Business planning, Technological innovations, Entrepreneurship, Energy consumption
In 2008, $5.2 billion was spent on program management and supporting contractors in energy efficiency in the United States. Funding for energy efficiency is expected to increase as the cost of power production rises. This report focuses primarily on energy efficiency available to dairy farms, located in the Northern Mid-West region of the United States. Dairy farms have seen sharp increases in feed prices, large fluctuations in milk prices, and a steady rise in electricity rates. Of these three, it is easiest for the farmer to lower energy consumption. Riverside Energy will enable farmers to realize maximum potential energy and cost savings by offering custom dairy energy audits.
Riverside Energy is proposing to startup as a sole proprietorship energy efficiency company, focusing on the agricultural and industrial markets of Michigan, which was ranked most improved in energy efficiency in a recent study . The primary revenue stream will be providing energy audits to dairy farms, which will help them to lower energy consumption, saving substantial money. The final deliverable from Riverside to the customer will be a detailed Dairy Audit Report, detailing the best ways to save energy, and the expected upgrade costs, dollar savings and payback (return on investment) for proposed upgrades.
As the demand for energy increases, there is more and more pressure for electrical utilities to build new power plants. But it is more cost effective for utilities to pay energy consuming customers to use less energy than to build new power plants. This promotes the sale of energy efficient equipment and energy audits. For dairies, there are cash incentives to pay for a portion of auditing services, and for dairy equipment upgrades. This in turn promotes Riverside’s auditing revenue stream. The biggest challenge for Riverside will be to compete against established auditors in the Michigan area, which is a fragmented group of university programs, state programs, small companies, and electric utilities. Riverside hopes to differentiate by establishing itself as both agriculturally knowledgeable and highly skilled in detailed analysis.
Five primary marketing strategies have been established, which include selling direct to farmers, presenting at trade shows, enrolling in the Michigan Farm Energy Audit Program, participating in utility incentive programs, and creating partnerships with dairy equipment vendors. The most promising will likely be dairy equipment vendor partnerships, because they have the highest amount of contact with dairies, strong generational relationships, and sell the efficient equipment that riverside will propose for upgrades.
It is estimated that each audit will sell for between $1,000 to $2,000 dollars, and that there are a potential of 1,900 dairies available for audits in the region. Riverside hopes to capture up to 67 audits per year, which would yield $120,000 in sales per year, taking 4 years to ramp up to this sales level. Pro forma income statements predict a break even after 23 months, with estimated startup costs at $26,700. Funding for this startup will be comprised of owner investment and a small bank loan.
Riverside believes it has found a niche in the energy efficiency market through dairy energy audits. Though prospects are promising, further details on additional revenue streams and development of key relationships should be pursued before launch. Riverside could be ready for launch in 6 months to a year.
Smeraglio, Matt, "Business Plan For Riverside Energy LLC" (2012). Engineering and Technology Management Student Projects. 509.