Each week, we seek out expert advice to help a small or medium-sized business overcome a key issue.
Ruth Klahsen knows how to make cheese. The former chef has been churning out high-end artisanal goudas and halloumis to great acclaim since she purchased Monforte Dairy in Stratford, Ont., 10 years ago.
Monforte’s products appear in Canada’s finer food establishments, and Ms. Klahsen is preparing to open a cheese-making school in February.
But it’s the procurement of another type of cheese, that of the pecuniary variety, which has proved more of a challenge.
A keen environmentalist, Ms. Klahsen wishes to mount a sustainability project that would allow her to recycle the waste water from her cheese production. She estimates that the project, which involves the cultivation and maintenance of algae-filled ponds to clean the water organically, would require $100,000 just to get off the ground.
Though she turns a small profit from her dairy, her restaurant and a small shop in Toronto’s Liberty Village, Ms. Klahsen says she can’t scrape together enough funds for the entire project. “We just don’t have that kind of profit in our company right now. Because we’re new in our location we’re still servicing debt pretty hard,” she says.
Despite this financial uncertainty, Ms. Klahsen has worked for the past three years with Dio Nkurunziza, an environmental practitioner and researcher on microalgae, to plan a system that would pump the dairy’s daily wastewater into one of the three man-made algae ponds.
Based on Mr. Nkurunziza’s research, the algae would absorb environmental pollutants, including whey runoff from the cheese and chlorine and benzyl compounds used as disinfectants to clean the equipment, also restoring the water to a healthy pH balance in the process. Longer term plans include selling the algae for profit.
Once returned to a potable state, the water could be used for the dairy production and to maintain the vegetables Ms. Klahsen grows on her land.
She recognizes that applying for government grants is her surest route, but with so many other side projects on the go she says she can’t do it all herself.
“The time to write those applications is arduous. I know that sounds silly but it’s all on speculation and you have to pay someone to write it – and right now even that cash is tight, so I would end up writing it and, it’s just, how many hours in the day are there?”
While she recognizes that the algae ponds are more of a passion project than a sound moneymaking investment, Ms. Klahsen remains determined to get the ball rolling as soon as she can.
The Challenge: Can a socially conscious dairy farmer find funding for a sustainability project that may not be able to guarantee any future profit?
THE EXPERTS WEIGH IN
Thomas Hellmann, finance and policy professor at Sauder School of Business, University of British Columbia, Vancouver
If you want to raise funding, it’s going to take time and effort. There’s no way around it. You have to be in charge of your own project; you have to convince people to put their trust in you. Ms. Klahsen should first consider which avenue she wants to take: grants, debt or equity. I would say no equity investor and no bank really wants to put in money if she hasn’t taken grant money, so step number one is to look for every single grant that’s out there.
Paid professionals can help write grant applications for a fee or a commission. If money is an issue, I would recommend contacting a local business school and see if she can persuade some MBA students to write the applications for her. They often do this pro bono. Even if you pay the students, they are far less expensive than professional grant writers and may be eager to put in the legwork for experience. She’s in a cool area, and people will be interested in doing this.
Bernadeen McLeod, principal at Mentor Works Ltd., Cambridge, Ont.
We write government grants for companies like Monforte Dairy. There are 210 programs available in Ontario, and we choose to write 54 of them, so we would develop a grant plan for them. We charge a flat fee that ranges from $500 to $6,000 depending on the size or scope of the project.
The first program I’d direct her to is Growing Forward 2. The funding available is 35 to 50 per cent of the cost of the project up to a maximum of $350,000 in grant money.
If she wanted money just to buy equipment, then the program of choice would be CME SMART, but you have to be incorporated for a minimum of two years. The other option available is government hiring grants for food processors, which would enable her to hire two or three engineers or operational positions to do some of the piloting cost in-house.
George and Linda Heinzle, owners of Terryland Farms, St. Eugene, Ont.
George has always been environmentally conscious, so the idea of building a biodigester had been on his mind for a while. A digester is a heated, oxygen-free tank that produces methane gas, or biogas, to run engines and generate electricity. The machine also produces digestate, a byproduct that can be used as fertilizer. We found an engineer in Ottawa who was willing to help us with the project. Our first step was to apply for funding with Ontario’s Rural Economic Development program (RED), and we were able to recuperate approximately half the $250,000 cost.
It was initially hard to get our bank to lend us money for the project, but they must have believed in us. The project required several stages and we had to be patient, do our research and wait for our environmental certificate of approval to come through. We were also lucky to receive more support from OMAFRA (the Ontario Ministry of Agriculture, Food and Rural Affairs) and the Renewable Energy Standard Offer Program (RESOP) as we went along, which allowed us to sell electricity to the grid and even make a little profit. Ms. Klahsen must be prepared to pay attention to details in applications and put her full attention toward the project. A good banker always helps, too.
THREE THINGS THE COMPANY CAN DO NOW
Seek expert assistance
Organizations like Mentor Works offer reasonably priced consultations to help small businesses like Monforte Dairy apply for grants from the right government programs.
Try MBA students
If time and cost are of the essence, consider asking MBA students to do the grant application legwork pro bono.
Hit the bank
It may take some research but, like the Heinzles, Ms. Klahsen may find a bank or investor willing to help finance her project.
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