Business Plan for Entry Level
Consumer Product
Renewable Energy Power Generation
Dorina M Morcan, MBA
http://www.globaleci.com
PO Box 1564
Malvern, AR. 72104
501-815-2018
501-262-4127 (fax)
July 23, 2011
Dorina Morcan, President/Owner
Global ECI
Page 1
Alan Wahlstrom, Engineer
3/8/2016
Executive Consultants, Inc.
1.0 Executive Summary
Large companies like Wal-Mart are generally locked-in to the existing electric grid and local monopoly utility
to serve their electric energy needs. Costs are continually rising and options to control costs are limited.
Nationally we all are coming to recognize the need for more renewable energy solutions. In addition only 3%
of US households have a renewable energy source product. Three reasons are:
•
Prohibitive costs in the range of $20,000 - $40,000 for a wind generator or roof full of solar
panels.
•
Local restrictions, codes and permit refusals and home owners association that will not allow
unsightly solar panels much less towered wind generators.
•
Lack of professional installation.
Renewable power must become readily accessible to allow full long term renewable power integration
Executive Consultants, Inc. (ECI) is being put together to create a solution to these problems by building an
entry-level renewable energy power generation unit powerful enough to lower home electric bill by 25% to
50%. This unit will allow households to partially separate from the electric grid. Consumers can be free of the
electric utility and in control of their energy costs!
For the majority of people, the idea of renewable power is so difficult and still seen as far away in the
future. ECI will build and develop an entry level unit using unique technology to capture the consumer
market. An entry level renewable energy power generator would:
1.
2.
3.
4.
Cost around $795
Follow satellite dish regulations.
Small enough to be used in urban areas
Would not require professional installation
Our project will be lucrative for the company and free consumers from high electricity bills by reducing the
demand on the grid. The power generation unit with other technologies opens other opportunities for
product marketing such as energy storage units. As consumers become more aware of environmental impacts
of traditional power generation the desire to reduce these impacts will continue to grow. Companies that are
aware of these consumer concerns and develop products to address these concerns will stand out in the
consumer market. Renewable energy systems for residential use have, as of now, been unattainable due to
cost and complexity. It is our business strategy to reduce both of these barriers. Our product has low
production cost and requires little effort for installation thereby making this system attainable for a larger
market.
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2.0 Project Schedule
The project plan is set up in four distinct phases. The first phase involves a proof-of-concept design and
construction of a small 500 watt prototype to test and verify initial assumptions with particular focus on the
renewable generator and storage. In the second phase, 12 demonstration units will be tested and deployed at
alpha sites such as Wal-Mart stores parking lots or rooftops. In phase three, the project moves rapidly
towards commercial production with a target of 6000 units in the second year and 120,000 units in the third
year into retail chain distribution channels. Phase IV moves the project into commercial production at a very
competitive cost per unit. A confirmation step at the conclusion of each phase will allow management to
judge success and proceed to the next phase.
Although completion of all four phases of the project has significant positive economical impact for ECI,
even the successful development of a 500 watt prototype unit, as described in Phase I, has both retail and
commercial applications. For example, a 500 watt unit can easily provide power for residential and small
commercial applications such as parking lot lights, motors, or cell phone towers; it can also be used to reduce
the demand peak at retail stores currently on the grid.
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Table 1.0 – Milestones
Milestone
Start Date
End Date
Budget
Phase I - Demonstration Project – Build a 500 watt 1/1/2011
(small) prototype as proof of concept.
(year 1)
8/30/2011
(year 1)
$464,500
Phase II - Build 12 demonstration units including 3/1/2011
appropriate renewable storage options.
(year 2)
9/30/2011
(year 2)
$730,000
Deploy the 12 demonstration units at alpha sites.
10/1/2011
(year 2)
12/31/2011
(year 2)
Phase III - Build 6000 units in the second year and
120,000 units in the third year for retail chain
distribution.
Phase IV - Commercial production at competitive
prices
1/1/2012
(year 3)
12/31/2012
1/1/2013
(year 4)
12/31/2013
Totals
$50,912,400
$52,106,900
There are no products being effectively made to produce the same energy independence as this entry level
unit. Modern industry has the capability to produce such a unit at a competitive cost. To mimic past feats of
emerging renewable energy products, ECI proposes to build a one 500 watt demonstration unit.
