re-tired reclamation - edwards school of business painter/businessplans... · web viewone company...

PREPARED BY: TAVIS KARNES

PREPARED FOR: MBA 992 – VENTURE MANAGEMENT

JUNE 6, 2017

Re-Tired Reclamation Business Plan

Re-Tired Reclamation 2017

Executive SummaryRe-Tired Reclamation (RTR) is a tire reclamation company, specializing in the break-down of

tires to recover three main components: carbon fuel oil, metal, and carbon black. To recover

these components, the business uses a heated vacuum chamber, in which almost all emissions

are used in the process. Due to the lack of emissions in the process, RTR positions itself based

on sustainability and lack of process emissions, leading to the mission statement:

“Re-Tired Reclamation is Dedicated to Recycling the Tires of Saskatchewan and Canada in a Sustainable and Emission Free Way.”

Currently, 28 million tires are recycled yearly in Canada, with only four major competitors in

Saskatchewan, one of which acts as an intermediary. Due to the high quantity of tires recycled

each year and minimal competition, there is a lot of opportunity for the business to succeed.

Furthermore, due to the composition of tires – carbon fuel oil, scrap metal, and carbon black

making up 55%, 9%, and 25% of the tires respectively – there is a lot of opportunity for financial

success.

Due to the high costs of running a business in Saskatoon, RTR will be located in the town of

Vanscoy, Saskatchewan, located approximately 50 kilometers southwest of Saskatoon. This

location will provide convenience as it is relatively close to Saskatoon, while eliminating

unnecessary expenses. The business will run out of a 120 by 60-foot shop where all processes

will occur. Included in the shop will be an office space for all essential tasks related to

management, sales, and marketing. A total capital cost of $2,119,214 is needed to start this

business split between building and land, equipment and operations, as well as a 20% safety

factor to ensure adequate start-up capital.

To reach out to the potential customers, an efficient marketing plan is needed. RTR has two

potential target segments, those purchasing the end products and those providing the tires.

The purchasers are split into three categories: Oil Purchasers, Carbon Black Purchasers, and

Scrap Metal Purchasers. Providers are split up into two groups: Agriculture/Construction and

the General Tires. As already mentioned, to attract these customers RTR will be positioned

based on sustainability and lack of emissions released during the process. Furthermore, three


marketing strategies will be used: social media, website, and search marketing. Regarding price,

all products will be sold based on market established pricing.

By efficiently executing the marketing and operations plan, the financial predictions for the

business is promising. To raise the required capital for RTR, the financial structure will be split

between bank debt (67%), equity (14%), and a government grant (19%). Upon receiving the

required capital, the net income is projected to vary from $71,223 in the first-year to $808,666

in the fifth coming from revenue ranging from $1,118,333 to $2,012,999 respectively. The

financial performance based on these values is as follows:

Net Payback: $16, 419, 047

NPV: $2,091,583

IRR: 120.7%

When performing a sensitivity analysis involving the product selling price and production

quantity, the financial performance of RTR still looks promising. In every case except the worse

case regarding product quantity, the IRR was above the required rate of return. Although, when

the production capacity goes below 1500 tonne in the first year (2264 base case) or the market

selling price goes 30% below the estimated selling prices the company would go broke due to

negative cash flows. Although these cases would bankrupt the company, due to the

conservative approach in estimating the financial performance the there is little doubt that RTR

would not achieve financial success.

After due consideration and analysis of the business plan created, it appears that the business is

feasible. To properly execute the business the following steps are required;

1. Develop the business plan (done);

2. Gain working contracts with purchasing segments and possibly some providers;

3. If contracts with purchasers are developed begin raising the required funding;

4. With the funding, begin building the business. During the building of the business, tires

can start to be collected to ensure efficient inventory to reach the required production;

and

5. Begin operation.


By following these steps RTR and properly executing the business plan established, RTR can

succeed in the tire recycling industry.

Table of ContentsExecutive Summary...................................................................................................................................... i

List of Tables.............................................................................................................................................viii


List of Figures.............................................................................................................................................. ix

1.0 Introduction.....................................................................................................................................1

1.1 Mission Statement.......................................................................................................................1

1.2 Goals and Objectives...................................................................................................................1

2.0 Business Overview...........................................................................................................................2

2.1 The Product.................................................................................................................................2

2.2 The Opportunity..........................................................................................................................2

2.3 The Industry.................................................................................................................................3

3.0 Operations Plan...............................................................................................................................4

3.1 Operation Location......................................................................................................................4

3.2 Facility..........................................................................................................................................5

3.3 The Process..................................................................................................................................7

3.3.1 Step 1-Tire Collection...........................................................................................................7

3.3.2 Step 2-Tire Cutting...............................................................................................................8

3.3.3 Step 3-Tire Incineration.......................................................................................................8

3.3.4 Step 4- Process Material Extraction...................................................................................10

3.3.5 Step 5- Selling the Process Materials.................................................................................10

3.4 Capital Expenditure...................................................................................................................11

3.5 Five-Year Operation Plan...........................................................................................................12

3.5.1 Operating Expenses...........................................................................................................12

3.5.2 Wage Expenses..................................................................................................................13

3.5.3 Cost of Goods Sold.............................................................................................................14

3.5.4 Cost of Sales.......................................................................................................................15

4.0 Human Resources Plan..................................................................................................................15

4.1 Organizational Structure............................................................................................................15

4.2 Job Descriptions.........................................................................................................................16


4.2.1 Board of Directors..............................................................................................................16

4.2.2 CEO....................................................................................................................................17

4.2.3 Plant Manager...................................................................................................................17

4.2.4 Collection, Sales, and Marketing Manager.........................................................................17

4.2.5 Loader/Vac Truck Operator...............................................................................................17

4.2.6 Plant Operator...................................................................................................................18

4.2.7 Collection Truck Driver.......................................................................................................18

4.3 Performance Management and Employee Retention................................................................18

5.0 Marketing Plan..............................................................................................................................19

5.1 Segmentation and Targeting......................................................................................................19

5.1.1 Agriculture and Construction – Provider............................................................................19

5.1.2 General Tire User – Provider..............................................................................................20

5.1.3 Oil – Purchaser...................................................................................................................20

5.1.4 Metal – Purchaser..............................................................................................................21

5.1.5 Carbon Black - Purchaser...................................................................................................21

5.2 Marketing Mix...........................................................................................................................22

5.2.1 Positioning.........................................................................................................................22

5.2.2 Product..............................................................................................................................23

5.2.3 Price...................................................................................................................................23

5.2.4 Place..................................................................................................................................24

5.2.5 Promotion..........................................................................................................................24

5.3 Marketing Strategy....................................................................................................................24

5.3.1 Social Media Marketing.....................................................................................................25

5.3.2 Website Marketing............................................................................................................26

5.3.3 Search Marketing...............................................................................................................26

5.4 Marketing Costs and Projected Revenues.................................................................................27


5.4.1 Marketing Costs.................................................................................................................27

5.4.2 Projected Revenues...........................................................................................................28

5.5 Marketing Conclusion......................................................................................................................28

6.0 Accounting and Financial Plan.......................................................................................................28

6.1 Capital Budget...........................................................................................................................29

6.2 Financial Structure.....................................................................................................................29

6.3 Financial Analysis.......................................................................................................................30

6.3.1 Income Statement.............................................................................................................30

6.3.2 Revenue Projections..........................................................................................................31

6.3.3 Cash Flow Analysis.............................................................................................................32

6.4 Financial Performance...............................................................................................................33

6.5 Break-even Analysis...................................................................................................................34

6.6 Sensitivity Analysis.....................................................................................................................35

6.6.1 Production Quantity Sensitivity Analysis............................................................................35

6.6.2 Selling Price Sensitivity Analysis.........................................................................................37

6.7 Risk Analysis...............................................................................................................................39

7.0 Conclusion...........................................................................................................................................39

Works Cited...............................................................................................................................................41

8.0 Appendices..........................................................................................................................................43

8.1 Appendix A: Excel Spreadsheet........................................................................................................43

8.2 Appendix B: Burner Specifications...................................................................................................44

8.3 Appendix C: Capital Cost Resources.................................................................................................48

8.4 Appendix D: Five-Year Operating Expenses.....................................................................................50

8.5 Appendix E: Sources for Marketing Costs and Projected Revenues.................................................51


List of TablesTable 1: Capital Expenditure......................................................................................................................11

Table 2: Five-Year Operating Expenses......................................................................................................12

Table 3: Five-Year Wage Projections.........................................................................................................13

Table 4: Cost of Goods Sold.......................................................................................................................14


Table 5: Production Plan............................................................................................................................14

Table 6: Cost of Sales.................................................................................................................................15

Table 7: Marketing Costs...........................................................................................................................27

Table 8: Projected Revenues.....................................................................................................................28

Table 9: Capital Budget Summary..............................................................................................................29

Table 10: Financial Projections..................................................................................................................31

