Official Business Plan

Methane Cookstove
by BioPower
Team 4: Mathieu Lavoie Sabourin, Marcus Moore, Madison Morman, Tom Schnee

Instructors
Constantine Polychroniou
Neil Choudhury
Jocelyn Desrochers
Tobi Rodrigue

03 December 2015

Table of Contents

Official Business Plan

1. Executive Summary.... Page 3
2. Business Overview....... Page 4
3. Sales and Marketing Plan. Page 14
4. Operation Plan........... Page 18
5. Human Resource Plan... Page 21
6. Action Plan and Deadlines Page 22
7. Annex - Financial Plan.. Page 24
APPENDIX..................... Page 31
Bibliography................... Page 35

1. Executive Summary
BioPower is a social entrepreneurship company created by four of the most determined and dedicated
entrepreneurs who value the environmental health of consumers as well as a sustainable economic
development for the generations to come. We value the critical needs of developing countries, such as the
need to boil water and cook food. In order to meet those needs, we created a product for the health and
benefits of our consumers.
Now bear in mind the following statement, as it defines our business: Our mission is to provide a clean
and responsible source of energy for the health and sustainability of rural China. There are extremely
harmful effects from the pollution produced as a result of coal fired cookstoves. Every day in China, 4400
people die due to air pollution. Our company has come up with a solution. The Biogas Cookstove is
powered by methane produced from the fermentation of biowaste. It therefore uses a totally renewable
source of energy while eliminating the need for coal. You can be part of this radical change that can
positively impact millions of people.
A comprehensive analysis of the Chinese market shows an exciting trend towards the use of natural gas
instead of coal as a source of energy. The use of coal is decreasing rapidly while the use of biogas is
increasing at a steady rate. The Chinese State Council also issued an anti-pollution plan which contains a
measure which aims for a reduction in the use of coal. The Chinese government has also invested millions
of dollars to encourage the massive adoption of biowaste digesters as a source of energy by providing the
citizens with financial subsidies.
In order to fund our mission, we are asking investors for $225,000. From this amount, we expect to get a
3.69% return on investment in the first year of operation and a capped 5% return on investment for the
years to come with an exponential growth of our consumer base. This plan is based on a steady growth of
our sales force coupled with increasing expenses in bonuses, tools, training and marketing. Projections for
growth and nationwide adoption of the Methane Cookstove by BioPower are promising with more than
42,000 units sold in the first 5 years of operation. The social benefits of this business, however, are even
bigger. Were talking about a significant improvement of the indoor air quality in our clients homes, a
massive long term savings in coal expenses for rural household and a decrease of 18850 tons of CO2
emissions within 5 years only.
In the long term, we plan to expand by opening a new manufacture plant in another region of China,
therefore increasing our market share and sharing with the world our vision of energy independence,

sustainability and health for the generations to come. Today, you have the opportunity to be part of greater
task for the good of mankind.

2. Business Overview
A.

Description of the Business

The mission of our business is to prevent illness and deaths related to indoor pollution caused
by coal-fired cookstoves. In order to achieve this mission, we have developed a MethanePowered Cookstove for sale within the business of environmentally friendly consumer goods,
specifically in the market of food preparation appliances. Not only will our product reduce
these illnesses and deaths, but it will also provide a financial surplus for the consumer in the
long run and produce a fertilizer byproduct as well. As a social entrepreneurship business,
this product has an incredible social and financial value for potential investors and BioPower
consumers.
B.

Main Demographic, Social, Economic, and Cultural Factors

We have chosen to market our product to the Sichuan Province of rural China. The decision
was made to market to this region largely due to it producing the largest pork output in China 1.
It was imperative that the region we chose had a strong agricultural setting because the
methane that powers our product relies on the fermentation process of animal waste.
Additionally,while anaerobic digestion occurs between 32 F (0C) and 150 F (65C), the
optimum temperature range for methane generating microbial activity is 85F (29C) to 95 F
(35C)2, which is the same climate experienced in the Sichuan Province. In this major
agricultural region, the traditional reliance on coal as the primary fuel source to cook food
harms the environment and enables our company to have a true social and environmental
benefit. In the Sichuan province there is a total population of 46 million with three people in
each household. This population ensures an estimated 15 million families to target, ensuring
a sufficient potential consumer base to support business in this region.
C.Main Actors
To successfully offer our product to consumers of rural China, a matured understanding of
main actors holding presence within our products business model is necessary. As an
1 http://thechinaperspective.com/topics/province/sichuan-province/
2 http://www.small-farm-permaculture-and-sustainable-living.com/methane_generator.html
4

introduction to the main actors in our business venture, below is a brief description of each
(More detail in the Sales and Marketing Plan):
a.

Suppliers

In order to obtain the proper components of our cookstove, we sourced 4 suppliers all
located in Mainland China. We have Innopack Suzhou Co, which supplies us with
plastic parts. Shenzen Puxin Technology supplies us with specialized parts. Cixi
Shinehold supplies the metal pieces and Shanghai Ruihe Enterprise Group takes care
of our specialized pipes. Additional benefits of these suppliers includes that supplier
pricing incorporates shipping costs thus addressing shipping cost need.
b.

Distributors

Distribution is organized into two parts, ordering and product shipping. In order to
make sure that the cookstoves reach the rural regions of Sichuan, our company has
hired sales representatives to interact with customers. An order is placed with the
sales representative and our product is immediately shipped directly to the customer's
door. In regards to shipping, the product is quite lightweight when the digestate, or
biowaste, container is empty, which makes it more cost efficient to use Chinas Postal
Service to distribute our product to our clients. We will then ship our products from
our small manufacturing warehouse located in the southern outer suburb of Chengdu,
the capital and main economic center of Sichuan.
c.