Many alternative energy resources made today for large businesses are not cost-efficient. Several of these
resources lack new technology with which to make them feasible in a high profit margin environment, such as
Wal-Mart. In order to compete in today’s marketplace with these renewable energy resources, it is critical to
begin with significantly higher energy yield products, such as the entry level unit. Properly utilized, these
stand alone energy units will put consumers in more control of their energy resources and expenditures.
The potential for this market is enormous. Experts have estimated that using renewable energy methods will
grow into an industry ranging from $280 billion/yr to $500 billion/yr by 2013.
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Table 2.0 – Phase I Demonstration Units
Phase I First 12 Months
1 Unit
Equipment
200.00
12 Demo Units
Total
1,000.00
1,200.00
Labor and Administration
4,000.00
20,000.00
24,000.00
Materials
1,200.00
14,400.00
15,600.00
5,400.00
35,400.00
40,800.00
Total Cost
Unit Sale Price
-
-
Manufacturing Cost
5,400.00
Demo Cost
(5,400.00)
-
35,400.00
(35,400.00)
40,800.00
(40,800.00)
Table 3.0 Phase II Manufacturing Cost
6000 units
120,000 Units
2nd Year
3rd Year
Total
10,000
250,000
260,000
Administrative Costs
617,120
617,120
1,234,240
Labor
390,000
7,800,000
8,190,000
Materials
1,800,000
36,000,000
37,800,000
Futures Contracts
1,000,000
1,000,000
2,000,000
(3,179,200)
(45,029,200)
(48,208,400)
Equipment
Manufacturing Cost
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3.0 About Us
ECI opened for business in Malvern, AR, on May 5, 2004, starting with the founding partner, one engineering
partner, and one office manager. After study of the emerging renewable energy market, the Company is
concentrating on developing and marketing a renewable-fueled entry level power generation unit capable of
producing 500 watts of power for the home to give consumers more control over their energy costs. A
manufacturing site will be maintained at a leased facility in Arkansas.
4.0 Objectives
We seek to establish the industry standard for technical and business excellence in pursuit of visionary entry
level products for customers and commercialization of an entry level unit will have far-reaching impact in the
energy business offering meaningful distributed generation to the rapidly growing market. No doubt there
will be other spin-off models to develop that will logically come from the research and development of the
500 watt unit.
Table 4.0 - Projected Costs for Phase I and Phase II
Year 1
Phase I
Start-Up Costs
Administration
Executive Salaries (Table 8)
Materials and Equipment
(Manufacturing Cost)
Rental Facility
Years 2 and 3
Phase II
Total
1,704,000.00
464,500.00
25,000.00
1,704,000.00
48,208,400.00
600,000.00
48,208,400.00
600,000.00
H
40,800.00
A
464,500.00
25,000.00
Demonstration Units
40,800.00
Year 4
P
S
Patent Licenses
200,000.00
400,000.00
600,000.00
E
Projected Costs for Phases I and II
730,300.00
50,912,400.00
51,642,700.00
III
5.0 Keys to Success



Concentrate on bringing to customers as much energy conservation and cost reduction enhancing
techniques as possible using the entry-level unit.
Manage the projects costs efficiently yet maintain a high concern for the environment.
Evaluate commercial possibilities for expansion into other markets.
6.0 Company Ownership
The company is organized as a corporation, which will allow easy changes of ownership in the future, as well
as certain tax advantages. The start-up investment needed is $464,500. Total start-up expenses are
summarized in Table 5.0 below.
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Table 5.0 -Start Up Costs
Legal
Insurance and Bonding
Rent- Initial Unit Production
Office Expenses
$300,000
$12,000
$9,000
$5,000
Office Equipment
$4,000
Sub-Total
$330,000
Product Development
$100,000
Presentations
Prospectus Expense
Travel
Web Site
Option for beta site lease
$34,500
Sub-Total
$134,500
Total Requirements
$464,500
7.0 Product and Service Summary
ECI is developing a 500 watt, renewable-fueled, consumer, entry-level energy generation unit for residential
use where users want more control over their energy costs and less impact on the environment. The project
involves obtaining renewable energy from unique technology and packaging a commercially-viable entry-level
unit for retail sales. The entry-level unit can be operated either on or off the electric grid based on the needs
of the owner.









Global ECI
One 500 Watt renewable power generation unit.
Operates stand alone on or off the grid.
