Transcript KAML SEEDLINS LTD. - University of Saskatchewan

Seedlings Ltd.
AG EC 75.6
Agribusiness Capstone
Business Plan Proposal
Introduction
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The largest expense to greenhouse owner/
operators is heating!
With natural gas and other heating alternatives
rising in cost, it seems natural for the business
to be built on a waste heat site, where heat is
put into the atmosphere daily
The proposed greenhouse will be built near the
Cory potash mine to take advantage of the
waste heat.
Mission Statement
“To provide high quality,
hardy tree seedlings to
Saskatchewan’s
forestry industry while
utilizing industrial
waste products that
may otherwise be
detrimental to the
environment.”
Environmental Trends
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There are efforts to reduce pollution that harms the
environment.
There are also efforts to further use by products from
manufacturing and other industries.
Operations and Human Resource
Plan
Organizational Structure
General Manager
+
Head Grower
General Laborer
(Part-time)
Worker*
Worker*
Worker*
Worker*
Worker*
Proposed site
Site Plan/Building and Floor Plan
Work Plan and Flow of Work
Access
Seed
Place the peat in
Styrofoam blocks
Seed
blocks
and water
Transfer blocks
to greenhouse
Thin seedlings
to one/cell and
pick weeds
Sorting and
Packaging
Application of
fertilizer during
watering. Removal
of weeds when
needed
Continue
growing in
greenhouses (8
months)
Low quality
seedlings are
discarded
High quality
seedlings are plastic
wrapped and placed
in cardboard boxes
Seedlings are
picked up by
contracted
company
Waste Heat Savings
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1,296,000 BTU/hr
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31,104,000 BTU/day
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$217.00/day to heat
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$65,100 in savings for one month
Cost of Goods Manufactured
Direct Materials
$36 864
Direct Labor
$66 447
Manufacturing Overhead
$34 305
Cost of Goods
Manufactured
$137 616
Cash Conversion Cycle
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CCC=Average days inventory (10
months*30 days=300 days) + Average
collection period (30 days) – Average
days payable (30 days)
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Total CCC=300 days
Marketing Plan
The Marketing Mix 4 P’s
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Product- hardy tree seedlings grown to the
customers specifications
Price- below industry standard of $0.25 a
seedling because of waste heat advantage
Promotion- using waste heat to grow tree
seedlings, that will benefit the environment
Place- government, pulp and paper along with
lumber companies that are involved in
reforestation
Segmentation, Targeting & Positioning
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Segmentation- this is a very narrow market so
all buyers will be aggregated into one group
Targeting- buyers will be mainly targeted
within the province of Saskatchewan, out of
province customers will be targeted if supply
allows
Positioning- the company will be seen as a
producer of high quality seedlings at a lower
cost grown to customer specifications
SWOT Analysis
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Internal Strengths and Weaknesses
 Human Resources
 Strengths Management and head grower will have expert
knowledge.
 Weaknesses Finding employees with greenhouse
experience willing to work seasonally.
 Physical Resources
 Strengths Capital costs and operating costs will be
reduced because the greenhouse does not require natural gas.
 Weaknesses The greenhouse requires sunlight for
maximum plant growth.
 Financial Resources
 Strengths Lower production costs because of waste heat
advantage.
 Weaknesses The cash conversion cycle is very long.
Product/Service Features
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The seedlings will be
grown to the buyers
specifications as
determined by a height
and root collar diameter
(RCD).
The Opportunity
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The opportunity to heat the
greenhouse at competitive cost to
conventional greenhouses, which
gives a profit advantage when
selling the tree seedlings.
Financial Plan
2006 Income Information
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IRR= 71.0%
ERR= 47.9%
Net Income= $ 154 688
Sales Revenue= $ 375 000
Total Liabilities= $ 235 222
Leverage Ratios
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Debt Ratio= 37.2%
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Debt to Equity= 59.3%
Profitability Ratios
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Gross Profit Margin= 63.2%
Net Profit Margin= 41.3%
Return on Total Assets= 24.5%
Return on Equity= 39.0%
All ratios are calculated after tax
Risk Analysis
Risk Analysis
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Critical Variables
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Breakeven Analysis
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Quantity of sales, Selling Price, Wage rates
Selling Price
Best, Base and Worst Case Scenarios
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Pricing
Number of Seedlings sold
Conclusion
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Seedlings is feasible
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Sensitive to success of contract negotiations
Contractors would be very aware of the
vulnerability of the company and would try to
take advantage of this.
High potential to be profitable
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Carries a high level of risk
Risk will diminish when contracts are secured
Questions ???