Table 11: Revenue Projections per Product...............................................................................................32

Table 12: Financial Performance...............................................................................................................34

Table 13: Breakeven Analysis....................................................................................................................35

Table 14: Production Quantity Sensitivity.................................................................................................36

Table 15: Product Price Sensitivity............................................................................................................38

Table 16: Risk Analysis...............................................................................................................................39

Table 17: Capital Expense Sources............................................................................................................48

Table 18: Operating Expense Sources........................................................................................................50

Table 19: Marketing Cost Sources.............................................................................................................51

Table 20: Sources used for Revenue Projections.......................................................................................51

List of FiguresFigure 1: Carbon Fuel Oil, Carbon Black, and Scrap Metal (Alibaba, 2017)..................................................2

Figure 2: Re-Tired Reclamation Location.....................................................................................................5

Figure 3: Saskatchewan Scrap Tire Corporation Territory...........................................................................5

Figure 4: Re-Tired Reclamation Facility.......................................................................................................6

Figure 5: Facility Layout...............................................................................................................................7


Figure 6: Tire Cutter (Jiangyin City Longtai Machinery Co, 2014)................................................................8

Figure 7: Heat Exchanger (Peyman, 2013)...................................................................................................9

Figure 8: Blower (Gardner Denver, 2017)....................................................................................................9

Figure 9: Process Layout............................................................................................................................10

Figure 10: Distribution of Five-Year Operating Expenses...........................................................................13

Figure 11: Organizational Structure...........................................................................................................16

Figure 12: Positioning Map........................................................................................................................22

Figure 13: Financial Structure....................................................................................................................30

Figure 14: Financial Projections.................................................................................................................31

Figure 15: Revenue Projection per Product...............................................................................................32

Figure 16: Net Cash Flow...........................................................................................................................33

Figure 17: Breakeven Analysis...................................................................................................................35

Figure 18: IRR Sensitivity as a Function of Production Quantity................................................................37

Figure 19: IRR Sensitivity as a Function of Product Price...........................................................................38


1.0 IntroductionRe-Tired Reclamation is a tire reclamation company, specializing in the break-down of tires to

recover three main components: carbon fuel oil, metal, and carbon black. By using a vacuum

heating chamber, the tires are melted down with all emissions going to powering the process.

With this method, tires will be recycled without harming the environment, and even help

recover unrenewable resources. The following report discusses the business plan for the

company moving forward while giving an overview of the operations, human resources,

marketing, and accounting and financial plans.

1.1 Mission StatementA mission statement is a short message that describes your goals and objectives to potential

customers. Re-Tired Reclamation has a highly unique business plan, which all works toward the

mission of the business. RTR’s mission statement is as follows:

“Re-Tired Reclamation is Dedicated to Recycling the Tires of Saskatchewan and Canada in a Sustainable and Emission Free Way.”

1.2 Goals and ObjectivesGoals are an important way to establish methods to reach the mission of the company. Without

goals, employees may not work towards the overall mission of the business. The short-term

goals of the business include;

Increase production by ten-percent every year for the first five-years of operations;

Assist in the clean-up of tire piles of Saskatchewan that have not been cleaned by Scrap-

Tire Corporation of Saskatchewan within the next 5-years; and

Eliminate ninety-percent of emissions created by the meltdown of tires within the first

five-years of operations.

Medium to long-term goals include;

Expand operations into the neighbouring provinces of Saskatchewan within ten-years of

operations; and

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MBA 992: Venture Management Business Plan


Be the leader in quantity of tires recycled in Saskatchewan within 10-years of

operations.

By striving to achieve the goals above, Re-Tired Reclamation can become a leader in the tire

recycling industry, and achieve the overall mission of the company.

2.0 Business Overview2.1 The Product

Re-Tired Reclamation (RTR) uses a vacuum heating process to melt down used tires from a

variety of vehicles including agriculture tractors, heavy-duty machinery, or even your everyday

car. Once melted at a temperature of approximately 415 degrees Celsius, three main

components are produced: carbon fuel oil, scrap metal, and carbon black. These three

components make up 55%, 9%, and 25% of the tires respectively. The other 11% of the tire is

made of 6% gas and 5% fibres (Eco Green, 2015). An image of the three main components can

be seen in Figure 1 below. With this breakdown, Re-Tired Reclamation is able to sell the three

components back to industry for other applications.

Figure 1: Carbon Fuel Oil, Carbon Black, and Scrap Metal (Alibaba, 2017)

2.2 The OpportunityAccording to the Canadian Association of Recycling agencies, one billion tires reach the end of

their life yearly across the world (2017). Out of these one billion tires, twenty-eight million are

discarded in Canada alone (Takallou, 2015). With so many tires reaching the end of their life

yearly, there is a definite need to find an efficient and environmentally friendly way to recycle 11

T a v i s K a r n e sMBA 992: Venture Management Business Plan


these tires. If not disposed of correctly, dangerous chemicals can be released into the

atmosphere such as carbon monoxide, sulfur dioxide, and nitrogen oxides. When not recycled

at all, tires can take up to 80 years to decompose and can have negative environmental impacts

(Korzeniewski, 2009). It is clear that there is a need for an effective method to recycle tires.

In Saskatchewan, there are four companies that focus on tire reclamation: Saskatchewan Scarp

Tire Corporation (SSTC), Shercom Industries, OTR Recycling, and Rubber Stone. SSTC acts as a

partner to the other three companies by assisting in the collection and clean up of the tires,

while the other three focus on the recycling processes (Scrap Tire, 2017). As SSTC acts as a

partner for tire collection, there is potential for Re-Tired Reclamation to also establish a

partnership. OTR takes the tires and develops water troughs for pastures and feedlots, while

the other two use crumbling methods to break down the tires to pebble size chunks that can be

used for rubber pavement, landscaping, and play grounds (Shercom Industries and OTR, 2017).

To do so, these companies offer pick-up services to collect your everyday automobile tires. The

opportunity that still exists, even with this competition, is the recycling of large agriculture and

semi tires. Furthermore, the method that RTR will use is one in which all of the tire will be

recycled rather than just the rubber components. Another benefit of the heated vacuum

chamber method is that it does not release emissions during the process. Finally, RTR’s process

helps recover an unrenewable resource for other applications. There are only limited

applications and uses of the crumbling and trough building methods, while the melt down of

the tires provides a wide range of opportunities.

2.3 The IndustryAs already mentioned, four companies exist in the tire reclamation industry in Saskatchewan.

Again, even though these companies exist there is still plenty of opportunity to take advantage

of heavy-duty equipment, semi-truck, and plenty more automobile tires in this province.

Additionally, there is plenty of opportunity to take advantage of tire piles in surrounding

provinces.

One company that uses a vacuum heating chamber similar to the one that is needed for RTR is

Titan Tire Reclamation. Titan Tire Reclamation is based in Fort MacMurray, Alberta, where they




focus on the recycling of large mining equipment tires used in the oil sands (Titan Tire

Reclamation, 2016). Similar to the process RTR is offering, Titan uses the vacuum chamber to

break down the tire to carbon fuel oil, TVR carbon Residue, and steel. On top of melting down

the tires to their original composition, they also offer tire repair services, where they are able to

replace missing lugs of the tire. According to Titan and upon further research, they are currently

the only company who provides this processing technique in Canada, so there is a lot of room

for entrance.

3.0 Operations PlanThe following section discusses the operations plan of Re-Tired Reclamation, including where

the operations will occur, the capital investments that are required, and the projected

operation costs for the first five years of the business.

3.1 Operation LocationWith high costs of building a facility in major cities of Saskatchewan, it was decided that RTR

would be developed in the town of Vanscoy, Saskatchewan, located approximately fifty

kilometers southwest of Saskatoon (see Figure 2). Another reason for this choice is that it

allows the company to be located on the perimeter of the area that has already been cleaned-

up by Scrap Tire, while staying close to a major city for convenience. A map of Scrap Tire’s

collection territory can be seen in Figure 3. The size of land that will be purchased for this

company is a quarter section (160 acres). This large section of land will ensure there is enough

land for the entire operation, including storage for the tires, the processed material, and room

for heavy-duty equipment to operate.




Figure 2: Re-Tired Reclamation Location

Figure 3: Saskatchewan Scrap Tire Corporation Territory

3.2 FacilityWith a large operation like this, a large facility is required. For all of the necessary processing

equipment to be inside, a 120 by 60-foot (36.58 x 18.29 meter) shop is needed, similar to what

is shown in Figure 4. The building will be built by Warman Home Centre, and feature:




29 Gauge #1 Colored Metal Walls & Galvalume Roof,

1 Large Sliding Door, and

1 Three-foot Walk-in Door.

To ensure the facility and all processing equipment will be stable, the shop will be built on four

inches of concrete.

