SOPHAX Biofuels

An example of a plan that I received from Lending Club.
A market with large potential but the plan is poorly crafted.

                      Business Plan

                SOPHAX Biofuels

 

                                                            Prepared by:

                             I. M. "Manny" Boronat, Founder & President

                                                June, 2009
 
 
 
 

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                                         CONFIDENTIAL & NOT FOR DISTRIBUTION
 

                           Executive Summary / About the Company

General Company Description

You need only open the morning paper to understand the importance – and urgency – of America's reduced reliance on foreign oil. The instability of the Middle East and OPEC makes our 58% dependence on foreign oil a dangerous – and costly – proposition. Look even closer and you will see that the lion's share of American oil use (nearly 2/3 of our consumption) is tied directly to transportation. If there was a time when an affordable fuel source was needed, that time is now. Even if third generation technologies prove to be more viable in the future, the production of and increasing efficiency of biofuels is not only an exciting opportunity for at minimum the entire next decade but biofuels also represent a viable bridge to the future of energy.
 

Company: Mission Statement

SOPHAX Biofuels aims to be a cornerstone in the community creating a neighborhood atmosphere where customers feel comfortable and become as excited as we are about biofuels and alternative energy. Alternative energy, after all, is just plain energy.

We would like to show the public that options do exist and are not only ready but easily accessible. We at SOPHAX Biofuels are sensitive to the current foreign fuel dependency and will attempt to increase awareness on such matters. Actions speak louder than anything and we intend to maintain and manufacture a reliable and affordable fuel source. That way it can be shown that "going green" can be profitable.

We see the current economic atmosphere of urgency as an opportunity. Where others see challenges and struggle we aim to provide solutions for the everyday South Florida consumer. Our collective strength as pioneers in a burgeoning field is only a seed along our journey. This is our core competency.

We see this present conflict as the creation of our Evolution and an opportunity to create meaningful and lasting change in the way we come to fuel Our World. We seek fair and responsible profit, enough to keep the company financially healthy for the long term and to fairly compensate owners and investors for their money and risk and shall be aligned with Fair Trade and Rainforest Alliance practices.

SOPHAX Biofuels will establish a namesake Foundation that will serve the public via different programs and activities designed to heighten education and awareness concerning biofuels and alternative energy. Although there is much to be done as far as the education of the public is concerned, we can only do, through our ventures, our small part to help Our World. Our message is simple. It expresses our goals.
 
 

Company: Message

Clear the Air. Defend the Land.
 

                                              Company: Business Philosophy

Comprehensive approaches towards a solution are a principal of our philosophy. Our model consists of effective vertical integration that best includes local products and services while relying on crowd sourcing and collective information to best handle challenges. A well informed consumer base will be better equipped to make better choices that positively affect the local economies and environment.

Our role in educating the public would include easing fears or concerns about varying technologies, including, but not limited to, diesel engine usage and using biodiesel as a fuel source for diesel engines. Typically, diesel engines are viewed as high in emissions and biodiesel fuel welcomed with apprehension since it is new to many potential customers. We must stress to include more consumers to participate. We all must strive to be better informed about topics that so evidently can affect our collective future on Earth, thereby joining in the process of change.

Only together can we effect the most change – our role as pioneers in this industry is to initiate change, not to exclude it, and have information we have acquired through process readily accessible and easily referenced for others to replicate and succeed.
 

Company: Goals and Objectives

Our short-term goals begin with feedstock brokerage and to begin producing high quality, EPA certified, ASTM B-100 grade biodiesel made with refined jatropha oil.  SOPHAX Biofuels will make available to South Florida a reliable and eco-friendly energy solution. Our long-term objective is producing a positive change that leads to an overall betterment of the South Florida community.
 

Industry Environment and the Product

Overview of the Industry

Addressing the recent need for an affordable fuel source is our aim. SOPHAX Biofuels is and will be environmentally friendly. Demand for an affordable fuel source is expected to grow exponentially as consumers become more and more aware of affordable fuel sources. The challenge is to responsibly meet that demand.
 

The Competition

Currently, the only existing operational organizations that can be considered competitors in the South Florida biofuels market are marketers / resellers of biodiesel fuel and not processors / manufacturers of biodiesel fuel. There are a handful of outfits that deal in biodiesel brokerage, including the sale of materia prima. However, there are two refineries that have applied with Miami-Dade County for land use approval. As of Jun 2009, to best knowledge, construction is nearly complete for the facility located in West Dade. Biofuel processing, distribution, franchising, marketing, and brokerage (raw pre-processed material / finished product) are all operations that have negligible competition in the current South Florida market.

                                  The Product: History and Importance

Rudolf Diesel, the inventor of the diesel engine, once said that "The use of vegetable oils for engine fuels may seem insignificant today. But such oils may become in course of time as important as petroleum and the coal tar products of the present time." That was in the early 20th century. Now that we have just begun to run out of petro-fuels, the vegetable based fuels, especially biodiesel, are again coming into currency.

