Internal / External Sales Overview

2 Introduction to Staff Keith Jansen – Manager of Internal / External Sales (612) Mary Kosowski – Compliance Officer - Internal Sales (612) Jeff Kurland – Compliance Officer - External Sales (612) address:

Internal/External Sales Compliance Office Approve new Internal/External Sales Review external sale contracts Validate compliance to policy and procedures Apply prudent business practices Risk assessment Analyze tax implications Assist with rate development Assist with proper cost allocation Scope of Activities 3

4 Review Process Subject Matter Experts (SMEs) – Risk Management – Taxation – Office of the General Counsel (OGC) – Sponsored Projects Administration (SPA) – Office of Technology and Commercialization (OTC) – Environmental Health & Safety (EHS) – Institutional Review Board (IRB) –Controller’s Office

Internal/External Sales Compliance Office Websites Classifications Approval Form Business Proposal Outline Rate Development Contracts Questions & Answers anytime during the presentation Agenda 5

6 When determining if a transaction should be a Gift, Sponsored Project or External Sale:  Review “Fund Bucket Definitions” guide (*See handout) If still unsure:  Send information regarding transaction to the classification group at: Classifications

7 Approval of an External Sale does not mean that a follow-on contract will not be a Sponsored project. Factors that could create a Sponsored project: Classifications Type of customer (federal or state agency. ect) Change in activity Sub-contractor status Consulting (who has the decision-making power?

8 Combined form for approval of Internal /External Sales Standardized responses to Yes or No questions Identify activity risk More complete list of questions Interactive response List of action items Shorter review process Internal / External Sales Approval Form

A key part of your application to conduct internal or external sales Business Proposal Outline

A.General Business Considerations 1.Business Description a.Describe the department and its activities at the University. b. Describe the proposed activity. c. How does the activity relate to the department and University mission? d. Who in the department will be responsible for the activity? e. What is the anticipated start date and duration of the activity? Business Proposal Outline (cont.)

2. Equipment and supplies to conduct business a. Office Space b. Phone/Fax c. Computer and software d. Packing boxes, material, and mailing labels e. UPS systems or other type of postage systems f. Other items Business Proposal Outline (cont.)

B. Sales/Marketing Considerations 1.Customers: Consider target customers and potential volume. List targeted customers in order of relative cost and ease of reach. With each increasing level, the cost associated with selling will generally increase. Business Proposal Outline (cont.)

Order Fulfillment Considerations Production Considerations Pricing/Cost Issues Budgeting and Forecasting Business Proposal Outline (cont.)

Prepare a financial forecast for the current and next three fiscal years. Detail estimated revenue, expenses, and sales volume Prepare a projection of capital funding needs for expenditures such as equipment, facilities or inventory acquisitions Proposal cont.

Steps to setting an Internal Sales rate: Determine all direct and indirect costs Determine the breakeven Determine the measurable unit for goods and services Determine annual output Exclude unallowable costs Determine the activity per-unit rate Rates should be reviewed and updated each year 15 Internal Sales Rate Development

Steps to setting an External Sales price: If you have an ISO, start with Internal Sales rate –Add unallowable costs for internal sales If no ISO activity, determine actual cost of external sales activity Add the University’s actual overhead rate (currently 63%) Add profit (review profit margins of similar industries to determine a reasonable profit percentage) Determine the market rate using one of the methods in the market driven pricing model Submit rate with initial application form and with contract 16 External Sales Rate Development

The following method should be used to price based on market: Compare price to a similar good or service from an outside vendor used by your department or another department at the University Call and request a quote from an outside vendor If activity is not available outside of the University, determine a similar effort with similar skill levels and request quote from an outside vendor Request information about pricing from the University of Minnesota Purchasing Department Incorporate industry standards into pricing model (i.e.,bls.gov) 17 Market Driven Pricing

18 Can we make a profit? – Yes! ‘profits’ are used to fund shortfalls, improvements, training of staff, FTEs, equipment, ….. For-profit vs. Non-profit “The Minnesota Secretary of State's office reviews and files the articles of incorporation for nonprofit corporations which are formed under Minnesota Statutes. It may form for any lawful purpose, including the conduct of commercial activities. ” Other examples – University investments in debt & equity instruments (stocks & bonds), real estate sales, etc. Rate Development – External Sales

19 Utilize standard U of M agreements whenever possible, available at OGC website: If non-standard agreement is used, OGC must review, which will lengthen the approval time OES reviews contracts for: Appropriate type of service (matches initial approval) Appropriate rate structure Related concerns, such as export controls issues, product liability concerns, currency validation, etc. Contract Review Process

20 Summary for Internal Sales Fill out approval forms with as much detail possible Send rate development Use standard rate development template Send draft to us for review before securing signatures Call or us if you have any questions Use our address

21 Summary for External Sales Use actual University overhead rate in costing model Use market driven pricing model to determine actual price Use standard contract whenever possible All contracts must be denominated in USD All contracts are reviewed by External Sales office Cost must be segregated for internal and external sales Use our address

22 Summary Go to website for forms, job aids, policies and training Use classification , identification tool Fill out forms with as much detail as possible New forms will improve process Send draft to us for review before securing signatures Call or us early in the process We are here to help you in anyway that we can

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