Clients

The clients that we are targeting are families who live in the in rural areas of the
Sichuan Province in China. In order to sell our product to the people in this region,
we have educated ourselves on the cooking methods that they already use. We know
that they spend around $80.64 on coal every year, which is a cost that we can
eliminate. Therefore, the initial investment to buy our product will in turn yield them
a great return in monetary savings since they will no longer need to buy their old
energy commodity.
D.

Nature of Business Segment

BioPower seeks to solidify positioning within a business segment focused on providing clean
energy through consumer products equipped with a manageable and self-sustaining utility.
Consumption patterns over the past decade have shifted towards focus on markets allowing
for environmental improvement due to the current environmental challenges of modern day
China. The Ministry of Environmental Protection has stated that, One-sixth of Chinas
5

arable land nearly 50 million acres suffers from pollution, and that, More than 13MT of
crops harvested each year were contaminated with heavy metals, and 22m acres of farmland
were affected by pesticides. Arising from the alarming environmental concerns, China has
developed several subsidies encouraging not only rural purchase of home appliances, but
home appliances that benefit the environment. This has influenced rural Chinese consumer
habits and makes this business segment a lucrative venture for most markets.
E.

Trends (tendencies) of Business Segment

Worldwide, the usage of biogas and the implementation of biogas digesters are on the rise.
Mainly due to do global warming and other environmental issues, effective and widespread
implementation of domestic biogas technology has begun and occurred. This occurrence is
mainly in countries where governments have been involved with the sales, subsidies,
planning, design, construction, operation and biogas plants maintenance. The top biogas
producing countries are Germany, USA and India. However, China is believed to be the one
with the highest growth rate in the next 15 years.
F.

Government Regulation

In Sichuan, BioPower would like to initiate business in compliance with all government
standards and regulation of both Sichuan and China. Our team has worked diligently in order
to define exact company registration requirements and processes necessary to legitimize
commerce under the definition of the Chinese government. As this is crucial in the
development of any company, key registration resources have been identified to be the
Development and Reform Commission, Provincial Development and Reform Commission,
and the Administration of Industry and Commerce. Additionally, once BioPower has been
successfully registered and approved for business, we plan on continuing to operate in
compliance with the following Sichuan Company Laws:
Law of the Peoples Republic of China on Chinese-Foreign Contractual Joint Ventures, Law of the
Peoples Republic of China on Foreign-Capital Enterprises, Company Law of the Peoples Republic
of China, Income Tax Law of the Peoples Republic of China for Enterprises with Foreign Investment
and Foreign Enterprises, and Labor Law of the Peoples Republic of China.

Although these regulations are plentiful, they ultimately help facilitate BioPowers ultimate
goal of providing rural Chinese citizens with clean, self-sustaining source of cooking energy
and are therefore welcomed.
6

G.

Market Segment

Within the food preparation appliance market in general, few offer an environmentally clean
and regionally abundant source of fuel. Furthermore, the few companies that do exist fail to
offer an affordable, small-scale utility offered for personal use to consumers. Thus, BioPower
has identified unique opportunity to expand the business of environmentally conscious
consumer goods into the rural Sichuan cookstove market. Because BioPowers unique
offering would be the fore leader in meeting this particular markets needs, it has the
advantage of being able to target the whole population of Sichuan. However, it is beneficial
to identify potential segments within Sichuan. The first segment observed is surrounding
Chengdu, the capital, which is a more urbanized area with a very concentrated population of
approximately 466 people per square kilometer and an average income of about $11,000
year3. The second segment that was identified was rural Sichuan, which is an area consisting
of a relatively large, but less dense population of approximately 306 people per square
kilometer with an average income of about $1500 per year or $4500 per household 4. The
average per capita income for the whole province is around $ 5776 per year5. Thus, it was
concluded that rural Sichuan was less developed, had a great agricultural environment, and
could benefit more from our product. These are some of the many reasons why this segment
has come to define our target market.
H.Products and Services
The product offered by BioPower, is a Methane Cookstove used for clean and
environmentally conscious cooking. Our Methane Cookstove is composed of several critical
parts, which are each designed to contribute to the efficiency of the product as a whole. The
first main component is a plastic barrel, which holds the pig feces and water during the
anaerobic digestion process. The methane gas produced from this fermentation process will
then enter a desulfurizer, which removes the sulphur, increasing cooking efficiency and
protecting the atmosphere from harmful hydrosulfuric acid. Next, the gas enters a biogas
storage bag where the methane gas is collected until the customer uses it as fuel. Once the
valve that releases the gas is opened, it flows through a dehydrator, which acts as a safety

3 http://www.numbeo.com/cost-of-living/city_result.jsp?
country=China&city=Chengdu&displayCurrency=USD
4 http://www.stats.gov.cn/tjsj/ndsj/2014/indexeh.htm
5 http://knoema.fr/atlas/Chine/Sichuan/Average-wage-of-Employed-Persons

device to prevent the flame from going back into the stove. Finally, the burners facilitate the
flame to the customer and allow a safe and efficient way to cook.

I.

Price and Distribution

The price of our product is $160, which includes the bio-waste digester, methane storage bag,
stove, filters, pipes, gas fittings and shipping costs. We will be using Chinas Postal Service to
ship our products from our factory to the clients after we receive orders from our salesmen.
BioPowers manufacturing warehouse will be located in the southern outskirts of Chengdu.
More information about our distribution model is detailed in the sales and marketing plan.
J. Market Trends (tendencies)
Air pollution in China has been quite a severe problem over the last two decades. Due to
rapid industrialization, deforestation and soil exploitation, Chinas air pollution is classified
as dangerous/very unhealthy (220 on the Air Quality Index), which accounts for more than
4,400 deaths every single day. In order to cope with this serious issue, the Chinese State
Council issued an Action Plan in 2013. This anti-pollution plan contains ten pollution
prevention and control measures, one of them being the reduction in coal consumption. The
graph to the right depicts the decline in coal consumption per capita since 1986 in rural
China. As observed in the graph, this 60% decrease is accompanied by a gradual increase in
usage of natural gas.
8

To promote biogas energy usage, Chinas central government invested more than 17 billion
Yuan (2.7 billion USD) alone between 2001 and 2010 as subsidies for the construction of
small-scale biogas digesters in rural households. The declared goal was to tackle the energy
issue as well as to reduce the pollution from livestock and mitigating greenhouse gas
emissions. Resulting from these direct subsidies, the biogas digester demand increased
dramatically at an annual rate of 17.1%. This national loan subsidy program (NLSP)
differentiates between three classes: 800 Yuan (125 USD), 1000 Yuan (160 USD) and 1200
Yuan (190 USD), depending on the region and actual cost for building a digester. This
therefore allows our clients to get reimbursed for the amount they paid for our digester,
directly from the government. While the government is not paying BioPower directly, it is
indirectly benefiting the company by supporting consumers who purchase our product.
K.

