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.
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.
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.
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:
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:
The detailed information about the start-up is given below:
|Research and Development||$32,750|
|TOTAL START-UP EXPENSES||$187,300|
|Other Current Assets||$232,500|
|Start-up Expenses to Fund||$11,875|
|Start-up Assets to Fund||$15,000|
|TOTAL FUNDING REQUIRED||$0|
|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|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$695,000|
|Loss at Start-up (Start-up Expenses)||$313,125|
|TOTAL CAPITAL AND LIABILITIES||$251,875|
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.
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.
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:
|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%|
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
6.4 Sales Yearly
6.5 Sales Forecast
Our forecasted sales are summarized in the following column charts:
The detailed information about sales forecast is given in the following table:
|Unit Sales||Year 1||Year 2||Year 3|
|TOTAL UNIT SALES||3,494,170||4,588,370||4,807,410|
|Unit Prices||Year 1||Year 2||Year 3|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Direct Cost of Sales|
|Subtotal Direct Cost of Sales||$1,294,100||$1,699,400||$2,104,700|
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
|Year 1||Year 2||Year 3|
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
|Year 1||Year 2||Year 3|
|Current Interest Rate||10.00%||11.00%||12.00%|
|Long-term Interest Rate||10.00%||10.00%||10.00%|
8.2 Brake-even Analysis
|Monthly Units Break-even||5530|
|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 1||Year 2||Year 3|
|Direct Cost of Sales||$15,100||$19,153||$23,206|
|TOTAL COST OF SALES||$15,100||$19,153||$23,206|
|Gross Margin %||94.98%||94.72%||94.46%|
|Sales and Marketing and Other Expenses||$1,850||$2,000||$2,150|
|Total Operating Expenses||$188,766||$220,744||$252,722|
|Profit Before Interest and Taxes||$105,205||$146,040||$186,875|
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|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|
|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|
8.5 Projected Balance Sheet
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$1,000||$1,000||$1,000|
|TOTAL CURRENT ASSETS||$201,259||$237,468||$273,677|
|TOTAL LONG-TERM ASSETS||$980||$610||$240|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$9,482||$10,792||$12,102|
|TOTAL LIABILITIES AND CAPITAL||$198,839||$232,978||$267,117|
8.6 Business Ratios
|Year 1||Year 2||Year 3||Industry Profile|
|Percent of Total Assets|
|Other Current Assets||1.75%||2.02%||2.29%||27.40%|
|Total Current Assets||138.53%||150.99%||163.45%||54.60%|
|Percent of Sales|
|Selling, General & Administrative Expenses||74.29%||71.83%||69.37%||65.20%|
|Profit Before Interest and Taxes||26.47%||29.30%||32.13%||2.86%|
|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.|
|Accounts Receivable Turnover||4.56||4.56||4.56||N.A.|
|Accounts Payable Turnover||14.17||14.67||15.17||N.A.|
|Total Asset Turnover||1.84||1.55||1.26||N.A.|
|Debt to Net Worth||0||-0.02||-0.04||N.A.|
|Current Liab. to Liab.||1||1||1||N.A.|
|Net Working Capital||$120,943||$140,664||$160,385||N.A.|
|Assets to Sales||0.45||0.48||0.51||N.A.|
|Current Debt/Total Assets||4%||3%||2%||N.A.|
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