prepared by: pauline bolay jamie freedman kurtis kramer andrew o'reilly
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Prepared by: Pauline Bolay Jamie Freedman Kurtis Kramer Andrew O'Reilly. Mission Statement. - PowerPoint PPT PresentationTRANSCRIPT
April 10, 2007April 10, 2007
Prepared by:Prepared by:Pauline BolayPauline Bolay
Jamie FreedmanJamie FreedmanKurtis KramerKurtis Kramer
Andrew O'ReillyAndrew O'Reilly
April 10, 2007April 10, 2007
Mission StatementMission Statement
Harvest Sun is a family owned and Harvest Sun is a family owned and operated business, created from a operated business, created from a genuine desire to make a difference in genuine desire to make a difference in our world. The guiding principle our world. The guiding principle behind Harvest Sun Organic Seeds behind Harvest Sun Organic Seeds Ltd. is the provision of nutritious Ltd. is the provision of nutritious healthy seeds for healthy birds.healthy seeds for healthy birds.
April 10, 2007April 10, 2007
Goals & ObjectivesGoals & Objectives
To market organic birdseed and To market organic birdseed and maintain a positive cash balancemaintain a positive cash balance
To improve the knowledge of organic To improve the knowledge of organic birdseed and it’s benefits birdseed and it’s benefits
To start out as a small company, but To start out as a small company, but increase it’s customer base over time, increase it’s customer base over time, and eventually become a large player and eventually become a large player in the birdseed market in the birdseed market
Operations PlanOperations Plan
Organizational StructureOrganizational Structure
President
Board of Directors
Operations Manager
Casual Laborer
Casual Laborer
Casual Laborer
Marketing Manager
Site PlanSite Plan
Near Estevan, Sk (President’s own Near Estevan, Sk (President’s own organic farm)organic farm)
NW35-1-9-W2 NW35-1-9-W2
Building and Floor PlansBuilding and Floor PlansN
Stairs To Upstairs Cold Storage
Work Table
Shelving Tack Room/Isolation Barrier Room
Horse Stall
Mini Bulk Storage
Mini Bulk Storage
Product Mixer
Counter Receiving Spout
Cold Storage (600 sq.ft)
Bin #1 Bin #2 Bin #3 Bin #4
Sliding Door
(400 sq.ft)
(600 sq.ft)
Door/OpeningLegend:
Bait Station Location (Downstairs)
Bait Station Location (Loft)
Upstairs Loft
Roll Up Door
(1000 sq.ft)
Work Plan and Flow of WorkWork Plan and Flow of Work Organic farms provide the grain for the birdseedOrganic farms provide the grain for the birdseed The seed is purchased pre-cleaned to provide no The seed is purchased pre-cleaned to provide no
contaminationcontamination The canary seed, millet and flax are stored in binsThe canary seed, millet and flax are stored in bins The oat groats are stored in the bags they come inThe oat groats are stored in the bags they come in Seed quantity are carefully measured using a digital scale Seed quantity are carefully measured using a digital scale Product is placed in a mixerProduct is placed in a mixer Product is then placed in a tub to ensure an even mixtureProduct is then placed in a tub to ensure an even mixture Labels are put on jars to make sure that no dust gets on the Labels are put on jars to make sure that no dust gets on the
sticky sidesticky side The jars that hold 1.5 lbs are filled by handThe jars that hold 1.5 lbs are filled by hand The handler uses gloves to prevent irritation of the skinThe handler uses gloves to prevent irritation of the skin The lids are screwed on with tamper proof capsThe lids are screwed on with tamper proof caps The cap label is placed after cap is placed on jar for a nice The cap label is placed after cap is placed on jar for a nice
looking productlooking product The finish product is stored until shipped and soldThe finish product is stored until shipped and sold
Quality ControlQuality Control Certified by Pro-Cert Organic Systems, the Certified by Pro-Cert Organic Systems, the
western affiliate of OCPP/Pro-Cert (OC/PRO), western affiliate of OCPP/Pro-Cert (OC/PRO), Canada’s foremost organic certification bodyCanada’s foremost organic certification body
To ensure compliance will all organic regulations To ensure compliance will all organic regulations and standards, “Certified Organic” producers and and standards, “Certified Organic” producers and processors are regularly inspected by an processors are regularly inspected by an independent third partyindependent third party
Every package of birdseed has a unique lot Every package of birdseed has a unique lot number. This number enables the consumer to number. This number enables the consumer to track the birdseed in the package back to the track the birdseed in the package back to the field on which it was grown and to the former who field on which it was grown and to the former who grew the seedgrew the seed
Business CycleBusiness Cycle
Raw inventory comes in the fallRaw inventory comes in the fall Processing and packaging of the Processing and packaging of the
birdseed takes place during the birdseed takes place during the winter months (3 months)winter months (3 months)
There is finished goods available for There is finished goods available for sale all year round.sale all year round.
