BUS-357 Business Plan Steve Pohler

Business Plan
Steve Pohler
Eric Michel
Nate Gifford
Mark Dekker
Caleb Mutschler
Calvin College Business
Table of Contents
I. Executive Summary .................................................................................................................................... 3
II. Vision, Values and Mission Statement ...................................................................................................... 4
III. Industry Profile and Overview ................................................................................................................. 4
IV. Business Strategy ..................................................................................................................................... 6
V. Company Products and Services ............................................................................................................ 10
VI. Marketing Strategy ................................................................................................................................ 12
VII. Location and Layout.............................................................................................................................. 13
VIII. Competitor Analysis ............................................................................................................................. 14
IX. Green Gold Team ................................................................................................................................... 15
X. Plan of Operation .................................................................................................................................... 17
XI. Financial Forecasts ................................................................................................................................. 18
XII. Loan or Investment Proposal ................................................................................................................ 20
I. Executive Summary
Biodiesel is a growing buzz word in the energy market. Discussion about the current state of
energy production and availability has led to government restrictions and customer awareness of bad
practices. Recent studies have shown that that acre for acre, algae is the most efficient source of lipids
for the production of biodiesel.
Growing concern over CO2 emissions has led to an increase in awareness of harmful greenhouse
gases in plant effluent streams. Many solutions have been devised to remedy this problem. However,
many of these carbon capture and sequestration methods are too expensive. Thus, Green Gold of Grand
Rapids, MI, has developed a cost effective and sustainable solution.
Utilizing an algae photobioreactor, the carbon dioxide leaving in a plant’s stack gas can be
captured and converted into oxygen and algal biomass. This biomass can then be converted into a useful
biodiesel using a process that Green Gold has developed. Not only can Green Gold’s photobioreactor
eliminate the carbon dioxide in plant effluent streams, it can also quickly pay for itself from the valuable
biomass produced.
Pending legislature for more stringent regulation on CO2 emissions will bring about a strong
demand for cost effective carbon capture and sequestration techniques. Green Gold will be ready to
penetrate the market early and develop relationships with major chemical and energy companies.
Additionally, Green Gold will develop solutions for smaller companies with carbon sequestration needs.
Green Gold will be able to adapt our design to nearly any application and therefore service both large
and small companies producing carbon dioxide.
The executive team at Green Gold consists of several highly skilled and driven engineers. These
engineers have backgrounds in both research and process development. Additionally, our executive
team has experience in the fuel processing industry, crucial to the success of our production of biodiesel
from algal biomass.
Green Gold will require initial startup capital in the range of 25 to 30 million dollars. This will
cover costs for research and optimization of our biodiesel production process. Additionally, this capital
will allow Green Gold to begin several smaller scale installations at local power and energy companies
who are interested in reducing CO2 and reaping the rewards of biodiesel production.
II. Vision, Values and Mission Statement
To differentiate ourselves from the competition, Green Gold will dedicate itself to constantly
optimizing and improving our designs. Additionally, we will focus on unmatched customer service and a
dedication to honesty and trust. Green Gold sees itself as a multinational company with name
recognition in the energy and chemical industries.
Green Gold values individuals who are driven to continually improve themselves and their
organization. We seek people who are able to look for solutions to a variety of problems. In addition, we
believe that a deep commitment to the customer is of paramount importance. Developing the trust and
respect of our clients is essential to the life of Green Gold.
Green Gold is concerned about and committed to the proper use and stewardship of the earth's
resources. We believe this commitment will result in a company dedicated to the pursuit of a better
planet and in turn, a better organization. Our drive to constantly improve ourselves, deep commitment
to customer satisfaction and unparalleled expertise is at the center of Green Gold’s philosophy.
III. Industry Profile and Overview
A. Industry background and overview
The production of biodiesel from algae is a fairly new technology and as a result, there is not an
extensive industry background. There are two basic premises which define this industry. The first is that
current petroleum based fuels are becoming ever more difficult to acquire as companies must go to
more and more remote places to obtain crude oil. The second is that the use of petro-fuels produces a
huge carbon debt which many believe to be having adverse effects on our environment. Using algae to
produce biodiesel is a carbon neutral means of obtaining fuels that work with our current energy
infrastructure and therefore appears to be a very attractive option for renewable energy advocates.
