born.
When the two decided to strike out on their own, they weren’t sure where they’d get their used-phone supply. “We started out with $1,000 and a car and drove around buying up people’s old cell phones from other retail stores,” recalls Colavecchio. “Ultimately we turned around and put them on eBay and started selling them for a profit.” And they did it all out of his business partner’s garage.
“We did that for about three years, and we really saw the demand was there,” he recounts enthusiastically. “And the supply was definitely out there: Every year there are over two million unused cell phones sitting in homes and offices all across the country.” Cell Runners Distribution wanted to get them back in circulation. “We figured if we could get 10 percent—maybe 20 percent—of those phones, we could have a nice little business.”
And that they do. Cell Runners Distribution is now housed in a 13,000 square-foot facility with 45 employees. They move more than 100,000 used and refurbished cell phones each month.
With growth comes change
Taking their successful online business from the garage to a larger space posed some challenges. The partners knew their industry and products, but Colavecchio says they didn’t know “all the things that are required to open and continue to run a brick-and-mortar location”.
“What we were NOT familiar with was how to select a location, how to sign a lease and how to set up the power and Internet.” Colavecchio remembers wondering, “How many computers do we need? How many employees? How much security?”
He says the security piece was a big learning experience. While they felt they had implemented “decent” security practices, some internal losses led to added measures to protect against employee theft. Then they were robbed from the outside. Realizing the need to refocus and reevaluate security, they brought in the pros. “Sometimes you should rely on other people—experts—to guide you and tell you what you need.” Only partially joking, he says, “Now we’re fully secured and locked down like Fort Knox.”
The investment is worth the return
Cell Runners discovered other benefits of outsourcing that are paying off for the company and its employees.
“This year as we’ve really, really grown, we’re outsourcing to a human resources company,” Colavecchio says. “They’re handling everything from payroll and recruiting to training classes for our employees.” One big plus for Cell Runner employees is the collective power of the human resources company. By representing several small businesses, the consulting company can offer employee-discount cards and other benefits that a single small business couldn’t offer on their own.
Saving time and maintaining focus are two other valuable reasons that Colavacchio and his partner have invested in outsourcing, especially when it comes to their information technology needs. “We really learned to invest a little extra—outsource to the experts—because my IT company can come in and set up a computer in 15 minutes, where it would take me eight or nine hours. It gives me the ability to focus on growing the business, launching new programs and looking for new customers.”
Outsourcing that offers a competitive edge
From Cell Runners’ early days selling used phones out of a garage and exclusively on eBay, shipping has always played a vital role in the company’s success. “We’re not really open to the public,” Colavecchio emphasizes, “so every single product we sell gets shipped”.
As the online marketplace has grown, so has the importance of competitively priced shipping. “Online selling and shipping are becoming more and more popular,” Colavecchio says. “To be competitive, we have to offer free shipping.”
“Any additional discounts we can get certainly help us make our margins,” he explains. “We use FedEx to ship to our customers, whether it’s a retail store or a residence. The more you ship, FedEx offers you a discounted rate, and in addition to that discounted rate, we save another five percent if we charge our FedEx expenses directly to our American Express OPEN Card. And that’s what we’ve done.”
Concentrate on your business
“As a small business owner, you wear many hats and you’re always working with a small budget,” Colavecchio says. “But what you realize after doing that for too long, is that you miss other opportunities. Concentrate on growing your business and getting your name out in the industry rather than having your head down doing IT- or HR-type projects.”
Kate Fisher is a Minneapolis-based writer and editor.
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