Supplies sufficient power to consumers to eliminate some electric cost
Market research and business development.
Renewable energy power system.
Product materials, energy, and other products.
In competition with petroleum-derived equivalents, (e.g. biopolymers, automotive fuels, and
electricity).
Future entry-level products such as renewable and a wide range of renewable energy materials
produced from renewable and solar non-photovoltaic energy systems.
Pilot and manufacturing facilities (preliminary and engineered designs).
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




Financial assessment (risk-adjusted NPV) of capital-investment options.
Affiliate network services.
Engineering and construction of the units.
Industrial and government facilities available for contractual R & D.
Search for project funding (network to include potential investors).
8.0 Who Will Buy, and Why?
Wal-Mart and other retail stores such as Lowe’s and Home Depot have a strategic initiative to get their
stores off of the electric grid. Likewise the consumers who shop at retail stores would like to reduce
their electric bill. The purpose of this project is to execute that strategy by building an entry level unit to
power an individual home. With the successful development of this solution, we will create the
flexibility to move retail consumers off the grid at a pace of their own choosing. Consumers will gain
control over their energy costs and leverage their strengths to control this key area of costs. With
successful implementation, there will be a tremendous market for similar opportunities in their stores.
This will redefine the energy industry in the future.
•
Not every house can be off the grid and fully sustainable, however, depending on the size of the unit
purchased, each house can reduce electricity cost.
• Consumers could be free to decide what to take off the grid - whether they want to power a lamp, a
motor, a TV circuit, other electronics, etc.
• Also, this unit would be a perfect stand alone back up power system.
• The use of the unit could be advertised inside department stores to:
1. Gauge customer interest
2. Raise the level of awareness about renewable power generation within the general population
3. Sustain Wal-Mart’s image as a company years ahead of its competitors and make the name
synonymous with renewable energy power generation
There are many start-ups, or groups considering starting up industrial renewable energy processes.
These organizations are often severely short on resources (time, money, and people) which make
execution of their plans extremely difficult. There are also companies that have successfully started up
and are now looking to grow their businesses or expand into new renewable energy markets. Finally,
several large global corporations are looking to participate in this emerging industry. As part of an aim
for sustainable development, there are initiatives at DuPont, Cargill BP, Shell, and Dow, to name only a
few.
The annual sales of these five companies alones (DuPont, Cargill, BP, Shell, and Dow) total close to
$500 billion, so clearly, large amounts of money are at stake. Public efforts are underway to utilize
energy resources for the production of industrial energy sources (both commodity and specialty). BP
and Shell are traditional refiners who understand what the future looks like. Both are actively studying
renewable technologies for the production of energy. The vision of economic entry level consumer
products is not lost on these oil giants.
9.0 Competitive Comparisons
Without an entry level product, renewable energy will never become commonplace nor gain widespread
acceptance.
Utilities and other new capacity providers are paying $750,000 or more per MW for new capacity at this
time. While utilities and other generators are paying for coal, natural gas and other fossil fuels, the
entry-level unit will effectively generate with no fuel costs due to its ability to produce its own fuel with
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the installed equipment. This clearly sets the entry-level consumer product apart from any other
generator in the market.
Theoretical savings are not motivating to most people
•
•
•
Science has never been able to compete with imagination.
Only an actual, immediate visible difference in people’s electric bill would be compelling.
Coupled with ease of use, this product would capture the imagination and have unequaled
marketing potential.
ECI will manage the project through aggressive use of its affiliate network and subcontractors. Post
installation maintenance of the units is not included in this business plan. The project plan is divided
into clearly discernable milestones and deliverables that will be evident to all involved. Clear
unambiguous goals will prompt laser focus on the part of the project team and other invested parties.
10.0 Feasibility Assessment Study
The complexities of full-scale renewable energy generation can be enormous. During the start-up phase
we will develop a feasibility assessment study of the renewable energy concept using a small model.
This model will prove the concept underpinning the unit. The prototype will be effectively modeled
using simulation software that will enable expansion and commercialization of the concept. The
feasibility assessment will use the real options valuation method for product development projects. The
real options valuation method is based on the Black-Scholes mathematical model of analysis. The
feasibility assessment will address specific renewable energy technical challenges, exit strategies, and,
how the client’s bottom line will be positively impacted.