B. Major customer groups
Initially, Green Gold plans to market this product to current sources of CO2 emissions as a means of
mitigating the carbon footprint from running such processes. Mainly, Green Gold will be targeting coal
burning power plants as potential customers.
C. Regulatory restrictions
The only regulatory restrictions that are of concern to Green Gold’s process are the restrictions on diesel
fuel quality. Diesel fuel has certain cetane level requirements as well as maximum levels of SO2 and
other pollutants which it can contain.
D. Significant trends
In recent years, there has definitely been a large push for renewable energy sources and many
companies are pushing to establish new ways of producing energy without increasing our carbon
footprint. Algal biodiesel especially is one technology which has been getting a lot of attention in the last
year or two.
E. Growth rate
The growth rate of the industry is difficult to predict but there is a great potential for rapid growth as a
result of a decline in petroleum wells and the attractiveness of algae as a fuel source since it can be
grown on land not suitable for normal food crops.
F. Barriers to entry and exit
Barriers to entry could be a concern as one issue that many who have researched this process have
faced is an inability to cost effectively produces the biodiesel on an industrial scale. A barrier to exiting
the industry should not be an issue as Green Gold will provide the design and initial training on
operating and maintaining the facility, but will not be involved past this.
G. Key success factors in the industry
The key to Green Gold’s success is to develop a highly effective algal growth process so as to maximize
algal growth and, corresponding to that, lipid production. We will also need an effective processing
design to perform the biodiesel conversion. From research, Green Gold believes such a process can be
developed with the expertise we possess.
H. Outlook for the future
The future for this business looks to be bright, which can be seen by the large amount of interest the
process has received recently. The conversion of algae into biodiesel is a viable process and will become
an important process in the near future as companies seek to reduce carbon emissions.
IV. Business Strategy
A. Desired image and position in market
Green Gold is in a position to capitalize on waste streams that have been emitting from power plants
and factories for years. Until recently the carbon being released from these sources has been largely
ignored, however the opportunity has sprung up for businesses to make a profit by cleaning up. Much
in the way that sulfurous compounds were required to be removed from coal plant stacks, there is now
demand for a carbon dioxide solution. Many companies are seeking solutions to carbon sequestration,
but do not have the in house expertise or capabilities to realize an effective solution. Green Gold
intends to provide long term solutions for plants seeking to decrease or even eliminate carbon emissions
to the atmosphere. Because designs will be largely location specific and requirements vary from source
to source, Green Gold designs and implements solutions tailored to meet the needs of each customer.
Once implemented, the customer will take responsibility for managing and operating the system, with
the option for continued technical support service from Green Gold. The assets of Green Gold lie mostly
in the knowledge domain, with each solution using similar technology, however requiring site specific
solutions. Because of this, our product is providing effective solutions built around the algal uptake
process, on the commercial and industrial scale.
B. Company goals and objectives
1. Operational
In a nascent industry, we aim to stay at the forefront of the technology as industry and our own
proprietary knowledge develops, in order to offer competitive solutions to customers. Closely tied to
technology development, the efficient, environmentally sound and cost effective implementation of
solutions is also of primary importance. Our goal is to achieve results while minimizing capital and
energy resources required in the solution.
2. Financial
Green Gold’s short term goal is to grow quickly and establish itself as a leader in finding innovative
sequestration systems. Initially this will mean building the necessary capital to engage in design and
implementation work. To achieve this goal, only the essentials such as materials and design labor will be
considered necessary to run the business, as operating needs and contingency capital are the first
priority. First and foremost, establishing profit based on effective solutions is the goal.
In the long term, Green Gold intends to use built capital to research more creative solutions.
Investment in process development is key to bringing further returns and helping the company to grow.
Following the startup phase and breakeven, revenue growth by 10% per year, increased cash flows and
a 10%+ operating margin are what the company is looking for in the long term.
3. Design Goals
The development of solutions that make sense on a customer to customer basis is of the utmost
priority; however the creation of these solutions under a flexible template is a desired goal as well. This
allows the security of working with methods that are proven, as well as the flexibility to investigate new
processes that may be later incorporated into the template.
