Resourceful Energy: McGuire Center for Entrepreneurship Business Plan

Abstract

Resourceful Energy is a startup venture set to engage in value-added applications for 900 tons of scrap tires discarded annually in the state of Arizona. Resourceful Energy will collect, sort, and process scrap tires into a Tire-Derived Fuel (TDF) compound. The processed TDF will be sold to cement factories, power plants, and industrial manufacturers in the Arizona region as an environmentally friendly substitute to coal fuels. TDF burns cleaner and more efficiently than coal and is significantly less expensive. The EPA-supported fuel is a technology that has yet to penetrate the Arizona industrial market as other companies have focused their efforts in more concentrated metropolitan areas. Resourceful Energy will turn the state’s own supply of scrap tires into one of its most valuable sources of industrial fuel. While TDF is the main product offered to our customers, our business model includes three separate revenue streams. A $2.50 per-tire fee will be assessed when tires are collected from local tire retailers. This service revenue contributes nearly 70% to our total annual revenue. The tires collected will be sorted, and those with remaining useful tread will be sold to local used tire outlets for $8.00 per tire. Finally, the remaining inventory of scrap tires will be fed through a series of shredders and conveyors and packaged as TDF to be delivered to cement manufacturing plants. Additionally, we will engage in research and development projects aimed to identify additional innovative applications for recycled tire rubber. In year 1 we project an EBITDA of $180,000. We expect to sell the company in year 5 with an EBITDA of $1,800,000. Based on our research of Waste Management and Allied Waste the benchmark P/E ratio for our industry is 17.5. Using this ratio, our year 5 value will be $32,000,000. We have calculated that the pre-money value of the company will be $1,200,000 after the $200,000 of founder’s investment has been spent and $400,000 has been raise through investors. The success of our venture relies heavily on securing a contract with one of the state’s largest new tire retailers. We are currently pursuing letters of intent from Discount Tire and Big O Tire, highlighting our lower price, convenient and consistent pick-up schedule and marketed environmental partnerships as the main benefits. Our financials rely on the assumption that we have secured Discount Tire as our first partner through year 3. In year 4 we expect to add Big O Tires as our next major client.