Biodiesel Business Plan Executive Summary

Biodiesel Business Plan

Executive Summary "Biodiesel Business plan in Tampa Florida"

The biodiesel industry is currently a growth industry with almost exponential potential as it is economically and environmentally sound in ways that many other fuel deriving industries are not. It has only limited controls and subsidies but requires little consumer adaptation to utilize it. This work will serve as an encompassing plan to develop a biodiesel business in Tampa Florida.

Mission Statement:

To develop through biodiesel production ways in which the local and regional communities can self sustain and take control of its carbon impact on the environment and to provide renewable alternative fuel to reduce dependency on foreign oil and fossil fuel usage.

This work will contain; an industry analysis, an overview of industry trends and current practices; a target market analysis describing the nature of the current market and what areas of this market can be expanded to new markets specifically in Florida, a competition analysis of all the local and regional biodiesel players, a strategic position and risk assessment, a marketing plan and sales strategy, a detailed description of operations, a current and future technology plan, a description of the management and the organization planned, a development, milestones and exit strategy and lastly a financial analysis.

The exit strategy for this company will rely heavily on the development of cooperatives in the regional biofuel market, if the company grows to such a state that the usefulness of a private corporation is limited or if the business is in need of additional support and collaborative resources to expand it is believed that a community cooperative may be the ideal purchasing agent for the business. Another plausible exit strategy would be to sell to another biofuel corporation.

Industry Analysis and Trends

The period of waiting for the market on alternative fuels to grow has ended as more and more individuals and industries seek to do their part in the development of alternative fuel vehicles and the fuels themselves and the community raises awareness of the need to do so. Biodiesel is an important and versatile player in the growing alternative fuel market for several reasons, not the least of which is the fact that there are only limited changes that need to be made to an existing diesel vehicle for it to run effectively and efficiently on biodiesel. In fact the history of diesel fueled vehicles is supported by the fact that the developer of diesel engines in fact intended them to run almost exclusively on biodiesel.

Rudolph Diesel designed his first engine in the 1890s to use the available local fuel sources such as vegetable oil and tallow. These fuels came from renewable feedstocks, easily accessible to the average person. His intention was to empower, both psychologically and economically, the small industries, farmers, craftsmen, and artisans who were struggling to survive the steam-engine's industrial monopolies. This humanitarian vision has been revived with the resurgence of the biofuel industry. Along with the revival of this vision comes the possibility of re-empowering our communities and ourselves. (Benefits of Biodiesel, 2006, NP)

Another significant industry plus is that biodiesel is flexible as a fuel source and can be obtained from multiple source feed stock with similar results in efficiency and productivity, though there are some notable exceptions that will be discussed in this plan, most significantly algae feedstock. Ethanol in comparison is divergent in efficiency depending upon the feedstock used to produce it. (Szwarc, 2004 December 9) Biodiesel is a renewable fuel derived from vegetable oil or animal fats that can be added to petroleum diesel as a blend or used on its own. In the United States, most biodiesel is made from soybeans. Biodiesel is also made from canola oils and from waste stream sources including used cooking oils or animal fats. In general biofuels are renewable, and are becoming more available (Ritter, 2007, NP) as they are derived from renewable grow able resources, and this is their most significant pro. On a national level this means that the individual nation is less dependant upon fossil fuel and from a politically important stand less dependant on foreign oil. There is also significant evidence that these fuels burn cleaner, more efficiently and are therefore less harmful to the environment, emitting a better carbon balance in comparison to the energy that is utilized to create them. (see comparison of efficiency in corn vs. sugar subheading below) Additionally, as most engines are designed to run on burnable fuel it is easier in general to transition them to biofuels than other forms of renewable resources, like wind, solar and hydrogen fuels. ("The Pros and Cons of Bio-fuels," 2007, NP)

The stress of biodiesel production and distribution, as well as its economic interests is clearly local as biodiesel has yet to be adopted as a viable fuel source by large corporate entities and its production therefore remains beneficial on the local level rather than supporting large corporate structures. In general with biodiesel in its current market production; the materials for production are done at a local level and money is fed back into the communities that are served by the producers and distributors. As production infrastructure is developed this will be even more apparent. This is very different within the fossil fuel industry. The monopolization of the refineries by a few corporations is becoming starker. (Economic Benefits, 2007, NP)

This particular trend in the biodiesel industry makes it one of the best industries to invest in and develop for both the short- and long-term prospects of the region and the nation. The historical transition from foreign dependency to local development and retention of resources could significantly aide in the future subsistence and even growth of communities and the profitability for the individual organization embarking on biodiesel production. Currently there is about a dollar spread between traditional fossil diesel and biodiesel, as biodiesel unlike petroleum-based fuels are largely unsubsidized, though structured much like other fuels in that feedstock (renewable in the case of biofuels and crude oil in the case of petroleum) is the most significant and costly aspect of production. (Morse, 1999, p. 1) (Economic Benefits, 2007, NP)