C. SWOT Analysis
1. Strengths
Risk is based on project size, which is up to the company
2. Weaknesses
No reputation to build from
Small size means only certain projects can be undertaken
Limited capital
3. Opportunities
The market has room for expansion
Business model has potential for solutions other than carbon capture
Possible branching into further consultancy with companies
4. Threats
Larger firms with more capital
A possible influx of companies with similar solutions
Carbon sequestration becoming unnecessary or unpopular for corporations
D. Competitive Strategy
1. Cost leadership
To achieve successful cost leadership, GGC is continually focused on the efficiency of solutions. This
means a concerted effort to bring down the cost of implementing sequestration systems by researching
cheaper, longer lasting materials for use in the reactor systems, as well as making a more economical
use of the space and materials needed for the systems. On a practical level this means minimizing waste
streams as much as possible, as well as reusing waste energy as inputs to other components in the
process. Repurposing streams and unit operations to gain further functionality will serve our customers
by offering more efficient solutions, as well as contributing to lower company costs.
2. Differentiation
Our product is distinctive in that it directly recycles carbon produced from an ongoing process. The net
amount of carbon generated to produce the fuel is zero, as the process is simply repurposing it. This
means that though no carbon is being sequestered for good, no new carbon dioxide is released into the
atmosphere. Other techniques seeking to permanently sequester carbon in oil wells, reservoirs or other
sinks simply store the carbon in the hopes that it will stay there. The approach of Green Gold is to reuse
the carbon rather than stashing it away. We are in the position of a carbon neutral company, which still
produces a valuable product. This is important because if a cap and trade system never comes into
effect, Green Gold will still have a viable business plan that does not rely on government incentives.
3. Focus
Green Gold is focused on providing solutions for companies that produce significant sources of carbon
dioxide from industrial processes, be they power generation, production or otherwise. Though the
market is confined to firms which produce carbon dioxide, the size of companies that we are prepared
to work with is large in scope. Though they can be a variety of sizes, an important characteristic of our
target market is a company with a concentrated source of carbon, such as a stack or gaseous effluent
stream. The industrial market is a large customer base, global in nature, which offers many possibilities
for expansion.
V. Company Products and Services
A. Description
1. Product or service features
Green Gold will develop a plant specific design for sequestration, tailoring the basic design to
the size and location dependent needs of the customer. This will allow use of the intellectual property
developed in the original design, while still providing a specific, appropriately scaled design.
The plant designed will include the design of the photobioreactor—the reactor in which the
algae is grown, as well as the design of all the processing required to take the algae and produce a useful
2. Customer benefits
Green Gold will provide consulting for the appropriate use of the biofuel produced as a service
to the customer. This consultation will entail the characterization of the biodiesel produced by the plant
for determination of the range of applications available. This will allow for better use of the fuels
produced, as well as the development of a greater context for the customer, helping the make decisions
such as whether to use or sell the biofuel produced.
3. Uniqueness
This product provides unique value due to the design for use in connection with a stack gas
stream from a power plant. This directs the use of algae based biodiesel production to a new market.
Additional tailoring to the individual customer provides a solution specific to the needs of specific power
generation facilities in terms of stack gas concentration, volume, and temperature. This freedom
provides a much broader range of applicability and the ability to expand from just a single design to a
design that is workable for a variety of other sites and power plants
B. Patent or trademark protection
Any patentable process or unit developed through the base case design process or individual
and specific designs will be patented to ensure the innovation will continue to benefit Green Gold in the
C. Description of production process
The process will be housed in a plant nearby a partner or customer power generation plant that
burns fossil fuels. The stack gas rich in carbon dioxide will be used as the primary feed to the process for
the growth of algae, along with a nutrient feed. An initial algae purchase must be made, but once
established, algae will rapidly propagate. Algae will be harvested such that growth will continue and
additional purchases will be unnecessary.
Operating costs for the plant will consist primarily of utilities, labor, and nutrients. Utilities
include all the electricity, water and steam used for heat exchange, water fed to the process, and all
other necessary utilities and services necessary for the operation of the plant.
The only suppliers that this plant requires are the partnering power plant for the CO2 stream,
and the supplier of the nutrients to be fed to ensure rapid growth.
