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

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 
Research and Development$32,750
Expensed Equipment$32,750
Start-up Assets$0
Cash Required$332,500
Start-up Inventory$32,625
Other Current Assets$232,500
Long-term Assets$235,000
Total Requirements$245,000
Start-up Expenses to Fund$11,875
Start-up Assets to Fund$15,000
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
Liabilities and Capital$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
Planned Investment$0
Investor 1$332,500
Investor 2$0
Additional Investment Requirement$0
Loss at Start-up (Start-up Expenses)$313,125
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 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 CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Industries & Factories45%11,43313,34416,55318,74520,54513.43%
Diesel & Gas Stations38%22,33432,34443,66552,54466,43210.00%

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.


After marketing analysis, sales strategy 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 SalesYear 1Year 2Year 3
Organic Acids539,3207702301,002,310
TOTAL UNIT SALES3,494,1704,588,3704,807,410
Unit PricesYear 1Year 2Year 3
Organic Acids$700.00$800.00$900.00
Organic Acids$50,110$71,600$93,000
Direct Unit CostsYear 1Year 2Year 3
Organic Acids$0.30$0.35$0.40
Direct Cost of Sales
Organic Acids$17,900$35,000$52,100
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 1Year 2Year 3
General Manager$85,000$95,000$105,000
Petroleum Engineers$145,000$152,000$159,000
Sales Executives$145,000$152,000$159,000
Field Employees$550,000$650,000$750,000
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 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%

8.2 Brake-even Analysis

Biodiesel Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even5530
Monthly Revenue Break-even$159,740
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 1Year 2Year 3
Direct Cost of Sales$15,100$19,153$23,206
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%
Sales and Marketing and Other Expenses$1,850$2,000$2,150
Leased Equipment$0$0$0
Payroll Taxes$34,510$40,726$46,942
Total Operating Expenses$188,766$220,744$252,722
Profit Before Interest and Taxes$105,205$146,040$186,875
Interest Expense$0$0$0
Taxes Incurred$26,838$37,315$47,792
Net Profit$78,367$108,725$139,083
Net Profit/Sales30.00%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 ReceivedYear 1Year 2Year 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
ExpendituresYear 1Year 2Year 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
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   
AssetsYear 1Year 2Year 3
Current Assets
Accounts Receivable$12,613$14,493$16,373
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 ASSETS$198,839 $232,978 $267,117
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$9,482$10,792$12,102
Current Borrowing$0$0$0
Other Current Liabilities$0$0$0
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
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 1Year 2Year 3Industry Profile
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets
Accounts Receivable5.61%4.71%3.81%9.70%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.