Agricultural Consultants Business Plan

O’Connor & Partners LLC sells consulting services to help clients at various stages of their own bio-refinery activities. The nature of the work we do is a combination of technical engineering, economic forecasting, and management strategy, all on a strict confidential basis. Our basic hourly rate of $175/hr for partners and $125/hr for associates applies to most of our services. In certain circumstances, we can be compensated with equity in the client’s venture.

3.1 Service Description

The management-consulting services of O’Connor & Partners can be classified as follows:

• Market research and business development.
• Biomass-feedstock supply and demand.
• bio-refinery chemicals, materials, fuels, energy, and other products.
• In competition with petroleum-derived equivalents (e.g., biopolymers, automotive fuels, and electricity).
• Chemicals and materials currently produced only from biomass resources (e.g., animal feed and nutraceuticals).
• Future bio-refinery products such as hydrogen and a wide range of chemicals and materials produced from fermenting biomass sugars.
• Confidential discussions with possible partners and vendors.
• Economic analysis of projects and plans.
• R & D projects.
• Pilot and manufacturing facilities (preliminary and engineered designs).
• Financial assessment (risk-adjusted NPV) of capital-investment options.
• Affiliate Network services.
• Engineering and construction of bio-refineries.
• Industrial and government facilities available for contractual R & D.
• Intellectual-property management and competitive-advantage strategies.
• Search for project funding (network to include potential investors).
• Client education (seminars, training, etc.).

3.1.1 Who Will Buy, and Why?

There are many start-ups, or groups considering starting up, within industrial biotechnology. These organizations are often severely short on resources (time, money, and people), and the pile of activities is always growing. Then, there are companies that have successfully started up and are now looking to grow their businesses or expand into new bio-refineries markets. An example is Cargill Dow LLC, a small stand-alone organization from its parent investors, Cargill and Dow. 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, and Shell, to name only a few.

The annual sales of these five companies alone (DuPont, Cargill, BP, Shell, and Dow) total close to $500 billion, so clearly large amounts of money are at stake. Cargill is already doing bio-refineries of agricultural crops, but the focus has traditionally been on foods and nutrients for humans and animals. However, public efforts are underway to utilize biomass sources for the production of industrial chemicals (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 bio-refineries is not lost on these oil giants.

In general there are countless companies – not just chemical companies – that want either their existing businesses to become more sustainable, or to enter new markets based on the concept of sustainable business systems. Many companies state they want to play the game but don’t know the rules, don’t know how to play, and are not quite sure of the impact on their overall business. O’Connor & Partners will help these companies understand the rules for their particular industry, lead the pack, and make a real difference. bio-refineries promises to make global impacts, not only technologically but also politically as we reduce our dependence on foreign oil. With another war with Iraq looming, oil is a hot topic again. At a minimum, there is economic instability in the markets which use imported petroleum. Refining and upgrading biomass offers a true alternative to petroleum in a variety of proven markets.

3.1.2 How Much Does It Cost?

At the outset of a project, the cost of our services will be outlined. We will bid for the project using an estimated number of hours for project completion. The standard hourly rate is $175/hr for partners and $125/hr for associates, for internal work. Outsourced services (through the Affiliate Network – Section 3.6) will be billed at cost plus 15% (e.g. use of a lawyer charging $175/hr means we charge the client about $200/hr). In some cases clients will seek a fixed-bid contract which will not depend on actual hours spent on the project. Only when we have prior experience which allows us to provide an accurate quotation, will we offer our services.

Travel expenses will be additional to base fees. For hourly-based bids, travel costs will be billed directly to the client. Travel time itself will be billed at normal rates since (1) it is time not billable to other clients, and (2) a large percent of travel time will indeed be spent working.

We recognize that many of the smaller bio-refineries start-ups are often strapped for cash and might be unable to pay our fees, especially for longer projects. Rather than paying us cash, we can become an equity partner (on a confidential basis) in the client’s venture. The terms would be negotiated, but essentially we would be compensated with stock (if publicly traded or privately available) or other equity holdings. For example, if a start-up is selling $1 million in equity shares and hires us for a 10-week project normally billed at $70,000, we would become 7% owner of that company. (Although they still might need most of that investment, in theory we did some of the work that the $1 million was to have paid for.)

This option does pose some risk for us since we lose time and money if the start-up fails, but we would likely gain valuable experience as a consulting company to take to future assignments. Additionally, this pricing option is part of our own investment strategy as a firm and as individual partners. If one of these start-ups takes off and we have equity in it, obviously we stand to gain financially (beyond billable hours).

