During year 2002, a new European regulation will oblige all testing Laboratories to follow a specific procedure to monitor Stack emissions and Ambient Air. This procedure will be acceptable in all countries, which are part of the European Community. It´s called Cofrac in France, Enac in Spain and BKO in Belgium.
We are concerned by this COFRAC procedure as far as all analyzers used for the measurement will have to be calibrated and linearity checked under a COFRAC procedure once a year and after each repair if a main component have been changed or modified.
This calibration should be done under specific conditions :
√ In a special Room with constant temperature and Humidity.
√ With COFRAC certified gas. Certificate delivered by the Manufacturer.
√ With a COFRAC certified Dilution System and Zero Air Generator. Certificates delivered by 2 Laboratories in France : in Lyon and Paris.
√ A procedure should be followed. Linearity is checked on several points selected up and down within the Analyzer ranges.
Today only 2 laboratories are able to do such a COFRAC´s procedure and to deliver proper certificate. Cost per Analyzer is 760 Euros. ( USD 670). We have today more than 30 analyzers concerned by this procedure. Even with a tuff negotiation on prices it will still be very expensive to subcontract this job.
Without such certificate per analyzer we won't be able to rent them. We have no choice at all than to get accredited ourselves.
Advantages to do it :
 Save repetitive expenses.
 Sell a new service in opening our Laboratory to Customers.
 Include this new service in a package including Maintenance & Repairs, Cofrac Certification and a possibility for the Customer to rent an Analyzer while his is under maintenance.
I have done recently a small Market Survey among the Testing Companies, they were very interested by this service based on a single supplier, best Money Value and a big time saving.
Some numbers : Estimated Budget to set up the COFRAC Laboratory 38 000 Euros
Estimated Cost for subcontracting our Analyzers : (Per Year) 22 800 Euros
Estimated Revenues expected the first year 15 000 Euros Plus
What we have done already :
 We have bought a new Dilution System.
 We have sent it to L.N.E. for Cofrac Certification.
 We have sent to L.N.E. our Thermo 146 for the Ozone Generator Cofrac certification.
 We are on the Process to buy certified gases.
 We have rent a new room to set up the Laboratory.
Total cost spent : 16 000 Euros.
What we must do to get ready :
 We need to order the cylinders racks.
 We need to order and fix SS tubes, fittings and Regulators.
 We need to buy furniture, lamps and miscellaneous items.
 We need to register CleanAir Europe for COFRAC accreditation
Total cost to be spent : 21 890 Euros.
We have 2 deadlines :
√ Get ready to operate under no official registration by June 2002.
√ Get the official accreditation by September/October 2002.
This project will be 100% financed by CleanAir Europe with the help of a loan specially granted for this kind of project.
An Idea of the Situation today :
This year we have estimated that some 12 to 15 systems will be requested. We are in February and we have already sold 4.
For the past 2 years the Stack testing business have been very booming and most of Testing Companies needed to invest in new equipment. By end of 2002, middle 2003 this Business will dry quickly for full systems in France. Spare parts and accessories will keep a reasonable level but our revenues will drop drastically. We need to look for new existing markets. They are closed and in Europe. The most promising are by order :
|
 Spain |
 Portugal |
|
 Greece |
 Turkey |
|
 Hungary |
 Poland |
|
 Czech Republic |
 Algeria, Marocco and Tunisia are also interested we have 2 on pending quote with Marocco and one with Algeria. Last year we lost 2 in Tunisia for price reasons.
Coming back to Europe, if we are so successful in France it is because we have taken all necessary actions in order to have our System approved by the European Legislation : CE Marking and Cofrac Certification for the DGM, Pitot Tubes and Thermocouples. Only one is missing, The German TUV. We would like to get it, but it´s costly and we have to give a complete system during a minimum of 6 months. Before to do that we have to clear a bigger problem : Prices. In France we work in Direct. No agent no commission. From our Distributor Price List we can manage to find the right price, but for other countries we are two expensive. No Agent accept to work with less than 20% Commission. He is also competing against other Agents which get the same price level that we have. The game is false. Since we appointed our Agents in Spain and Portugal they have lost more than 7 Systems for Price reasons. I have already spoken about this problem before and suggested to receive part of your equipment on Kit, to purchase the other part from the European Market and do the assembly here in France. This is the only way if we want to be competitive. For information we have attached some price comparisons which show a great difference.
Following first price investigation and first proposals from manufacturers :
Here below are these examples :
√ Ombilical 30m made in France total cost including Manpower : Euros 512. Compared to your US distributor price list of Euros 992
√ Ombilical 15m made in France total cost including Manpower : Euros 313 Compared to your US distributor price list of Euros 735,6.
√ Ombilical 7,5 m. made in France total cost including manpower : Euros 302,38 Compared to your US distributor price list of Euros 490.
