Rhonda EhaltJeff Prosko

Braden HudyeTerrance Mckee

•

• “A revolution in organic weed control”

45’ cutting width reduced wheel tracks increased operating speed safer transport Improved contouring ability Fewer passes Reduced inputs cost of the XP Chopper

Machine Construction

Machine Construction

Weed Bashing

Construction Costs

Complete Machine including all: Steel Hydraulic Components Mechanical Components Paint and Decals Labor

Comes to a total cost of $21,048

Start Up Working Plan (Year 1) Engineer develops a working blue print Research and Development with 45’ model (side by

side plot trials) Field demos Attend Trade Shows (new inventions at Farm

Progress) Goal: to sell 5 machines in year 1

Working Plan (Year 2+) Once established as a reputable company sales will

continue to increase on a yearly basis

Attend Saskatoon, Brandon, and Red Deer Trade Shows in January

Early Spring will consist of taking and delivering orders to our dealers

R and D manager and summer student will manage side by side plot trials across prairies

Working Plan continued Marketing Manager and summer student will be in

charge of taking orders and all public relations

Marketing Reps will put on field demos across the prairies

Marketing Reps will continue attending trade shows throughout the summer and develop advertisements

Continue developing new and improved models

Site Plan

Operating Expenses

Building Expenses CostsBuilding lease $24,000 Taxes $1,100 Natural Gas $2,600 Power $1,200 Insurance $500Phone $2,400

Total

$31,800

Operating Expenses continued

Travel Costs CostsTruck License $1,000 Trailer License $300 Truck Repairs $2,000 Trailer Repairs $1,000 Fuel (30,000miles)(15mpg) $4,500 Hotels (15 nights) $1,500 Meals (45 meals) $4,500 Trade show fees (5 shows) $5,000 Total Operating Costs $52,500

Organizational Structure

President and Vice President

SecretaryAdministration

Marketing Manager

R & D Manager

Summer Student R&D Technician

Summer Student Marketing Technician

Human Resource Plan

2 Share Holders (President and Vice President) Company Profits split 50-50 between share holders 5 positions

President (Marketing Manager) Vice President (R and D Manager) Secretary/Administrator 2 Summer Students

Human Resource Plan President and Vice President are sole investors and

each own 50% of the Company President will have the responsibilities of Marketing Vice President will have the responsibilities of

Research and Development Full time Secretary will be hired to handle

administration and bookkeeping (Accountant will be hired for tax filing)

Part time research and marketing assistants will be hired during the busy season (University Summer Students)

Human Resource Plan Salary Unemployment

Insurance Canada Pension

Holiday Pay

TOTAL

President (Marketing Manager)

$50,000 $1,700 $1,900 $3,000 $56,600

Vice President (R & D Manager)

$50,000 $1,700 $1,900 $3,000 $56,600

Secretary Administration

$21,600 $734.40 $820.80 $1,296 $24,451

Part-time Marketing Technician

$9,600 $576 $10,176

Part Time R & D Technician

$9,600 $576 $10,176

XP Choppers will pay out $158,003 per year in wages

The Marketing Mix

Products and Services – Organic in-crop weed control system with many advantages over traditional systems.

Pricing - No direct competition making XP Choppers a price establisher, will use premium pricing.

Promotion – More effective weed control, higher ground speeds, reduced wheel tracks.

Place – Western Canadian organic farmers.

Segmentation, Targeting and Positioning Segmentation – 45’ model being built to

service the needs of larger organic farms, smaller models will be built in the future.

Targeting – Leading edge organic producers who desire improved weed control.

Positioning – Long term sustainability by controlling weeds effectively without the use of chemical.

SWOT AnalysisInternal Strengths and Weaknesses

Human Resources (Strength) Well educated staff. (Weakness) Possible conflicts (two equal

partners) Physical Resources

(Strength) Welding shops, location, building. (Weakness) Quality control issues.

