Table of Content

    Do you want to start biodiesel business?

    Are you thinking about starting a biodiesel company? With the increasing environmental awareness, the use of biodiesel has significantly increased during the recent years. Moreover, it is projected to increase steadily since it is extremely eco-friendly and emits lower emissions as compared to the petroleum derived diesel. That’s why this business can prove extremely profitable provided that you plan it successfully.
    The first thing you must do is develop a comprehensive business plan covering all aspects of the startup. To help you avoid the trouble of making a plan yourself, we are providing a business plan for a biodiesel business startup ‘Austin Biodiesel’ which is soon going to be launched.

    Executive Summary

    2.1 The Business

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    Austin Biodiesel will be a licensed and insured biodiesel manufacturer, located in the industrial zone of Austin, Texas. The company will be set up in an existing facility, previously used as a small petrochemical firm.

    2.2 Management

    Austin Biodiesel will be solely owned and operated by Roni Clark who has been associated with petroleum industry for more than 20 years. Being experienced in this industry, Clark knows everything about starting a biodiesel business.

    2.3 Customers

    Our target customers are the factories, industries, production plants, government agencies, diesel stations and farmers located in Austin and its nearby areas. We will produce, purify and distribute high-quality biodiesel as well as by-products like biogas, organic acids and glycerol.

    2.4 Target of the Company

    Our target is to produce high-quality and economical biodiesel by environment friendly methods. The company’s three-year performance, as forecasted by the experts, is given in the chart below:

    Biodiesel Business Plan - 3 Years Profit Forecast

    Company Summary

    3.1 Company Owner

    Austin Biodiesel will be solely owned and operated by Roni Clark, a petroleum engineer who has been associated with the petroleum industry for more than 20 years and was associated with ‘Sinopec’ as the production manager for last 7 years.

    3.2 Why the Business is being started

    Austin Biodiesel aims to produce economic biodiesel using organic wastes and vegetable oils by using eco-friendly methods of production. Our efficient methodology will result in low and non-toxic waste generation which can be easily handled afterwards. Being experienced in this industry, Clark knows how to start a biofuel business in an eco-friendly way.

    3.3 How the Business will be started

    The company will be set up in an existing facility, previously used as a small petrochemical firm that’s why most of the machinery will be already available. The biggest expense for the startup will be the procurement of digesters and transportation trucks. The company has forecasted following costs for the start-up:

    Biodiesel Business Plan - Startup Cost

    The detailed information about the start-up is given below:

    Start-up Expenses  
    Legal $55,300
    Consultants $0
    Insurance $32,750
    Rent $32,500
    Research and Development $32,750
    Expensed Equipment $32,750
    Signs $1,250
    TOTAL START-UP EXPENSES $187,300
    Start-up Assets $0
    Cash Required $332,500
    Start-up Inventory $32,625
    Other Current Assets $232,500
    Long-term Assets $235,000
    TOTAL ASSETS $121,875
    Total Requirements $245,000
    START-UP FUNDING $0
    START-UP FUNDING $273,125
    Start-up Expenses to Fund $11,875
    Start-up Assets to Fund $15,000
    TOTAL FUNDING REQUIRED $0
    Assets $23,125
    Non-cash Assets from Start-up $18,750
    Cash Requirements from Start-up $0
    Additional Cash Raised $18,750
    Cash Balance on Starting Date $21,875
    TOTAL ASSETS $0
    Liabilities and Capital $0
    Liabilities $0
    Current Borrowing $0
    Long-term Liabilities $0
    Accounts Payable (Outstanding Bills) $0
    Other Current Liabilities (interest-free) $0
    TOTAL LIABILITIES $0
    Capital $0
    Planned Investment $0
    Investor 1 $332,500
    Investor 2 $0
    Other $0
    Additional Investment Requirement $0
    TOTAL PLANNED INVESTMENT $695,000
    Loss at Start-up (Start-up Expenses) $313,125
    TOTAL CAPITAL $251,875
    TOTAL CAPITAL AND LIABILITIES $251,875
    Total Funding $255,000

    Services for customers

    A biodiesel business can become immensely profitable if you are well aware of its production process and the by-products formed as side reactions. That’s why, you are advised to do proper research before you start thinking about how to start a biodiesel business.
    Austin Biodiesel will engage itself in the commercial production and distribution of high-quality and natural biodiesel. Although, our primary product is biodiesel but to increase the efficiency of our operations and our revenue, we will also collect, purify and sell by-products produced during the production of biodiesel.