VI. Marketing Strategy
Our team is designing a full scale algae photo bioreactor plant that can be used in conjunction with large
scale power plants. We are going to market our product toward the companies that own power plants.
We are striving to be an international company that can provide our product to power plants all over
the world. We can set up our design anywhere in the world with little or no adjustments to our product.
We are going to help these power plants clean up their CO2 emissions while producing algae which can
be separated and used for biodiesel fuel. Our plant design does not depend on any outside uses such as
sunlight or heat, so as long as there is electricity which a power plant will have our process can be built.
We are not limited to places that have lots of sun, like other algae growers, but we can grow our algae
without that making, our product valuable in places that are less ideal conditions. Our customers will
use our product to help reduce greenhouse gas emissions from there stacks. Pretty soon the U.S.
government along with the governments of the other countries will soon be putting a tax on greenhouse
emissions. By buying our product that charge will be significantly less, and they will make money by
being able to sell the biodiesel as fuel.
We are planning to get into the market at the right time. Right now, there is no tax on emissions, but will
be changed shortly. Since this is going to be a burden soon, the market will be exploding soon. The
market now is pretty small since all algae farmers, are still at the research stage. Recently the
production has been picked up by major companies. For example, within the last couple of months,
Exxon Mobil, has started trying to produce biodiesel from algae on their stack gases. Right now they are
still researching the best, way but soon they will have it all figured out. The time to get into the market
now, while there is still a chance for the best design to be figured out, once that is determined only
improvements can be made and then it will be a lot harder to start up in this market.
To advertise our product, we plan to make a website that will show what we are really about, it will
provide who we are, what we can give them, and why they should choose us. We will also give pitches
to some of the companies close by. As our company expands we will give more pitches to more
companies. At first our budget for advertising will be very small. As the company expands, our budget
for advertising will as well. We will not advertise in any kind of media to start. Since we are planning to
work for business and not individuals we feel like advertising in the mainstream media would be a
waste. We would like to advertise in “Renewable Energy magazine.” This will help us to get our name
out their all over the country which is where we would like to be in the future.
We want to be competitive with our pricing. We will be one of the first to bring this product to market
and price it relatively high. We will at first try to make a high profit for all of the work we put into it
before we have made any profit. We will be at the same price as our competitors, but we will constantly
work to improve our process so we will always be ahead of the curve. We anticipate a gross margin of
50%. We will want to make a high profit margin because our product has so much work going into our
product before we can sell it to an actual corporation to make a profit. We plan to distribute our
product through trade magazines with energy and word of mouth. We will have a few energy plants
working closely with them and then we will show our ideas to others and hope that they hire us as well.
VII. Location and Layout
The recommended location for this business is in Grand Rapids, MI. Culturally, Grand Rapids is the ideal
site for Green Gold headquarters as the cultural attitude is one of environmental stewardship. Grand
Rapids is home to several state of the art research laboratories and medical schools showing their
support of cutting edge technology. From our headquarters, Green Gold will perform designs for coal
power plants and other sources of CO2 emissions across the country.
VIII. Competitor Analysis
Currently, there are few competitors besides universities and research laboratories performing studies.
The two largest competitors for Green Gold’s market are Exxon Mobil and OriginOil.
OriginOil’s strength lies in advanced growing technologies which are patent pending. OriginOil has
designed a photobioreactor which uses LED light rods to stir the system and to provide specific
wavelengths of light to the system at specific times during the algae’s growth cycle. This technology
could give them an edge on efficient algae growth. OriginOil’s market strategy is also competitive as it
centers on a form of fuel which does not add to the carbon debt and also does not require a large
infrastructure change for implementation.
Another competitor to Green Gold’s process for biodiesel production is Exxon Mobil. The strength of
Exxon Mobil obviously lies in the vast resources at their disposal. Because of their large presence in the
petroleum fuels market, they have the experience in conversion processes for the biodiesel. Also, they
have teamed up with Synthetic Genomics, a highly successful research group specialized in genomics, to
study and optimize the growing process. Despite all of this, Exxon Mobil appears to be focusing strongly
on the research and optimization portion of the process. This means they are not looking to enter the
market to actually produce biodiesel on an industrial scale in the near future, allowing Green Gold to
break into the market.
