Small-Scale Success Stories

By Ron Kotrba | July 13, 2010
A reader asked the following question regarding one of my F.A.M.E. Forum blog posts in late June, about small- and community-scale producers:

"It seems to me that many of these smaller plants are represented by a very diverse mix of local business models, many with nearly-proven production processes and wishful-thinking business, marketing and distribution plans. The results are mixed. Is there anyone out there who has developed a proven turnkey package for these small plants-one that includes a robust business and marketing plan?"

My August feature article, "The Resilient Community Producers," on page 24, was still in development when I posted the entry to which the commenter referred. I had a lot of great conversations with many small-scale producers before writing the article. One element shared by local community producers is that they take advantage of local opportunities in their specific regions, which would make it tough to develop a cookie-cutter plan for individual locales. Another commonality is that many of them use waste cooking oils collected from local establishments.

Here's a stream of pointers I learned from this inventive crowd. When starting a local project, get investments from local people who have a vested interest in the project's success, rather than from a stranger who is simply looking for a financial return. Know the feedstock and end markets-don't be in the position in which many mega-plants now find themselves: building a large plant for which you have to import feedstock from vast distances, and then export fuel far away. Many of the community plants are sized around the realistic volume of feedstock they can get from their own region. The more directly one can sell to consumers, the better the profit margins will be. And the same goes for feedstock-the more plant personnel can collect themselves without involving a broker or middleman, the better the profit margin will be.

Being successful isn't always about having the best technology, although that is an important component. But vertical integration seems to be one major key element to the survival of the small producer. The more diversified the operations are-not just producing biodiesel but consulting, offering different types of services, being creative about selling and marketing your main and coproducts-the more success will be had at riding through the down markets.

Subsidy-proof operations, don't rely on the tax credit but rather find ways to center the business plan around a noncredit environment so if/when the credit does come back, it's all profit and not relied upon to stay in business.

Befriend the community and get the green message out there through education, workshops, demonstrations and tours. Let them know you exist and how you benefit the community. Practice what you preach-people admire and respect the fact that trucks delivering B99 are also running on B99, or some blend of biodiesel if the season won't allow it.

One of the most important things I have learned, and one that is less quantifiable, involves the relationships that exist with small producers and their customers, their communities. One source said those relationships allow for a flexibility and loyalty that would be harder to find in many of the larger operations.

I learned that one cannot assume a small, local plant is sustainable just as one cannot assume a large, centralized plant is not sustainable. The best solution is that both models must be sustainable.

The commenter on my blog referred to some of these plans as "wishful thinking business," but I disagree. I see these small producers as being realistic and down to earth. After all, they are not the ones who position a massive plant in a location where they are forced to import feedstocks and export fuel long distances. These small producers would say that is more of a wishful-thinking business model.
 
 
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