    • Biodiesel: Our primary product produced by eco-friendly digestion of organic wastes, canola, soybean oil, palm oil and other oils.
    • Biogas: Produced as a by-product.
    • Organic Acids: Produced as a by-product.
    • Glycerol: Produced as a by-product.

    Marketing Analysis of biodiesel business

    Marketing analysis is an important component of an effective biodiesel production business plan that’s why Clark acquired the services of marketing experts and business consultants to help him through this phase. After identifying the market trends and prospective clients, the marketing experts also helped him to develop an effective biodiesel marketing plan. If you are wondering how to carry out marketing analysis of your biodiesel company, you can take help from this biodiesel business plan sample.

    5.1 Market Trends

    The biodiesel industry is growing at an extremely fast rate due to its efficient and environment friendly nature. Moreover, biodiesel reduces greenhouse gas emissions by 57-86 percent, according to the EPA, that’s why it is becoming popular day-by-day. The US biodiesel production doubled from 1 billion gallons to 2 billion gallons in just four years, from 2011 to 2015. According to EPA, 2.8 billion gallons biodiesel was produced in 2016. According to a recent study, the industry supported about 64,000 jobs nationwide. These statistics clearly show that a business in biodiesel industry can prove extremely profitable provided that you pan and execute it successfully.

    5.2 Marketing Segmentation

    We will mainly target the corporate sector located in the industrial zone of Austin. Our marketing experts have identified the following target audience which can become the potential customers of our products.

    Biodiesel Business Plan - Market Segmentation

    The detailed marketing segmentation is as follows:

    5.2.1 Industries & Factories:

    Austin Biodiesel will primarily supply its biodiesel to the industries and factories located in Austin and the neighboring cities. Most of the industries and product manufacturers, including private as well as government agencies, rely on diesel for operating their heavy machinery hence this target group will be the biggest consumer of our products. We will also transport our products to them as well as other industries located in neighboring cities.

    5.2.2 Diesel & Gas Stations:

    We will supply our biodiesel and biogas to the hundreds of diesel and gas stations located in Austin. Considering the fuel demand of these stations, they will be the second biggest consumer of our products.

    5.2.3 Farmers:

    Austin Biodiesel will also supply its products to farmers and agricultural industries located in the rural areas of Austin and neighboring cities. Farmers are become more mechanized for large-scale and efficient agricultural production; hence they also need diesel for their machines.
    The detailed market analysis of our potential customers is given in the following table:

    Market Analysis
    Potential Customers Growth YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 CAGR
    Industries & Factories 45% 11,433 13,344 16,553 18,745 20,545 13.43%
    Diesel & Gas Stations 38% 22,334 32,344 43,665 52,544 66,432 10.00%
    Farmers 17% 8,322 9,455 10,655 12,867 14,433 15.32%
    Total 100% 42,089 55,143 70,873 84,156 101,410 9.54%

    5.3 Business Target

    We aim to produce economical biofuels by environment friendly methods of production. Our main business targets are as follows:

    • To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
    • To balance the initial cost of the startup with earned profits by the end of the first year

    5.4 Product Pricing

    Since our primary ingredients for biodiesel production will be waste oils and we will collect every single by-product generated in the production process, we can afford to set the price of our biodiesel lower as compared to our competitors. Our biodiesel will be 5% cheaper, priced at $0.95 per liter, still its quality will be as high as of other biofuels available in market.

    Strategy

    After marketing analysis, sales strategic plans is the second most important component of a business plan. Therefore, considering its importance, you must develop it before you think about how to start a biodiesel business.

