Bioboyz Diesel Business Plan

BioBoyz Diesel – Business Plan

BioBoyz Diesel

Business Plan

Prepared for: Marvin Painter

MPAcc 809 Entrepreneurship

Prepared by: Adam Taman

Brett Thiessen

Jim Knittig

Michael Bowcock

Table of Contents

Table of Contents 2

List of Exhibits 3

1.0 Executive Summary 4

2.0 Business Overview 5

2.1 Vision 5

2.2 Mission 5

2.3 Core Values 5

2.4 Goals and Objectives 5

3.0 Industry Overview 6

4.0 Operations Plan 6

4.1 Organizational Structure 6

4.2 Daily Operations 7

4.3 Location 7

4.4 Floor Layout 8

5.0 Human Resources Plan 9

5.1 Job Descriptions 9

5.2 Salary Costs 11

6.0 Marketing Plan 12

6.1 Competitive Analysis 12

6.2 Customer Analysis – Segmentation, Targeting and Positioning 13

6.2.1 City of Saskatoon 13

6.2.2 Other Potential Target Customers 15

6.2.3 Future Plans 15

6.3 Marketing Mix Summary 16

6.3.1 Product 16

6.3.2 Pricing 17

6.3.3 Promotion 18

6.3.4 Distribution 19

7.0 Financial Plan 19

7.1 Variable Costs 19

7.2 Fixed Costs 20

7.3 Capacity of Production 20

7.4 City of Saskatoon Requirements 20

7.5 Financial Projections 20

7.6 Risk Analysis 21

8.0 Summary 22

9.0 References 23

Appendix One: Floor Plan of BioBoyz Diesel Plant 24

Appendix Two: BioBoyz Diesel Organization Chart 26

Appendix Three: Example of a Processor to Be Used in the Plant 28

Appendix Four: Example of Trucks to Be Used in Operations 30

List of Exhibits

Exhibit I - Projected Financial Statements (75% Capacity)

Exhibit II - Projected Financial Statements (Near Capacity)

Exhibit III - Projected Financial Statements (Business Failure)

Exhibit IV - Fixed Costs

Exhibit V - Contribution Margin & Breakeven

Exhibit VI - Production Capacity

Exhibit VII - City Transit Requirements

Exhibit VIII - Projected Financial Statements

Exhibit IX - Projected Financial Statements1.0 Executive Summary

BioBoyz Diesel is an exciting new company that presents a promising opportunity to potential lenders. Our goal is to become the exclusive provider of bio-diesel to Saskatchewan’s fleet of buses, including city and provincial transit and school buses. To accomplish this, we are attempting to obtain debt financing of $110,000 to help get the project off the ground. This financing will work in combination with our shareholders’ management and marketing expertise to generate an 8% return to the lender with full repayment by the end of our fifth year of operations.

The recent increase in environmental awareness of consumers and governments has led to a significant boost to the adoption of bio-diesel, creating a new, relatively untapped marketplace. We have already negotiated and secured a contract to provide the City of Saskatoon’s transit fleet with the 5% bio-diesel content they currently require, with the potential of the city expanding to 20% bio-diesel use in the future. The low capital costs to begin production as well as our proximity to the City of Saskatoon’s fleet will allow us to be profitable by our third year of operations.

Our strategic advantages are based around the utilization of waste vegetable oil from local restaurants. This allows us to maintain low direct material costs and pass these savings on to our customers. By charging lower prices to our customers, we can discourage competitors from entering the industry and work to secure long-term contracts with other transit operators including Saskatchewan Transit Company and FirstBus, with potential expansion into new Western Canadian markets in the future.

2.0 Business Overview

2.1 Vision

To provide sustainable energy sources to reduce the carbon footprint of the population.

2.2 Mission

To provide affordable bio-diesel to our customers while substantially decreasing the negative effects of emissions in our atmosphere.

2.3 Core Values

The following core values will assist with future business decisions and the future direction of BioBoyz Diesel:

§  Lower carbon emissions

§  Maintain the planet for future generations

§  Focus on the local environment

§  Produce quality bio-diesel

2.4 Goals and Objectives

Short term goals

§  Produce sufficient bio-diesel to meet the city’s demands while maintaining an adequate level of bio-diesel inventory to manage any unforeseen production issues.