Risk Factors

In order to launch with the greatest chance of success, BioPower must be cognizant of
potential risk factors of its business endeavors, and therefore has laid out potential risks
associated with the product on a technical level, the product adoption on a marketing level,
and lastly the potential start-up challenges on a business level.
a.

Technical Risk: Cookstove Quality Assurance

Technical risks associated with the Methane Cookstove by BioPower include methane
combustion, component malfunction, and fecal particulate borne illness. A major
safety precaution that BioPower has undertaken is to ensure the stove portion of the
cookstove stays outside of the consumers home, while the burners connect inside the
home. This ensures that the smell and possible leakage of biowaste will not hinder the
social value associated with the Methane Cookstove.

Methane combustion is a cultural concern established through improperly designed

methane powered cookstoves within the area. While this is a possibility, the proper
durability testing and procedures have been finished. Thus, BioPower has effectively
reduced the risk of any combustion-taking place. A specific test to prevent any leakage
of biowaste or methane gas was also put into place during the manufacturing process.
The possible inhalation of methane can cause health issues such as agitation, slurred
speech, nausea, vomiting, facial flushing and headache. However, the concentration of
methane released by BioPowers product is theoretically anticipated to be lower than
the required 1000 ppm in air to initiate the aforementioned reaction. Thus, with the
Methane Cookstoves safety precautions and instructions, the risks of a component
malfunction can be viewed as virtually negligible.
Lastly, in the Sichuan region, the rate of zoonotic disease, or illness driven by contact
and interaction with pigs and pig feces ranging from a skin rash to more pressing
infection was also a concern that BioPower did not handle lightly. Choosing to have
the biowaste container kept outside immensely reduces any risk for infection regarding
the animal feces. All of the testing and research that has been conducted leads to the
conclusion that the Methane Cookstove by BioPower is a manageable risk product
ready to be placed into the culturally appropriate market. This company will further
reduce the above risks by continuing to test and incorporate more safety precautions.
b.

Marketing Risk: Product Adoption in China

True value in product long term saving coupled with secondary environmental
protection and fertilizer production. However, if the products perceived initial cost is
deemed to be more than its worth, then this primary value would not accepted by rural
Chinese consumers leading to the potential rejection of the cookstove to be a great
marketing risk factor. Thus, in exploring this risk, our team has identified and explored
three consumer cost assessment categories to better understand associated marketing
risk. The three categories are as follows:
i.

Monetary: Chinese rural consumer income

ii.

Energy: Weight of digestate; Amount of energy necessary to fill/ empty tanks

iii.

Time: Using BioPower cookstove vs. coal cooking; Daily opportunity cost

Taking note of these three marketing risk factors, it is apparent that with strong
positioning and proper marketing infiltration strategy, both of which discussed further
in the Marketing and Sales Plan, these risks can be managed and overcome to achieve
success in Sichuan.
10

c.

Business Risk: Start-Up Challenges

Starting-up business within another country is an endeavor that comes with its own
obstacles and challenges. However to accommodate for the challenges of registering
business and managing hiring of employees, BioPower has set a foundation of great
adaptation abilities in the way of setting relationships with suppliers based on product
demand and with our distributors based on reward. Furthermore, in the chance of a
new market presence or a cultural shift, the company plans to protect itself through the
use of interpersonal connection between our company and the client via brand loyalty
driven by the utilization of familiar and trustworthy sales representatives. These
accommodations come together to support that starting-up the business also presents
low uncertainty and thus low risk.
L.

Competitors and Type of Competition

Below is a breakdown of our main competitors who also build small-scale methane digesters:

Company

BioPower

Shenzhen Lungjyun

Shenzhen Puxin

1 Cubic Meter

1.5 cubic meter

1 cubic meter

Waste storage
(m3)

0.25 cubic meter

1.5 cubic meter

2 cubic meter

Waste storage
(kg)

125kg

750kg

1000kg

Max Methane
Output / Month

50 cubic meters

300 cubic meters

400 cubic meters

Max Standard
Coal
Equivalent /
Month

67.5kg

405kg

540kg

Includes stove

Yes

No

Yes

Presence of

No

Yes

No

Methane Storage

11

oxygen
Includes
desulfurizer

Yes

No

Yes

Includes
dehydrator

Yes

No

Yes

Solar pump

Optional (64$)

no

Yes

150$

800$

1407$

Price

Our digester is the easiest to access in terms of price. We are targeting the ordinary family
while the other two competitors presented here are targeting small domestic farms. Our
product is made to provide enough energy to sustain the cooking needs of an ordinary family
while the others are meant for more than just cooking. There are several production scale
digester units on the market; however, these are manufactured mostly for large-scale
commercial operations. If we look at the way the other companies market their products, we
immediately see that they target wealthier people with bigger needs than the average rural
family for which their prices are simply too high. Their products are only sold solely online
while ours will be the first to be sold in small villages through direct sales. Finally, our
product truly differentiates itself by targeting the people who need it the most and couldnt
afford an alternative source of energy before we came to the market.
There are two types of competition that we face in our market. If we look at the methane
digester and methane cookstove market, it is realized that it is pure competition, meaning that
the barriers to entry are low and that there are many companies competing with none having a
significant advantage. However, if we look at the energy market, we fall into an oligopoly
since a few multinational companies dominate the coal industry. Since our product is mainly
for cooking, we dont really fall into this market per se. We do however offer an alternative
that can reduce or eliminate the dependence to the polluting products sold by the big
companies who compete in the energy market.