Despite having strong competitors, Green Gold still has great potential to be successful as the market for
this product is growing rapidly. It will be impossible for one single organization to control the entire
market because of its vast size.
IX. Green Gold Team
Caleb Mutschler – Chief Executive Officer
Caleb was a Process Safety Consultant Intern with Siemens Oil and Gas Consulting with responsibilities in
overpressure scenario identification based on API 520/521 and ASME codes. These identified scenarios
included blocked outlets, overfilling, control valve failure, check calve failure, thermal expansion, and
external fire. Before coming to the Green Gold Team in 2010, Caleb also held positions at Herbrucks
Poultry Ranch, and JVR Builders. Caleb is very strong in being able to see where our future is, and
making sure the company gets there. From his experience Caleb’s other strength is building culture. He
is the type of person that takes his thoughts and beliefs and shares them with everyone around him.
Eric Michel – Chief Brand Officer
Eric was a Process Design Engineering Intern at CITGO Lemont Refinery with responsibilities to come
into compliance with new EPA regulations regarding fuel gas flow meter correction using temperature,
pressure and GC analysis. Eric joined the Green Gold team in 2010, after working for 2 years with CITGO
Lemont Refinery and Spectrum Restoration for 1 year. Eric has lots of creativity which will help since he
is responsible for the brands image. Eric will use the brand that is started now, and use it throughout the
company. Eric also has strong leadership attributes which will help him oversee marketing, advertising,
design, public relations, and customer service departments.
Steve Pohler – Chief Financial Officer
Steve was an International Intern at Boehringer-Ingelheim GmbH with responsibilities with optimizing
feed conditions in a pharmaceutical reaction scheme as part of a process development laboratory.
Steve came to the Green Gold Team in 2010, before being with us he held positions at Calvin College
Engineering Department, and Calvin College Student Academic Services, Calvin College Chemistry
Department. Steve is the type of person that is always on time and accurate with his information. This
will be needed so that many important decisions that are based on this can be made. He is also able to
make quick but effective decisions on where to invest our money. He is also very effective at forecasting
our economic future and making sure that it is resilient.
Mark Dekker – Chief Operating Officer
Mark was a Chemical Engineering Intern at International Flavors and Fragrances Inc. where he
researched and tested new fragrance materials to meet new EPA VOC guidelines. He came to the Green
Gold Team in 2010, before he was part of this team he led a team for Green Valley Landscaping for 5
years. Mark has very specific skills which will help him be a very good COO. Mark has knowledge of the
business & industry that we are branching into, he understands modern management theories from the
extensive research he has done, and employs process/quality improvement techniques that he has
learned at his previous employers.
Nate Gifford – Chief Technology Officer
Nate was a Student Researcher for Calvin College Chemistry Department for 2 years where he worked
on computing specific reaction barriers for the decomposition of Trifluoroacetylacetone via Molecular
HF elimination. He is very familiar with the science behind our process and since joining Green Gold in
2010, has helped us out a lot. Since he has worked in the Research and Development of our design he is
well prepared to lead the efforts of the people working there now. He has combined his strong technical
skills with strong business development skills so that he is able to transform capital into future
technology that will keep our company viable in the future.
(All of the previous team member’s resumes are available in the appendix)
As you can see in the Green Gold Organizational Chart (located in the appendix) we are currently full
with the management team. Depending on the future of our company and as it grows we will add some
new positions. The most likely new addition is a Chief Information Officer. At this point we have no
people involved with our IT department. We realize this is an important part that we are missing and as
we grow it will become even more critical.
Our Board of Directors will be appointed by our shareholders. At this point the five of us are our only
shareholders so we will elect the board which will in turn appoint us to our positions.
X. Plan of Operation
A. Legal Form of Ownership
Green Gold’s legal status is a publicly owned corporation. This status protects our individual
employees from liability for Green Gold’s operations. Additionally, our profits enjoy lower tax rates
which will allow the company to reinvest and grow. This legal status also allows the company to more
easily seek outside investment. Our transferable shares will be listed on an exchange to incur public
investment to grow the company.