Capital BudgetCapital Budget Rents all land, equipment, buildings (monthly Rents all land, equipment, buildings (monthly
rent)rent) Will incur working capital (1Will incur working capital (1stst yr = $25 584) yr = $25 584) At full production, Harvest Sun can produce At full production, Harvest Sun can produce
approximately 36 000 jars (1.5 lbs each) of approximately 36 000 jars (1.5 lbs each) of birdseed in its current rented facilitybirdseed in its current rented facility
Expects to produce a third of full capacity in its Expects to produce a third of full capacity in its first year of operations and two thirds in its first year of operations and two thirds in its second year of operations. In its third year and second year of operations. In its third year and subsequent years it plans to operate at full subsequent years it plans to operate at full production.production.
Cost of Goods ManufacturedCost of Goods Manufactured
Cost of Goods SoldCost of Goods Sold
Direct Materials $18,120Direct Labour & Benefits $21,757Manufacturing Overhead $5,200Cost of Goods Manufactured $45,077
The cost of goods sold for 2008 are as follows:Beginning Finished Good Inventory ($0)+ Cost of Goods Manufactured ($45 077)= Cost of Goods Available for Sale ($45 077)- Ending Finished Goods Inventory ($22 477)= Costs of Goods Sold ($22 600)
Operating ExpensesOperating Expenses
Marketing & Administration Expenses 2008Organic Certification $800Website Hosting $180Business Cards (1000) $108Introductory Packages $500Magazine Advertising $500Office Supplies $500Business License $80UPC - bar code $800Telephone $1,800Administration Salaries & Wages $32,670
Total Expenses $37,938
Inventories, A/R, A/PInventories, A/R, A/P
Raw inventories received in fall = 45 Raw inventories received in fall = 45 daysdays
Inventory in progress = 1 dayInventory in progress = 1 day Finished goods inventory avail. Finished goods inventory avail.
throughout year = 182 daysthroughout year = 182 days A/R for internet = 0 daysA/R for internet = 0 days A/R for pet stores = 30 daysA/R for pet stores = 30 days A/P = 15 daysA/P = 15 days
Cash Conversion CycleCash Conversion Cycle
CCC = Average Days Inventory + CCC = Average Days Inventory + Average Collection Period - Average Collection Period - Average Days PayablesAverage Days Payables
CCC = (45+182+1) + 30 – 15 = 243 days
Human Resources PlanHuman Resources Plan
Organizational StructureOrganizational Structure
President
Board of Directors
Operations Manager
Casual Laborer
Casual Laborer
Casual Laborer
Marketing Manager
Board of DirectorsBoard of Directors
5 individuals5 individuals– 3 internals, 2 externals3 internals, 2 externals
Meet a few times a yearMeet a few times a year Make the decisions about the overall Make the decisions about the overall
management of the business, also management of the business, also the direction it will head in the future the direction it will head in the future
Update the shareholdersUpdate the shareholders
PresidentPresident
Already hiredAlready hired Same individual as operations Same individual as operations
manager (25%:75%)manager (25%:75%) Report all aspects of the business Report all aspects of the business
operations to the board of directors operations to the board of directors Needs to be dedicated and possess Needs to be dedicated and possess
leadership skillsleadership skills
Operations ManagerOperations Manager
Already hiredAlready hired Same individual as presidentSame individual as president Organize, train, direct and coordinate Organize, train, direct and coordinate
the activities of the casual labor the activities of the casual labor Very involved in the physical aspect Very involved in the physical aspect
of producing organic birdseedof producing organic birdseed Shipping and receiving of productsShipping and receiving of products
Marketing ManagerMarketing Manager
Well-rounded office personnel Well-rounded office personnel – run the day to day activities of the run the day to day activities of the
company that include the marketing company that include the marketing selling, customer contact/interaction, selling, customer contact/interaction, advertising, invoicing, inventory control advertising, invoicing, inventory control and shipping logistics.and shipping logistics.