    6.1 Competitive Analysis

    Austin Biodiesel will have various competitors ranging from small businesses to multinational manufacturers, still we hope to have a lot of sales due to three competitive aspects. Our biodiesel will be high quality, low priced and produced by environment friendly methods of production.

    6.2 Sales Strategy

    We will arrange seminars, webinars and conferences for increasing awareness about importance of fuels manufactured by environment friendly methods. We will also advertise ourselves in magazines, newspapers, TV stations, and social media.

    6.3 Sales Monthly

    Biodiesel Business Plan - Sales Monthly

    6.4 Sales Yearly

    Biodiesel Business Plan - Sales Yearly

    6.5 Sales Forecast

    Our forecasted sales are summarized in the following column charts:

    Biodiesel Business Plan - Unit Sales

    The detailed information about sales forecast is given in the following table:

    Sales Forecast      
    Unit Sales Year 1 Year 2 Year 3
    Biodiesel 1,887,030 2,680,320 2,588,240
    Biogas 802,370 815,430 823,540
    Organic Acids 539,320 770230 1,002,310
    Glycerol 265,450 322,390 393,320
    TOTAL UNIT SALES 3,494,170 4,588,370 4,807,410
    Unit Prices Year 1 Year 2 Year 3
    Biodiesel $140.00 $150.00 $160.00
    Biogas $600.00 $800.00 $1,000.00
    Organic Acids $700.00 $800.00 $900.00
    Glycerol $650.00 $750.00 $850.00
    Sales
    Biodiesel $2,149,800 $2,784,000 $3,383,200
    Biogas $120,050 $194,500 $268,500
    Organic Acids $50,110 $71,600 $93,000
    Glycerol $139,350 $194,600 $249,850
    TOTAL SALES
    Direct Unit Costs Year 1 Year 2 Year 3
    Biodiesel $0.70 $0.80 $0.90
    Biogas $0.40 $0.45 $0.50
    Organic Acids $0.30 $0.35 $0.40
    Glycerol $3.00 $3.50 $4.00
    Direct Cost of Sales
    Biodiesel $989,300 $1,839,000 $2,679,700
    Biogas $66,600 $119,900 $173,200
    Organic Acids $17,900 $35,000 $52,100
    Glycerol $19,400 $67,600 $115,800
    Subtotal Direct Cost of Sales $1,294,100 $1,699,400 $2,104,700

    Personnel plan

    Personnel plan is also an important component of a biodiesel business plan since it gives you an estimation of the required staff and their salaries over the next few years.

    7.1 Company Staff

    Clark will act as the Chief Executive Officer of the company. The company will initially hire following people:

    • 1 General Manager to manage the overall operations of the production plant
    • 2 Administrators / Accountants to maintain financial records
    • 2 Petroleum Engineers to operate the production plant
    • 4 Sales Executives to create brand image and discover new ventures
    • 20 Field Employees to operate and maintain the production plant
    • 8 Drivers to transport products to industries, factories, stations and farmers

    7.2 Average Salary of Employees

     Personnel Plan      
    Year 1 Year 2 Year 3
    General Manager $85,000 $95,000 $105,000
    Accountants $66,000 $73,000 $80,000
    Petroleum Engineers $145,000 $152,000 $159,000
    Sales Executives $145,000 $152,000 $159,000
    Field Employees $550,000 $650,000 $750,000
    Drivers $410,000 $440,000 $480,000
    Total Salaries $1,250,000 $1,394,000 $1,548,000

    Financial Plan

    The most important component of a biofuel business plan is its detailed financial plan since it presents a clear picture of the cost of startup.