Figure 4: Re-Tired Reclamation Facility

A layout of the facility as a whole, inside and out, can be seen in Figure 5 below. As shown in

the layout, all of the facility processes occur within the shop. For the process to occur, two 6-

meter-long cylindrical treaters with 3 meter diameters are needed. To take advantage of the

emissions for use in the process, which will be discussed later, three large cylindrical propane

tanks are also needed for the process. In addition, there is an area for loader parking and

repairs, as well as a 15 by 15-foot (4.57 x 4.57 meter) office space. Outside of the shop exists an

area for tire storage, an area for semi parking, a 750-barrel oil tank for the carbon fuel oil, and

four storage bins for processed materials (carbon black and metal). Surrounding the facility is a

16.4-foot (5 meter) wide gravel road to allow trucks to access all of the tires and processed

material. This gravel road will connect to the main RM road, which will be a minimum of six 15



meters away from the building according to Saskatchewan municipal bylaws (Statutes of

Saskatchewan, 2005).

Figure 5: Facility Layout

3.3 The ProcessTo melt down the tires to the three composition materials a variety of steps are required. This

section discusses all the steps necessary in the process to give a clear idea of what is required.

3.3.1 Step 1-Tire CollectionThe first step that is required for the process to begin is the collection of tires. For this to occur,

an employee with a 1A license will be sent to various locations, such as farms and tire shops, to

pick-up the used tires. Once collected, the driver will place the tires in the tire storage location

shown in Figure 5. In addition, customers will be able to deliver their tires to RTR’s location.

Also, potential partnered companies will also be able to deliver large quantities of tires to the

location site.




3.3.2 Step 2-Tire CuttingAs agricultural farm equipment tires are large in comparison to your everyday automobile tire,

a cutting process will be required at times. By using a tire cutter, similar to that shown in Figure

6, those large tires will be cut into smaller chunks to allow for more product to be processed. A

front load tractor will be required to transfer the tires from the storage area to the cutter.

Figure 6: Tire Cutter (Jiangyin City Longtai Machinery Co, 2014)

3.3.3 Step 3-Tire Incineration Once the tires are cut into the required size, it is time to melt them down. To do so, the tires

will be placed into the treaters, which will then be sealed for processing. With the treater door

closed, the process begins by starting the blowers to create a vacuum. Next, the burners that

are located on the back of the treater will be ignited to heat the chamber to approximately

415⁰C, the ideal temperature to extract the oil. The specifications for the burners can be seen in

Appendix B. As the melting is occurring, the blowers are still drawing the air (emissions) from

the treater to the tanks. Due to the high temperature of the air being extracted from the

process, a heat exchanger is required to cool it down before reaching the blower. The emissions

that are drawn from the process are then used to power the burners, which are otherwise

powered by natural gas. Examples of the heat exchanger and blower can be seen in Figure 7

and Figure 8 below, respectively. A zoomed image of the process from section 3.2: Facility is

shown in Figure 9.




Figure 7: Heat Exchanger (Peyman, 2013)

Figure 8: Blower (Gardner Denver, 2017)




Figure 9: Process Layout

3.3.4 Step 4- Process Material ExtractionWith the tires melted down, the three components are then put into storage for sale. To do so,

a vacuum truck is used to first extract the oil and place it in the 750-barrel oil tank. Once the

liquid is extracted from the treaters, the scrap metal, rubber, and fibre can then be separated

using an industrial-sized electromagnet and put into their respected storage bins. The storage

bins and oil tank are shown in Figure 5.

3.3.5 Step 5- Selling the Process MaterialsAs the storage containers become full, the three processed products can then be sold. The

carbon fuel oil will be sold to oil processing companies, likely around the Swift Current,

Saskatchewan area, which will be transferred by a hired oil hauler. Regarding the metal and

carbon black, they will be transferred to locations in Saskatoon who purchase these materials,

such as Inland Steel Products. Finally, the fibre will be transferred to the local Saskatoon dump

for further processing.




3.4 Capital ExpenditureAs outlined in section 3.2: Facility, a variety of equipment is needed for this plant to operate

efficiently. Because there is a need for a lot of equipment a large initial capital investment is

required. Table 1 below expands on the capital costs required for the facility building, land,

equipment, and operations. The total initial capital required, as outlined in Table 1, is

$1,766,012: $689,387 from the building and land and $1,076,625 from equipment and

operations. With such a large operation capital costs can be hard to estimate, so a 20% safety

factor was applied. In doing so, the total investment was calculated to be $2,119,214. All

resources for estimations can be found in Appendix C.

Table 1: Capital Expenditure

Capital CostsBuilding and Land

Building (60'x120'x18') $73,400Office Development $50,000Concrete pad $24,408Furnace $4,979Water Heater $1,000Bathroom Installations $2,470Light Fixtures $980Location Sign $24,000Utility Installs $5,000Gravel Road $3,150Quarter Section of Land $500,000Building and Land total $689,387

Equipment and Operations750 Barrel Tank $15,000Vessels (2 vessels) +Insulation $125,500Burners and Accessories $60,576Gas Piping $600Heat Exchanger $5,000Tire Cutter $60,000Industrial Magnet $3,500Propane Tanks $7,200Metal Bin $18,000Rubber Bin $18,0002 loaders $330,000Air Compressor Pumps $5,000




Office Supplies $3,0002017 Ford F-150 $28,249Semi-trailer unit $175,000Vac truck $150,000Initial Cash Requirement $75,000Equipment and Operations Total $1,076,625Total Capital Costs $1,766,012Capital Cost Safety (20%) $353,202Total Capital Costs with Safety Factor

$2,119,214

3.5 Five-Year Operation PlanUpon reading this section, the planned operations for the first five years will be understood. To

do so, an explanation of the operating expenses, cost of goods sold, and cost of sales will be

discussed.

3.5.1 Operating ExpensesWith a such a large operation, high operating expenses can be expected year-to-year. Table 2

below outlines the total operating expenses for the first five years of operation. As shown in the

table, these expenses range $783,741 to $874,289 over the time frame. The five-year average

distribution of these expenses is shown in Figure 10. When observing this data, it is clear that

the majority of the operating expenses come from wages, capital cost allowances, and debt-

interest, making up 53%, 17%, and 11% respectively. A full detail analysis of the expenses can

be found in the attached excel sheet, while sources for the data can be seen in Appendix D.

Table 2: Five-Year Operating Expenses

Operating Expenses

2018 2019 2020 2021 2022

Total $874,289 $833,682 $811,079 $794,862 $783,741




53%

17%

11%

5-Year Average Operating Expenses

MarketingInsurancePower-ElectricalWages and SalariesEmployee Benefits (salaries)Employee Benefits (wages)Misc Variable Costs % SalesCapital Cost AllowanceDebt Interest

Figure 10: Distribution of Five-Year Operating Expenses

3.5.2 Wage ExpensesWith employee wages making up over 50% of the yearly expenses, it is important to outline

how they are being distributed. Table 3 below highlights the total value of wages and employee

benefits in terms of those getting an hourly wage and those getting paid salary. Those getting

paid salary include the CEO, Plant Manager, and Collection, Sales, and Marketing Manager

(CS&M), while the hourly paid workers are the three labour employees. These positions will be

explained further Section 4.2: Job Descriptions. The attached excel spreadsheet gives a more in-

depth analysis of the year one wages paid to show how these numbers were calculated. With

the one year wages calculated, it was possible to calculate the future year wages by adding a

2.4% average raise rate, which is the going rate in Canada.

Table 3: Five-Year Wage Projections

Salaries and WagesYear 2018 2019 2020 2021 2022

Total Salary Wages $258,742 $264,952 $271,311 $277,822 $284,490 Total Hourly Wages $154,526 $158,235 $162,033 $165,921 $169,904

Total Salary Benefits $22,433 $22,971 $23,523 $24,087 $24,665 Total Hourly

Benefits $22,314 $22,849 $23,398 $23,959 $24,534




3.5.3 Cost of Goods SoldThe process required to melt down the tires requires a lot of extra electricity and natural gas,

which was not included in the calculation of expenses. Instead, it was calculated on its own so it

could be easily adjusted as the process becomes more efficient, as shown in Table 4.

Table 4: Cost of Goods Sold

Cost of Goods Sold 2018 2019 2020 2021 2022Cost of Recycling

Fibre $11,88

8 $14,265 $16,64

3 $19,020 $21,398 Process Natural Gas $408 $490 $572 $653 $735

Process Electricity $3,402 $3,992 $4,582 $5,172 $5,762Tire Collection Fuel $40,000 $40,648 $41,306 $41,975 $42,655

In calculating the cost of goods sold multiple assumptions were made. First, it was expected

that the emissions from the process would produce 75% of the fuel requirements. Second, it

was assumed that the cost per cubic meter of natural gas is $0.1387 per cubic meter and the

cost of electricity is $0.1158 per kW-hour (SaskEnergy and SaskPower, 2017). Next, it was

assumed that the plant would run five days a week, eight hours a day, with the run time shown

below (Table 5). Again, the attached excel spreadsheet shows the break down of the cost of

goods sold regarding each step of the process. The specifications for the equipment used to see

the required fuel and energy consumption can be found in Appendix B. In addition, the fuel

requirement was calculated using the average fuel consumption of a semi-truck of 35.19 litres

per one hundred kilometers. Finally, the extra fibre that comes from the tires is able to be

recycled at the local Saskatoon dump.

