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Golden FlaxProcessing Ltd. Business Plan Prepared by: Oksana Akhova, Éric Lefol and Sarah Schuster April 05, 2007.

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Presentation on theme: "Golden FlaxProcessing Ltd. Business Plan Prepared by: Oksana Akhova, Éric Lefol and Sarah Schuster April 05, 2007."— Presentation transcript:

1 Golden FlaxProcessing Ltd. Business Plan Prepared by: Oksana Akhova, Éric Lefol and Sarah Schuster April 05, 2007

2 Site Plan

3 Product description 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

4 Operation Plan Organizational Structure Organizational Structure Average work day, and activities Average work day, and activities Cash Conversion Cycle Cash Conversion Cycle Capital Budget Projection Capital Budget Projection

5 Organizational Structure Owner/ManagerOwner Administrative Assistant Operation Plan:

6 Average Work Day and Yearly Schedule of Activities Winter vs. Summer commitment Winter vs. Summer commitment Monthly activities include Trade Shows and Taxes! Monthly activities include Trade Shows and Taxes! Operation Plan:

7 Activities $ 0.20$ 0.14 $ 0.55 $ 1.43 $ 0.01 $ 0.14 $ 0.04 Operation Plan:

8 Cash Conversion Cycle Average Days Inventory 180 days Average Collection Period 30 days Average Days Payables 30 days CCC = – 30 = 180 days Received days Account Receivable Account Payable Packaged Toasted Seed in Inventory Operation Plan:

9 Capital Budget projection Capital Budget Cash $ 11,443 $ 11,443 $ 7,158 $ 7,158 $ 16,255 $ 16,255 $ 34,763 $ 34,763 $ 60,503 $ 60,503 Accounts Receivable $ 877 $ 877 $ 3,354 $ 3,354 $ 6,842 $ 6,842 $ 10,469 $ 10,469 $ 14,238 $ 14,238 Inventory $ 4,994 $ 4,994 $ 18,456 $ 18,456 $ 34,600 $ 34,600 $ 51,372 $ 51,372 $ 68,327 $ 68,327 Accounts Payable $ (1,081) $ (1,081) $ (3,030) $ (3,030) $ (4,910) $ (4,910) $ (7,530) $ (7,530) $ (10,465) Land $ - $ - Equipment $ 1,900 $ 1,900 $ 1,710 $ 1,710 $ 1,539 $ 1,539 $ 1,385 $ 1,385 $ 1,247 $ 1,247 Total 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 Sold $ 4,648 $ 4,648 $ 17,027 $ 17,027 $ 38,421 $ 38,421 $ 62,221 $ 62,221 $ 86,614 $ 86,614 Expenses Administration salaries $ 6,055 $ 6,055 $ 10,459 $ 10,459 $ 9,977 $ 9,977 $ 17,593 $ 17,593 $ 28,754 $ 28,754 Marketing 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. $ 7,888 $ 7,888 $ 13,416 $ 13,416 $ 15,189 $ 15,189 $ 25,004 $ 25,004 $ 38,402 $ 38,402 Operation Plan:

10 Summary Look into lowering Packaging Cost Look into lowering Packaging Cost Lower Average Day in Inventory Lower Average Day in Inventory Keep good ratio between Owners Equity and Expenses & Costs Keep good ratio between Owners Equity and Expenses & Costs

11 Human Resources Shareholders agreement Shareholders agreement 50/50 net profits 50/50 net profits Building arrangements Building arrangements Wages for 2006 Wages for 2006WageEICPPWCCTotal Labour Manager4, ,053 Secretary1, ,150 Total6, $ 7,131

12 Marketing Plan The Marketing Mix The Marketing Mix (Product, Pricing, Promotion, Place) Segmentation, Targeting, and Positioning Segmentation, Targeting, and Positioning Summary Summary

13 The Marketing Mix: Product Golden Toasted Flax Golden Toasted Flax Omega-3 Fatty Acids Omega-3 Fatty Acids Fibres Fibres ZPP Image and Service ZPP Image and Service Sold only in Health Food Stores Sold only in Health Food Stores Quality control (Colour, Toasting) Quality control (Colour, Toasting) Naturally grown Naturally grown Marketing Plan:

14 The Marketing Mix: Pricing The Competition in SK The Competition in SK CanMar Products Ltd. CanMar Products Ltd. Northern Quinoa Corporation Northern Quinoa Corporation Pricing Strategy Pricing Strategy Parity Pricing Parity Pricing Price Taker Price Taker Marketing Plan:

