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7/21/2015 AgEc 495.3 Business Proposal Outline Overview of Business Planning Operations Plan Human Resources Plan Marketing Plan Financial Plan Conclusion 7/21/2015 AgEc 495.3 Business Proposal Production Facility Ice Cream Batch Freezer 12X 24 Walk-in Freezer 3 Compartment Sink Employee Washroom Vacuum Sealer and Weigh Scale Table Table 40' X 40' Building Cherry Pitter Table Cherry Sorter and Conveyer Cooler Cooler Insulated Door 7/21/2015 AgEc 495.3 Business Proposal Flow of Work 7/21/2015 AgEc 495.3 Business Proposal Average Business Week About 11.7 L/ 15 minutes 374.4 L/ day 1 day/week on marketing 1 day/week on distribution About 90,000 L/ year at maximum production capacity 7/21/2015 AgEc 495.3 Business Proposal Cost of Goods Manufactured Cost of Goods Manufactured Description Direct Expenses: Fruit: Cherries $1.59/kg Apples $3.37/kg Rhubarb $3.49/kg Raspberries$5.13/kg Saskatoon berries $4.58/kg Strawberries $2.70/kg Total Fruit Expense Ice Cream Mix Expense Packaging Cost Pails Lids Shipping and Handling Sticker Label Total Packaging Cost Total Direct Expenses Total Direct Labour Total Direct Labour Benefits Manufacturing Overhead Depreciation Insurance Accounting Utilities Variable Overhead Costs Total Manufacturing Overhead Estimated Cost ($) COST OF GOODS MANUFACTURED 7/21/2015 AgEc 495.3 Business Proposal 623 661 570 3,352 299 265 5,769 14,400 6,260 2,184 200 769 9,413 29,582 7,100 676 6,013 200 1,500 1,000 6,350 15,063 $52,421 Cost of Goods Sold Cost of Goods Sold Beginning Inventory 0 Cost of Goods Manufactured 52,421 Cost of Goods Available for Sale 52,421 Total Ending Inventory 4,309 COST OF GOODS SOLD 7/21/2015 48,112 AgEc 495.3 Business Proposal Human Resources Plan 7/21/2015 AgEc 495.3 Business Proposal Organizational Structure Board of Advisors Owners Fruit Inventory & Processing Manager (1) 7/21/2015 Ice Cream Production Manager (1) AgEc 495.3 Business Proposal Sales & Marketing Managers (2) Marketing Mix Product Promotion Place Price 7/21/2015 AgEc 495.3 Business Proposal SWOT Analysis Human Resources Strengths Weaknesses Education in ice cream production Experience with product and customers Ease of communication due to small work force Prior knowledge of fruit processing Land is already purchased Fruit is grown in close proximity to processing facility Facility located off of a paved road More land for building expansion is easily acquired Transport costs are still minimal and done Situated in lower tax assessed area Cost split Physical Resources Financial Resources 7/21/2015 AgEc 495.3 Business Proposal Seasonal labour will be difficult to gauge and rely on Intense workload for employees Buildings and equipment need to be purchased which will come at a high cost Freezer space will be an important part of the facilities but the company’s needs may change drastically over time Initial start-up costs will be large and take a large amount of capital Seasonal labour wages will be difficult to gauge based on quality of work SWOT Analysis Opportunities Threats Need for premium ice cream in hotel and convention centers Contracting product out during the slow season will reduce the effects of market flux Need for this type of premium dessert product in special events market 7/21/2015 Market trend in ice cream has been decreasing (Goff, 2007) Competitors in the market will fight for the market to acquire Contracts may be difficult to maintain yearround Seasonal inventory needs to be stored until it is needed AgEc 495.3 Business Proposal Competitive Analysis of SK Ice Cream Producers Premium Price Ben & Jerry’s Jerry’s Homestead Dairy Queen Chapman’s Low Quality High Quality Fast Food Restaurants Industry dominated by Nestle (25.5%) & Unilever (23.5%) Generic Low Price 7/21/2015 AgEc 495.3 Business Proposal Customer Analysis of SK Ice Cream Buyers Not Currently Serviced with Ice Cream Hotels & Convention Centers Sask -Made Market Place Need for Generic , Low Quality Ice Cream High-end Local Restaurants FarmerÕs Market Summer Ice Cream Stands Grocery Stores Currently Serviced with Ice Cream 7/21/2015 AgEc 495.3 Business Proposal Need for Premium , High Quality Ice Cream The Opportunity “To explore a niche market in the Saskatchewan premium ice cream industry by positioning a company that provides a unique option allowing customers to tailor a signature ice cream brand to meet the needs of the menu at their locale.” 7/21/2015 AgEc 495.3 Business Proposal Marketing Budget Marketing Expenses Marketing Personnel (Part of Salary) Marketing Tools (Website, Pamphlets, etc) Samples (Approx. 150 pails X $ 20.00/pail) Total Marketing Expenses 7/21/2015 AgEc 495.3 Business Proposal 10,000 5,000 3,00 $15,000 Financial Plan 7/21/2015 AgEc 495.3 Business Proposal Recommended Debt vs. Equity 75% Equity at $87,751 : 25% Debt at $16,249 Debt will be financed using a 7% interest rate Reduces company’s risk Increases IRR and NPV to be artificially high from original base case IRR = 23.8% NPV = $18,415 7/21/2015 AgEc 495.3 Business Proposal Risk Analysis Risk Analysis Critical Value Base Case IRR=0% Allowable % Change $2.99 $2.62 12% 18,000L 15,260L 15% Labour $7,100 $13,277 87% Manager $7,200 $33,978 372% Marketing Salary $12,900 $39,676 208% Ice Cream Mix $14,400 $21,157 47% Fruit Expense $5,769 $12,521 117% Packaging $9,413 $16,198 72% Sales Revenue $53,820 $45,628 15% Selling Price Production 7/21/2015 AgEc 495.3 Business Proposal Break-Even Analysis Break-Even Sales Price $ 4 .5 0 $ 4 .0 0 Sales Price/Liter $ 3 .5 0 $ 3 .0 0 $ 2 .5 0 $ 2 .0 0 $ 1 .5 0 $ 1 .0 0 $ 0 .5 0 $ 0 .0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year N et I nc ome Break E ven P ric e C as h F low Break E ven P ric e E c onomic (N P V ) Break E ven P ric e Bas e C as e 7/21/2015 AgEc 495.3 Business Proposal 2017 Break-Even Analysis Break-Even Sales Quantity 100 Sales Quantity (In Thousands) 90 80 70 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year N et I nc ome Break E ven Sales Q uantity C as h F low Break E ven Sales Q uantity E c onomic (N P V ) Break E ven Sales Q uantityBas e C as e 7/21/2015 AgEc 495.3 Business Proposal Scenario Analysis Sales Price & Sales Quantity Variable Sales Quantity (L) Sales Price ($) Average Cost ($) Percent Change NPV IRR 7/21/2015 Worst Case 14,400 $2.39 $2.11 -20% ($299,326) 0% Base Case 18,000 $2.99 $1.64 0% $10,188 22% AgEc 495.3 Business Proposal Best Case 21,600 $3.59 $1.37 20% $362,460 69% Conclusions 7/21/2015 AgEc 495.3 Business Proposal Questions? 7/21/2015 AgEc 495.3 Business Proposal