Table 5: Production Plan

Production Plan 2018 2019 2020 2021 2022Planned Equipment Run Time (% of work

day)50% 60% 70% 80% 90%

Tire Quantity (tonnes) 2264 2717 3170 3623 4076




Regarding the production plan, it is expected that the vacuum chambers can each hold six

tractor tires. Each tractor tire weighs approximately 400 pounds, and it is assumed that when

there is a low quantity, this weight can be made up with other tire types. Furthermore, the

process time for was estimated to be 30 minutes.

3.5.4 Cost of SalesSimilar to the cost of goods sold, the cost of sales was separated from the operating expenses.

The cost of sales is simply the cost to deliver the processed products to the buying customers.

These costs include the fuel required for RTR’s semi-truck to deliver the metal and carbon black,

and the fee to hire an oil hauler to deliver the carbon fuel. Table 6 below highlights these costs.

Table 6: Cost of Sales

Cost of Sales 2018 2019 2020 2021 2022Fuel to Deliver Metal and Carbon black $40,000 $40,648 $41,306 $41,975 $42,655

Cost of oil hauler $67,619 $81,143 $94,667 $108,191 $121,715

4.0 Human Resources PlanTo gain an understanding of how the organization will perform, it is important to outline the

human resource plan. As a whole, this plan describes the organizational structure of Re-Tired

Reclamation, the job description of the required positions, and the required steps for

performance management and employee retention.

4.1 Organizational StructureAs mentioned earlier, there are six employees who will receive wages at this organization: the

CEO, Plant Manager, Collection/Sales/Marketing Manager, Loader/Vac Truck Operator, Plant

Operator, and Collection Driver. Figure 11 below shows how these positions and the board of

directors are positioned, regarding hierarchal structure. The job descriptions and

responsibilities of these positions are described in section 4.2: Job descriptions.




Figure 11: Organizational Structure

4.2 Job DescriptionsUpon reading this section, the responsibilities of all positions involved in the organizational

structure will be understood.

4.2.1 Board of DirectorsFor Re-Tired Reclamation, three board of directors will be required: Engineer, Lawyer, and

Environmental Specialist. These specialists are used to act on behalf of the shareholders and

stakeholders, and ensure the day to day affairs are in their best interest. In this case, the main

stakeholders are the owner, Tavis Karnes, the public who is benefiting due to the

environmentally friendly recycling method, the companies who are buying the finished goods,

and the tire production companies. The engineer of the board, Tavis Karnes, is essential to

ensure all members understand the technical portion of the process. In this case, Tavis Karnes

will also have his Masters of Business Administration to help with the financial stability of the

company. Next, the lawyer is needed to ensure all activities being performed are abiding by the

law and that all contracts being made benefit the company as a whole. Finally, the 25


Board of Directors

CEO

Plant Manager

Loader/Vac truck Operator Plant Operator

Collction, Sales, and Marketing

Manager

Collection Truck Driver


environmental specialist is beneficial for another technical background director, as well as a

balance to help shed light on the environmental benefits of the process being used.

4.2.2 CEOFor RTR, the CEO is also the engineer on the board of directors. It is his responsibility to ensure

all operations that are occurring abide by what is expected by the board of directors and the

stakeholders. He is also responsible for overseeing the two managers and communicating the

events that are occurring throughout the day-to-day activities. Finally, he is also responsible for

the hiring processes that occur throughout the business and ensuring all employees have

proper operation training.

4.2.3 Plant ManagerThe Plant Manager is responsible for overseeing all operations that are occurring within the

facility. They will be in charge of ensuring all plant employees are performing their tasks safely

and following company policies. In doing so, they will have to keep constant communication

with the CEO so he knows what problems are occurring. It will be important that the plant

manager helps with operations on a weekly basis to ensure they know all that is going on and

how the plant is operating.

4.2.4 Collection, Sales, and Marketing ManagerAs a Collection, Sales, and Marketing Manager, it will be important to develop relationships

with those buying the final product and those recycling the tires. It will be their job to keep

constant communication with these channels to ensure that all parties are satisfied with the

products. Additionally, they will also be responsible for organizing the tire collections and final

products delivery. They will oversee the collection driver and organize pick-up and delivery

times with the other organizations. Finally, they will also be responsible for overseeing all

marketing related tasks discussed later.

4.2.5 Loader/Vac Truck OperatorOne position under the Plant Manager is the Loader/Vac Truck Operator. As the title describes,

it is their responsibility to run the heavy-duty loader and vacuum truck required for plant

operations. They will be in charge of transferring the tires from the tire storage to the tire-




cutter and heated chambers using the loader, as well as transferring the treated oil to the oil

tank using the vacuum truck. Also, they will assist with the separation of the metal and carbon

black, and any other plant operations that are needed.

4.2.6 Plant OperatorAnother position under the Plant Manager is Plant Operator. The main responsibility of the

plant operator is to ensure all processes are running smoothly day-to-day. In doing so, they will

be in charge of the operations of the heated vacuum chamber and assisting the loader/vac

truck operator when needed. It will also be important for this operator to keep constant

communication with the Plant Manager with all issues that are occurring so the plant runs

smoothly.

4.2.7 Collection Truck DriverThe only position under the Collection, Sales, and Marketing Manager is the Collection Truck

Driver. This employee’s sole-purpose is to drive to different locations to collect tires, and to

deliver the processed metal and carbon black to the end customers. For this to occur, they must

keep constant communication with the C, S, & M Manager, so they know when and where

these pick-ups and deliveries will occur.

4.3 Performance Management and Employee RetentionWith a process such as this, performance management is one of the keys to success. To ensure

employee performance is up to company standards consistent communication is required, as

described throughout the employee job descriptions. Furthermore, annual reviews will be

necessary where each employee under the CEO will be required to fill out a personal evaluation

of their performance. The front-line employee will then be required to meet up with their

immediate supervisor and discuss these reviews to see what areas they are succeeding in, and

what areas could use some improvement. Also, they will have to participate in safety training

courses as required, including first aid, gas detection, loader and 1A training, confined space,

fall protection, and company specific safety training. All of this will ensure that employees are

performing their jobs safely and to company standard. By having this proper training and

performance measurements, the drive to comprehend and defend will be satisfied.




To ensure employee retention, all employees will be paid above Canadian averages for their

respected position, as outlined in attached excel spreadsheet, relating to the drive to acquire. In

addition, the performance measurements can be used to assist with the pay raises given to

employees. If an employee is consistently performing exceptionally well, the wage they

received has the potential to be raised by over the established 2.4%, also helping satisfy the

employees drive to acquire. Furthermore, as all employees are expected to keep constant

communication with each other throughout the day-to-day activities, the drive for employees

to bond can also be met. All of this will ensure employees are satisfied in their positions, and

keep them working at RTR for years to come.

5.0 Marketing PlanRe-Tired Reclamation has a unique marketing plan, as it targets both individuals and businesses

for the collection of tires, but strictly businesses for the sale of the processed products. The

following section discusses the target markets of RTR, the strategy that will be used in targeting

these markets, and the marketing mix of the company.

5.1 Segmentation and TargetingThere are two major areas of segmentation for Re-Tired Reclamation, those who are providing

the tires, known as the Provider segment, and those who are buying the finished product,

known as the Purchaser segment. Within the Provider segment are two groups, those providing

tires from agriculture and construction equipment, and those who are providing day-to-day

vehicle tires. Regarding the Purchasers, there are groups for each material that is processed: oil,

metal, and carbon black. This section is used to primarily discuss who these segments are and

why they are ideal segments for RTR. The methods used to target these segments will be

discussed in detail in section 5.3: Marketing Strategy.

5.1.1 Agriculture and Construction – ProviderAs mentioned earlier, there are three main competitors in Saskatchewan who process used

tires using crumbling or trough making methods. In doing so, they focus on the regular day-to-

day tires that are used by most citizens, bicycle tires, and small industrial tires but do not




usually target larger sized tires. RTR can take full advantage of the large industrial and

agricultural tire market, making it an ideal segment for the company.

To reach out to this segment, it will be important for the Marketing Manager to contact

individual customers and businesses who use these types of equipment. It will be unproductive

to contact individual, small farms who may not need recycling methods often. Instead, it will be

ideal to contact tractor and construction vehicle dealerships and repair shops who are

responsible for replacing the tires on such equipment. Similarly, it will also be beneficial to

contact larger farms, such as those ran by Hutterites, and construction companies, who take on

the responsibility of replacing their own tires. The members of this segment are spread across

the province and country, and will likely be willing to provide the tires year-round.