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M. Strengths and weaknesses of competitors

The strengths and weaknesses of our two most direct competitors are explained in the table
below:
Company

Strengths

Weaknesses

Shenzhen Lungjyun

Digester and methane storage

combined
Has a greenhouse to improve
digestion
Easy to assemble
Movable

Expensive
Accessories sold separately

Shenzhen Puxin

Best output for a small scale

digester
Comes with multiple
accessories
Includes accessories

Very expensive
Complicated to assemble
Hard to move

N.

Competitive Advantages

Our main competitive advantage is that our product is available at a very low cost. This
allows for average rural families to afford purchasing it. In fact, if we look at the competition,
we have the lowest price for a bio-waste digester with the methane storage and the stove
included. We even include security valves and the adequate filters to guarantee the security of
the user and the efficiency of the methane when it burns. Our product provides enough
methane to secure the cooking needs of a small family of three people. Furthermore, it can
even save them the $80 per year they spend on coal on average. Our competitive advantage is
therefore that our product is the easiest to access and to afford while providing enough
methane to totally replace coal in an average household.

13

3. Sales and Marketing Plan

A.

Clients

The clients that we target are Chinese families in the rural area segment of Sichuan. These
families consist of an average of three people, which enables them to combine their incomes
for more buying power. Sichuan families typically own livestock, which from regional
custom has become predominantly swine or pigs. They therefore consistently have access to
pig manure in order to feed our digester. Additionally, as mentioned before, it is known these
families currently spend on average $80 a year on coal. They spend on average 6308 per
Yuan was spent per person per year as of 2013 and 15191 Yuan per household per year for
2013 as well which amounts for 2402 USD. These expenses are however rising sharply with
an inflation rate of 2.4%. Finally, the minimum salary is set at $130$ USD per month for a
total of 1560 USD a year.
Furthemore, from this understanding of the client, also the consumer of our product, the
defined target market segment is broken into five regions. Each region is 30,000 square
kilometers in size, approximately one sixth of Sichuan, and consists upwards of an estimated
9.18M people. The regions are labeled one (R1) through five (R5), which coordinates to the
exact year in which BioPower Sales Representatives will begin sales within the region. For
example, the 20 initial Sales Representatives will cover sales throughout about 1,500 square
kilometers each in their first year to cover all of R1, translating into about 125 square
kilometers per month, per representative including only about 72 families per month, per
representative. Overall, this region to region approach combined with the steady addition of
sales representatives leads BioPower to the ultimate goal of meeting the cookstove needs of
all of our target market, rural Sichuan, within five years time.
B.

Suppliers

In order to obtain the proper components of our cookstove, we have four suppliers all located
in Mainland China who will ship us the different components for us to assemble our product
at our factory. We have Innopack Suzhou Co who supplies us with plastic parts; this includes
the plastic barrel in which the bio-waste is stored as well as the plastic box, which holds the
whole unit together. Shenzen Puxin Technology supplies us with specialized parts since they
14

are also in the methane digester industry. Even if they are a competitor, they agreed to sell us
separate parts to increase their sales volume. They provide us with the methane storage bag,
the desulfurizer, the dehydrator and the adequate gas fittings to connect the whole system.
Cixi Shinehold supplies us the metal pieces such as the stove itself and the stirrer to mix the
waste inside the barrel. Finally, Shanghai Ruihe Enterprise Group which takes care of
providing us with specialized pipes in which we will put the slurry inside the barrel and
similar pipes, which will serve as a purge. All the prices we got from different suppliers
includes shipping to our factory (FOB). For a brief overview with the supplied components
and the related certifications our suppliers possess, please refer to the table below:

Supplier

Experience

Components

Certifications

Schenzen Puxin

Established in 2001

Methane bag, Desulfurizer,

Blue Sky Award (UN)

Dehydrator, Gas fittings

Innopack Suzhou

Established in 2006

Plastic barrel, Plastic box

N/A

Cixi Shinehold

Established in 2005

Stove, Stirrer

ISO9001,ISO14001

Shanghai Ruihe

Established in 2002

Pipes

ISO9001,ISO14001

C.

Publicity/ Promotion/ Commercialization

In the Sichuan province there is a total population of 46 million with three people in each
household. This population ensures an estimated 15 million families to target. In order to
present ourselves as a credible company, we will use grassroots marketing. In the first year
we will give away ten free stoves in key villages spaced evenly around the Sichuan province.
Once the families who receive these free cookstoves have a positive experience, they will
recommend our product to their friends and neighbors. This word of mouth method will cut
down the costs that would accumulate from huge investments in other advertisement
methods.
The Chinese consumer is more likely to trust doing business with someone who has a similar
background. We will hire a local salesperson in each community who knows the region,
language and customs. The sales representative will need to inform the people in the Sichuan
region that their health is being negatively impacted by indoor pollution and that our
company wants to help. This salesperson will make sure to present a good quality to price
ratio and will provide simple instructions on how to use the product.