Casual Production StaffCasual Production Staff
Will be hired when there is a needWill be hired when there is a need– Blackburn children, friends, neighbors, school Blackburn children, friends, neighbors, school
kidskids Duties would include blending seed, Duties would include blending seed,
putting the seed in jars, applying labeling, putting the seed in jars, applying labeling, transferring finished products to storage, transferring finished products to storage, cleaning the facilities cleaning the facilities
Approx. 520 hrs of labour needed per year Approx. 520 hrs of labour needed per year at full productionat full production
Cost of EmployeesCost of Employees2008 President Marketing Manager Total Cost
Annual Salaries $6,000 $24,000 $30,000 EI (1.95%) $117 $468 $585 CPP (4.95%) $297 $1,188 $1,485 Workers Comp. (2%) $120 $480 $600 Total Cost $6,534 $26,136 $32,670
2008 Operations ManagerAnnual Salaries $18,000 EI (2.73%) $491 CPP (4.95%) $891 Workers Comp. (3%) $540 Total Cost $19,922
Casual Production Staff 2008 2009 2010Individual Wage (per hour) $9.00 $9.18 $9.36 Hours per Year 175 350 520Total Annual Wage $1,575 $3,213 $4,867 EI (2.73%) $43 $88 $133 CPP (4.95%) $78 $159 $241 Workers Comp. (3%) $47 $96 $146 Holiday Pay (5.8%) $91 $186 $282 Total Cost $1,835 $3,743 $5,669
Marketing PlanMarketing Plan
ProductsProducts Certified organic birdseedCertified organic birdseed
– Blended for canaries, budgies, and finchesBlended for canaries, budgies, and finches– Ingredients: mixture of organic canary seed, millet, flax Ingredients: mixture of organic canary seed, millet, flax
and oat groatsand oat groats The guiding principle behind Harvest Sun is the The guiding principle behind Harvest Sun is the
provision of nutritious healthy seeds for healthy provision of nutritious healthy seeds for healthy birds birds – No fertilizers, insecticides, pesticides, G.M.ONo fertilizers, insecticides, pesticides, G.M.O– No preservatives or additives No preservatives or additives
Harvest Sun is providing products that allow bird Harvest Sun is providing products that allow bird owners the choice to make a difference in the owners the choice to make a difference in the well being of our planet. well being of our planet.
PricingPricing
Will charge a premium priceWill charge a premium price No competitorsNo competitors
PromotionPromotion Promoting the healthy choice of certified Promoting the healthy choice of certified
organic birdseedorganic birdseed Harvest Sun will be marketing the Harvest Sun will be marketing the
alternative of organic birdseed compared alternative of organic birdseed compared to a chemically altered, chemically to a chemically altered, chemically enhanced or chemically treated birdseedenhanced or chemically treated birdseed
Harvest Sun will also promote support for Harvest Sun will also promote support for farms using traditional and sustainable farms using traditional and sustainable farming practices that are safe for humans farming practices that are safe for humans and the environmentand the environment
PlacePlace Increase its consumer base in Western Increase its consumer base in Western
Canada (expand to eastern CDN , USA)Canada (expand to eastern CDN , USA) Large urban centres Large urban centres
– Independently owned pet storesIndependently owned pet stores Internet sales = all over the worldInternet sales = all over the world Member of STEP (Saskatchewan Trade and Member of STEP (Saskatchewan Trade and
Export Partnership)Export Partnership)– list of about 700 independent pet stores in list of about 700 independent pet stores in
Ontario, Manitoba, Saskatchewan and British Ontario, Manitoba, Saskatchewan and British Columbia. Columbia.
Registered with FDA (Registered with FDA (FDA (U.S. Food and FDA (U.S. Food and Drug Administration) so they can ship their Drug Administration) so they can ship their product into the USA.product into the USA.
Segmentation/TargetingSegmentation/Targeting
Will be targeting people who live in Will be targeting people who live in large centers whose birds and/or the large centers whose birds and/or the environment is very important to environment is very important to themthem
sell to people who will settle for sell to people who will settle for nothing less than the best for their nothing less than the best for their pet bird(s) pet bird(s)
PositioningPositioning
To promote Harvest Sun organic To promote Harvest Sun organic birdseed as a safe, healthy birdseed as a safe, healthy alternative to regular birdseed which alternative to regular birdseed which will benefit the health and well being will benefit the health and well being of the consumer pets.of the consumer pets.