5.1.2 General Tire User – ProviderAlthough the other competitors primarily target this group, there is still a lot of opportunity to

collect tires from the general user. As previously mentioned, competitors have only been able

to reach out to about half of Saskatchewan. By locating on the edge of this area, RTR will be

able to become efficient at targeting the rest of the province. The company can target a variety

of business and individuals including: general car dealerships and tire shops, recycle depots and

garbage dumps who may have excess tires, and large groups of individuals who may not know

where to recycle their used tires. As with the Agriculture and Construction segment, members

of this segment are located throughout all of Canada, and will be able to provide tires to RTR

year-round. It is noted that Saskatchewan Scrap Tire Corporation is a major collector of general

tires, and the possibility of developing a working relationship with this group could prove

advantageous.

5.1.3 Oil – PurchaserAs a whole, Saskatchewan is a province in which the Oil Industry plays an important role. One of

the reasons that RTR has chosen to locate in Vanscoy is because of the closeness to oil

processing companies. These companies have multiple oil treating plants surrounding the larger

centres of Swift Current and Kindersley, Saskatchewan. RTR can develop relationships with




these companies in order to sell them the oil that is recovered during the heating process, as

they will be able to further treat the oil for consumer use. Such companies include:

Crescent Point Energy Corp.,

Norther Blizzard Inc.,

Canadian Natural Resources Ltd.,

Penn West Exploration, and

Surge Energy Inc.

These companies are consistently producing and treating oil, so the sale of the product can

happen at almost any time.

5.1.4 Metal – PurchaserAs RTR will not process the metal that is recovered during the process, it will be important to

have scrap metal collectors as a purchasing segment. These companies will buy the excess

metal and process it for future use. As Vanscoy is relatively close to Saskatoon, the ideal scrap

metal collectors will be located within this area. Three companies that can be targeted include

Hub City Iron & Metal, BN Steel & Metals, and Inland Steel Products. All three of these

companies collect a variety of metal types, making them ideal for targeting. As these companies

are consistently processing scrap metal, the frequency of buying would likely occur on an as-

processed basis.

5.1.5 Carbon Black - PurchaserSimilar to the other two processed products, Re-Tired Reclamation will not take responsibility

for further processing the carbon black. There are multiple companies who use carbon black for

the production of oilfield drill bits and tires. Companies who produce such products include:

Carbon Black Specialty Services Ltd.,

Buy Carbon Black,

Michelin, and

Bridgestone.




These companies can either treat the carbon black or directly use the product in their

manufacturing process. For RTR, there is no preference on the type of company they sell to.

Similar to the other two produces products, these segments are constantly using and

processing the carbon black, so the time of sale would likely be on an as-processed basis.

5.2 Marketing MixWhen determining the marketing strategy for a company, it is important to take the four P’s of

marketing into account: product, price, promotion, and place. The following section will discuss

these four areas regarding Re-Tired Reclamation, as well as the positioning that the company is

wanting to take.

5.2.1 Positioning With three main competitors in Saskatchewan, and one large group responsible for the majority

of tire collection and industry regulations, it is important to come up with a position to make

RTR stand out. The positioning of RTR will give them a competitive advantage, making the

business more attractive to the target segments. Two areas that were looked at for the

positioning of RTR relative to the three direct competitors include the sustainability of the

business and the emissions released during the recycling process. Figure 12 below highlight the

positioning map in relation to sustainability and process emissions.




Figure 12: Positioning Map

As shown in Figure 12, RTR is the most sustainable business of the four competitors.

Furthermore, it is also the business with the lowest emissions created during the recycling

process. With the vacuum system used during the process and use of recycled gas, the process

used by RTR has relatively no emissions. Furthermore, by recovering the three components of

the tire to their original state, RTR has long-term sustainability. These three components are a

necessity for the current market and are used regularly throughout the world.

The three competitors use a variety of processes that release emissions into the atmosphere

and require a significant amount of power. Also, the products that they produce are not as

sustainable as RTR’s. The need for the crumbled rubber in sidewalks and playgrounds is not as

sustainable, as this is not necessarily a necessity for the public. In addition, according to NBC

News some people are actually hesitant to put the rubber mulch in their playgrounds, making

the crumbling process less sustainable (2014). Although Rubber Stone uses a similar process to

Shercom Industries, they are slightly more sustainable, as they are located nation wide.

Furthermore, OTR’s method of turning the used tires into troughs is more sustainable than the

crumbling method, but the requirement for these troughs is minimal compared to that of the

three products produced by RTR.




5.2.2 ProductRe-Tired Reclamation is a company whose main focus is the production of oil. Furthermore,

with the process used, two other products are recovered: metal and carbon black. To develop

these three products, the company takes old, recycled tires and melts them down using a

vacuum heating process. These three products will be sold separately to companies who

process them further. Each product will be sold in different volumetric or mass units: oil will be

sold per barrel, metal will be sold per tonne, and carbon black will be sold per tonne.

Considering the purchasing customer segments, these units are most appropriate.

5.2.3 PriceWhen selling the products that are produced by RTR, the pricing system is very simple. All three

products that are being produced are sold based on the market price at the time of sale. These

prices fluctuate constantly based on the supply and demand of the products. Consequently, Re-

Tired Reclamation will unlikely be able to set the price of the product. Keeping an eye on the

market price of each product will be essential to maximize profit, while considering the limited

on-site storage.

5.2.4 PlaceAs mentioned throughout the report, the location of RTR will be Vanscoy, Saskatchewan. To get

this product to the target markets, RTR will be selling directly to the buyers. The selling of the

product will likely occur over the telephone or email and occur on a contract basis. All products

will likely be delivered to the buyer via semi-truck. Oil can be transferred to the buyer by the

use of a vacuum truck, while the other two products can be delivered using a flat-deck or side-

kit trailer.

5.2.5 PromotionRe-Tired Reclamation must have a unique promotional program to attract the provider

segment. Currently, customers may not know the implications of not recycling their used tires

or may not know what to do with them. As a result, delivering this message is essential using

social media, a company website, and search marketing techniques. Delivering this message will

allow a wide range of customers to see why this process is essential and convince them to bring




their used tires to RTR. It will also promote the company to larger businesses, such as

agriculture equipment and car dealerships, and persuade them to develop a working

relationship with RTR.

Regarding the buyers of the product, not a lot of promotion is required. The companies willing

to buy the three products have a need as much as Re-Tired Reclamation. By contacting these

companies directly and offering the processed products, contracts could be developed for price

and volume consistency.

5.3 Marketing StrategyAs previously discussed, there are five target segments that must be considered for Re-Tired

Reclamation’s success. To reach out to these segments an in-depth marketing strategy is

needed, which takes into account all areas of the marketing mix: position, product, price, place,

and promotion. The promotion of the products to the different segments is particularly

important, as it will allow the providers and buyers to see the importance of RTR and persuade

them to become a working partner with the company.

The following section will discuss what marketing strategy that will be used by RTR. In doing so,

it will describe the different promotion techniques that will be used to reach out to the tire

providers and product purchasers.

5.3.1 Social Media MarketingOver the last decade social media has became a major influencer on consumer behaviour and

opinion. With such a large reliance on social media, it is important for RTR to use a variety of

these platforms to contact those who will be supplying the tires: general tire users and

agriculture/construction tire users. This technique will likely be more beneficial for those using

general tires, such as the young to middle age drivers and general tire shops. Some social media

platforms that can be used include Facebook, Instagram, and LinkedIn.

The platforms that will be used to target the users of the general tires include Facebook and

Instagram. These media platforms are used by tires users of all ages, and can be used to show

the importance of RTR and what the company stands for. To target these users a Facebook and




Instagram profile will be created for the company, where pictures and ‘statuses’ of the

implications of not recycling your tires, the process that is being used, and the benefits of the

process will be posted. This will help spread awareness and allow potential customers to

contact the company for tire pick-up. Furthermore, these media platforms can also be used for

marketing to businesses that will provide large quantities in both the general tire and

agriculture/construction tire segments.

Although Facebook and Instagram can be used in part to target the larger tire supplying

business, LinkedIn would be a more reliable social media platform for this. In addition, LinkedIn

will also be very beneficial in targeting the purchasers of the processed products. To do so, a

LinkedIn profile will be made for the company, as well as the CEO Tavis Karnes for personal

contacts. Similar to the other social media techniques, this platform will be used to spread

awareness of the process being used and the products that are being offered. This will allow

potential product buyers to see the benefits of the company and where the products are

coming from. LinkedIn has become an essential media platform for businesses to contact all

potential customers and suppliers, so this presence is essential for the success of RTR.