B. Company Structure
Each year shareholders elect or reelect individuals for the company’s board of directors. These
directors choose the current CEO, CFO, CBO and CTO. These positions then choose their subordinate
vice presidents and directors. A full description of the company’s structure can be found in the attached
organization chart.
C. Decision Making Authority
Day to day company decisions are made by the chief officers. The chief technology officer
directs the activities of the research and development division and the technical aspects of currently
deployed projects. The chief operations officer ensures that management is working effectively and
oversees the day to day performance of employees. The chief financial officer directs the fiscal actions
of the company, develops company strategy and predicts future market conditions. The chief brand
officer oversees customer relations, marketing and protects and improves the image of the company.
D. Compensation and Benefits Packages
Green Gold’s compensation package is based on two metrics. First, the employees experience
and previous salary is determined. Second, the employee’s education level and certifications are
considered. From these two analyses a competitive salary is computed.
Green Gold offers a competitive benefit package. This package includes comprehensive medical,
dental and vision coverage. Employees enjoy paid holidays, vacations days and travel assistance. In
addition the package includes a 401k retirement savings plan and a pension plan to provide our
employees with a monthly retirement income for their lifetime.
XI. Financial Forecasts
A. Key assumptions
The outlook of the market for carbon capture and conversion is quite good at the present time, and only
expected to grow in the future. Because of this, profits are expected to increase in future years based
on companies being introduced to Green Gold’s technology and track record. As our technology
matures, it is expected that the variable costs to design and build a plant will diminish as well. This is
due to experience as well as research that is ongoing in the company. Fixed costs are expected to
remain relatively constant from year to year, as the cost of materials and labor is the primary
contributor. The nature of Green Gold is such that operating costs, both fixed and variable, will remain
constant in the short term, at least until the growth of the company requires additional resources and
hires. As a design firm these costs are based on the workers who produce the designs as well as the cost
of materials and labor to produce and implement them.
B. Financial Statements
1. Income statement (Annual, 3 years)
Year 1
Sales revenue
Variable Cost of Goods Sold
Fixed Cost of Goods Sold
Gross Margin
Variable Operating Costs
Fixed Operating Costs
Operating Income
Interest Expense
Income Before Tax
Income tax (40%)
Net Income After Tax
Year 2
Year 3
2. Balance sheet (Annual, 3 years)
Balance Sheet
Year 1
Year 2
Year 3
3. Cash flow statement (Annually, 3 years)
Year 1
Beginning Cash Balance
Net Income After Tax
Depreciation expense
Invested Capital (Equity)
Increase (decrease) in borrowed funds
Equipment Purchases
Ending Cash Balance
Year 2
Year 3
C. Break-even analysis
Year 1
Sales revenue
Less: Variable Costs:
Variable Cost of Goods Sold
Variable Operating Costs
Total Variable Costs
Contribution Margin
Less: Fixed Costs
Fixed Cost of Goods Sold
Fixed Operating Costs
Interest Expense
Total Fixed Costs
Income Before Tax
Year 2
Year 3
D. Ratio analysis
Year 1
Year 2
Year 3
Total debt to total assets
Total assets turnover
Profit margin on sales
Return on common equity
XII. Loan or Investment Proposal
As described in the financial forecasts, Green Gold is requesting an investment in the realm of
$30,000,000. The majority of this amount will be used in the second year for the purpose of constructing
the plant.
It is forecasted that revenues of the plant will increase significantly over time, as carbon taxes
continue to increase, and scarcity continues to drive the prices of petroleum and competitive energy
sources higher. Predictions are based on countries in which carbon taxes are being implemented, the
most obvious example being the Canadian province of British Columbia, where the Carbon tax is set to
reach $30 US / metric tonne of CO2 emitted in 2012 (up from $20 in 2008). This increase in revenue and
therefore share value should afford the opportunity to 'cash out' quite easily.
The schedule on which this repayment becomes viable is dependent on the location of
partnering plants, and the biodiesel market, but is projected to be within 6-8 years.
The timetable for implementation and launch follows a 2 year plan. The design of the plant and
partnership development is scheduled to go forward in the first year. Plant construction and launch is
scheduled to go forward in the second year. Year three will consist of project maintenance, evaluation,
and improvement, along with further development of the partnership, and seeking for new
opportunities and partnerships for growth.