golden flaxprocessing ltd. business plan prepared by: oksana akhova, Éric lefol and sarah schuster...
TRANSCRIPT
Golden FlaxProcessing Ltd.
Business PlanBusiness Plan
Prepared by:Prepared by:
Oksana Akhova, Éric Lefol and Sarah SchusterOksana Akhova, Éric Lefol and Sarah Schuster
April 05, 2007April 05, 2007
Site PlanSite Plan
Product Product descriptiondescription
Golden Flax: toasted, ready to eat, unique “nutty” flavour, healthy (Omega-3, Fibres)
Toasting at “InfraReady” : unique process with high temperature for a short time
Packaging: Vacuum packed in aluminized plastic to keep flax air-tight and avoid exposition to light
Operation PlanOperation Plan
Organizational StructureOrganizational Structure Average work day, and Average work day, and activitiesactivities Cash Conversion CycleCash Conversion Cycle Capital Budget ProjectionCapital Budget Projection
Organizational StructureOrganizational Structure
Owner/Manager Owner
Administrative Assistant
Operation Plan:
Average Work Day and Average Work Day and
Yearly Schedule of ActivitiesYearly Schedule of Activities
Winter Winter vs.vs. Summer commitment Summer commitment
Monthly activities include Monthly activities include Trade Shows and Taxes! Trade Shows and Taxes!
Operation Plan:
ActivitiesActivities
$ 0.20 $ 0.14 $ 0.55
$ 1.43
$ 0.01
$ 0.14
$ 0.04
Operation Plan:
Cash Conversion CycleCash Conversion Cycle
Average Days Average Days Inventory Inventory
180 days180 days
Average Collection Average Collection Period Period
30 days30 days
Average Days Average Days PayablesPayables
30 days30 daysCCC = 30 + 180 – 30 = 180 daysCCC = 30 + 180 – 30 = 180 days
ReceiveReceivedd
3030 181800
210 210 daysdays
Account Account ReceivablReceivabl
ee
AccounAccount t
PayablPayablee Packaged Toasted Seed in InventoryPackaged Toasted Seed in Inventory
Operation Plan:
Capital Budget projectionCapital Budget projection
20072007 20082008 20092009 20102010 20112011
Capital BudgetCapital Budget
CashCash $ 11,443 $ 11,443 $ 7,158 $ 7,158 $ 16,255 $ 16,255 $ 34,763 $ 34,763 $ 60,503 $ 60,503
Accounts Receivable Accounts Receivable $ 877$ 877 $ 3,354 $ 3,354 $ 6,842 $ 6,842 $ 10,469 $ 10,469 $ 14,238 $ 14,238
InventoryInventory $ 4,994 $ 4,994 $ 18,456 $ 18,456 $ 34,600 $ 34,600 $ 51,372 $ 51,372 $ 68,327 $ 68,327
Accounts Payable Accounts Payable $ (1,081)$ (1,081) $ (3,030)$ (3,030) $ (4,910)$ (4,910) $ (7,530)$ (7,530) $ (10,465) $ (10,465)
LandLand $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
EquipmentEquipment $ 1,900 $ 1,900 $ 1,710 $ 1,710 $ 1,539 $ 1,539 $ 1,385 $ 1,385 $ 1,247 $ 1,247
Total Owner EquityTotal Owner Equity $ 18,133 $ 18,133 $ 27,650 $ 27,650 $ 54,327$ 54,327 $ 90,459$ 90,459 $ 133,850$ 133,850
Cost of Goods SoldCost of Goods Sold $ 4,648 $ 4,648 $ 17,027 $ 17,027 $ 38,421 $ 38,421 $ 62,221 $ 62,221 $ 86,614 $ 86,614
ExpensesExpenses
Administration salaries Administration salaries $ 6,055 $ 6,055 $ 10,459$ 10,459 $ 9,977 $ 9,977 $ 17,593$ 17,593 $ 28,754 $ 28,754
Marketing expensesMarketing expenses $ 1,833 $ 1,833 $ 2,957 $ 2,957 $ 5,212$ 5,212 $ 7,411 $ 7,411 $ 9,648 $ 9,648
Total Adm. & Mark. Exp.Total Adm. & Mark. Exp. $ 7,888 $ 7,888 $ 13,416 $ 13,416 $ 15,189$ 15,189 $ 25,004$ 25,004 $ 38,402$ 38,402
Operation Plan:
SummarySummary
Look into lowering Packaging CostLook into lowering Packaging Cost
Lower Average Day in InventoryLower Average Day in Inventory
Keep good ratio between Owners’ Keep good ratio between Owners’ Equity and Expenses & CostsEquity and Expenses & Costs
Human ResourcesHuman Resources
Shareholders’ agreementShareholders’ agreement 50/50 net profits50/50 net profits Building arrangementsBuilding arrangements