5.3.2 Website MarketingAnother technique that will be used as a main resource for potential and existing customers will

be a company website. A website is a good way to develop company credentials and

reputation. In addition, it also helps identify the core mission and vision for customers. For the

webpage to be effective in communicating to the target segments it will include the following

sections;

Home page - which will include a detailed description of the mission and vision of RTR,

images of the environmental benefits of the process, and links to the others sections of

the website;

Products that are being offered – describing the three products that are being produced

during the process;

Process information – which will give a brief description of the process being used;




Contact information – so potential tire suppliers or product buyers can contact RTR for

information on tire pick-ups, price of the products, or for general inquiries;

Frequently asked questions – for people to get general information about the company

with ease;

Blog – which can be used as a means of communication for the public to discuss

environmental issues and develop a positive image for RTR; and

Links to social media pages – to allow customers to access the social media pages with

ease.

With all of these components, the website will be successful at building credibility for Re-Tired

Reclamation and develop a positive company image.

5.3.3 Search MarketingSearch Engine Marketing (SEO) is the last marketing technique that will be used to attract the

target segments. Paid ads will be used using search engines, such as Google, to allow customers

to learn about the business. The following list is examples that could be used as key words to

attract the target segments:

“Tire recycling,”

“Tire reclamation,”

Competitor names, and

“Tire process.”

By having key words like the ones above, customers will be able to hear about the business

when trying to find out how to recycle their old tires. SEO marketing is an effective method to

reach out to the tire providers and increase the number of tires collected.

5.4 Marketing Costs and Projected RevenuesTo perform the marketing plan as previously discussed a lot of annual costs are required. This

section is intended to present the costs associated with the marketing plan and the projected

revenues for RTR if the plan is executed as planned.




5.4.1 Marketing CostsTable 7 outlines the costs associated with the marketing plan for RTR. As outlined in the table,

the average marketing costs per year is approximately $25,000. Links for the sources of this

data can be seen in Appendix E.

Table 7: Marketing Costs

Marketing Costs 2018 2019 2020 2021 2022Google ads $15,000 $15,243 $15,490 $15,741 $15,996

Website $5,000 $300 $304 $309 $314

Social Media Ads $8,187 $8,187 $8,187 $8,187 $8,187LinkedIn $959 $975 $991 $1,007 $1,023

Business Cards $20 $20 $20 $20 $20

Fuel (sales meetings)

$102 $104 $106 $107 $109

Total $29,270 $24,8230 $25,099 $25,373 $25,651

Table 8: Projected Revenues

Product 2018 2019 2020 2021 2022Metal (tonnes) 203 244 285 326 366

Carbon Black (tonnes)

566 679 792 905 1018

Oil (BBL) 9128 10954 12780 14605 16431

Total Revenue $ 1,118,332 $ 1,341,999 $ 1,565,665 $ 1,789,332 $ 2,012,999

In summary, there are two main segments that will be targeted for the operations or Re-Tired

Reclamation: Providers and Purchasers. To effectively target these two groups, three marketing

strategy techniques will be used: social media marketing, website marketing, and search engine

marketing. Through these marketing techniques, RTR will be able to effectively promote their

positioning strategy involving the sustainable and low-emission process. Furthermore, they will

be able to efficiently describe the product that is being produced and sold, the place and

method for distributing these products, and the price at which they will be sold. With these

marketing techniques, RTR will be able to become successful in the industry, develop

partnerships with potential tire suppliers and final product purchasers, and provide awareness

about the implications of not recycling your tires.




6.0 Accounting and Financial PlanFeasibility is extremely important when considering whether or not to pursue a business

venture. This section takes a look at the expected financial and accounting information of Re-

Tired Reclamation to see whether this business would be successful. The financial model for all

information calculated in this section can be seen in the attached excel document.

6.1 Capital BudgetBefore the financial plan can be discussed, it is important to review the capital budget of RTR.

As highlighted in Table 9 below, the total expected capital budget for the business is

$2,119,214. Of this amount, approximately $689,387 comes from the required building and

land, $1,076,625 comes from the equipment and operations, and $353,202 is a 20% safety

factor in the case the budget was underestimated.

Table 9: Capital Budget Summary

Source Value

Building & Land $689,387

Equipment & Operations $1,076,625

Total Capital Costs $1,766,012

Capital Cost Safety (20%) $353,202

Total Capital Costs with Safety

$2,119,214

6.2 Financial StructureWith a large capital budget of $2,128,814, it I important to discuss how this money will be

raised. There are three forms of financial methods that will be used for this business: bank

debt, equity financing, and government grants. Figure 13 below shows the division of these

financial methods regarding percentages. As shown in the graph, bank debt makes up 38



approximately 67% of the capital budget. The debt was assumed to have an interest rate of 7%

amortized over 15 years. Regarding government debt, the Saskatchewan government gives

grants anywhere ranging from $10,000 to $4,000,000. With this in mind, it is estimated that

RTR could raise approximately $400,000 due to the environmental benefits of the business. No

additional debt should be required for the first five years of operation.

67%

14%

19%

Financial Structure

Bank debtEquityGovernment Grant

Figure 13: Financial Structure

6.3 Financial Analysis6.3.1 Income Statement

Before getting into details on the income statement, it is important to consider the revenue

streams of RTR. There are three products that develop revenue for the business: Scrap metal,

carbon black, and oil making up 5%, 46%, and 49% of revenue respectively. These revenue

projections can be seen in section 5.4.2 Revenue Projections, and are based on the production

capacities discussed in Section 3.5.3 Cost of Goods Sold.

With these revenues, the income statement could be developed. A summary of the project five-

year income statement can be seen in Table 10below. As shown in the table, the net income in

the first year is relatively low but increases substantially as production increases.




Table 10: Financial Projections

Year 2018 2019 2020 2021 2022Revenue $1,118,333 $1,341,999 $1,565,666 $1,789,332 $2,012,999

COGS $163,318 $181,187 $199,077 $216,989 $234,922

Gross Profit $955,015 $1,160,812 $1,366,588 $1,572,343 $1,778,077

Total Operating Expenses $873,617 $833,036 $810,462 $794,276 $783,188

Taxable Income $81,398 $327,776 $556,126 $778,067 $994,889Taxes $10,175 $40,972 $76,532 $132,017 $186,222

Net Income $71,223 $286,804 $479,595 $646,050 $808,666

To get a clear understanding of these number a Financial Projection graph was developed, as

seen in Figure 14 below. When looking at this figure it is clear that net income increases

substantially due to the large increase in revenues, while the costs of goods sold stays relatively

constant and the operating expenses decrease due to the decreases in debt interest paid.

2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 $-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Financial ProjectionsRevenue COGSOperating Expenses Net Income

Year

Figure 14: Financial Projections

6.3.2 Revenue ProjectionsThis section provides a clear description of the revenues developed during RTR’s operations.

Table 11 below shows the value that each product is expected to generate in the first five-




years. As already mentions, the scrap metal, carbon black, and oil make up 5%, 46%, and 49% of

the revenue projections.

Table 11: Revenue Projections per Product

2018 2019 2020 2021 2022Scrap Metal $61,137 $73,364 $85,592 $97,819 $110,047

Carbon Black $509,476 $611,371 $713,266 $815,161 $917,056

Oil $547,720 $657,264 $766,808 $876,352 $985,896

Total $1,118,333 $1,341,999 $1,565,666 $1,789,332 $2,012,999

A graph of this data can be seen in Figure 15 below. The figure simply shows the significance

that the carbon black and oil have on the total revenue of the business, while the scrap metal

has relatively no impact.

2018 2019 2020 2021 2022 $-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Revenue Projections

Scrap Metal Carbon Black Oil

Figure 15: Revenue Projection per Product

6.3.3 Cash Flow AnalysisAlthough net income and revenue projections can say a lot about the financial position of a

business, it is also essential to analyze the cash flows that are occurring year to year. As not all

operating expenses are a cash expense, such as Capital Cost Allowance, the net cash flow is not

the same as net income. Figure 16 below shows the expected net cash flows when considering

all investment, operating, and financing activities as highlighted in the attached excel




spreadsheet. It is noted that the decrease in cash flows after year two is due to the dividends

payments being made based on net income. It was assumed that if net income reached a value

above $300,000, which is over three months of operating expenses, a dividend payment would

be made.

2018 2019 2020 2021 2022 -

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Net Cash Flow

Figure 16: Net Cash Flow

6.4 Financial PerformanceAs discussed earlier, the net income for the business looks promising in the first five years, with

a steady increase over the period. Even with a positive net income, it is hard to see how the

business will perform in relation to the required capital budget of $2,119,214. The distribution

of this capital budget has a large impact on the financial performance, which again is 67% bank

debt, 19% government grant, and 14% equity. Table 12 below highlights the key performance

factors when considering 20 years of operations. For year 5 and on it was assumed that the

production capacity would remain the same with cash flow increases based on an inflation rate

of 1.6%.




Table 12: Financial Performance

Performance Factor ValueNet Payback $16,419,047

NPV $2,091,583IRR 120.7%

Average 5-Year Net Income

$458,468

When observing the financial performance, it is obvious that this business has a lot of potential.