3.1.3 What is the Service, Exactly?

Our goal is to save our clients time and money by doing a combination of research studies, calculations and simulations, and report writing. We will utilize our proprietary computer model (see Section 3.5), our education and experience, the literature/internet, and the Affiliate Network. Past experience, always utilized in a confidential manner, will be a crucial piece of our value proposition. Presentations, as often as appropriate, will be made to the client team. General communication will be accomplished through teleconferences, face-to-face meetings, e-mail, and fax. Travel will be scheduled as needed for efficient project completion.

Some specific bio-refineries problems we can solve through consulting include:

• Insufficiently washed and pre-treated feedstocks can cause numerous processing problems, which we can address before they occur. One example is high ash content, which can cause fast mechanical failure of equipment. The appropriate ash-removal steps need to be employed during pretreatment. Also we can show the client how to capture value from that ash (as a soil nutrient).
• Collection of some feedstocks requires farmer buy-in early because farming practices may need to be changed. We can work with the appropriate stakeholders to tell the story to the right people, show them they stand to gain financially, and get the systems in place.
• Marketing a product based on environmental advantages alone is not a good strategy, but it is commonly perceived to be the only approach. In almost all cases, products need to meet or exceed the specifications of existing products to be replaced. We will study the existing market conditions and relate those to the client’s product and process potential.
• For some existing manufacturers, there will be unused plant equipment which needs to be utilized for biomass processing. Or, the reactor design for a pre-treated was poor, but there is no more capital to be deployed to fix it. In both cases we will help the client understand how to make the reactor work to accomplish its objectives.
• The cost of feedstock is argued to be a key advantage of biomass. Most clients will want an answer to the question, “What is the cost of carbon today (from biomass vs. petroleum vs. coal) and what is it projected to be in the future?” An important aspect of this question is geography, because the low density of biomass translates into high transportation costs. Thus biomass feedstock supply is usually local, while the market demand is global.

3.2 Competitive Comparison

The key reasons that clients will use our services include:

• By removing technical obstacles, O’Connor & Partners will save our clients money, or make them more profitable, compared to doing the work themselves.
• Technical expertise and market knowledge from actually working in the transportation industry (the founder as well as top personnel expected to be recruited).
• We are committed to an in-depth understanding of transportation technologies and economics. The larger management-consulting firms will apply general knowledge and tools gained from a variety of practices, but they will not necessarily have specific transportation expertise. This is our business.
• Strategic vision is not always automatic; we can help a client see the future before their competitor does, and gain essential competitive advantage.

O’Connor & Partners will work to become an all-purpose transportation consulting firm. While obviously it would not be possible for one small firm to do everything, our efficient use of the Affiliate Network means that clients can feel comfortable about hiring O’Connor & Partners for large, integrated, strategic projects.

Because our firm is devoted to commercializing biomass, we consider ourselves part of the transportation industry more than the consulting industry in general. Top management–or technology–consulting outfits, such as McKinsey and A.D. Little, respectively, are not expected to be direct competitors for the first several years. Later, when transportation becomes a full-fledged industry, these firms will perhaps create a transportation practice. At that point, O’Connor & Partners will have the experience and customer base to compete directly with any new entrant. Alternatively, we will have the expertise that these giants will be seeking to acquire by buying out our firm.

Our primary competitors, then, in the first few years are likely to be the clients themselves. They may decide to do the work in-house. Many companies involved in transportation, as with most other emerging industries, are extremely pressed for time and personnel resources, so there should be a driver for outside help. Also, the unique collection of partners’ experiences will hopefully give the client something they could not provide themselves, even if time allowed.

3.3 Sales Literature

A variety of sales literature will be created. A sample brochure can be mailed or e-mailed as a PDF to interested parties. The website of O’Connor & Partners will also be important. We will provide our philosophy and mission statement, along with many links to interesting transportation-industry resources. Rate information will not be posted, instead requiring an inquiry. We will welcome questions and comments by e-mail, which will go to a dedicated e-mail address for this purpose. Finally, and most importantly, jobs will be managed utilizing the website, for efficient exchange of information with the client. Each project will have its own unique and password-protected site, allowing two-way exchange of progress, ideas, calculations, reports, and presentations which are often difficult to send by e-mail.