11.0 Affiliate Network
The Affiliate Network will be very important for the success of ECI. We have access to and experience
with top engineering and construction companies that can build the unit, industrial and government
laboratories and facilities, non-government organizations, intellectual-property lawyers, and potential
investors In addition, the network includes several industry experts with up to sixty years of individual
experience that is directly relevant to the emerging renewable energy industry. Engineering partners’
principals bring 75 years of utility experience, generating experience and engineering design to the
project. There are others that cannot be disclosed publicly at this time, because of the founder’s
obligations to them as clients.
A margin of 15% will usually be added to all work outsourced or sub-contracted by ECI. One exception
is for engineering and construction, for which only initial work requiring our cooperation has the 15%
surcharge. When the industry grows to ~$300 billion/yr in 2013, it is likely that ECI also needs to grow
by a few orders of magnitude. Thus a 6-person business formed in 2007 would expand to more
employees in 2013, as the business matures.
12.0 Market Segmentation
Often linked to chemical operations, utility companies define a unique sector due to the large, separate
markets for electricity and power. Consumer entry-level units have the capability for generation of
electricity through a smaller renewable power generation unit. The future “renewable economy” could
be well-served by entry-level products. This can produce clean renewable energy through a combination
of wind and solar energy.
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Table 6.0 Anticipated Cash Flow
Phase I
Year 1
Phase II
Year 2
Total Sales
Cost of 12
Demonstration Units
6,000 Units
$799 Sales
Price
Sell 5,000
120,000 Units
$799 Sales
Price
Sell 115,000
3,995,000.00
91,885,000.00
40,800.00
Total
95,880,000.00
40,800.00
1,800,000.00
Start-up Cost
Year 3
36,000,000.00
37,800,000.00
390,000.00
7,800,000.00
8,190,000.00
1,000,000.00
1,000,000.00
2,000,000.00
25,000.00
617,120.00
617,120.00
1,259,240.00
200,000.00
200,000.00
200,000.00
600,000.00
464,500.00
464,500.00
10,000.00
Cost of Goods Sold
730,300.00
Profit
(730,300.00)
4,017,120.00
(22,120.00)
250,000.00
260,000.00
45,867,120.00
50,614,540.00
46,017,880.00
45,265,460.00
13.0 Target Market Segment Strategy
ECI proposes on initial focus on Wal-Mart as the key client. This project meets a key strategic move for
this progressive company and will draw great support from the industry giant.
• Design team and marketing team working in parallel with production and delivery.
• Imagine being able to go to the store and pick up a unit which will immediately cut energy
costs.
• Create a lucrative product easily accessible to the general population using renewable energy
power generation.
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14.0 Market Trends, Needs, and Growth
There are many market trends which are speeding up the emergency in renewable energy industry. Key
concepts are sustainability and the “triple bottom line”—paying attention to not only the economic but
also the environmental and social aspects in all business activities.
Most companies, organizations, and individuals would probably characterize the perceived benefits of
consumer level units using at least one of the following:






To develop energy from renewable resources.
The increase the energy independence of the United States (for fuels and chemicals).
To reduce dependence on foreign fuel.
To provide favorable effects on conservation, public health, and the environment.
To diversify markets for raw agricultural and forestry products.
To create jobs and enhance the economic development of the Arkansas rural economy.
These five points are closely linked to the concepts of sustainability and the triple bottom line. For
long-term sustainability, using renewable resources is the only choice, since fossil fuels are essentially
never replenished. As the cost of petroleum rises, entry-level consumer products can be justified on
purely economic terms. Energy costs are a key part of any household.
In a 1978 article published in Science, DuPont provided a review of over 250 chemicals that are
manufactured today from petroleum and were once manufactured from sugar. Many of these are
niche chemicals with small markets and high barriers to entry. The others are comprised of
commodities whose manufacturing costs are optimized by the economies of scale found in the megarefineries of the world. In order to compete in today’s marketplace with these petroleum-derived
commodity chemicals, it is critical to begin with significantly lower energy costs. Development of an
entry-level renewable energy power generation unit offers a way to accomplish this.
15.0 Market Growth
Entry-level consumer units might be coined by industry observers as the “new wave of renewable
energy” after photovoltaic solar panels and heat transfer systems. Keynote speaker Rolf Bachmann, a
consultant with McKinsey & Co., said a new report from his firm estimates that by 2010, renewable
energy will impact about 20% of the worldwide business market—a $280 billion-a-year slice.