15 The Marketing Mix: Promotion From our Farm to your Home From our Farm to your Home Selling & Advertising Selling & Advertising Health Benefits Health Benefits Differentiation Differentiation Tools (trade shows, web-site, direct advertising, pamphlets) Tools (trade shows, web-site, direct advertising, pamphlets) Marketing Plan:

16 The Marketing Mix: Place Health Food Stores in Saskatchewan Health Food Stores in Saskatchewan Health Food Stores in the Prairies Health Food Stores in the Prairies Network Network Marketing Plan:

17 Segmentation, Targeting, and Positioning Marketing Plan:

18 Summary Based on: STRENGTHS in reputation, enthusiasm, and healthy product claims, STRENGTHS in reputation, enthusiasm, and healthy product claims, WEAKNESSES in competitive pressure, risk associated with outsourcing, limited production capabilities, limited advertising of product and health benefits, WEAKNESSES in competitive pressure, risk associated with outsourcing, limited production capabilities, limited advertising of product and health benefits, OPORTUNITIES in higher margin selling to health food stores, and innovation of diversification, OPORTUNITIES in higher margin selling to health food stores, and innovation of diversification, THREATS in existing and new competition, and other available sources of Omega 3 THREATS in existing and new competition, and other available sources of Omega 3 ZPP should: Approach the retailer Nutters Approach the retailer Nutters Seek approval of Golden Flax with a broker Seek approval of Golden Flax with a broker Continue to approach Saskatchewan health food stores Continue to approach Saskatchewan health food stores Follow up with the shaker Follow up with the shaker Marketing Plan:

19 Financial Plan Financial results Financial results Critical variables analysis Critical variables analysis Break-even analysis Break-even analysis Scenario analysis Scenario analysis

20 Goals Price per bag (1 Pound): $4.54 Price per bag (1 Pound): $4.54 Year Quantity (tons) #units2,350 8,813 17,625 26,438 35,250 Sales: Sales: Financial Plan:

21 Financial overview Year Sales$10,669$191,257 COGS4,684107,867 Gross Profit 6,02183,390 Expenses7,88842,250 Net Income Before Tax (1,867)41,140 Income Tax 04,114 Net Income After Tax (1,867)37,026 Ending Retained Earnings ($1,867)$175,429 Net Present Value (NPV) 53,674 Internal Rate of Return (IRR) on Equity Investment 55.60% External Rate of Return (ERR) on Equity Investment 31.00% Financial Plan:

22 The Critical Variables Analysis The most critical variable for ZPP is price per unit. A drop from $4.54 to $3.91 (14%) drives the NPV from $53,674 to zero The most critical variable for ZPP is price per unit. A drop from $4.54 to $3.91 (14%) drives the NPV from $53,674 to zero The second critical variable is number of packages sold. 34% of decrease of this variable brings NPV to zero The second critical variable is number of packages sold. 34% of decrease of this variable brings NPV to zero The least critical variable is secretarial salary. It is needed to be changed by 336% to bring NPV to zero. The least critical variable is secretarial salary. It is needed to be changed by 336% to bring NPV to zero. Financial Plan:

23 Break-even analysis Financial Plan: NPV=0 NPV=53, Price per unit, $

24 Break-even analysis Financial Plan: Packages sold ,350 8,813 17,625 26,438 35,250 1,552 5,819 11,637 17,456 23,275 NPV=0 NPV=53,674

25 Summary Price is the most critical variable for the business. If this variable change by -14% brings ZPP business to NPV=0. Price is the most critical variable for the business. If this variable change by -14% brings ZPP business to NPV=0. Sales level is the second critical variable Sales level is the second critical variable ZPPs business is able to generate positive NPV under projected sales and price at $4.54 ZPPs business is able to generate positive NPV under projected sales and price at $4.54 Financial Plan:

26 Recommendations Look into lowering Packaging Cost Look into lowering Packaging Cost Lower Average Day in Inventory Lower Average Day in Inventory Keep good ratio between Owners Equity, and Expenses & Costs Keep good ratio between Owners Equity, and Expenses & Costs Approach the retailer Nutters Approach the retailer Nutters Seek approval of Golden Flax with a broker Seek approval of Golden Flax with a broker Continue to approach Saskatchewan health food stores Continue to approach Saskatchewan health food stores Maintained level of sales as outlined in the break-even analysis Maintained level of sales as outlined in the break-even analysis Seek possibilities to increase price per unit if volume of sales drops Seek possibilities to increase price per unit if volume of sales drops

27 Acknowledgments Bill Brown and classmates Bill Brown and classmates

28 Thank You


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