Wages for 2006Wages for 2006
WageWage EIEI CPPCPP WCCWCC TotalTotal
LabourLabour 823823 2222 4141 4242 928928
ManageManagerr
4,4844,484 8787 222222 260260 5,0535,053
SecretarSecretaryy
1,0201,020 2020 5050 5959 1,1501,150
TotalTotal 6,3276,327 129129 313313 361361 $ $ 7,1317,131
Marketing PlanMarketing Plan
The Marketing Mix The Marketing Mix
(Product, Pricing, Promotion, Place)(Product, Pricing, Promotion, Place)
Segmentation, Targeting, and Segmentation, Targeting, and PositioningPositioning
SummarySummary
The Marketing Mix: The Marketing Mix: ProductProduct Golden Toasted FlaxGolden Toasted Flax
• Omega-3 Fatty AcidsOmega-3 Fatty Acids• FibresFibres
ZPP Image and ServiceZPP Image and Service• Sold only in Health Food StoresSold only in Health Food Stores• Quality control (Colour, Toasting)Quality control (Colour, Toasting)• Naturally grownNaturally grown
Marketing Plan:
The Marketing Mix: The Marketing Mix: PricingPricing
The Competition in SKThe Competition in SK• CanMar Products Ltd.CanMar Products Ltd.• Northern Quinoa CorporationNorthern Quinoa Corporation
Pricing StrategyPricing Strategy• Parity Pricing Parity Pricing • Price TakerPrice Taker
Marketing Plan:
The Marketing Mix: The Marketing Mix: ProPromotionmotion
From our Farm to your HomeFrom our Farm to your Home
Selling & AdvertisingSelling & Advertising• Health BenefitsHealth Benefits• DifferentiationDifferentiation• Tools (trade shows, web-site, direct Tools (trade shows, web-site, direct
advertising, pamphlets)advertising, pamphlets)
Marketing Plan:
The Marketing Mix: The Marketing Mix: PPlacelace
Health Food Stores in Health Food Stores in SaskatchewanSaskatchewan
Health Food Stores in the PrairiesHealth Food Stores in the Prairies
NetworkNetwork
Marketing Plan:
Segmentation, Targeting, and PositioningSegmentation, Targeting, and PositioningMarketing Plan:
SummarySummaryBased on:Based on: STRENGTHSSTRENGTHS in reputation, enthusiasm, and healthy product claims, in reputation, enthusiasm, and healthy product claims,
WEAKNESSESWEAKNESSES in competitive pressure, risk associated with in competitive pressure, risk associated with outsourcing, limited production capabilities, limited advertising of outsourcing, limited production capabilities, limited advertising of product and health benefits,product and health benefits,
OPORTUNITIESOPORTUNITIES in higher margin selling to health food stores, and in higher margin selling to health food stores, and innovation of diversification,innovation of diversification,
THREATSTHREATS in existing and new competition, and other available sources in existing and new competition, and other available sources of Omega 3of Omega 3
ZPP should:ZPP should: Approach the retailer Nutter’sApproach the retailer Nutter’s Seek approval of Golden Flax with a brokerSeek approval of Golden Flax with a broker Continue to approach Saskatchewan health food Continue to approach Saskatchewan health food
storesstores Follow up with the shakerFollow up with the shaker
Marketing Plan:
Financial PlanFinancial Plan
Financial resultsFinancial results Critical variables Critical variables
analysisanalysis Break-even analysisBreak-even analysis Scenario analysisScenario analysis
GoalsGoals
Price per bag (1 Pound): $4.54Price per bag (1 Pound): $4.54
Year 2007 2008 2009 2010 2011
Quantity (tons) 1.00 3.75 7.50 11.25 15.00
#units 2,350 8,813 17,625 26,438 35,250
Sales: Sales:
Financial Plan:Financial Plan:
Financial overviewFinancial overviewYear Year 20072007 20162016
SalesSales $10,669 $10,669 $191,257 $191,257
COGSCOGS 4,6844,684 107,867107,867