SOPHAX Biofuels recognizes this as the time to re-introduce these technologies to the market and offer B-100 biodiesel as an affordable fuel source. B-100 biodiesel is a cleaner fuel source that eases dependency on foreign oil.

An oil feedstock (jatropha) that is not edible is thereby not considered a commodity in other markets. This helps inflation in energy markets. Biodiesel also helps the environment by greatly eliminating harmful emissions when used in a diesel engine. B-100 does not require a conversion kit for use in a diesel engine. Our product will be produced as an E.P.A. approved fuel, ASTM grade B-100 biodiesel.

Innovators such as Rudolf Diesel have long been typified as being forward –thinking. Now that the future that he was referring to is here, we feel that it is a duty to maintain the string of forward-thinking by letting others know of these options that have been made available today. As a company, we feel that we can create a strong impact not only to consumers but to demonstrate and/or provide an example of a way for a mid-level entrepreneur can get involved in changing the local economy and environment for the better. We would gladly share our knowledge and experience in order for more to share in the vision of the technologies and their applications.

The end result is a product we can be proud to offer to an ever-increasing market, knowing it is highly beneficial while in line with environmental responsibility.

In fact, U.S. and European auto makers have recently announced plans to manufacture more diesel engine cars. Auto makers anticipate higher use of diesel engines in America. This product represents change.

Higher usage of diesel engines opens a larger market and, for biodiesel in particular, an opportunity to market the diesel engine as a cleaner, more efficient technology.
 

The Product: B-100 Biodiesel
 

B-100 biodiesel is a cleaner fuel source that eases dependency on foreign oil. It will contribute positively in many ways, including the fact that it helps the environment by greatly eliminating harmful emissions compared to petroleum based diesel when used in a diesel engine. B-100 does not require a conversion kit for use in a diesel engine. It is based on vegetable oil or even algae oil feedstock. It is blended and processed in reactors that come with manufacturer warranties. Our product will be an E.P.A. approved fuel, ASTM grade ready-for-the-tank B-100 biodiesel.
 
 
 
 

The Product: Jatropha Oil

Jatropha oil in particular is considered among the highest quality feedstock for biodiesel because of its advantageous lubricating properties, among other factors. Jatropha oil happens to be among the highest in efficiency ratios among land crops. It takes less energy to harvest the amount of oil in one acre of jatropha than almost all land crops. Additionally, once processed, jatropha-based biodiesel is among the highest quality available. B-100 biodiesel made from jatropha is among the highest quality presently attainable by current processing standards.

Jatropha is being grown in large quantities in Africa, where farmers have developed various Co-ops. This is due to the anticipation for Europe's diesel fuel needs, where diesel engines are more in use compared to North America. In addition, jatropha plantations are being discussed as viable farming options here in America. It is indigenous to Central America and grows rapidly in sub-tropical climates. Following the lead of mature markets would signify a steady increase in jatropha valuation.
 

Furthermore, the fact that jatropha is not an edible commodity makes it a stand alone commodity. This makes for a more stable futures market compared to other oil feedstocks that have the value fluctuate in commodities markets.
 
 
 

               Product Demand and Potential Customers / Marketing

                                               

                                                            The Demand

Demand for an affordable option to rising fuel costs is presently very high. Educating the public and presenting it with affordable fuel options is a major key. The public must become more aware that this product not only exists, but is readily available. Additionally, a key would be to ease concerns and fears of using B-100 biodiesel. Potentially, anyone that would like to fuel a diesel engine could be a customer. The wide range of potential customers include private car and truck owners, semi-truck operators, boat owners, farm equipment owners, diesel generator owners, even all the way up to municipality vehicles plus school buses. We can offer long-term contracts that spell economic relief tied with environmental responsibility.
 

                                                   The Potential Customers

Demand for an affordable option to rising fuel costs is presently very high. Educating the public and presenting it with affordable fuel options is a major key. Also, a key would be to ease concerns and fears of using B-100 biodiesel. Potentially, anyone that would like to fuel a diesel engine could be a customer. The wide range of potential customers include private car and truck owners, semi-truck operators, boat owners, farm equipment owners, diesel generator owners, even all the way up to municipality vehicles plus school buses.
 
 
 

List of Potential Customers
 

Truck Fleets

Truck operators

Private filling stations

Biodiesel Producers / Distributors / Users

Private Cars/Trucks

Construction Sites / Industrial Sites

Heavy Duty Truck Fleets

Delivery Trucks / Varied Businesses

Rental Fleets / Heavy Equipment Suppliers

Motion Picture & Television Production/Concert and Event Tours

Marinas / Boat Captains / Boaters

Agriculture / Farmers / Ranchers

Tow Truck Fleets

Private School Bus Fleets

Movers

Health Care Transportation

Taxis / Shuttle / Jitney Fleets

Public Utilities / Back-Up Fuel Source

Public Transportation and Services: Buses, EMT, Fire Rescue

Public Safety Agencies / Police / Fire / Marine

Emergency Preparedness Agencies / Disaster Recovery

Private Transportation / Rental Fleets
 
 
 

                             Company Impact / Marketing

                      

                                                        Company Impact

SOPHAX Biofuels will aim to keep the price of the product for sale as the lowest commercially available source of fuel in South Florida.