√ DGM S-275 Metric from Equimeter but bought in UK. Cost without any unions and calibration : Euros 62. Cost with Unions without calibration : Euros 298,50. Cost with Union and Calibration : Euros 520 compared to your US Distributor price list of Euros 1300.
We have not yet finished our investigation but the following purchases from France show already some difference in our favor :
√ Silicone Heater Element : From Watlow : Difference is about 37 % in favor of us may be more if we add transportation costs from the US.
√ Heater Element for Oven Compartment : Difference about 25 % in favor of us, more if we add transportation costs from the US.
√ Glassware : From several glassware manufacturers we have received quote which are located between 20 to 30 % less than your Distributor Price List. We need to do more work on these prices but already we can say that there is a significant difference.
In other comparison we found some equipment more attractive on prices from your distributor price list such as the Gast Pump, the inclined manometer and the Fuji temperature controller. Sure that there should be more, but before to make more studies we would like to receive some confirmation that we can go further on. Why to spend time and money if we don´t have any chances to reach our goal. From this first studies we have estimated that the assembly of the express system in France should drop the costing price by a minimum of 30 to 35 %.
Bill this is the only chance we have to sell this equipment out of France with the same success than in France. I don´t think you are able to drop your price by this percentage.
Thanks to tell me which comments you and Dan have on that idea.
C) Italian Office : Milano
Bill, you do remember than during your last trip to Milano with Al Kephart we spoke about a possibility to open an office in Milano mostly orientated toward Stack Testing and Instrument Rental.
In fact it is time now to really speak seriously about this project.
√ In 2001, just a year after we signed the Representative agreement with Ario, (Tecnic Representanze) Italy ended the year with a total revenue of 55 300 Euros mostly on Rentals and some promising stack testings. By the end of February, Italy has already reached the revenue of 15 000 Euros.
√ Italy is far less structured for Stack Testing than France was and is now. There are a lot of demand, Ario has even asked if we could equipped a Van in order to be able to respond quickly all over Italy to that growing market.
√ Up to now, Italy was not pretty much concerned by Environmental problems. Priorities were more orientated toward quality improvement and profitability. Today, with Europe regulation Italian customers should be more concerned and the market should grow consequently.
It means that we have a good opportunity to extend our business in Europe.
This possibility is facing some problems :
√ Ario our Agent is alone : he has to take care about prospecting, quotes, Office work (Typing etcƒ) Sales, some time commissioning and at the end he shall everyday clean the office and shut the light. It´s too much for a single man in a period like this one. He need help.
√ We have problem shipping gas from France to Italy. Europe is sometime strange when regulations are concerned. Our Shipping Company in France accepts gas cylinders, its Italian counterpart does not. Results twice we had gas cylinders be stuck at the border. In other hand to ship gas cylinder from one place to another one inside Italy does not represent a particular problem. Results : Gas cylinders shoulb be stocked in Italy.
What do we need to do :
We need to open an office in Milano and have Ario joining the Company. He is not against and have sent us a first tentative Budget : See document attached.
This document shows that the first year will not generate any profit. Normal, expenses are real and revenues have to be generated.
Of course we have minimized expenses the first year in order to generate enough revenues to fix the base of our future business in Italy.
Regarding Ario´s position he should join the Company on part time condition 50% as a Consultant. To run the office with me he will need a Commercial/Technician help and a Commercial Secretary.
Here below is a tentative Budget including Expenses and Revenues : :
CleanAir ITALY : 3 Years Budget Forecast.