Gross ProfitGross Profit 6,0216,021 83,39083,390
ExpensesExpenses 7,8887,888 42,25042,250
Net Income Before TaxNet Income Before Tax (1,867)(1,867) 41,14041,140
Income TaxIncome Tax 00 4,1144,114
Net Income After TaxNet Income After Tax (1,867)(1,867) 37,02637,026
Ending Retained Ending Retained EarningsEarnings ($1,867)($1,867) $175,429$175,429
Net Present Value (NPV) Net Present Value (NPV) 53,67453,674 Internal Rate of Return (IRR) on Equity Investment Internal Rate of Return (IRR) on Equity Investment 55.60%55.60%
External Rate of Return (ERR) on Equity Investment External Rate of Return (ERR) on Equity Investment 31.00%31.00%
Financial Plan:Financial Plan:
The Critical Variables The Critical Variables AnalysisAnalysis
The most critical variable for ZPP is price per The most critical variable for ZPP is price per unit. A drop from $4.54 to $3.91 (14%) drives unit. A drop from $4.54 to $3.91 (14%) drives the NPV from $53,674 to zerothe NPV from $53,674 to zero
The second critical variable is number of The second critical variable is number of packages sold. 34% of decrease of this packages sold. 34% of decrease of this variable brings NPV to zerovariable brings NPV to zero
The least critical variable is secretarial salary. The least critical variable is secretarial salary. It is needed to be changed by 336% to bring It is needed to be changed by 336% to bring NPV to zero.NPV to zero.
Financial Plan:Financial Plan:
Break-even analysisBreak-even analysis
3.00
3.50
4.00
4.50
5.00
5.50
6.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Financial Plan:Financial Plan:
NPV=0
NPV=53,674
2007200
8 2009 2010 2011201
2 2013201
4 2015 2016
4.54 4.63 4.72 4.82 4.91 5.01 5.11 5.22 5.32 5.43
3.91 3.99 4.07 4.15 4.23 4.32 4.40 4.49 4.58 4.67
Pri
ce p
er
unit
, Pri
ce p
er
unit
, $$
Break-even analysisBreak-even analysis
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Financial Plan:Financial Plan:Pack
ag
es
sold
Pack
ag
es
sold
2007200
8 2009 2010 2011 2012 2013 2014 2015 2016
2,350 8,813
17,625
26,438
35,250
35,250
35,250
35,250
35,250
35,250
1,552 5,819
11,637
17,456
23,275
23,275
23,275
23,275
23,275
23,275
NPV=0
NPV=53,674
SummarySummary
Price is the most critical variable for Price is the most critical variable for the business. If this variable change by the business. If this variable change by -14% brings ZPP business to NPV=0.-14% brings ZPP business to NPV=0.
Sales level is the second critical Sales level is the second critical variablevariable
ZPP’s business is able to generate ZPP’s business is able to generate positive NPV under projected sales and positive NPV under projected sales and price at $4.54price at $4.54
Financial Plan:Financial Plan:
Recommendations Recommendations Look into lowering Packaging CostLook into lowering Packaging Cost Lower Average Day in InventoryLower Average Day in Inventory Keep good ratio between Owners’ Equity, and Keep good ratio between Owners’ Equity, and
Expenses & CostsExpenses & Costs Approach the retailer Nutter’sApproach the retailer Nutter’s Seek approval of Golden Flax with a broker Seek approval of Golden Flax with a broker Continue to approach Saskatchewan health food sContinue to approach Saskatchewan health food s
tores tores Maintained level of sales as outlined in the Maintained level of sales as outlined in the
break-even analysis break-even analysis Seek possibilities to increase price per unit if Seek possibilities to increase price per unit if
volume of sales drops volume of sales drops
Acknowledgments Acknowledgments
Bill Brown and classmates Bill Brown and classmates
Thank YouThank You