Internal Strengths & Internal Strengths & WeaknessesWeaknesses
Human Resources Strengths Human Resources Weaknesses
Family owned and operated businessLots of labor availableFew Employees to manage
Lack of training, education, experience
Physical Resources Strengths Physical Resources Weaknesses
Established processing and packaging facilityLow rental feeLow input costsLocal raw ingredients
Location (distant from market)
Financial Resources Strengths Financial Resources Weaknesses
Debt-free company Long cash conversion cycleLots of working capital required
External Opportunities & External Opportunities & ThreatsThreats
External Opportunities External ThreatsRelatively new marketOpportunities to enter new marketsSole producerLow ‘organic’ competition
Raw materials are weather dependentCompetition may easily enterHigh non-organic competitionProducts advertised as “natural” or “organic”
The MarketThe Market
There is a large customer base that There is a large customer base that is available to be reached because is available to be reached because there is currently no one active in the there is currently no one active in the organic birdseed market organic birdseed market
The best market is probably going to The best market is probably going to be found in urban centers where be found in urban centers where people are more likely own a bird people are more likely own a bird because it is difficult to own a large because it is difficult to own a large pet in a city pet in a city
CompetitionCompetition
No other producers of organic No other producers of organic birdseed birdseed
The only competition that Harvest The only competition that Harvest Sun will face will be the competitors Sun will face will be the competitors who produce regular non-organic who produce regular non-organic birdseedbirdseed
CustomersCustomers
People who really love their birds. People who really love their birds. People of all agesPeople of all ages
– Young children to seniorsYoung children to seniors Higher disposable incomeHigher disposable income Care about the protection of the Care about the protection of the
environment and they care about what environment and they care about what foods their pets consumefoods their pets consume
Pay what ever it takes to ensure that their Pay what ever it takes to ensure that their bird is healthy and thrivingbird is healthy and thriving
Product/Service FeaturesProduct/Service Features
SK grown and producedSK grown and produced Certified organicCertified organic Buy and receive the product in the Buy and receive the product in the
comfort of their on homecomfort of their on home Provide customers with a natural, Provide customers with a natural,
safe, and environmentally friendly safe, and environmentally friendly product to feed to their pet birds product to feed to their pet birds
Sales and Profit ObjectivesSales and Profit Objectives
Sell 20% of its product over the Sell 20% of its product over the internet and the remaining 80% to internet and the remaining 80% to independently owned pet storesindependently owned pet stores
The main profit objective is to sell all The main profit objective is to sell all products produced at a price in order products produced at a price in order to cover all costs and achieve a 20% to cover all costs and achieve a 20% return.return.
Year 2008 2009 2010 - 2017Quantity of Sales via Internet 2400 4800 7200Quantity of Sales to Stores 9600 19200 28800Total Sales 12000 24000 36000
Channels of DistributionChannels of Distribution
Products will be sold as FOB from Products will be sold as FOB from EstevanEstevan
This means that the shipping and This means that the shipping and handling costs are the buyers from handling costs are the buyers from the place of originationthe place of origination
Harvest Sun will work with the Harvest Sun will work with the buyers to determine the buyers to determine the best/cheapest shipping costs and best/cheapest shipping costs and distribution methods distribution methods
Selling and AdvertisingSelling and Advertising
Marketing manager will do a lot of Marketing manager will do a lot of advertising workadvertising work
Mail out introductory packagesMail out introductory packages Web page: www.harvestsun.caWeb page: www.harvestsun.ca Appropriate magazinesAppropriate magazines
Marketing Plan BudgetMarketing Plan Budget
Year 2008Magazine Advertising $500Business Cards (1000) $108Introductory Packages (100) $500Web page $180Total Advertising Expenses $1,288
Financial PlanFinancial Plan
Debt and Equity MixDebt and Equity Mix
To meet initial capital requirements To meet initial capital requirements and cover expenses for the first few and cover expenses for the first few years of operations, the company will years of operations, the company will need to raise $51,000 in owner’s need to raise $51,000 in owner’s equityequity
Dividend PolicyDividend Policy
When profits and cash flow reach a When profits and cash flow reach a level that ensures there will be level that ensures there will be enough cash for operating in the enough cash for operating in the next year the excess profits will be next year the excess profits will be paid out in dividends paid out in dividends
Year 2008-2013 2014 2015 2016 2017Dividends Paid $0 $11,486 $19,745 $20,252 $20,543
Economic ForecastEconomic Forecast
Financial Projections have been Financial Projections have been made for a ten year period using an made for a ten year period using an inflation rate of 2.0%inflation rate of 2.0%
This rate has been used to derive all This rate has been used to derive all wages, supplies and expenses.wages, supplies and expenses.
