McInnis Founds Company while still in College

It was only a college class assignment, but it inspired Clay McInnis to found his first company even before graduation and identified him as an entrepreneur of statewide note when the ink was barely dry on his diploma.

In 2008, Clay McInnis founded Montgomery-based SouthernEco, the first commercial biodiesel producer in Alabama, a year before graduating from Auburn University with a degree in entrepreneurship and family business and a minor in sustainability. Back then, it was mainly celebrities like Daryl Hannah — who ran her 1983 El Camino pickup truck on used cooking oil from local fast food joints — who were most vocal about this alternative to fossil fuels.

A class assignment was to come up with a business concept and write a business plan. Fuel prices were high at the time, so McInnis says he decided to look for new ways to produce energy to alleviate the “pain at the pump.”

“Our family business is to build roads and bridges for the Alabama Department of Transportation, and we have lots of diesel engines in our fleet of construction equipment. My thought was, if I can offset some of the high diesel prices by making our own biodiesel from used cooking oil, we can have a relatively short ROI on the biodiesel production equipment.”

The human body doesn’t run so well on deep-fryer oil, but a diesel engine does. What’s bad for your arteries and waistline is great for diesel-powered vehicles. Biodiesel fuel’s superior lubricating properties reduce wear on engine parts and provide better fuel economy than gasoline because it contains more useable energy. McInnis collects used cooking oil for free from nine area restaurants, converting it to biodiesel at a production cost of about $1.20 a gallon. Distribution to companies with fleets of vehicles is one of the services offered by SouthernEco — in tandem with the service of free disposal of restaurant fry grease. A third segment of SouthernEco business is sales representative for the little processing plants that convert grease to fuel.

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When the Montgomery native graduated from Auburn University in 2009, he became the Alabama representative and dealer for Springboard, a leader in the small-scale biodiesel production industry. The California company manufactures and sells biodiesel processors that convert vegetable or animal oil into premium-grade biodiesel, a clean-burning alternative to petroleum-based diesel used in nearly all diesel engines.

“It was exciting being in a niche that was in uncharted waters, but it’s not easy being on the front end of any new industry, ” notes McInnis. “You’re always going to have exposure to risk when you’re an entrepreneur. The question is how much are you willing to risk and what does that exposure look like? Because my barriers of entry and capital costs were not high, I had, and continue to have, a higher tolerance for risk.”

It is difficult to maintain an alternative fuel business right now because the product is 100 percent contingent upon the price of gasoline.

“The higher the price of petroleum at the pump, the more attractive biodiesel becomes. The price of petroleum is balancing on the tipping point of a decent ROI for biodiesel. Petroleum needs to stay above $4 per gallon for people to really take a hard look at biodiesel for the long term. When that happens, we’ll be ready.”

Like any entrepreneur, McInnis wants to run a profitable enterprise and expects to once the price of gasoline goes up and stays up. But money is just one objective. So is decentralizing the process to create a sustainable business and community. Instead of sending fuel through pipelines and trucking it, production is localized. Used cooking oil is gathered locally, processed into high-grade biodiesel locally, and then used by local citizens, businesses and government agencies.

McInnis is helping ease “the pain at the pump” for Alabamians one biodiesel processor at a time, including one company that starts with its used lard. Springboard processors cost between $6, 000 and $35, 000. The largest can produce 100 gallons of biodiesel fuel a day. Each produces biodiesel at about 95 cents to $1.20 a gallon.

McInnis created his business plan for SouthernEco in an independent study course under the guidance of Dave Ketchen, management professor and executive director of the Lowder Center for Family Business and Entrepreneurship at Auburn University.

Along with SouthernEco, McInnis also started Cold As Ice, a company that operates self-contained ice machines in parking lots in Gulf Shores.  He is also a co-investor in a commercial rental property in downtown Montgomery. And he is on the board of the Montgomery-based Eat South, a non-profit organization encouraging healthy lifestyles through education and sustainable food production.

“For Clay to have done all this in his mid-20s is astounding, ” says Ketchen.  “I don’t think there is another person his age in the state that can match his accomplishments. Not only does risk not scare Clay, he relishes risk taking.”

SouthernEco has brought McInnis national recognition. His biodiesel company was featured in July 2010 on CNN’s “Anderson Cooper 360.” The following year, McInnis was named one of BusinessWeek’s “Top 25 Entrepreneurs Under 25.”

True entrepreneurial spirit isn’t driven solely by fame and fortune, but making a difference in the world. For McInnis, that means helping Alabama achieve energy independence.

“I think the future is bright, but we have to think smarter and better for our kids’ generation. Get back to localized economies where businesses help other businesses. We need to know where our food, clothes, supplies and fuel come from. As fuel prices go up, everything we consume goes up. It would be nice if we could have a little more control over that.”

Jessica Armstrong is a freelance writer for Business Alabama. She lives in Auburn.

text by Jessica Armstrong • photo by David Bundy

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