It is also very

important to let the customer know that our product is a one-time investment that will save

15

them money that wouldve been continuously spent on coal. As an added benefit, they
should know that our cook stove will produce a fertilizer byproduct to help their crops grow.
Our company will also be featured on Alibaba.com and we will launch a website. This will
ensure that our company doesnt miss any opportunity to penetrate the market. Although
there isnt much internet usage in this province presently, it is growing rapidly. Alibaba ask
for a commission per sale which is equivalent to the commission we pay our reps. Our own
website will be an e-commerce which we will manage ourselves to sell additional products to
consumers outside our target market. This is also essential to assure the long term viability of
our business since e-commerce is thriving fast.
Lastly, as you will see in our financial annex, we will most likely be generating surplus
within our second year of operation. On year two, we plan to have 7917$ of surplus to
reinvest in marketing initiatives to improve next years sales. We will therefore reinvest this
amount proportionally to the percentage of sales coming from a source or another, whether
they are coming from our representatives or from our web presence. In our second year of
operation, we plan to make 4848 sales with 48 coming from the web. We will therefore be
investing 99% of this surplus in bonuses, formations and tools for our sales representatives
such as communication means (cellphones or tablets) that will make it easier for them to send
orders to our factory since they wont have to send the documents from their homes internet
connection. We will start with training and tools for the whole enterprise and then give the
bonuses starting with the highest performing representatives until the budget is entirely used.
We know training and tools will help the whole company while the bonuses will help
motivate the salesmen to perform more. The other 1% will be reinvested in search engine
marketing and search engine optimization to improve our websites visibility and traffic,
therefore growing the number of sales coming from this source. We will keep this strategy for
our 4 first years of operation. On year 5 however, we will be using the surplus generated to
buy a second facility. This falls in line with our plan for continued growth and expansion to
new markets.
D.

Price/ Distribution

The price of our product is $160, which includes the bio-waste digester, the methane storage,
the stove, the filters, the pipes, the gas fittings and the shipping costs. We choose this price
since it will be yielding us just enough profits per unit to pay for our fixed costs on a yearly
basis. It is also still in the affordability range of our target market. Now for the distribution of
our product, it will be shipped from our factory, located in the southern outskirts of Chengdu,
16

the biggest city in Sichuan. This location is between the rural regions where our target market
is and the central city where it is easier to get our resources shipped to us. We will be using
Chinas Postal Service to ship our products from our factory to our clients after we receive
orders from our salesmen or from online from at Alibaba and or TMall. Shipping is included
in the price but could be removed if the client wants so desires to come pick up his product
directly at our manufacturing warehouse, therefore slightly alleviating this added cost.
BioPower realizes that although a family may want to purchase our cookstove, they might
have difficulty financing the cost. In order to calm the concerns of the consumer about our
price, we have to show them what they will be saving in the long run. As of now, the average
our targeted consumer is spending $80 on coal every year. That may not seem like much in
the span of a year, but that cost adds up throughout the years. This biogas cookstove will
eliminate their dependence on coal, and free up their assets in the future.
E.

Customer Service Policy

Our customers are our number one priority and their safety is of the utmost importance. The
proper precautions and tests will have been conducted in order to ensure that the quality and
safety of our product is up to standards for use. If our customers have dissatisfaction with our
stove, we will look into any solutions we can provide to meet their expectations. If any
pieces break or get damaged, we can provide a replacement piece. We are proud to say it is
our goal to provide a healthier cookstove, which will protect the lives of more families as we
grow. As a company, it is one of our goals to provide such excellent customer service, that
there is no need to consider alternative sources of supply.
After ensuring that we have put the proper tests and precautions into manufacturing our
product, we must provide a disclaimer before selling it to anyone. The disclaimer will act as
a way to eliminate or reduce any liability to investors and owners of the business if the
product is misused. The disclaimer of our stove will state as follows:
WARNING:

This product contains methane gas, which is combustible when in

contact with a flame. Installing, operating, or otherwise utilizing this device in any
way, indicates the owner of this device has read and accepted these terms and
conditions and limits of liability and warranty. Use of this device is at the owners
own risk and any disregard to the directions of use may result in injury or death. We
will not be liable for any loss or damage of any nature or any losses arising out of
any event or events beyond our reasonable control.
17

4. Operation Plan
A.

Location of Production

In order to assemble the different components of our product, we need a small shop. Our idea
is to buy most of the components necessary to the assembly of one digester on demand so
that we dont have to pay for storage space. Another advantage to that is that we then have
more liquidity available rather than stored assets. Since we will buy the components on
demand, we figured out that we would only need 150 square meters to start. We decided to
buy this space outside of the city center. The prices outside the city center, which will bring
us closer to our target market (rural areas) is approximately 800 Yuan per square foot. We
need 150 square meters, which means we need 1612 square feet. The total price to buy a
space this size would then be approximately 1291200 Yuan, which amounts for 200,000USD.
Buying a factory allows us to own a fixed asset, which can be sold if we need liquidity to
expand to a bigger one. Well go more into detail about that in the financial plan. The main
benefits of a factory outside the city center are that the price are more affordable and that it is
still relatively close to the rural regions we target. It is also close enough to the city center to
make it easy for us to receive the components necessary to build our product easily at an
affordable price since getting those components shipped far from a major city would increase
the cost of sales.
Here Below is cartography of our operations using the ANSI system outlining our
manufacturing logistics:

18

B.

Equipment/ Technology

For the equipment we determined we would need a maximum of 5000$ to buy furniture, tools
& amenities for the employees. Since all our components are already conceived to be used
immediately, we dont need any special technology to transform them. All we need is some
basic tools to puncture holes in our barrels, insert pipes, bolt them to the digester, glue the
fittings hermetically and screw the box together. For these same tools we included storage to
keep the work space clean . Lastly, we are getting basic amenities for our employees to eat
and rest and therefore to ensure their efficiency while they are at work.
C.

Research and Development (R&D) Plan

The role of Research and Development within BioPower is to grow the benefit of the
Methane Powered Cookstove. In doing so, focus is placed on driving efficiency, assuring
quality manufacturing, and ensuring safety in the designated usage of our product.
a.

