Executive Summary
KF3 Biodiesel brings to market a proprietary line of biodiesel production equipment and processes that produce a high-quality product; are simple, inexpensive and safe to operate and will establish KF3 as the most widely recognized and accepted biodiesel production system in the world. 
Under the guidance of an experienced team, and with the development of derivative products and revenues, the company expects a $15 million value in Year 5.
Business Description:
KF3 Biodiesel franchises a proprietary line of biodiesel production equipment and processes, called the Hive System, which is scalable from personal to industrial production environments (patents pending). The company earns additional revenue and R&D insight through its biodiesel production unit. This unit sells biodiesel and creates several valuable commodities that are byproducts of KF3’s biodiesel production process. KF3 also markets a training program and a complete business model that will optimize the value of the production equipment.
Value Proposition:
KF3’s pilot biodiesel production facility is the proof of concept for the financial and environmental sustainability of the business model that it will franchise. This model increases in profitability as the price of oil and diesel fuel continues to climb. KF3 will market the business model and equipment packages to a global network of millions of potential clients.
Values Statement:
KF3’s business philosophy is grounded in the concept that all people, businesses and organizations must take responsibility for their own actions to conserve resources and preserve the world’s ecosystems. By consuming the minimum amount of resources required and by creating valuable products from its process byproducts, KF3’s model ensures maximum profitability to its users.
Business Model:
KF3 generates revenue through the manufacture and sale of Hive Systems and paid training seminars for purchasers of the system at its Moss Landing, California, facility. KF3’s pilot Hive System operation in Moss Landing, provides revenues that cover the company’s basic operating costs and allow technical staff to refine and improve processes and equipment. KF3 is developing a network of manufacturing, sales, and training associates to market the Hive System worldwide.
Ownership and Management:
KF3 is a sole proprietorship owned by Raymond Kemp, who functions as Chief Technical Officer and operates with the guidance of a Board of Advisors with expertise in the areas of business development, process control, financial management, sales and marketing, biodiesel production, and intellectual property development. KF3 is slated to convert itself into a California-based LLC and appoint a compensated Board of Directors in 2008.
Key Initiatives and Objectives:
The objective of its key initiatives to establish KF3 as the most widely recognized and accepted biodiesel production system in the world, thereby generating long-term profits for its principals, investors and employees. The company’s first key initiative is to legally protect its intellectual property and create a legally protected brand identity to globally market the Bee Hive production system. The second key objective is to continue to improve its refining processes in order to prove the viability of its business model, develop new products, and maintain its position as a leader in the development of the biodiesel industry, which is vital to growing KF3 Biodiesel into a recognizable global brand.
Market Opportunity:
Worldwide, there is an underutilized abundance of waste vegetable oil (WVO) that can be converted to biodiesel. In the U.S., alone, most businesses actually pay to dispose of more than 3 billion gallons of WVO per year. Valued at approximately $2.4 Billion (at $3/gallon after biodiesel conversion), this valuable resource has not yet been effectively utilized. This free, existing supply of WVO, combined with the many shortcomings of competing WVO processing products, has created an opportunity for the KF3 Hive System to be adopted as the worldwide standard and leader in the conversion of WVO into biodiesel. The Hive System is scalable in size and production volume, which allows it to be marketed to a wide spectrum of clients, including: individuals, co-ops, fleet managers, small business enterprises, municipalities, NGOs, and international aid organizations. The Hive System will appeal to anyone, anywhere in the world, who wants to produce high quality, low cost biodiesel on the scale of 200 to 1,000 gallons per week.
Competitive Advantages:
Simplicity, efficiency, adaptability, product quality, low production costs, safety and diverse revenue streams are KF3’s key competitive advantages. A provisional patent application has been filed with the U.S. Patent and Trademark Office on the KF3 Hive System, as well as additional valuable intellectual property. The system’s components and operating expenses are extremely inexpensive and simple to implement, far outperforming any competing system in start up time and adaptability. A list of physical advantages, detailed in the business plan, demonstrates that the Hive System is simpler and safer to operate and requires less labor per unit volume than any competing system. The byproducts of biodiesel production, a waste-disposal challenge for competing systems, are converted by the KF3 Hive System into valuable products. The results are additional revenue streams as well as an ecologically sound model that produces virtually no unusable waste.
Marketing Strategies:
The KF3 Biodiesel Bee Hive Reactor is targeted towards do-it-yourself individuals and transportation-dependent organizations such as municipalities, schools and small to medium-sized businesses. Through qualitative market research, KF3 has determined that fleet managers and mechanics with no experience working with or producing biodiesel can easily operate the Bee Hive System, and are typically very impressed with the benefits of utilizing biodiesel in their diesel fleets and equipment once testing trials have been implemented. Therefore, KF3 has developed an overarching product image based on a Bee Hive that includes images, logos, color schemes, characters, and a story line. The CTO, Ray Kemp, is presented as the “mad scientist in charge” – the friendly, eccentric and brilliant mind behind KF3’s technology and educational programs. Product and company images are intentionally designed to be simple, humorous and cartoon-like. This approach makes the technology more accessible and appealing to the average person or fleet manager. Initial marketing is being done through direct contact at networking events in the Monterey Bay Area and Silicon Valley, as well as free online resources, including MySpace, YouTube, and Office Live. KF3 plans to use capitalization funds to hire professional artists to refine the images and dedicated marketing and sales staff to aggressively pursue the worldwide market outlined in the marketing opportunities section.
Summary of Financial Projections:
The cost to produce a Hive reactor is less than $200 and current consumer market value for such a system is between $5,000 and $10,000. Securing provisioning contracts with government, NGO, and international aid organizations will bring in hundreds of thousands of dollars. Capitalization will allow the immediate, aggressive pursuit of government and organizational level grants and contracts, as well as increased global marketing programs.
Assumptions:
Sales price and initial training $7500
Per month sales: Y1 = 2, Y2=4, Y3 = 10, Y4 = 20, Y5 = 50
Gross margin: 60%
Investment needs:
KF3 Biodiesel is currently seeking $200,000 in funding, which will be utilized for protection of intellectual property, ASTM testing and marketing activities. It is projected that merger or acquisition by a BQ-9000 Biodiesel Production Company will occur in year 5.