Financial Resources (Strength) Low overhead, investors run company (Weakness) Two-Three year break even period.

SWOT AnalysisExternal Opportunities and Threats

Opportunities Increasing number of

organic farms (5%/yr) Increased consumer

demand for organics. Premium prices No direct competition

Threats Many variable affecting

producer income. Possibility of biological

herbicides. Renewed emphasis on

convention practices.

Market Analysis

The Market – 1500 organic farms in western Canada consisting of approx. 1,500,000 acres as of 2005 (OCPP, 2005)

Competition – Close direct competition consists of farmers using existing swather tables.

Customers - Organic producers looking for improved methods of mechanical weed control.

Target Markets – Will start out in western Canada and eventually move into the United States and Australia.

Market Analysis (cont’d)

Product/Service Features - The XP Chopper is the first machine of its kind, it is designed to bash the structure of the weed as opposed to cutting the stem clean, causing the plant to die or re-grow at a much slower rate.

Opportunity – One of a kind machine entering into an untapped market.

Sales Forecast Projected units

sold Projected number of farms (5% growth)

Percent of market growth

Total market share

Year 1 5 1500 0.3% 0.3% Year 2 30 1575 1.9% 2.2% Year 3 60 1654 3.6% 5.7% Year 4 80 1737 4.6% 10% Year 5 91 1824 5% 15% Year 6 96 1915 5% 19% Year 7 101 2011 5% 23% Year 8 106 2112 5% 27% Year 9 111 2218 5% 31% Year 10 117 2329 5% 34% Total 797

Marketing Strategy

Sales Objectives – to sell 797 units in 10 years capturing 34% of total market share.

Profit Objectives – 125% of the cost per unit.

Channels of Distribution – Year one sell directly to customers, in year two will establish a dealer network consisting of existing equipment dealers.

Marketing Strategy (cont’d) Pricing Policy – pricing will be based on the

cost of the machine (25% Markup) XP Choppers

Cost to build $ 21,048 x 25 % = $ 5,262 profit Dealership:

Cost to buy $ 26,310 x 25% = $ 6,578 profit Machine Retails at $ 32,890

Selling and Advertising

Attend agricultural tradeshows Booth with video of machine, brochures, research, etc.

Arrange field days/demonstrations Write press releases and submit to Grainews,

Western producer, Top Crop Manager, etc. Feature the machine on the prairie farm

report. Attend organic crop growers conferences

Marketing Plan BudgetTRAVEL EXPENSES Vehicle repairs, maintenance and license $3,000 Trailer repairs, maintenance and license $1,300 Fuel $4,500 Accommodations (8 shows @ 3 nights) $2,400 Meals $1,000 Sub Total $12,200 Promotion and Development Trade show entries (8 shows @$1500) $12,000 Trade show booth (model, tv/vcr, display) $2,000 Video Production $300 Brochures $100 Web Page $1,000 Newspaper Advertising $5,000 Field Demos (6 locations) $6,000 Swather fuel and repairs (field demos) $1,400 Sub Total $27,500 Total Marketing Cost $40,000

Financial Plan

The initial start up cost is $350,000 $300,000 will come from owner’s equity The remaining $50,000 will be long term debt The $50,000 loan will be amortized over 5

years at an average interest rate of 7% Annual loan payment will be $12,195 for 5

years.

Summary of Financial ResultsYear 2006 2007 2008 2009 2010

Sales Revenue 131,550 805,086 1,610,17

2 2,146,35

9 2,448,996

COGS 137,537 652,983 1,283,756

1,726,562

1,981,574

Gross Margin (5,987) 152,103 326,416 419,797 467,422 Expenses 202,886 206,265 209,681 213,133 216,619 Net Income Before Tax

(208,872) (54,161) 116,735 206,664 250,803

Income Tax 0 0 0 6,544 27,187 Net Income After Tax (208,872) (54,161) 116,735 200,121 223,616 Dividends 0 0 0 0 0 End Retained Earnings