Efforts in driving efficiency include: (i) speeding up the fermentation process to

provide more quickly meet consumer need; (ii) further researching product
components to ensure that the best value is received from each individual piece of our
product; (iii) mixing of the fermentation chamber to provide more efficient release of
19

the natural gasses found within the digestate. Currently, these efforts have been
supported by: (i) exploration into methanogenic bacteria, which increase fermentation
efficiency by balancing the types of bacteria present within the fermentation chamber
contributing to the various steps of anaerobic digestion (hydrolysis, acidogenesis,
acetogenesis, and methanogenesis); (ii) growing understanding of the current
desulferizer and the processing it utilizes in order to successfully remove sulphur
which both lowers cooking efficiency and reacts with the atmosphere to form
environmentally harmful hydrosulfuric acid; (iii) planning for experimentation to
determine best mixing blades for digestate. These efforts enable the Methane Powered
Cookstove to continue to lead its non-methane based competitors in efficiency when
placed in direct comparison.
b.

Efforts in assuring quality manufacturing include: (i) inspection of product

components to ensure suppliers uphold commitment to providing products of a decent

standard; (ii) evaluating the successful work of our manufacturers through random
selection of 5 cookstoves daily for leak or designated usage testing; (iii) conducting
consumer reviews after one year with the product to make sure our product is meeting
consumer standard.
c.

Efforts in ensuring safety within the designated use of our product include: (i)

collision testing to ensure that even at maximum methane capacity our product
presents a negligible threat of combustion upon events such as natural disasters (i.e.
earthquakes); (ii) flame flow testing to ensure that the flame of the cookstove does not
travel through the connection piping leading to the methane storage balloon; (iii)
stability testing to ensure that in the addition and removal of feces into the
fermentation chamber, our product does not overturn, potentially trapping or injuring
our consumer.
D.

Environmental Standards/ Responsibility

Throughout operations, BioPower will meet the following environmental expectations as

enforced by the following Chinese legislation:
Environmental Protection Law of the Peoples Republic of China, Law of the Peoples Republic of
China on Evaluation of Environmental Effects, Law of the Peoples Republic of China on Promotion of
Cleaner Production, Law of the Peoples Republic of China on the Prevention and Control of
Atmospheric Pollution, Law of the Peoples Republic of China on Prevention and Control of

20

Environmental Pollution by Solid Waste, Law of the Peoples Republic of China on Prevention and
Control of Water Pollution, and Frontier Health and Quarantine Law of the Peoples Republic of
China.

5. Human Resource Plan

21

The company BioPower is made up of four founders, Mathieu Lavoie Sabourin, Tom Schnee,
Marcus Moore, and Madison Morman. Our Chief Executive Officer (CEO) is Mathieu
Lavoie Sabourin who has a degree in marketing and international commerce with expertise in
finance and research as well.

He oversees and contributes to and facilitates the

administration of BioPowers three core departments: R&D, Manufacturing, and Sales. Tom
Schnee is the Chief Financial Officer (CFO) who has an extensive background in accounting
and finance. His role is to handle all financial responsibilities and must consult with the CEO
with reports each quarter.

Marcus Moore is the Chief Technology Officer who has a

background in engineering, research and technology. His contribution to the company is to

conduct research regarding the optimization, manufacturing quality assurance, and safety
regulation and standards of our product. New developments from this department of the
company he will be presented to all four founders put to a vote to determine new business
direction. In the event of a tie, the CEO has final decision. Lastly, Madison Morman is the
chief marketing officer of BioPower who has a marketing and finance major with experience
in both areas. She also serves as the Human Resources Representative for the company
ensuring the efficiency and productivity of all company employees. Together, we four
founders lead BioPower to success in rural Sichuan.

22

6. Action Plan and Deadlines

In the first year of production we plan to do much Research and Development through
optimization, quality assurance, and safety testing. BioPower also plans to penetrate the
market by giving away ten free stoves as a promotion and featuring its Methane Cookstove
on Alibaba and TMall. Both of these tasks will begin in our first quarter along with hiring a
salesforce to sell the initial sales of the stoves.
In the second year, we want to hear back from our customers that weve accumulated.
Knowing what they think about our product will allow us to improve and make any
adjustments necessary to increase our number of sales. It is also important to renegotiate
supplier contracts to try and get a lower price on parts for our cookstove. This would help us
lower costs, which would increase the demand for our product. Our company will also hold
salesmen reviews in order to make sure our salesforce is being as productive as possible.
In the third and fourth year BioPower plans to reinvest money into marketing in order to
increase sales. Increasing our sales force and reinvesting will be especially crucial at this
time because BioPower will have gained a secure place in the market. We will also be
conducting research to prepare for expansion to the Hubei Province. Our expansion to this
province will be accelerated in the fifth year and a production facility will be bought in
Hubei. On the following page is a diagram that will be used to track our progress toward
these goals.

23

24

7. Annex - Financial Plan

A.

Underlying assumptions for the Financial Plan

Selling Price:

160 USD

Ongoing inflation in Sichuan:

2.4%

Fixed Costs:
Salary for one salesman per month

300 USD

Electricity (monthly)

50 USD

Marketing, Website (monthly)

50 USD

Variable Costs:
Labour per Unit

5 USD

Shipping per Unit

15 USD

Commission per Unit

15 USD

Material per Unit

90 USD

Total

125 USD

B.

Forecasted Sales from year one to year five

On the one hand

There are 15 million families living in our target region, Sichuan. During the first five years
we are aiming to reach an average of 36,360 customers, or in other terms 0.28% of our target
market. In consideration of the tremendous benefits of our product, this number might seem

25

surprisingly low. However, we are still targeting about 36,000 families or in other words
108,000 Chinese people that would benefit directly from this innovative product and all its
advantages.
Furthermore, it is the Chief Financial Officers main task to provide a solid and reassuring
financial analysis of the possible sales figures of the BioPower Biogas Cooking Stove that
take into account potentially occurring risks rather than to promise ludicrous sales figures.
Those risks could be: non responding of our target group to marketing measures, low
performance of salesmen or other internal problems like supply shortage.
We think it is legitimate to assume that one salesman can sell about 120 units (10 per month).
On the other hand
We are convinced that during our intensive research, we got a very deep understanding of our
market and are therefore easily capable to announce an even more optimistic scenario which
estimates that one salesman can sell approximately 168 units (14 per month).