§  Communicate to the population of Saskatoon the health and environmental benefits of bio-diesel.

Long term goals

§  Increase the city’s contract to B20 bio-diesel or obtain another contract to utilize the excess capacity.

§  Expand into other local cities such as Regina, Calgary, Edmonton or Winnipeg.

3.0 Industry Overview

The bio-diesel industry has been expanding rapidly over the past 15 years due to the demand for alternative fuels that are better for the environment. As the technology for the refinement of bio-diesel has improved various bio-diesel operations have begun to operate throughout North America. The majority of these bio-diesel producers use raw oil from canola or soybeans as the feedstock into their bio-diesel operations. The industry as a whole has struggled to find a reliable and low cost feedstock to produce bio-diesel cost effectively in large quantities. The other inhibitor to growth the industry has faced is the reluctance for vehicle owners to use bio-diesel in the vehicles because of fears of reduced performance or the bio-diesel harming the engine. Through intensive industry marketing, government support for bio-diesel and shift in the general populations’ mindset to use more renewable fuels the use of bio-diesel has now become accepted in North America.

4.0 Operations Plan

4.1 Organizational Structure

Please see appendix two for a possible organizational structure of our company. Our board will consist of Marvin Painter (Chairman), Douglas Kalesnikoff, and Noreen Gregor. Our board members are all respected and knowledgeable business people from the Saskatoon area, and have offered their services free of charge in order to see that our business has the greatest possible chance of success.

4.2 Daily Operations

Our operations shift will run from 8 in the morning until 4 in the afternoon. The first part of the shift will involve the worker adding the waste vegetable oil into the processors. Next, the worker will add the methanol, and lye to the mix. The amount of methanol is 17% of the total vegetable oil used in the process. The amount of lye that is in the process is 3.5 grams per litre of vegetable oil. Once inside the processors, the transformation takes place by agitating, and heating the mix. After a reasonable time frame, the mix will stop, and the glycol by-product will settle to the bottom of the processor.

Currently our business will run with mainly manual labour between the storage tanks and processors. However, in the future we will have the option to have piping to automate the entire process.

At the end of the process we will separate the glycol by-product, as well as the useable bio-diesel. This will take place between 3:30 and 4:00. At that time the delivery man will come back and make the delivery to the city yard.

4.3 Location

Based on our market research, we have found a possible future location for the new City of Saskatoon bus yards. Please see the red box in figure 1 below. We are proposing to lease the building in the green box in the figure. This will put us in a fairly central location, as well as being close to our initial target customer. The location is on 48th Street in Saskatoon, just west of Millar Avenue. The ideal size of our building will be 30 by 20 feet, or 600 square feet. At approximately $10 per square foot per year, we will pay approximately $6,000 annual lease costs.

Figure 1: Saskatoon Plant Location Map

4.4 Floor Layout

We have chosen to use a U-shaped layout in our production facility. This will allow us to facilitate one overhead door to bring in raw materials, and remove the finished goods. Please see appendix one for the possible layout. Further, we will have a small meeting room and a service counter at the front of the building. This will allow us to meet potential future customers, and will give us a possible commercial appeal. Further, we will have a small kitchen area and a bathroom. The bathroom will also contain a shower stall to be used as a possible chemical shower. This is a precaution since we are dealing with chemicals.

5.0 Human Resources Plan

5.1 Job Descriptions

Chief Executive Officer (CEO)

§  Responsibilities include reconciling the summary of billings and deposits to monitor the cash flows of the business. Brett, the CEO, will also review the financial summary of operations each month and prepare for the quarterly board meetings. The board will meet with the CEO every quarter to review the financial and operational performance of the company. The board will focus on a high level review to verify that there are no major indicators of financial or operational failures. Any indentified improvements or changes will be discussed with the directors and implemented as necessary.

Director of Sales

§  Responsibilities include negotiating existing and new contracts with potential customers.

Administration - Adam, the Director of Sales, will receive and deposit the monthly payments from the city. He will also prepare a monthly deposit summary and bank reconciliation to be forwarded to the Director of Production and the CEO.