Specific to Florida there is a growing supply chain associated with biodiesel that is currently not meeting the real or potential for demand. This is especially true with the expansion of biodiesel usage to marine transportation (a significant usage of fuel in Florida). (Freckman, 2006) There are many diesel powered vehicles in Florida, in the transportation as well as other areas and in public and private use, that could further benefit from additional sources of biodiesel. The largest growth area will be in industry and private transportation as the fuel becomes more available. Currently many municipalities in the state of Florida have commitments to biofuel usage and specifically biodiesel usage for public transportation. This trend will likely continue. Additionally, the local community is at risk of becoming dependant on biodiesel imports from places like Ecuador, rather than domestically and preferably locally produced sources.

The most dire competitor of the company will be the Tampa-based firm EarthFirst that is importing massive shipments of biodiesel made from Palm Tree Oil, despite soy bean grower protests regarding the companies use of a tax incentive to do so. (Adams & Huettel, November 19, 2005, NP) EarthFirst Technologies has many other goals and holdings and does not exclusively trade in biodiesel, but has significant interest in many areas of alternative fuel technologies and fuel procurement as well as recycling and reuse projects. (EarthFirst Technologies Website) the company's actions give proof to the idea that the local, regional and national need for biodiesel is not currently being met domestically and this therefore needs to be remedied with the development of biodiesel refineries in the U.S. And specifically Florida.

Target Market

The target market of the proposed biodiesel company is first local and regional, as more expanded facilities are clearly needed for the development of biodiesel infrastructure and future dependence on this versatile alternative renewable fuel. Private transportation, industry, marine use and supplementation of public biodiesel infrastructure are the main market focuses of the company. The areas that are due for the greatest expansion are private transportation, industry and marine use. By obtaining specific contract market assurance in industry and public sectors the company will be better able to expand exponentially into the private sector, where the fuel will be supplied to consumers at equipped traditional fuel retailers and at one retail location developed by the company at the refinery. The immediate goal of the company will be to secure two large industry accounts to ensure the revenue to increase operations and offer biodiesel fuel to the local and regional consumer market. The next logical target market stage would be to achieve a supply contract with a larger retail fuel provider to provide pure biodiesel to local and regional retail petroleum refineries to be mixed or sold as pure biodiesel. Primary research indicates an extremely limited number of biodiesel retail sights in Tampa and the surrounding area with extremely limited sales options. Historically one retailer in the area has offered 100 gallon drums of B100 to consumers for purchase, but has recently restricted sales to 500 gallons per purchase, no doubt to serve industry. While another retail location has spotty supplies that must be called upon, on a weekly basis to determine if B100 is even available, though conveniently they do sell it by the gallon. (Biodiesel in Tampa Website)

Competition

One of the most essential aspects of beginning to build a biofuel infrastructure on a local level in a domestic city is to create such an infrastructure that would curtail the dominance of foreign biofuel in the region. As was seen in the first section of the work EarthFirst Technologies serves as a significant local and regional competitor as this company has seen and answered the need to import biodiesel to answer a growing need in the U.S. For such sources. Currently the biodiesel market is cooperative in Florida, meaning that biodiesel and other alternative fuel creators, providers and distributors seem to be poised to work together to strengthen the infrastructure before they seek to create a highly competitive energy market, like other energy markets and companies have. (Florida Biofuel Coop Website)

Yet, it must also be said that the main competition will be from companies who have sought to meet the needs of the local community from outside sources (domestic or foreign) as a result of limited infrastructure. Currently there are only 6-10 retail sites associated with biodiesel sales in Florida. One of those is in Tampa, but is currently restricted to bulk sales, (Ward Oil Company) clearly with a focus on industry, as they intend to sell only 500 gallon drums of B100 biodiesel as of May 2008. (Biodiesel in Tampa Website) This leaves private consumers in need of resources that are local and practical, as most people do not have the space or resources to buy such large quantities of fuel. Another trend that is notable on such primary resource links, such as the consumer information/question site noted above is that biodiesel is not always available at retail locations that sell it, one example is left by a consumer who states that Mcmullin Oil (another fuel retailer) plans to have B100 fuel on sale (by the gallon) next week for a quoted price (including a $1 tax break of unknown origin). Mcmullen Oil is also named in a 2006 lawsuit as being an intended contract delivery location for a large quantity of fuel made by a company that may have never existed. In other words the company (Tampa Biofuel) the owners of which are currently being sued by investors never were able to develop product but were able to cash in on the fact that the fuel is so desperately needed that companies are willing to buy from relative unknowns in the business, and investors are willing to fund biofuel projects sight unseen. (Hinman, May 23, 2006, NP)