C.

Initial Investment:

One of the biggest questions during the financial planning was whether to rent or to buy the
assembling facility.
a.

Renting:

According to Caixin Online, the rent is about 97,1 yuan per square meter in Chengdu,
which equals 15 USD. A 150 square meter facility would cost 2,250 USD per month.
b.

Buying:

The price to buy a 150 square meter building in the Chengdu suburbs is comparable to
prices in the United States and would be total approximately 200,000 USD, depending
on selection of the exact location.

26

Finally, we decided to purchase the building. Not only do we want to keep the fixed cost low,
but also we found that it was favorable to invest in an asset that will be the basis for our rising
business. In addition to the 200,000 USD for the building, we need another 5,000 USD for
furniture, tools and equipment. Lastly we ask for a treasury of 20,000 USD which will be
utilized to pay for the first salaries and salesmen training.

Dear Investors, we are therefore demanding an initial investment of 225,000 USD to launch
the BioPower Biogas Cooking Stove in the Sichuan Market.

At a Return on Investment of 5%, you as an investor would be having constant monetary

flows of 11,250 USD annually and your capital outflow would be amortized within 20 years.

D.

Calculating the ROI:

Due to the fact that sales per salesman might be very volatile due to various external factors
(climate, performance, etc.), the first two tables show scenarios with constant sales over the 5
years in order to show our performance in good and in bad times. In the third table however
we made a more realistic assumption about the increase of sales figures and the reinvestment
of surplus money. The first two are therefore for information only while the third table is to
be considered as our real 5 years forecast. The following paragraphs will explain in details
how and why we came up with these numbers.
a. This table shows the sales forecast from year one to year five based on a quite
conservative assumption about sales per salesman. As you will see later, 9 sales per
month is just the monthly break-even point for the first salesman. Every additional
sale then creates a profit. However, this forecast allows us to make a realistic yet
careful assumption.

27

As you can see, in the first year we do not fully reach the favored 5% return on
investment. However, the following years compensate for that and even go beyond
this figure.

b.

This second table assumes that in a very optimistic scenario our employees would
easily be able to sell 14 units per month (equal to selling 168 units per year). In this
case, the ROI would increase tremendously. Of course we are aware of the mere
height of return, which is not the main goal of our business. Nevertheless, we
discussed a possible decrease of our selling price but reached to the conclusion that a
net profit of 35 dollars is already the minimum amount we need to succeed in the long
run. As we have very high fixed costs, we need every single salesman to sell as many
units as possible in order to break even. Once this point is arrived, every single unit
that is being sold yields its marginal return. That is also the reason why the second
table shows such high profits and returns on investment.

28

We added an extra row to show how much money we will make every year that is actually
above the 5% ROI. In the first scenario that amount adds up to 89,680 USD over 5 years. The
second scenario yields 457,288 USD in extra money over 5 years.

c.

Being a social entrepreneurship, BioPowers primary interest is not in making as

much money as possible. After looking at these two tables, we decided to use a more
rational approach in which the number of sales per salesman increases over the years
as a result of the bonuses, tools and training in which we invest. You can find these
amounts in the row additional expenses. In the second year we would reinvest
$7917.50 USD into marketing which would then increase our sales per salesman by 5
in the third year. This strategy is to implemented for the following years as well. The
result, as you will see below, is a capped 5% ROI and an exponential increase in sales.

This extra money will be used to reinvest and to finance our action plan (section 6):
1. Sales tools and performance bonuses
2. Salesmen training
3. Web marketing expenses
4. Research and Development for expanding into new regions (Hubei)

29

5. Buy second manufacturing facility

In order to calculate the Return on Investment for year one in the first scenario, we access our
forecasted sales figures.

The Revenues for year ONE are calculated as follows:[1] [ST2] [ST3]
Revenues

Units sold

Selling Price

2424

160 USD

387,840.00 USD

The Fixed Costs for year ONE are calculated as follows:

Fixed Costs

Salesman salary per year * number of salesmen + annual

marketing and electricity expenses + cost of giveaways

* annual

factor
=

3600

* 20 + 1200 + 1250 * 1

74,450.00 USD

The giveaways consist of 24 Units per year * an annual factor (year one = 1, year two = 2,
year three = 3, etc.)
The Variable Costs for year ONE are calculated as follows:
30

Variable Costs

Total Variable Costs *

Units sold

125 USD

2424

303,000.00 USD

Subtracting the total costs from the revenues generated from sales we get our profit:
Profit

387,840.00 USD - 74,450.00 USD - 303,000.00 USD

10,390.00 USD

And after taxes (20% industrial taxes in China):

Profit after taxes

10,390.00 USD * 0.8

=

8,312.00 USD

Return on Investment:
ROI

E.

Profit after taxes / Initial Investment

8,312.00 / 225,000

3.69%

Break-Even Point

At a selling price of 160 USD, fixed costs of 400 USD and variable costs of 125 USD we
reach our monthly break-even point at 9 units sold per salesman. According to current market
31

trends, a relatively price sensitive target market, and more expensive competition, we expect
this number to be absolutely doable.

F.

Income Statements

With the aforementioned assumptions about prices (including inflation) and sales figures we
can deduct an exemplary income statement for Year 1.

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G.

Evaluating the SROI

There are many things we can consider in the social return on investment of our business, The
first social benefits our clients will experience is a significant improvement of the indoor air
quality in their homes. This will in turn reduce the number of air pollution related diseases
and the vitality and health of our clients households. The second and very important social
benefit is the savings in coal expenses that our clients will experience. Since they will no
longer have to buy coal, they will save 80$ per year for the whole life of the product which
can exceed 10 years. The money they save can then be reinvested in other important goods
which is good for the development of their local economy. Finally, we calculated that our
product reduces green house gasses emissions by 184kg per year. If we add up all the yearly
CO2 reduction of all the products we will sell, we get an astonishing 18850 tons of CO2!
Thats 18850 tons of CO2 less being released in the atmosphere! This proves without a doubt
that we can truly have an impact of the health and the environment of world.