3.4 Fulfillment

The key fulfillment and delivery will be provided by the partners and associates of the firm. The real core value is professional expertise, provided by a combination of experience, education, and hard work. The service is mostly provided by directly employing professionals, including the firm’s founding partner full-time. The remainder of the service is supplied through a network of professional affiliates, which will have agreed to such collaboration with O’Connor & Partners. We refer to these allies as our Affiliate Network throughout this plan (more information in Section 3.6). Every project will be led by a partner.

Of course we will use the latest electronic communications tools. Every consultant with O’Connor & Partners will be equipped with a cable-internet connection, dedicated fax line, land line, cell phone, and personal digital assistant (e.g. Palm Pilot) with internet and e-mail capabilities. We will also communicate with the clients through their own dedicated web page, linked through our internet site, as described in Section 3.6 below.

3.5 Proprietary Computer Model

We will build a proprietary computer model (to be trademarked Biofinity™) of the transportation concept, using simulation software. This model will be capable of analyzing multiple feedstocks and multiple product scenarios, and it will be tied directly to operating and capital costs. Using this technology tool, O’Connor & Partners will be able to effectively assess the business potential of various options explored by the client. The founder has significant experience building such models with simulation (and other) software.

The following list highlights specific transportation technical challenges that can be addressed by the Biofinity program, and how the client’s bottom line will be positively impacted:

• Most transportation platforms can be fed many feedstocks, depending on local conditions. The software will consider the possibilities of feeding rice straw rather than corn stover or bagasse, for example. Biomass compositions can be entered as part of the overall sensitivity analysis. Depending on geographic location and specific product mix, the net economics of the various feedstock scenarios will be simulated.
• Biomass compositional variability is a key challenge in a transportation. The feedstock composition (even within a single type of biomass) not only affects optimum processing conditions but also can greatly impair the profitability of the operation when the concentrations of certain components are abnormal. Biofinity will include routines to optimize the entire transportation for varying inputs, specifying whether a purchased feedstock should be rejected for the primary production process and instead burned for energy (or even sent to waste, depending on fuel value which is computed by Biofinity).
• The complexity of a full-scale transportation can become enormous. Biofinity will be designed to consider market-based product opportunities, feedstock choices, energy integration, and utility sharing and co-generation, among other features. Often, a bio-refiner who focuses on a single feedstock and single product will conclude that the economics are poor. However, integrated strategies that take advantage of complex networks of feeds, products, and energy, are those that can offer much higher returns on capital invested. Contrary to simple calculations, these simulations require feedback and recycle loops which cannot easily be performed without a computer program such as Biofinity.

In addition to these specific examples, the Biofinity program will be able to help clients with their environmental life-cycle inventory assessment, which requires detailed inputs and outputs of raw materials, electricity, and gas. Indicators such as total CO2 emissions or fossil-fuel usage will be calculated, assisting the client’s sustainability efforts.

3.6 Future Services

Every business is an evolving one. As we work with the industry, we might uncover issues that we did not intend to address as a consulting company but for which we can add value. Over time, some of our core activities could change, as we build reputation and experience in a particular area. Such activities could emanate from biotechnology, for instance, since genetic engineering and biocatalyst development are essential tools in the fermentation of sugars from biomass.

If the industry really grows to ~$300 billion/yr in 2013 (see Section 4.4), then in order to keep up it would seem that O’Connor & Partners needs to also grow by a few orders of magnitude. Thus a 3-person firm in 2004 would become several hundred employees in 2013, if we actually tracked industry growth. This is an exciting possibility to grow up with a new industry and emerge as the leading bio-refinery consulting company. Additional offices will be added as needed, eventually globally.

3.7 Affiliate Network

The Affiliate Network will be very important for the success of O’Connor & Partners. We have access to and experience with top engineering and construction companies that can build a biomass plant, industrial and government laboratories and facilities, non-government organizations, intellectual-property lawyers, and potential investors in bio-refineries. In addition, the network includes several industry experts with up to 60 years of individual experience that is directly relevant to the emerging bio-refining industry. Some of the potential members of the network include the National Renewable Energy Lab, The Rocky Mountain Institute, and Jim Hettenhaus. There are others that cannot be disclosed publicly at this time, because of the founder’s obligations to Cargill Dow LLC.

A margin of 15% will usually be added to all work outsourced or sub-contracted by O’Connor & Partners. One exception is for engineering and construction, for which only initial work requiring our cooperation has the 15% surcharge.