(208,872) (263,034) (146,298) 53,822 277,438

Summary of Financial ResultsYear 2011 2012 2013 2014 2015

Sales Revenue 2,583,691 2,712,87

5 2,848,51

9 2,990,94

5 3,140,492

COGS 2,105,726 2,213,907

2,318,452

2,429,055

2,546,422

Gross Margin 477,965 498,968 530,067 561,890 594,071 Expenses 220,138 224,541 229,031 233,612 238,284 Net Income Before Tax

257,827 274,428 301,036 328,278 355,786

Income Tax 27,948 29,748 32,850 41,524 50,282 Net Income After Tax 229,879 244,680 268,186 286,754 305,504 Dividends 153,584 173,311 240,720 258,789 272,550 End Retained Earnings

353,733

426,102 453,567 481,532 514,487

Net Present Value (NPV) of Equity Investment 310,719 Internal Rate of Return on Equity Investment 35.7% External Rate of Return on Equity Investment 24.4%

Summary of Financial Ratios

2006 2008 2010 2012 2014 Liquidity Ratios Current Ratio 7.41 2.29 4.46 4.85 4.87 Activity and Operating Ratios Total Asset Turnover .93 5.72 3.32 3.00 3.06 Inventory Turnover 3.89 9.94 11.55 11.68 11.67 Average Days Inventory 94 37 32 31 31 Leverage Ratios Debt Ratio 35.4% 45.4% 21.8% 19.7% 20.1% Debt to Equity 54.8% 83.2% 27.9% 24.6% 25.2% Profitability Ratios Gross Profit Margin -4.6% 20.3% 19.1% 18.4% 18.8% Net Profit Margin -158.8% 7.2% 9.1% 9.0% 9.6% Return on Total Assets -148% 41.5% 30.3% 27.1% 29.3% Return on Equity -229.2% 75.9% 38.7% 33.7% 36.7%

Risk AnalysisCritical Variables

Critical Variables

020406080

100120140160

1 2 3 4 5 6 7 8 9 10Years

Qua

ntity

of S

ales

I.R.R 50%I.R.R. 36% BaseI.R.R. 0%

Breakeven Analysis Economic Breakeven

the percent of markup on the cost of goods manufactured can be reduced from the current 25% down to a 13% markup before a 0% I.R.R. is reached

Cash Flow Breakeven In order for the company to avoid a negative cash

balance, the percent of markup can only drop by 1% from 25 down to 24

Breakeven Analysis

Income Breakeven needs to maintain a minimum 20% markup to

achieve a minimum income in order to avoid a negative return to equity.

Sensitivity Analysis Base Case uses the current 25% Markup on the cost

of goods manufactured Best Case scenario the markup has been raised

from 25% to 45% Worst Case scenario the markup has been dropped

by 10% down to 15%

Best Case +20% Base Case Worst Case -10% Mark Up 73.2 % I.R.R. 35.7% I.R.R 1.6% I.R.R. Quantity of Sales 43.6 % I.R.R. 35.7% I.R.R 30.0 % I.R.R. Mark Up and Sales 85.4% I.R.R. 35.7% I.R.R. -5.3% I.R.R.

Sensitivity Analysis

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Mark Up Quantity of Sales Mark Up andSales

I.R.R

. Best +20%BaseWorst -10%

Summary In order for XP Choppers to meet and

maintain their cash flow requirements in the beginning, the initial sales targets must be met. A 25% markup over the cost of production must also be maintained.

XP Choppers can potentially decrease the cost of production based on volume sales and manufacturing contracts, lowering our cost of goods sold.

Summary This allows room to increase the markup,

while still achieving the same list price, thereby increasing the company’s revenue and profit margins.

If these objectives are met will be a highly profitable business, delivering an outstanding internal rate of return of 35.7%, and a 24.4% external rate of return, proving to be a sound financial investment.