The required rate of return was estimated to be 25% as this business could be risky, but as

shown in Table 12 the IRR exceeds this value. Furthermore, the net payback and NPV of the

business far exceeds expectations. These numbers seem to be high, but when considering the

increases in revenue as operating expenses have decreased it is reasonable. But, to limit the

possibility that these numbers are incorrect a sensitivity analysis was performed which will be

discussed later.

6.5 Break-even AnalysisTo see the success of the business, it is important to compare the expected production and

revenue projections to the breakeven production quantity. The breakeven analysis was done

calculating the required quantity of tires processed to produce a taxable net income of zero. In

doing these calculations, the required production capacity was found as highlighted in Table 13

below. As shown in the table, the expected production capacity far exceeds the breakeven

requirement with a safety cushion ranging from 7.8% to 53.5%. To give a clear image of this

data, Figure 17 was created as shown below. Again, this graph shows how the expected

production is well over the required production to breakeven.




Table 13: Breakeven Analysis

Base tonne of tire/year

2264 2717 3170 3623 4076

Breakeven tonne of tire/year

2087 2000 1953 1919 1897

Safety Cushion

7.8% 26.4% 38.4% 47.0% 53.5%

1 2 3 4 50

50010001500200025003000350040004500

22642717

31703623

4076

2087 2000 1953 1919 1897

Year

Tonn

e of

TIre

s/Ye

ar

Figure 17: Breakeven Analysis

6.6 Sensitivity AnalysisIn doing a sensitivity analysis for RTR, there were two main variables that could have a large

impact on the financial performance: quantity of tires produced and the selling price of the

three products. If the tires that are produced are over-estimated, they may become lower than

the breakeven points. Similarly, if the selling price of the products is diminished then the net

income for the business will drastically change.

6.6.1 Production Quantity Sensitivity AnalysisThe production quantity is the variable that has the largest impact on the net income and

financial success of RTR. If the production is not there, either is the business. In doing a

sensitivity analysis on this variable, the production financial success factors were calculated




using a range of 1,250 to 3,000 tonnes in the first year, while the following years were derived

from this number. Keep in mind, the actual production capacity estimated for the first year was

2,264 tonnes. Table 14 below highlights the changes in average 5-year income, net payback,

IRR, and the year five owner’s compensation with the changes in production quantity. When

looking at these values, it is noticed that if the production quantity dips to 1,250 tonne per

year, the IRR will diminish under the required rate of return. Furthermore, when looking at the

year-end cash balance, RTR would go broke in the two worst case scenarios. With this in mind,

RTR should have no problem keeping a production quantity over this value. It is also important

to note the substantial increase in IRR as the production quantity is increased to 3,000 tonnes in

the first year, reaching a value of 209.3%.

Table 14: Production Quantity Sensitivity

Tonne/Year Average 5-year Profit

Net Payback

IRR Year 5 Owner Comp

Cash Balance

1250 (100,952) 2,560,196 17.1% 120,946 Negative in 5 years

1500 51,411 6,202,639 39.5% 141,362 Positive in year 3

1750 189,358 9,652,852 64.3% 509,845 Positive throughout




2750 700,529 22,731,776 179.2% 1,069,278 Positive throughout

3000 823,161 25,975,707 209.3% 1,206,072 Positive throughout

As IRR is the main financial performance factor to be considered when considering whether this

business is feasible, Figure 18 was created as shown below. This graph simply shows how the

IRR changes as the production quantity changes. The red dot in the figure represents the base

case for the analysis.




Figure 18: IRR Sensitivity as a Function of Production Quantity

6.6.2 Selling Price Sensitivity AnalysisSimilarly, if the market price for the three products sold suddenly falls, the financial

performance of the business will be greatly affected. In performing this analysis, the selling

price of the three products ranged from a decrease of 30% to an increase of 30%. For example,

the base case predicted the selling price of metal, carbon black, and oil to sell at $300/tonne,

$900/tonne, and $60/BBL respectively, while the decrease of 30% has them selling at

$210/tonne, $630/tonne, and $42/BBL. Although it is unlikely that all three products price

drops by this much, it gives a good idea on the impact it could have on the business. Table 15

below highlights the financial performance with this variation in selling price. When observing

the data, it is important to note that even with a 30% drop in market price the IRR stays above

the required rate of return. In addition, in the worst-case scenario it seems that RTR would go

broke. Although this is true, as the market prices were estimated using a conservative approach

so it is unlikely that this will occur. As a result, it is concluded that the market price does not

have as big of an impact as the production quantity.

Table 15: Product Price Sensitivity

Product Purchase Price

Average 5-Year

Net Payback

IRR Year 5 Owner

Cash Balance




Profit Comp-30% 69,725 6,533,505 42.3% 216,095 Positive in

year 3-20% 203,692 9,999,682 67.0% 526,650 Positive

throughout-10% 332,509 13,212,384 93.8% 670,003 Positive

throughout0 458,468 16,419,047 120.7% 804,440 Positive

throughout10% 580,932 19,591,727 150.6% 937,061 Positive

throughout20% 701,535 22,763,357 179.6% 1,070,590 Positive

throughout30% 821,155 25,930,071 209.1% 1,204,119 Positive

throughout

Again, as IRR is the most important financial factor when considering the feasibility of RTR, it’s

sensitivity was graphed as shown in Figure 19 below. The red dot in the figure represents the

base case for the analysis.

Figure 19: IRR Sensitivity as a Function of Product Price




6.7 Risk AnalysisWhen considering the financial performance of Re-Tired Reclamation, there are obviously

multiple risks involved including those involved in the sensitivity analysis. Table 16 below

highlights the five main risks involved in the business. These five risks include the sales volume

(ability to sell the product), the inability to get a government grant, the quantity of production

(discussed in sensitivity analysis), the quality of the oil produced being poor, and the product

selling price (discussed in sensitivity analysis). The table below shows the way of mitigating

these risks to ensure they do not have a significant impact on the financial performance of RTR.

If all mitigation factors are considered when moving forward, there should be no major issues

for the business.

Table 16: Risk Analysis

Risk Mitigation

Sales Volume • Developing working contracts

Inability to get Government Grant • Raise more equity or increase bank loan, feasible regardless

Quantity of Production • Follow through with marketing plan

• Develop contracts with tire shops

Oil Quality • Sell to producer rather than refinery, take a small loss

Product Selling Price • Develop working contracts

7.0 ConclusionAfter due consideration and analysis of the first five years of operation for Re-Tired

Reclamation, it appears that the business is indeed feasible. In proceeding with the business,

there are a few key steps;

1. Develop the business plan (done);48



2. Gain working contracts with purchasing segments and possibly some providers;

3. If contracts with purchasers are developed begin raising the required funding;

4. With the funding, begin building the business. During the building of the business, tires

can start to be collected to ensure efficient inventory to reach the required production;

and

5. Begin operation.

If contracts cannot be developed with purchasers, the feasibility of the business will likely

diminish. It is highly important to have these contracts in place to develop a reasonable market

price for the products and ensure business success. Upon success in the first five years, it can be

possible to expand to increase the profitability of RTR. In conclusion, it is recommended that

this business can be pursued.

Works Cited




Alibaba. (2017). Continuous Waste Rubber/Plastic/Tire Recycling Machine to Fuel Oil, Carbon Black and

Steel Wires. Retrieved from Alibaba: https://www.alibaba.com/product-detail/Continuous-

Waste-Rubber-Plastic-Tire-Recycling_60497140163.html

Canadian Association of Tire Recycling Agencies. (2017). Tire Recycling in Canada. Retrieved from

CATRA: http://www.catraonline.ca/

Eco Green Equipment. (2015). Eco Green Granulator. Retrieved from General Recycling:

http://www.general-recycling.eu/granulating.html

Gardner Denver. (2017). Blowers. Retrieved from Gardner Denver:

http://www.gardnerdenver.com/gdproducts/blowers/

HANNAH RAPPLEYE, S. G. (2014, December 03). Is Rubber Mulch a Safe Surface for Your Child’s

Playground? Retrieved from NBC News: http://www.nbcnews.com/storyline/artificial-turf-

debate/rubber-mulch-safe-surface-your-childs-playground-n258586

Historical Commercial Rate. (2016). Retrieved from SaskEnery:

http://www.saskenergy.com/business/comrates_hist.asp

Jiangyin City Longtai Machinery Co. (2014). Tire cutter, Cutting machine, for tire recycling plant, pyrolysis

plant-Convinient Design. Retrieved from Jiangyin City Longtai Machinery Co.:

http://www.dieselengine001.com/sell-

tire_cutter_cutting_machine_for_tire_recycling_plant_pyrolysis_plant_convinient_design-

203621.html

Korzeniewski, J. (2009, April 17). Sobering Statistics: How long will it take for your car to decompose?

