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INTRODUCTION

University departmental activities are supported by 8 major categories of revenue. External sales represent one of these categories of revenue:

• Tuition and Fees
• Government Appropriations
• Sponsored Projects
• Gifts
• Investment Income
• Patient Care Reimbursement
• Sales to University Departments
• Sales to External Customers

WHAT ARE EXTERNAL SALES?

An external sale is an exchange by the University of tangible or intangible property or service for monetary consideration with external customers. Transactions handled by SPA related to technology transfer, licensing or trademark agreements are excluded from this policy. See Appendix F for examples of external sales.

Sales to external customers include the following:

• Department sales of property and services
• Auxiliary enterprise sales (Housing, Bookstores, etc.)
• Centrally negotiated agreements involving U-wide property or services (e.g. exclusive use contracts)
• ISO sales to customers that are NOT University departments

At times, it is difficult to determine if an activity is an external sale or if it is a sponsored project or gift. To help with this determination see Appendix E.

PLANNING QUESTIONS

Can I conduct this activity?

External sales activity must be consistent with the University mission or be undertaken to maximize the use of existing University resources consistent with the objectives of the University. These activities should be pursued in a commercial and competitive manner and whenever feasible provide learning opportunities for students and foster good relations with outside constituencies. The following are some examples of activity that would be appropriate and inappropriate.

Potentially Appropriate Activity (Subject to Procedures in this Policy)

• Operate medical testing labs 24 hours a day for commercial testing
• Operate a veterinary medicine clinic for routine care on nights and weekends
• Test commercial software products
• Provide medical/surgical services to community hospital
• Sell advertising space on the WWW
• Provide parking and shuttle service to the general public for non-University sports events
• Use University labs and equipment to consult with business and industry

Potentially Inappropriate Activity

• Operate businesses such as a shoe store entirely unrelated to the U mission
• Contract with a vendor in a manner that violates existing exclusive University vendor agreements
• Engaging in activities that violate federal or state laws or University policy (copyright, trademark, conflict of interest)
• Seek unfair competitive advantage by using government appropriations, tuition revenues, or other U funds to subsidize operations (e.g., no charge for space or utility costs)
• Engaging in activities that expose the University to unresolved insurance, legal, tax, or environmental health and safety risks

Once you have determined that the business activity you are considering is appropriate, you should then decide if you have the appropriate staffing to handle this activity. The External Sales Coordinator can help with these questions.

Should I Conduct This Activity?

A major purpose of conducting these activities is to generate profits to support the department and University mission. To determine profit, you must estimate the revenue and expenses related to the activity. Expenses include not only the direct expenses of the activity (i.e. salaries and cost of goods sold) but also indirect expenses (i.e., space, utilities, administrative support, and depreciation). An external sales activity should generally not be undertaken if it cannot be sustained as a self-supporting activity. In situations where University facilities would otherwise sit idle, incremental revenue may be desirable even if allowable indirect expenses are not fully recovered. Many University facilities carry fixed overhead costs that will be incurred regardless of how a facility might be used with an external customer base.

External sales activities can also enhance student experiences and expand relationships with entities outside the University. These goals along with the chance to generate profits must be balanced with the risks associated with the activity. Consideration should be given to risks such as legal, tax, or insurance issues as well as the consequences of sales on major donors or supporters.

If you have been operating a business activity on a commercial, competitive, and profitable basis for some time, you may want to consider contacting SPA about making a technology transfer decision.

The External Sales Coordinator can help with these questions.