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The new business is a marketer of a new technology for recycling plastic bottles. The business is primarily design and sales of new technologies. The target market is any recycling operation. The potential is huge, given the size of the plastics recycling business globally, and sales forecasts range between $2-5 million the first year, and upward of $10 million the second year. Profit is expected to be $100,000 in the first year, and $1 million the second year. It will cost $1.5 million to start the business, plus $500,000 in working capital for the first year. The ROI on this would then be 6.7% in the first year, 67% the second year. There is a significant amount of risk both political and technological.
The new business is an innovative way to recycle plastic bottles that eliminates the need for sorting through different types of plastic. The current process has different types of plastic noted on each plastic product ("1," "6," etc.), numbers that help with the sorting of the plastic at the recycling stage (no author, 2013). This makes for a somewhat cumbersome and costly recycling process. The new business has a new process that allows it to recycle all types of plastic, especially bottles, into a high-grade liquid form of plastic. The company controls the technology, which it can license around the world. There will also be a prototype recycling plant that will be used to illustrate the effectiveness of the new technique.
The type of business therefore is primarily a technology business, with the main asset being intellectual property relating to the innovative new recycling technique and the different pieces of equipment and chemical compositions that are required. The unique selling point of the business is that the proprietary technology allows for more efficient and effective recycling of all plastic types, and a superior output of recycled plastic as well. The patent protection gives this process and its equipment a unique value proposition that cannot be replicated by competitors. There are a number of competitors on the market, making conventional equipment for plastics recycling. In total, between competitors and customers, there are around 1800 businesses involved in recycling (APR, 2013), plus a large number of governments, and the business side of things has increased threefold in recent years (Earth911.com, 2013). For the most part, plastic is recycled with conventional machinery by simply melting it down, skimming off impurities and repurposing it. This process has remained essentially unchanged for decades, and is both time-consuming and has a high cost in terms of the carbon resources needed to heat the plastic. For example, one ton of plastic bags costs $4,000 to be recycled, and is worth $32 (Clean Air Council, 2013).
The life of the product is linked to patent protection, and the actions of competitors. In both the U.S. And Canada, intellectual property laws are rigorous, and so the patent protection will have essentially limitless life. The equipment that is being sold to facilitate the new technique is robust, and should have a useful life of 10-20 years. The actions of competitors, however, could result in superior products being brought to market that would reduce the value of our patents. Thus, it is imperative that a portion of the income earned from our operation be plowed back into research and development so that we remain at the cutting edge of plastic recycling technology. Patents are pending for several elements of our process, and for the equipment and chemical compounds used in the process. In addition, several brand names associated with the company and the product are in the trademarking process as well. EU and Japanese patents are being pursued in order to facilitate entry into those markets once the company becomes established in North America.
Sales & Marketing
The target market will be all types of plastic recycling facilities around the world. There are several different types of these facilities -- public recyclers, private recyclers and private enterprises. The public recyclers are government facilities that manage the recycling efforts in their local areas. In some places, recycling companies are privately-owned. These will still control municipal, state or national recycling programs, but will not be owned or run by the local government. The product and service offering will basically be the same for these companies but marketing to private companies is drastically different than marketing to government. The third type of customer will include plastics companies, bottlers and other private enterprises that recycle for their own needs. These companies might only receive certain types of plastics, and only seek certain types of plastic outputs. With more highly-specialized needs, these companies will need more specialized forms of the equipment than the generic forms that are used for general civic recycling purposes.
The overall size of the plastic recycling market is tremendous. 31 million tons of plastic waste were generated in 2010; 28% of HDPE bottles and 29% of PET bottles were recycled (EPA, 2013). This represents a massive market, one that remains largely untapped in the world. The three main targets are responsible for the vast majority of plastic recycling in this world. Thus, the market opportunities lie with all three of these types of plastic recyclers. A full100% of plastic bottle recycling in the world today is conducted using the old melt-and-skim technique. It is this technique for which we have developed a superior solution, so in that sense every single plastic bottle recycling operation in our target geographical area is a potential customer. The opportunity arises because of technological revolution, and the fact that our process is cheaper, faster, more effective and uses less energy. As noted, the competitors currently work with old technology, and most are not exclusively in the plastic recycling business the way that we are. A few of the larger companies will have the ability to invest in R&D to try to counter our product, but those efforts could take years. We expect to have a technological competitive advantage for three to four years before facing any competition with comparable technological ability.
The marketing mix is as follows. As noted, the product is a combination of intellectual property and equipment. The pricing will depend on the size of the customer. The intellectual property of course is the same for any scale, and the equipment is also scalable. As a result, we are able to be flexible with the IP license in order to attract business from smaller recyclers as well as from major customers. This pricing bias will help us achieve our objective of 90% of the plastic bottle recycling market.
Promotion is going to be achieved through a sales team, in addition to basic Internet and social media channels. The sales team will be responsible for contacting all plastic recyclers in their respective territories, and pitching the product directly. The sales team will work on a small salary, but mostly on commission to provide sufficient motivation. The website and other online channels will be functional, providing information and a link to the sales rep in the viewer's area. In addition, there will be a small public relations campaign, in particular linked to successful installations in major media markets. This PR campaign will get the word out about successes, and the result is expected to be greater exposure to the idea, opening the door for easier first contacts by our sales reps. The sales reps will be managed by a sales manager, who will oversee the efforts to not only contact all recyclers, but to ensure that all are being pitched to effectively. There will be a special rep for major customers -- bottlers like Coca-Cola and PepsiCo, or major municipal recycling programs or waste management companies.
Manufacturing and Distribution
The company is going to be incorporated in Delaware to minimize taxes, and will have its main base of operations in a low-tax state as well. Manufacturing of the equipment will be contracted out to a low bidder, whether in the U.S. Or elsewhere. Several southern states, Mexico and China are all likely places where the winning bidder might come from. The main location will feature the sales office and the research and design center, with everything else being contracted to outside parties. There will also be a need for warehousing, no matter where the manufacturing bidder eventually comes from. There will be two warehouses. One will be in the West, probably in California, and the other will have a central location near the head office. However, as the equipment is built to order, the warehouses will be relatively small, handing only a few days' worth of inventory before it is shipped to the client. Some assembly may occur at these locations as well. Bar codes and satellite tracking will ensure that inventory is tightly-controlled and is delivered to the client in a timely manner. We will also be able to fly consultants to assist with the installation process. Independent contractors will be used to take the equipment to the job…[continue]
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