Any business starts with an idea. Ideas are then put down on paper, discussed with esteemed partners and friends or at least mulled over in your own mind. Work begins to put the business strategy into production.
Small business plans are created in the same way large business create their plans. In fact, looking at the development of large companies is helpful to the small business owner. Modeling the success strategies they use can help you take your business to the next level.
Molycorp Inc.
For example, the story behind the scenes of the well publicized Molycorp, Inc. gives small business owners key strategies to emulate. Making a paper profit of $2.3 billion dollars in less than three years, Molycorp Inc. made some strategic business plans.
Molycorp Minerals LLC was formed in 2008 by a group of investors. Two critical players in this LLC are Mark S. Kristoff, CEO of Trayxs, (which provides financial services for the mining, metals and minerals industries) and Dr. Ross R. Bhappu, of Resource Capital Funds (focused on investing exclusively in the mining and minerals industry).
These two individuals have expert, inside knowledge of the mining industry. When Mr. Kristoff was just 12 years old, his father, who worked as an executive at the mine, gave him a tour of the Mountain Pass rare earth mine in California, one of the largest rare earth mines in North America. Dr. Bhappu’s father was also an executive at the mine which was then owned by a Union Oil company. In 2005, the company was acquired by Chevron.
Mr. Kristoff and Dr. Bhappu developed an interest in buying the Mountain Pass mine in 2005. In 2008, Chevron sold the mine to their LLC because they promised to keep the existing employees and to revitalize the unproductive mine. It had been inactive since 2002. Mr. Mark Smith, former President of Mining for Chevron was lured away from Chevron to become the new CEO of Molycorp Inc.
Investment Strategies
In the beginning, there were four principal investors in the company, Resource Capital Funds, Pegasus Capital Advisors, Traxys and Goldman Sachs. In 2009, Goldman Sachs sold their shares of the company because the economy was in such turmoil.
Demand Exceeds Supply
Molycorp Inc. invested $80 million into upgrading the mining equipment and facility. Currently producing 3,000 tons per year, their next goal is to produce 20,000 tons. Leaders have predicted that this will double in production by 2014. With China recently announcing that they are limiting the export of rare earth materials, demand (predicted to be 190,1000 tons in 2014) is now exceeding the supply (170,000 tons). Cerium oxide rose in price from $6,000 to $71,000. Ianthanum oxide rose from $8,400 to $73,000.
Production of Green Technologies
The rare earth minerals that will come from this mine are used in many green earth technologies like wind turbines and hybrid cars. They are also used in electronics, plasma and LCD televisions and the widely popular Apple Ipad.
The combination of the world events and good strategic business planning by the Molycorp, Inc. leaders have caused, “one of the fastest windfalls in private-equity history.” (Wall Street Journal).
Small Business Plans
For small business owners, the key strategies that created this success were familiarity and expertise with the product line, choosing products that are in demand, effectively using global trade news to make plans, hard work, passionate leaders and the ability to communicate their business plans to key investors. Definitely a good model for small business owners to emulate.