|
Item |
Description |
2002 |
2003 |
2004 |
|
1,00 |
REVENUE |
|||
|
1,10 |
Sales - Manpower |
30 000,00 |
90 000,00 |
150 000,00 |
|
1,20 |
Sales Æ Rentals |
90 000,00 |
200 000,00 |
290 000,00 |
|
1,30 |
Sales Æ Others |
20 000,00 |
50 000,00 |
75 000,00 |
|
Total Yearly Revenue |
140 000,00 |
340 000,00 |
515 000,00 |
|
|
2,00 |
INDIRECT LABOR EXPENSES |
|||
|
Forecast of Yearly % increase of costs : |
2,00 |
2,00 |
||
|
2,10 |
Secretary Salary net |
5 250,00 |
10 710,00 |
10 924,20 |
|
2,1,1 |
Taxes, Insurance, benefits |
5 775,00 |
11 781,00 |
12 016,62 |
|
2,20 |
Management & Tech. Serv. Mgr. Salary |
17 500,00 |
35 700,00 |
36 414,00 |
|
2,2,1 |
Taxes, Insurance, Benefits |
19 250,00 |
39 270,00 |
40 055,40 |
|
2,30 |
Sales / Technician Person Salary |
10 000,00 |
28 560,00 |
29 131,20 |
|
2,3,1 |
Taxes, Insurance, benefits |
15 400,00 |
30 800,00 |
32 044,32 |
|
Total Indirect Labor Yearly Expenses |
73 175,00 |
156 821,00 |
160 585,74 |
|
|
3,00 |
DIRECT LABOR EXPENSES |
|||
|
Forecast of yearly % increase of costs : |
2,00 |
2,00 |
||
|
Number of Technicians |
0 |
1 |
2 |
|
|
3,10 |
Lab & Field Tech. Salary |
21 420,00 |
43 696,80 |
|
|
3,1,1 |
Taxes, Insurance, Benefits. |
23 562,00 |
48 066,48 |
|
|
Total Direct Labor Yearly Expenses |
44 982,00 |
91 763,28 |
||
|
4,00 |
DEPARTMENT INDIRECT EXPENSES |
|||
|
Forecast of yearly % increase of costs |
2,00 |
2,00 |
||
|
4,1 |
Office & Lab |
6 000,00 |
12 240,00 |
12 484,00 |
|
4,2 |
Heating & air cond. |
2 000,00 |
4 080,00 |
4 161,00 |
|
4,3 |
Telecommunications |
3 000,00 |
6 120,00 |
6 242,00 |
|
4,4 |
Office Supplies |
1 000,00 |
2 040,00 |
2 080,00 |
|
4,5 |
Car rental (2 cars) Including Insurance |
7 200,00 |
14 688,00 |
14 981,33 |
|
4,6 |
Car expenses (gas & travel) |
1 200,00 |
2 448,00 |
2 497,00 |
|
4,7 |
Fairs & Exhibition (1 per year) |
5 000,00 |
10 200,00 |
10 404,00 |
|
4,8 |
Commercial expenses (travels, boarding, lodging etc) |
6 000,00 |
12 240,00 |
12 484,00 |
|
4,9 |
Advertising |
3 000,00 |
6 120,00 |
6 242,40 |
|
4,10 |
Training |
1 250,00 |
2 550,00 |
2 601,00 |
|
4,11 |
Tools & Lab. Instrumentation |
1 000,00 |
2 040,00 |
2 080,80 |
|
4,12 |
Lab. Consumables |
500,00 |
1 020,00 |
1 040,00 |
|
4,13 |
Financial expenses (Bank charges etcƒ) |
1 000,00 |
2 040,00 |
2 080,80 |
|
4,14 |
Financial expenses (Interests on delayed payments at 12%/YEAR on 50% of total revenue for 120 days., |
1 302, 80 |
2 656,25 |
2 709,38 |
|
Total indirect yearly expenses |
39 452,80 |
80 482,25 |
82 087,71 |
|
|
5,00 |
INTER-COMPANY |
|||
|
Inter-Company transfer % of Instrument Rentals |
50,00 |
|||
|
5,1 |
Instrument Rental |
45 000,00 |
100 000,00 |
145 000,00 |
|
Total Inter-Company |
45 000,00 |
100 000,00 |
145 000,00 |
|
|
TOTAL EXPENSES |
157 627,80 |
382 285,25 |
479 436,73 |
|
|
NET INCOME (Before Taxes) |
-17 627,80 |
-42 285,25 |
35 563,27 |
Comments :
√ All prices quoted above are in Euros.
√ The 2002 column is only 6 months as nothing will come up until Julyƒ if something comes up.
√ Salary levels have been determined by Ario for Italy.
√ Year 1 and Year 2 should loose money but this situation can change if Manpower & Services is developed better than budgeted. This is something highly possible with Italy.
√ Inter-Company numbers represents France office invoicing of rental assets to Milano Office at 50% discount.
√ Numbers for Sales Æ Rental cannot be estimated properly as Ario is not an exclusive Commercial Person for CleanAirE. To have somebody 100% covering the Market should bring more orders.
Bill in this venture we would like Palatine to financially participate for this project as we are not sure to get any special help for export. It exists for French Companies but not so much for French Company owned by Americans.
D) Stack Testing
To Invest in a Stack Testing Company E
This project for the next 2 years to come is ranking NÁ4. For some reasons I have not given any numbers to present it. The most important think is first to answer this question : Does this project can be acceptable ?. Then we will start asking questions for numbers and feasibility.
I have an idea about the Stack Testing Company we could invest by buying a maximum of shares and become the Major Shareholder. This Company is located at about 40 Miles from Marseilles. It has been one of our first French Customers for Rentals. They are in the business for more than 10 years. 5 people in the Company including the Manager and the Commercial, both helping to climb Stacks.
Bill about this project and before to sort out all figures and contact people, I would like to get your advise. Does it seems crazy for you or does it has a chance to interest you.
For us such project could give us a chance to enter this Stack Testing Market, mostly in Italy. To act quickly we need experienced people, with field mentality and all time ready to go.
Awaiting your comments.