33

APPENDECES
APPENDIX A:
Below is our usage cycle to instruct the customer how to use our cookstove:

1.
2.
3.
4.
5.
6.

Load water with pig feces and stir together to form fermentation digestate.
Wait two weeks for fermentation process to produce methane.
Remove valve to release methane stored within cookstove.
Utilize methane produced to boil water or cook food.
Unload portion of old biowaste for fertilizer.
Repeat for renewable cooking fuel!
APPENDIX B
PESTEL Analysis

Political: The politics of Sichuan Province in the People's Republic of China is structured in
a dual party-government system like all other governing institutions in mainland China.The
Governor of Sichuan is the highest-ranking official in the People's Government of Sichuan.
However, in the province's dual party-government governing system, the Governor has less
power than the Sichuan Communist Party of China Provincial Committee Secretary,

colloquially termed the "Sichuan CPC Party Chief.

Economical: Sichuan is one of the major agricultural region of China, rice and wheat being
the main products in terms of output. This region has the largest output of Pork of all
China. Sichuan is one of the major industrial centers of China. In addition to heavy industries
such as coal, energy, iron and steel, the province has also established a light industrial sector
comprising building materials, wood processing, food and silk processing.
34

 Social: The total population of Sichuan province was 87.5 million in 2005, the third largest
figure among Chinese provinces, 27 million out of it are the urban population, accounting for
33% of permanent population, 54 million out of it are the rural population, accounting for
67% of permanent population. The population has shrunk to 80 million as of 2010.
Technological: By the end of 2005 , the subscribers of fixed phone reached 15.7736 million,
and 38% of the population have access to phone. The total number of subscriber of mobile
phone reached 16.8973 million. In 2013, there are close to 26 million Internet users, which
represents 31,8% of the population. This penetration rate is ranked 25th out of the 30
administrative regions of China. Sichuan thus ranks below than Tibet and Inner Mongolia
when it comes to internet usage penetration.
Environmental: Sichuan was struck by an earthquake in 2013, which killed more than 200
people and injured 6000. It however very little compared to another who struck in 2009,
killing 90,000 people. This area, while not as worst as some other parts of China, experiences
a poor air quality on daily basis. The AQI (Air Quality Index), as the time of writing these
lines, is of 93 in Chengdu, the biggest city of the Sichuan region. A 93 represents a grade
twice as high as Montreal and even worst than New York. It is not the worst as some places in

China can score higher than 400, which is described as Hazardous.

Legal: The minimum salary is now the equivalent to 125$ USD in the Sichuan region.
APENDIX C
SWOT Analysis
Conducting a SWOT analysis was an important task in order for us to know our strengths and
weaknesses. For our strengths we have identified that buying our stove for a one time cost
will save the consumer money in the long run. Chinas government has awareness about their
pollution, which we will capitalize on when advertising our product. It is also a strength that
we are using pig feces, which will be a free and natural resource for cooking fuel. As for our
weakness, some we listed in our analysis was the danger of methane, the delivery of our
product, and the risk of not having enough methane for the consumer to cook. Storing and
selling excess methane and the fertilizer byproduct would be a great opportunity for us to
scale up. We also have the opportunity to reduce pollution in China with our product. As for
threats, we are very cautious about the consumer possible running out of methane. Methane
regulations could also be a barrier as well when we try to enter the market. However, the
biggest threat is the possibility of our consumer not changing their current methods of
cooking.

35

APPENDIX D
Scaling Up Potential
We have looked into some opportunities to scale up such as storing the methane and selling it
to homes. We also found the necessary components to add a solar powered pump for bigger
scale methane storage, which costs 64$. Additionally, selling bacteria to families who buy
our stove in order to boost the anaerobic digestion process would allow the methane to be
produced at a faster rate.
Research has found that the performance of most novel methane fermentation reactors are
hindered due to the fact that, ...the overall growth of acidogenic bacteria proceeds faster (10fold) than that of methanogenic bacteria. This results in the accumulation of inhibitory
products like volatile fatty acids and hydrogen gas, ultimately slowing the fermentation
process. Thus the addition of these bacteria to the fermentation barrel would ensure methane
production remains at an optimum level. Several products exist containing these additions
with the top option being the Biogas Catalyst ZH-1001 sold for approximately $20-$25 with a
minimum order quantity of 100 kilograms which would be sufficient for our tank sizing. In
order to reduce costs, alternative methanogenic bacteria packages will be explored, however
at this time, it is believed that the Biogas Catalyst ZH-1001 could offer positive scaling effect
that would increase social benefit.
Lastly, advertising our stove to regions with a lower pig density could enable methane trade
between the regions with a higher and a lower density. This would create income for those
families who have livestock and promote the use of methane as fuel instead of coal. We
could also scale up by selling our stove to other regions with dangerously high air pollution.
The Hubei province in China would be a great region to further promote our cookstove to
because their government has acknowledged the poor air quality. Overall, there are many
promising scaling up opportunities to achieve a sustainable contribution to the communities
of rural China.
APPENDIX E
Energy Savings:
Considering the cost of energy in Chengdu is between 28$ and 67$. However, since we
operate in a rural market we work from the assumption that the cost of energy is the lesser of
the above. So considering our product can replace all of the annual 67kg of coal used by rural
households, and that the coal amounts for 24% of their energy usage, they spend around
6.72$ a month on coal which amounts for 80$ a year. Thus, at a cost of 160$, the price point
36

of our product could therefore be recovered in less than two years of usage, further increasing
the benefit provided by the product and our competitive edge overall.

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