“Momentum is building in the sector. Production is becoming more cost-efficient, yields are
improving, and public pressure is growing for industry to develop safe, environmentally friendly, and
sustainable products.”
Many speakers emphasized that, in most cases, industrial renewable energy is limited by the size and
resource of companies doing the research. Development of improved processes will play an
important part in propelling consumer entry-level units into the traditional renewable energy industry.
16.0 Strategic Value Proposition and Implementation Summary
ECI offers a powerful alternative to the normal way of developing new renewable energy products for
companies seeking long-term business sustainability and flexibility. With narrow focus and leveraged
partnerships to supply needed skills, ECI can put together the key pieces to bring a commerciallyviable entry-level unit to the market. By concentrating on the needs of one major client Wal-Mart, ECI
can focus on the creation and technical challenges of building a renewable energy-powered electric
generator for household use.
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In terms of net cost or NPV, the key value proposition of the project is that Wal-Mart moves into
position to offer consumers options to separate from the grid if they so choose. This project creates a
tremendous strategic advantage for Wal-Mart worth many times the cost invested. From day one, our
clients will be assured that our top-level people will do the actual work.
17.0 Personnel Plan
In addition to the founding partner, and engineering support, an office manager will be hired at the
outset. A CEO, who is a West Point graduate, and COO, who is a retired vice president of a utility, a
technical advisor, and an accountant will be added as ECI grows. In addition, we will hire on
additional consultants, including web design, and other staff professionals if necessary. The salary
schedule is presented in Table 7.0. The monthly total payroll is $52,000. Salaries of partners grow at
10% annually, while those of other positions are assumed to grow at 5% annually (for the purpose of
this plan). The base compensation of all partners will be the same. In the future, a bonus system
(rewarding sales generations and other initiatives of the firm) could be developed.
Table 7.0 Personnel Plan for Phase II
Q1
Q2
Q3
Annual
Total
Q4
Founding Partner
$32,000
$32,000
$32,000
$32,000
$128,000
Engineering (1 FTE)
Office Manager
$20,000
$12,000
$20,000
$12,000
$20,000
$12,000
$20,000
$12,000
$80,000
$48,000
CEO
$32,000
$32,000
$32,000
$32,000
$128,000
CFO
$20,000
$20,000
$20,000
$20,000
$80,000
$116,000
$116,000
$116,000
$116,000
$464,000
$34,800
$34,800
$34,800
$34,800
$139,200
3,480
$154,280
3,480
$154,280
3,480
$154,280
3,480
$154,280
13,920
$617,120
Total People
5
5
5
5
5
Total Payroll
$154,280
$154,280
$154,280
$154,280
$617,120
Salaries
Benefits (assume 30%)
Payroll Tax (assume
10%)
Total Labor costs
18.0 Management Summary.
The initial management team includes the founders themselves, and, a small cadre of professionals.
As ECI grows, it will add additional consulting help. We will appoint a board of advisors, made up of
investors plus a few key members of the affiliate network, to help make management decisions. The
business is immediately scalable, and, the founder has identified individuals who would be a valuable
addition to the firm. The organizational structure will eventually include several partners at an equal
level, with junior-level associates reporting to those partners. If a revised plan calls for more
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immediate partners, and/or as the firm grows with the new emerging industry, attracting top-quality
management personnel should be easily done.
19.0 Sales Strategy
ECI will remain focused on delivering against our project plan and the clearly established project
goals. Some of the most important underlying assumptions are:



ECI assumes to be able to obtain all of the necessary permits.
ECI assumes, of course, that there are no unforeseen changes in technology to make
production difficult.
ECI will build a prototype of small size first.
20.0 Consumer Entry-Level Unit Manufacturing.
The concept of entry-level consumer unit fits into Wal-Mart’s existing business and manufacturing the
units can define new businesses. Incorporating entry-level consumer units will positively impact WalMart’s long-term corporate goals (such as reduced dependence on nonrenewable energy). Many
companies and consumers are keenly aware of their need to reduce energy costs. In some important
cases these companies have publicly stated they are going down this path. Then their need becomes
the time and people devoted to the necessary research projects to move faster down the path, and, to
confirm it is the right path for them. Executive Consultants, Inc. understands that any renewable
energy project needs to respect economic realities, as determined by market-growth opportunities, the
pool of capital available for projects, and, executive strategic decisions to become key partners for
Wal-Mart Stores.
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