Director of Transportation

§  Responsibilities will include picking up grease from the restaurants and delivering the final bio-diesel product to the customer.

Raw Material Acquisition - The pickup schedule will run from 5 am until 8 am. This schedule will allow for the busy rush hour traffic to be avoided. Jim, the director of transportation, will operate on a 5 day schedule, Monday through Friday working the early morning shift. Each restaurant will have a grease storage bin behind their main building that is locked. Both the restaurant owner and our company will have a key. This will allow us to pick up the grease at the most convenient time. Depending on the production needs, the pickup schedule will include approximately 25-100 restaurants. Once production is increased in the future this position will go from part-time to full time and the pickup schedule will require an additional 2 hours. At future capacity the schedule will run from 4 am until 8am. The pickup truck we are planning to purchase will be able to handle, in one load, the maximum litres of raw material acquisition for the planned future capacity.

Final Product Delivery – The delivery schedule will run from 4 pm until 5 pm. This will give Jim a split part time shift for the first two years and a split full time shift for year three and beyond as additional delivery time will be required as more final product will be delivered. This shift is preferred by Jim as it will give him time at home with his young children during the day. The final product will be loaded at the warehouse onto the delivery truck. The product will be delivered directly to the City of Saskatoon’s storage facility. As the pickup and delivery shifts use different trucks no major cleaning is required between the shifts.

Director of Production

§  Responsibilities will include transferring the grease from the pickup truck into the “Waste Vegetable Oil” holding tank as well as monitoring the production cycle.

o  Production - Each production cycle runs for 8 hours. Throughout the 8 hour cycle (8 am – 5 pm with a one hour lunch) Michael, the Director of Production, will need to verify that the equipment is working properly and that the necessary additives (i.e. Lye and Methanol) are mixed in with the waste vegetable oil at the appropriate levels. After each cycle is complete Michael will need to transfer the product from the processor container to the final holding tanks in the warehouse. Michael will assist the truck driver in loading the final product onto the truck for delivery at 4 pm. Any additional product will be transferred to the holding tank for the next delivery. The last hour of each day will be dedicated to cleaning the warehouse and getting ready for the next day’s production.

o  Administration - During the production stages throughout the day (i.e. downtime) Michael will prepare and send the monthly billings to the city as well as maintain the accounting records. Each month Michael will be required to submit a financial summary of operations and a summary of billings to the CEO.

5.2 Salary Costs

§  Labour costs are detailed in exhibit IV. The estimated labour costs for year 1 and 2 total approximately $40,000. For years 3, 4, and 5 they are estimated to be approximately $50,000. These labour costs include the salaries paid to the Directors of Transportation and Production.

§  Management Administration is estimated at $12,000. This fee will be paid to the Director of Sales and CEO for compensation for the management services provided.

§  Marvin Painter, Noreen Gregor, and Douglas Kalesnikoff have volunteered their time as active board members for BioBoyz Diesel. All three board members are volunteering to assist four MPAcc students in achieving a lifelong business dream.

6.0 Marketing Plan

6.1 Competitive Analysis

Our product competes with other bio-diesel products currently on the market. We are planning to serve a very local market and fill the needs of specific bio-diesel users. Given this fact we feel that we can serve this niche market and be relatively unaffected by existing bio-diesel producer competition.

Current Canadian competition in the bio-diesel production industry includes twelve companies in Canada that are members of the Canadian Renewable Fuels Association. Of these twelve companies, six of these have not started production and are in the process of building their plants.

The six companies currently producing bio-diesel are:

·  Bio-Diesel Quebec Inc. – St-Alexis-des-Monts, QU

·  Biox Corporation – Hamilton, ON

·  City-farm Biofuel Ltd. – Delta, BC

·  Milligan Bio-Tech Inc. – Foam Lake, SK

·  Rothsay Bio-diesel – Montreal, QU

·  Western Bio-diesel Inc. – Calgary, AB

Our main competition in the local Saskatoon market will be Biox Corporation and Milligan Bio-Tech Inc.

Biox Corporation is a public listed company and is currently the largest Canadian producer of bio-diesel. Their plant is located in Hamilton, Ontario and has capacity to produce 67 million litres of bio-diesel per year.