Transcript Prepared by: Pauline Bolay Jamie Freedman Kurtis Kramer

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