Feasibility Studies and Business Planning
Plan for your Success!
North Dakota Corn Utilization Council
Value Added Summit
December 18, 2013
Kyle Althoff
Equinox LLC
www.equinox8.com
Plan for your Business Success
“By failing to prepare, you are preparing to fail.”
― Benjamin Franklin
“Give me six hours to chop down a tree and I will
spend the first four sharpening the axe.”
― Abraham Lincoln
Plan for your Business Success
• Set goals and objectives that meet your needs, as well as fit the needs
for those that will be your “partner” in this adventure
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•
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•
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Investors
Debt providers
Employees
Joint venture, strategic partners
Marketers, suppliers
• Create a plan for your development and operations
• Update your plan - continuously evaluate and modify your business
plan as markets change and new information arises
Improving The Odds Of Success
Idea, Wish, or
Value Proposition
Objective?
Process
1. Pre-Feasibility
Explore the Opportunity
2. Market Feasibility
Is it Possible?
3. Business Feasibility
4. Business Plan
Cost?
Is it Practical?
Commitment
Expense
Plan to Execute
Time
5. Focused Execution
Execute the Plan!
Business Success!
Positioning Within the Value Chain
Market
Drivers
Consumer
Trends
Consolidation
& Integration
Globalization
Grain Supply Chain
Farm Mgmt
Machinery &
& Agronomy
Equipment
Genetics
Seed
Companies
Retail
Chemical
Companies
Technology
Livestock
Production
Biotechnology
Risk Management
Policy
Slaughter &
Processing
Feed Mill
Foreign
Markets
Local
Elevator
Grain
Processor
Terminal
Elevator
Industrial
Foreign
Consumer
Food
Manufacturer
Wholesale
Retail
Foodservice
Grower
Fertilizer &
Petroleum
Supplier
Brokers &
Grain Co.
Domestic
Consumer
Biofuels
Road Map
Business Models: Representations of Reality
What is the Value of a Model?
• Breeds Creativity & Interaction:
• experiment, test, create, tear down, recreate, stimulate, react
& communicate
• Helps Develop Deeper Understanding of Concepts and Process
• Allows for Quick Decision Making
• Governs Repeatable Actions
• Educates in Context
• Supports Creation of Other Models
Example of a Business Development Path
1.
2.
3.
4.
5.
6.
7.
Business formation
Conduct a feasibility study
Develop a business plan
Fund initial development
Proceed with preliminary work, permits, siting, research
Raise balance of equity
Negotiate marketing agreements, utility agreements, sales contracts,
JV/partnerships
8. Obtain debt financing/financial close
9. Hire a project construction manager, management team, employees
10. Begin construction, startup, operations
The 5 C’s - What does it take to Attract Financing?
1.
2.
3.
4.
5.
Character:
Capacity:
Capital:
Collateral:
Conditions:
Management
Repayment ability
Financial condition
Quality and value
Purpose, amount and requirements
• External
• Internal
The Three M’s – Be able to Demonstrate
1. Management
• Management/Leadership Team
• Board Direction
• Operations
2. Markets
• Inputs
• Outputs
3. Money
• Cash flow available
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•
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Debt Payments
Dividend Payments
Tax Payments
Future Capital Expenditures
Why Businesses Fail
• Poor management
• Undercapitalized
• Operations do not perform to specifications or original plans
• Business is not competitive with other projects
• Structural changes in the market
• Increased price of raw materials
• Lower sales price for products
Successful Businesses
• Mitigate feedstock supply & price risk
• Early biofuel plants were farmer owned with corn delivery contracts
• Strong management team with industry experience
• Engage reputable partners
• Sales agreements/ off take, feedstock suppliers
• Technology providers
• Contractors, construction, design/build companies
• Well capitalized – typically 40% minimum equity
• In a commodity market – you must focus on being a Low cost
producer and/or differentiate your product/process to improve
the returns
Feasibility Studies and Business Planning
Plan for your Success!
North Dakota Corn Utilization Council
Value Added Summit
December 18, 2013
Kyle Althoff
Equinox LLC
www.equinox8.com