    8.1 Important Assumptions

     General Assumptions      
    Year 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 10.00% 11.00% 12.00%
    Long-term Interest Rate 10.00% 10.00% 10.00%
    Tax Rate 26.42% 27.76% 28.12%
    Other 0 0 0

    8.2 Brake-even Analysis

    Biodiesel Business Plan - Brake-even Analysis

     Brake-Even Analysis  
    Monthly Units Break-even 5530
    Monthly Revenue Break-even $159,740
    Assumptions:
    Average Per-Unit Revenue $260.87
    Average Per-Unit Variable Cost $0.89
    Estimated Monthly Fixed Cost $196,410

    8.3 Projected Profit and Loss

     Pro Forma Profit And Loss      
    Year 1 Year 2 Year 3
    Sales $309,069 $385,934 $462,799
    Direct Cost of Sales $15,100 $19,153 $23,206
    Other $0 $0 $0
    TOTAL COST OF SALES $15,100 $19,153 $23,206
    Gross Margin $293,969 $366,781 $439,593
    Gross Margin % 94.98% 94.72% 94.46%
    Expenses
    Payroll $138,036 $162,898 $187,760
    Sales and Marketing and Other Expenses $1,850 $2,000 $2,150
    Depreciation $2,070 $2,070 $2,070
    Leased Equipment $0 $0 $0
    Utilities $4,000 $4,250 $4,500
    Insurance $1,800 $1,800 $1,800
    Rent $6,500 $7,000 $7,500
    Payroll Taxes $34,510 $40,726 $46,942
    Other $0 $0 $0
    Total Operating Expenses $188,766 $220,744 $252,722
    Profit Before Interest and Taxes $105,205 $146,040 $186,875
    EBITDA $107,275 $148,110 $188,945
    Interest Expense $0 $0 $0
    Taxes Incurred $26,838 $37,315 $47,792
    Net Profit $78,367 $108,725 $139,083
    Net Profit/Sales 30.00% 39.32% 48.64%

    8.3.1 Profit Monthly

    Biodiesel Business Plan - PROFIT MONTHLY

    8.3.2 Profit Yearly

    Biodiesel Business Plan - PROFIT YEARLY

    8.3.3 Gross Margin Monthly

    Biodiesel Business Plan - GROSS MARGIN MONTHLY

    8.3.4 Gross Margin Yearly

    Biodiesel Business Plan - GROSS MARGIN YEARLY

    8.4 Projected Cash Flow

    Biodiesel Business Plan - Projected Cash Flow Diagram

     Pro Forma Cash Flow      
    Cash Received Year 1 Year 2 Year 3
    Cash from Operations
    Cash Sales $40,124 $45,046 $50,068
    Cash from Receivables $7,023 $8,610 $9,297
    SUBTOTAL CASH FROM OPERATIONS $47,143 $53,651 $59,359
    Additional Cash Received
    Sales Tax, VAT, HST/GST Received $0 $0 $0
    New Current Borrowing $0 $0 $0
    New Other Liabilities (interest-free) $0 $0 $0
    New Long-term Liabilities $0 $0 $0
    Sales of Other Current Assets $0 $0 $0
    Sales of Long-term Assets $0 $0 $0
    New Investment Received $0 $0 $0
    SUBTOTAL CASH RECEIVED $47,143 $53,651 $55,359
    Expenditures Year 1 Year 2 Year 3
    Expenditures from Operations
    Cash Spending $21,647 $24,204 $26,951
    Bill Payments $13,539 $15,385 $170,631
    SUBTOTAL SPENT ON OPERATIONS $35,296 $39,549 $43,582
    Additional Cash Spent
    Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
    Principal Repayment of Current Borrowing $0 $0 $0
    Other Liabilities Principal Repayment $0 $0 $0
    Long-term Liabilities Principal Repayment $0 $0 $0
    Purchase Other Current Assets $0 $0 $0
    Purchase Long-term Assets $0 $0 $0
    Dividends $0 $0 $0
    SUBTOTAL CASH SPENT $35,296 $35,489 $43,882
    Net Cash Flow $11,551 $13,167 $15,683
    Cash Balance $21,823 $22,381 $28,239