Ratio AnalysisRatio Analysis
Unit Cost of ProductionUnit Cost of Production
Unit Cost Analysis ($ per Unit) 2008 2009 2010Unit Cost of Direct Materials 1.51 0.77 0.66Unit Cost of Direct Labor 1.63 0.90 0.66Unit Cost of Manufacturing Overhead 0.43 0.22 0.15Total Unit Cost 3.57 1.89 1.47
Financial Analysis and Overall Financial Analysis and Overall Financial PerformanceFinancial Performance
Year 2008 2009 2010 2011 2012
Sales $48,000 $97,920 $149,818 $152,814 $155,870Cost of Goods Sold $22,600 $55,734 $77,379 $89,251 $91,036Gross Margin $25,400 $42,186 $72,439 $63,563 $64,834Total Expenses $45,077 $66,332 $88,365 $90,132 $91,935Income Before Taxes $2,923 $31,588 $61,453 $62,682 $63,935Income Taxes $0 $0 $2,403 $2,342 $2,377Net Income(Loss) $2,923 $31,588 $59,050 $60,340 $61,558Dividends $0 $0 $0 $0 $0Net Cash Flows to Equity $12,877 -$12,583 $13,771 $19,904 $20,197
Year 2013 2014 2015 2016 2017
Sales $158,988 $162,167 $165,411 $168,719 $172,093Cost of Goods Sold $92,857 $94,714 $96,608 $98,540 $100,511Gross Margin $66,131 $67,453 $68,803 $70,179 $71,582Total Expenses $93,774 $95,649 $97,562 $99,513 $101,504Income Before Taxes $65,214 $66,518 $67,849 $69,206 $70,589Income Taxes $2,436 $2,473 $2,535 $2,573 $2,637Net Income(Loss) $62,778 $64,045 $65,314 $66,633 $67,952Dividends $0 $11,486 $19,745 $20,252 $20,543Net Cash Flows to Equity $20,708 $21,013 $21,545 $21,862 $38,794
Net Present Value (NPV) $4,990Internal Rate of Return on Equity Investment 22.0%External Rate of Return on Equity Investment 14.2%
Risk AnalysisRisk Analysis ThereThere are three main critical are three main critical
variables:variables:packaging expensepackaging expenseselling price (to stores = most critical)selling price (to stores = most critical)quantity of salesquantity of sales
Critical Variables Base Case IRR = 0 % ChangePackaging 1.06 1.45 0.27Labor costs (wage) 9 31.68 0.72Inflation Rate 0.02 4.1 1.00Long-Term Interest Rate 0.08 37344 1.00Selling Price - Internet 7 5.04 -0.39Selling Price - Stores 3.25 2.76 -0.18Quantity of Sales - Stores 6884 9600 0.28Quantity of Sales - Internet 1543 2400 0.36
Break Even AnalysisBreak Even AnalysisHarvest Sun Break Even Analysis
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1 2 3 4 5 6 7 8 9 10
Year
Selli
ng P
rice
to S
tore
s
Economic Break Even Cash Flow Break Even
Net Income Break Even Base Case
Year 1 2 3 4 5 6 7 8 9 10IRR 2.76 2.82 2.87 2.93 2.99 3.05 3.11 3.17 3.27 3.3Cash Flow 1.79 4.1 2.75 2.67 2.75 2.79 2.85 2.9 2.97 3.02Net Income 4.56 3.13 2.24 2.64 2.7 2.74 2.81 2.85 2.92 2.98Base Case 3.25 3.32 3.38 3.45 3.52 3.59 3.66 3.73 3.81 3.88
Scenario AnalysisScenario Analysis
Changed 5 most critical variables by Changed 5 most critical variables by 20% in each direction20% in each direction
Variable BEST CASE BASE CASE WORST CASEPackaging 0.85 1.06 1.27Selling Price - Internet 8.4 7 5.6Selling Price - Stores 3.9 3.25 2.6Quantity of Sales - Stores 11520 9600 7680Quantity of Sales - Internet 2880 2400 1920NPV 205102 4990 -158723IRR 82.2 22 negative
ConclusionConclusion Business plan shows that the business is a Business plan shows that the business is a
feasible enterprisefeasible enterprise– sensitive to the quantity of units sold and sensitive to the quantity of units sold and
selling priceselling price The required rate of the return (20%) is The required rate of the return (20%) is
achievedachieved Harvest Sun Organics has the potential to Harvest Sun Organics has the potential to
be a very profitable company if it is able to be a very profitable company if it is able to properly market its product and sell the properly market its product and sell the amount of product indicated in this amount of product indicated in this business planbusiness plan