Retrieved from AutoBlog: http://www.autoblog.com/2009/04/17/sobering-statistics-how-long-

will-it-take-for-your-car-to-decom/

OTR-Recycling. (2017). The Ugly Trough Specialists. Retrieved from OTR-Recycling: http://www.otr-

recycling.com/

Peyman, J. (2013, July 10). Double Pipe Heat Exchanger Design, part 1. Retrieved from Scope WE a

Virtual Engineer: http://scopewe.com/double-pipe-heat-exchanger-design-part-1/

Power Rates. (2017). Retrieved from SaskPower:

http://www.saskpower.com/accounts-and-services/power-rates/




Saskatchewan Scrap Tire Corporation. (2017). Products. Retrieved from Scrap Tire:

http://www.scraptire.sk.ca/products

Shercom Industries. (2017). Retrieved from Shercom Industries: http://www.shercomindustries.com/

Takallou, H. B. (2015, May 6-8). Waste Tire Management and EPR Programs in the United States and

Canada. Retrieved from RCBC: http://www.rcbc.ca/files/u7/RCBC2015_CRMTakallou.pdf

The Statutes of Saskatchewan. (2005). The Municipalities Act. Retrieved from Saskatchewan

Government: http://www.qp.gov.sk.ca/documents/English/Statutes/Statutes/M36-1.pdf

Titan Tire Reclamation Corp. (2016). How it Works. Retrieved from Titan Tire Reclamation:

http://titantirereclamation.com/

8.0 Appendices8.1 Appendix A: Excel Spreadsheet

See the attached excel spreadsheet for all calculations discussed throughout this business plan.




8.2 Appendix B: Burner Specifications




8.3 Appendix C: Capital Cost ResourcesTable 17 outlines the resources used for the capital costs.

Table 17: Capital Expense Sources

Capital Expense

Resource

Building (60'x120'x18')

http://www.warmanhomecentre.com/departments/builds/farm_buildings/

Office Development

http://smallbusiness.chron.com/average-cost-renovate-office-space-31284.html

Concrete pad

https://howmuch.net/costs/slab-equipment-pad-concrete-install-build

Furnace http://www.homeadvisor.com/cost/heating-and-cooling/install-a-furnace/Water Heater

http://www.homeadvisor.com/cost/plumbing/install-a-water-heater/

Bathroom Installations

https://www.rona.ca/en

Light Fixtures

http://www.warehouse-lighting.com/warehouse-industrial/high-bay-lights/compact-fluorescent-(cfl)

Location Sign

http://signsbycrannie.com/outdoor-business-sign-cost/

Utility Installs

http://www.homeadvisor.com/cost/electrical/install-electrical-wiring-or-panel/

Gravel Road http://www.gravelproductsinc.com/calculator.php Quarter Section of Land

http://www.producer.com/2015/07/sask-farmland-perception-versus-reality/

750 Barrel Tank

http://calroc.ca/equipment/glm-750-bbl-sales-tank/

Vessels (2 vessels)+Insulation

http://www.matche.com/equipcost/Vessel.html and http://www.finehomebuilding.com/2012/01/24/buyers-guide-to-insulation-spray-foam

Burners and accessories

Honeywell Process Solutions

Gas Piping https://www.rona.ca/enHeat Exchanger

http://www.matche.com/equipcost/Exchanger.html

Tire Cutter https://www.alibaba.com/product-detail/QDJ-Tire-Cutter-waste-tire-recycling_838610210.html

Industrial Magnet

https://www.alibaba.com/showroom/industrial-electromagnet.html

Propane Tanks

https://www.thriftypropane.com/purchasetank



http://www.matche.com/equipcost/Exchanger.html

http://calroc.ca/equipment/glm-750-bbl-sales-tank/

http://www.producer.com/2015/07/sask-farmland-perception-versus-reality/

http://www.gravelproductsinc.com/calculator.php

http://www.homeadvisor.com/cost/electrical/install-electrical-wiring-or-panel/

http://signsbycrannie.com/outdoor-business-sign-cost/


Metal Bin https://scsinc.ca/ Rubber Bin https://scsinc.ca/ 2 loaders https://www.fastline.com/v100/listings.aspx?

Category=Loaders&Manufacturer=John+Deere Air Compressor Pumps

http://www.gardnerdenver.com/gdproducts/blowers/?gclid=CjwKEAiArbrFBRDL4Oiz97GP2nISJAAmJMFa4aQWGPeXnjbuNxz-OPGZ_203N82-OWjxrkX3wVbbTxoCRvrw_wcB

2017 Ford F-150

http://fleetowner.com/blog/big-rigs-big-costs

Semi-trailer unit


Vac truck http://www.commercialtrucktrader.com/Vacuum-Trucks-For-Sale/search-results?category=Vacuum+Truck%7C2009082

Website http://www.websitebuilderexpert.com/cost-to-build-a-website/



http://www.websitebuilderexpert.com/cost-to-build-a-website/

http://www.commercialtrucktrader.com/Vacuum-Trucks-For-Sale/search-results?category=Vacuum+Truck%7C2009082

http://www.commercialtrucktrader.com/Vacuum-Trucks-For-Sale/search-results?category=Vacuum+Truck%7C2009082



https://www.fastline.com/v100/listings.aspx?Category=Loaders&Manufacturer=John+Deere

https://www.fastline.com/v100/listings.aspx?Category=Loaders&Manufacturer=John+Deere

https://scsinc.ca/

https://scsinc.ca/


8.4 Appendix D: Five-Year Operating ExpensesAll links used for the data for operating expenses is highlighted in Table 18 below.

Table 18: Operating Expense Sources

Expense Salary Basis LinksAdvertising https://www.bdc.ca/en/articles-tools/marketing-sales-export/

marketing/pages/survey-what-businesses-are-doing.aspxEmployee Benefits (salary)

https://www.payworks.ca/payroll-legislation/CPPEI.asphttps://www.payworks.ca/payroll-legislation/VacationPay.asphttp://www.managingyourhr.com/Employer-Healthcare-Costs-Rising

Employee Benefits (hourly)

https://www.payworks.ca/payroll-legislation/CPPEI.asphttps://www.payworks.ca/payroll-legislation/VacationPay.asphttp://www.managingyourhr.com/Employer-Healthcare-Costs-Rising

Health and Safety

Training

http://leavitttraining.com/index.cfm?action=store.home&PageNum_Results=7&category=132&secondary=0&Language=1

Insurance http://www.commercialtruckinsurancehq.com/tractor-trailer-insurance-cost

ISO Certification

http://the9000store.com/iso-9000-tips-how-much-does-it-cost/

Telephone/Internet

https://www.sasktel.com/store/browse/Personal/Home-Phone/_/N-26vk

Tools http://education.costhelper.com/auto-mechanic-schools.htmlUniforms https://www.walmart.ca/en/clothing-shoes-accessories/men/

mens-uniforms-and-workwear/coveralls/N-2867Plant

operatorBased on ADM https://www.careerbliss.com/adm/salaries/

Collection Based on grain truck driver

http://www.payscale.com/research/CA/Job=Truck_Driver,_Heavy_%2F_Tractor-Trailer/Hourly_Rate

Admin Based on Canada Admins

http://www.livingin-canada.com/salaries-for-administrative-clerks-canada.html

Loader Based on Canada average

https://www.glassdoor.ca/Salaries/front-end-loader-operator-salary-SRCH_KO0,25.htm

Plant Manager

Based on Canada Average

http://www.payscale.com/research/CA/Job=Plant_Manager,_Manufacturing/Salary/955413f5/Toronto-ON

C,S, & M Manager

Based on Aspen Heights

https://www.glassdoor.ca/Salaries/sales-and-marketing-manager-salary-SRCH_KO0,27.htm?countryRedirect=true

CEO Lower than Canadian Average

http://www.payscale.com/research/CA/Job=Chief_Executive_Officer_(CEO)/Salary




8.5 Appendix E: Sources for Marketing Costs and Projected RevenuesTable 19 below shows the sources used to determine the marketing costs.

Table 19: Marketing Cost Sources

Marketing Costs

Sources

Google ads

http://www.wordstream.com/blog/ws/2015/05/21/how-much-does-adwords-cost

Website https://www.atilus.com/what-does-a-website-cost-web-site-development-costs/

Social Media Ads

https://adespresso.com/academy/blog/facebook-ads-cost/

LinkedIn https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/georgeanders/2015/01/06/linkedin-reprices-premium-services-hoping-users-wont-turn-furious/&refURL=https://www.google.ca/&referrer=https://www.google.ca/

Business Cards

http://www.vistaprint.ca/business-cards.aspx?couponAutoload=1&GP=04%2f09%2f2017+14%3a01%3a22&GPS=4356254479&GNF=0

Similarly, Table 20 below highlights the sources used in determining the projected revenues.

Table 20: Sources used for Revenue Projections

Material SourceAverage price of carbon

blackhttps://www.alibaba.com/showroom/price-of-carbon-black-per-ton.html

Average steel price https://www.quandl.com/collections/markets/industrial-metals



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