Corey Kliewer

ECON 331

Business Proposal

Advantage Storage Incorporated

Executive Summary:

This proposal involves the incorporation of two newly formed businesses. I currently operate a construction and assembly business. This business easily supports itself; however, there is a marginal amount of down time. During this time I plan to effectively invest my time and knowledge into a complimentary start-up business, located in the Ames area.

The current business that I operate, Hired Hands, focuses on the assembly of agricultural equipment, and much of the assembly occurs directly on location for my customers. The primary equipment that I represent is in the grain handling industry. Therefore, I already posses the tools and technical skills to operate and fabricate many of the assets required for this new venture. Advantage Storage Inc will provide alternative storage facilities, for agricultural products; mostly to businesses and individuals in the Story county and surrounding areas.

As a business owner I have extreme difficulty in being witness to wasted resources, or idle resources. Living in the Ames area for the past ten years, I have met and interacted with numerous individuals in the agricultural sector; many of which are owner- operators of their own farms, or family founded businesses. The average age of these individuals is increasing, and while many of them are not fully retired, they choose to rent out cropland and maintain rights to facilities.

The largest example of idle resource, that I have discovered, is the Clyde Black Seed Farm. I have known members of this family since my arrival to Ames in 1998. Once a close-knit family working towards a common goal, now broken apart by inheritance feuds; most of their remaining assets go unused, and are rapidly deteriorating.

There is approximately 300,000 bushels of grain storage remaining on the seed farm. Granted the facilities require updating, the potential to offer companion storage options to elevators, seed producers, farmers, or specialty product manufactures are limitless. The infrastructure exists; what is needed is resurrection back to a productive state.

I am eager to learn if operating cost of the facility will limit a commercial storage option. The owners of the facility and I have discussed future options for their property, and possible investors. Marketability of this storage facility within a ten mile radius is rapidly growing. Multiple seed production plants exist in the area, and are expanding at rates faster than they can support. New mergers of local coops have also given rise to a need for diversified facilities, for commercial operations

This farm and two others have been of interest to me since grain prices and input cost reached all-time highs the past few years. The combined storage availability of the three farms is close to 700,000 bushels, plus numerous other structures for flat storage or dry fertilizer. By evaluating each property individually I hope to discover a profitable way to commercially store grain and agricultural products. Many different proposals can be made as to which storage market has the greatest earning potential, and multiple research studies will be need to determine the values of each. My initial idea is that the facilities must be more valuable full, than empty.

I understand this idea is a little rough around the edges, and hope to dramatically refine it with market analysis. Skeptics may say, “If there was money in it why are they not already full.” From my conversations with the facilities owners, two prominent reasons emerge: “We didn’t need the money”, and “We’re getting older and didn’t want the hassle”. Both of these are valid ownership points, but simply not acceptable to someone who can see their facility’s earning potential. If my analysis justifies the creation of this business, I intend to rent or possibly purchase the facilities.

My proposal is simple, use my existing business to economically remodel the facilities, and provide economic storage to local customers, who are growing themselves. Many of the prospective customers have outgrown their current structures, need separation distance for a new product, or currently do not have storage facilities; and believe renting is more economical than building facilities of their own. There is clearly a real demand for storage, I am certain I can provide it for profit.

Problem:

Local agricultural commodities facilities, near Ames, IA, are operating above maximum storage capabilities. This results in loss of revenue for the business, and poses disadvantages to their customers.
Seed production companies are expanding at rates they can not support, and much of their product requires isolation or separation of varieties. The initial cost to build such facilities is not feasible to most companies.
Input cost of commercial farm products are at all time highs. Most local producers and business do not have the facilities to store off-season products, even though they may have the capital to purchase them.

Solution:

Modernize already established facilities, that currently lay idle, in order to provide economical storage options to local business.
Take advantage of niche market storage options for new companies that can not support these structures on their own.
Offer additional storage to large commodity acquiring firms, with large customer bases, in order to offset cost of seasonal inputs.

Competition:

Advantage Storage has no intention of offering storage to local producers for No. 2 yellow corn or soybeans. Therefore, Advantage Storage will not compete directly with local coops on commercial storage rates. Advantage Storage will, however, offer facilities for specialty products, cereal grains, specialty seeds, and additional space to coops. The only direct competition for this business will be the price at which we offer our services. Our price must be more economical and efficient than individual entities can provide in-house.

Market/Industry Overview:

Advantage Storage has an increasing customer base in which to draw from. For example, there are four different large scale coops within five miles of all the prospective facilities. Also, there is one organic coop that is in the developmental growth stages, only one mile away. Approximately seven seed producing companies operate locally in relation to these facilities, and one currently stores some equipment at one of the facilities.

All of these businesses are growing, despite economic short-falls. Many new products emerge each year, and permanent facilities are not justifiable to certain companies because they may decide not to develop a product. The increased demand for commercial commodity storage is undisputable. Yields for local producers grow each year, and some facilities store grain in undesirable conditions do to a lack of resources. Much of this grain is lost to damage and spoilage. All of this could be avoided by taking advantage of existing local facilities.

There is a true need for additional facilities, and I anticipate Advantage Storage will to reach maximum storage capacity. At this time, there will be sufficient equity in the business to expand and remodel another facility, or add to an existing site. I am positive many of these facilities sit empty across the state, and with the success of Advantage Storage in the Ames area, I plan to broaden my territory within three years.

Management Team:

The success of Advantage Storage will take the combined efforts of many individuals, from the beginning. Facilities managers or teams will be needed at each location. Each member will need the knowledge and skill sets required by each aspect of the operation. Natural ability to communicate the customer’s requirements, and provide them the service they desire, will be necessary for establishment of a customer base. Advantage Storage will offer specialty storage options, and for that reason we will have to service the individual, not a consolidated group of people. Last, all members will have to be innovative and receptive to new technologies, and their options for incorporation into Advantage Storage facilities.

Marketing/Operating Plan:

During my time in this area, I have begun to develop relationships with some of my potential customers. Informing them of the service I intend to offer and tailoring facilities to suit the specific needs of these individuals will best establish marketability of each site. No large scale advertising should be required. After securing specific long term customers, more developments can be made to diversify storage options further. Bringing online three separate facilities, and generating profits from each, during the first year, will allow expansion into new territories of the state within five years. Having an established, marketable product to demonstrate value to future clients will guarantee entry into growing markets. Eventually, Advantage Storage will encompass multiple markets, generate large revenues throughout the year, and be viewed as a desirable asset for acquisition by a large commodity firm. At this time majority interests in Advantage Storage would be passed on to new management.

Procuring existing facilities, redefining their value in the market place, and conveying storage diversity options to each customer, will define Advantage Storage as a leader in optimizing resources.