We will not gouge or inflate our prices. Paying forward the savings of our applied innovative technologies to the local economy -- and being successful as a company while doing so -- will create a strong impact. The greatest impact as a company, though, will be evidenced by maintaining this integrity through time.

Educating the Public

Making the public aware of solutions available to many environmental issues, including, but not limited to, global warming. Additionally, making the public aware of tax incentives, which combined with this more affordable fuel source, shows that one can save some green by going green.
 

  Product and Services Plan

The focus will be on easing concerns and overcoming initial objections to using what is perceived as a new product. SOPHAX Biofuels will have associations with service technicians that shall provide recommended installations and regular maintenance.
 

For example, fuel lines and filters will be replaced at service technician location under service contract with SOPHAX Biofuels.
 
 

                                                             Benefits Matrix
 
Customer Pain Points     Benefits
High fuel prices.     Making affordable solutions available.
Fear of new technology.     Educating the Public.
Concerns with supply reliability.     Secure and steady savings.
Uneasy over biodiesel usage and any application concerns.     No loss of power, just fill up as usual.
Worry over damage to engine.     Fuel filters will need to be replaced because biodiesel actually cleans the fuel system out. It's like a fuel additive that cleans out the system so well that oil filters are available for usage in diesel engines that, once cleaned out by biodiesel, actually allow for the oil itself not need to be replaced ever.
 

Company Sales and Marketing Strategy

The marketing strategy will center on two main points. By offering the lowest price for fuel while being eco-friendly SOPHAX Biofuels will thus dictate its marketing strategy.

SOPHAX Biofuels will:

1) Initially cater to private truck drivers and semi-truck operators. This will define our niche in the market

2) Establish an online presence to provide general information and exposure

3) Use radio, television, bus bench, billboards and specially designed promotions as will round out the marketing strategy

4) Repeatedly highlight the company as having the lowest priced fuel available locally

5) SOPHAX Biofuels will also be profiled as being highly environmentally responsible and aware.

Structure, Capital Requirements, Growth Strategy, Outline of Core Operations, and Brokerage Opportunity
 

Organizational structure

Form of ownership: SOPHAX Biofuels shall be filed as an LLC-corporation. The distribution arm of the company will offer franchise slots for willing and able independent contractors.  SOPHAX Biofuels will establish a distribution arm that will offer franchises to independent distributors. The goal would be to increase sales volume through these business relationships. A small franchise fee would make the option viable. Fuel trucks would be leased to franchisees, who would be instructed to maintain the company brand and image strong. Distribution areas will be assigned within South Florida. Payment to franchisees would be largely based on sales commission.
 

Capital requirements

The capital requirements will be documented in the following Financial Plan and 12 Month Projected Cash Flow. As determined by our research and analysis, the capital requirement would be a sum of $55,000. Refer to APPENDIX B.
 

Growth Strategy

SOPHAX Biofuels will start small and grow slowly or as reflected by demand. Processing will scale up using modular technology. Implementation will occur as needed. Capital requirements reflect the need to set up operations in this regard.
 

Outline of Core Operations

Core operations will consist of:

    1) Acquiring feedstock in bulk

                                                   2) Adding the necessary chemicals in the correct ratios in order to manufacture ASTM grade B-100 Biodiesel

                                                    3) Processing on location

                                                   4) Selling directly from factory as large bids or contracts, through franchises, or Distribution Company.

Note that filling stations (licensed), dispensing on-site, will be serviced via long-term agreements. Initial focus at start-up will be squarely on brokerage operations, which will then fund step-by-step growth of processing plant.
 
 
 

Brokerage Opportunity

Brokerage operations will capitalize on the low price available on jatropha oil (refined and suitable for biodiesel processing).

Point to consider: As demand for biodiesel rises, so the demand for biodiesel feedstock will rise. Getting futures contracts for jatropha oil immediately would be greatly beneficial as it would guarantee low costs. Excess feedstock availability according to the futures contract would allow an opportunity for strategic advantage due to leveraging costs.

This would allow SOPHAX Biofuels to leverage opportunities in feedstock acquisition and broker to other producers of biodiesel. The jatropha feedstock will be acquired on a five-year fixed contract basis and sold in successive manner at $0.10 per gallon margins. Volumes available from supplier are 10 million gallons per month. The challenge would be to acquire the jatropha and find a suitable buyer in order to achieve stated margin goal of $0.10 per gallon.

SOPHAX Biofuels has contacted two companies that have expressed an interest in five year contracts on the purchase of jatropha at the price offered. According to our projections, after transportation and related costs, the margins of $0.10 per gallon would be met. Refer to APPENDIX A.


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