    8.5 Projected Balance Sheet

     Pro Forma Balance Sheet      
    Assets Year 1 Year 2 Year 3
    Current Assets
    Cash $184,666 $218,525 $252,384
    Accounts Receivable $12,613 $14,493 $16,373
    Inventory $2,980 $3,450 $3,920
    Other Current Assets $1,000 $1,000 $1,000
    TOTAL CURRENT ASSETS $201,259 $237,468 $273,677
    Long-term Assets
    Long-term Assets $10,000 $10,000 $10,000
    Accumulated Depreciation $12,420 $14,490 $16,560
    TOTAL LONG-TERM ASSETS $980 $610 $240
    TOTAL ASSETS $198,839 $232,978 $267,117
    Liabilities and Capital Year 1 Year 2 Year 3
    Current Liabilities
    Accounts Payable $9,482 $10,792 $12,102
    Current Borrowing $0 $0 $0
    Other Current Liabilities $0 $0 $0
    SUBTOTAL CURRENT LIABILITIES $9,482 $10,792 $12,102
    Long-term Liabilities $0 $0 $0
    TOTAL LIABILITIES $9,482 $10,792 $12,102
    Paid-in Capital $30,000 $30,000 $30,000
    Retained Earnings $48,651 $72,636 $96,621
    Earnings $100,709 $119,555 $138,401
    TOTAL CAPITAL $189,360 $222,190 $255,020
    TOTAL LIABILITIES AND CAPITAL $198,839 $232,978 $267,117
    Net Worth $182,060 $226,240 $270,420

    8.6 Business Ratios

     Ratio Analysis        
    Year 1 Year 2 Year 3 Industry Profile
    Sales Growth 4.35% 30.82% 63.29% 4.00%
    Percent of Total Assets
    Accounts Receivable 5.61% 4.71% 3.81% 9.70%
    Inventory 1.85% 1.82% 1.79% 9.80%
    Other Current Assets 1.75% 2.02% 2.29% 27.40%
    Total Current Assets 138.53% 150.99% 163.45% 54.60%
    Long-term Assets -9.47% -21.01% -32.55% 58.40%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 4.68% 3.04% 2.76% 27.30%
    Long-term Liabilities 0.00% 0.00% 0.00% 25.80%
    Total Liabilities 4.68% 3.04% 2.76% 54.10%
    NET WORTH 99.32% 101.04% 102.76% 44.90%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 94.18% 93.85% 93.52% 0.00%
    Selling, General & Administrative Expenses 74.29% 71.83% 69.37% 65.20%
    Advertising Expenses 2.06% 1.11% 0.28% 1.40%
    Profit Before Interest and Taxes 26.47% 29.30% 32.13% 2.86%
    Main Ratios
    Current 25.86 29.39 32.92 1.63
    Quick 25.4 28.88 32.36 0.84
    Total Debt to Total Assets 2.68% 1.04% 0.76% 67.10%
    Pre-tax Return on Net Worth 66.83% 71.26% 75.69% 4.40%
    Pre-tax Return on Assets 64.88% 69.75% 74.62% 9.00%
    Additional Ratios Year 1 Year 2 Year 3
    Net Profit Margin 19.20% 21.16% 23.12% N.A.
    Return on Equity 47.79% 50.53% 53.27% N.A.
    Activity Ratios
    Accounts Receivable Turnover 4.56 4.56 4.56 N.A.
    Collection Days 92 99 106 N.A.
    Inventory Turnover 19.7 22.55 25.4 N.A.
    Accounts Payable Turnover 14.17 14.67 15.17 N.A.
    Payment Days 27 27 27 N.A.
    Total Asset Turnover 1.84 1.55 1.26 N.A.
    Debt Ratios
    Debt to Net Worth 0 -0.02 -0.04 N.A.
    Current Liab. to Liab. 1 1 1 N.A.
    Liquidity Ratios
    Net Working Capital $120,943 $140,664 $160,385 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 0.45 0.48 0.51 N.A.
    Current Debt/Total Assets 4% 3% 2% N.A.
    Acid Test 23.66 27.01 30.36 N.A.
    Sales/Net Worth 1.68 1.29 0.9 N.A.
    Dividend Payout 0 0 0 N.A.

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