SEED by malj

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									Seeds Ltd.


                                               Table of Contents

INTRODUCTION............................................................................................................. 1
1.0 OPERATIONS PLAN ................................................................................................ 1
  1.1 Site Plan and Five Year Development ................................................................... 1
  1.2 Work Plan and Flow of Work ............................................................................... 1
     1.2.1 Description of Machinery .................................................................................. 2
     1.2.2 HACCP Compliance .......................................................................................... 6
     1.2.3 Average Week, Month ....................................................................................... 6
  1.3 Supply Analyses ...................................................................................................... 6
  1.4 Service Providers .................................................................................................... 7
  1.5 Land and Building Costs ........................................................................................ 7
  1.6 Working Capital Planning ..................................................................................... 9
  1.7 HUMAN RESOURCE PLAN .............................................................................. 10
     1.7.1 Job Descriptions ............................................................................................... 10
     1.7.2 Planned Additions ............................................................................................ 11
     1.7.3 Training ............................................................................................................ 11
     1.7.4 Labour & Management Costs .......................................................................... 11
     1.7.5 Human Resource Strategy................................................................................ 13
2.0 MARKETING PLAN ............................................................................................... 13
  2.1 The Marketing Mix (4 P’s) ................................................................................... 13
     2.1.1 Products and Services ...................................................................................... 13
     2.1.2 Pricing .............................................................................................................. 13
     2.1.3 Promotion......................................................................................................... 13
     2.1.4 Place ................................................................................................................. 14
  2.2 Segmentation ......................................................................................................... 14
  2.3 Targeting ................................................................................................................ 14
  2.4 Positioning ............................................................................................................. 14
  2.5 SWOT Analyses .................................................................................................... 15
     2.5.1 Internal Strengths ............................................................................................. 15
     2.5.2 Weaknesses ...................................................................................................... 16
     2.5.3 Opportunities.................................................................................................... 16
     2.5.4 Threats.............................................................................................................. 17
  2.6 Projection of Revenues and Marketing Expenses .............................................. 18
  2.7 Market Analyses.................................................................................................... 18
     2.7.1 Past Performance ............................................................................................. 18
     2.7.2 The Market ....................................................................................................... 19
     2.7.3 Competition...................................................................................................... 20
     2.7.4 Customers ........................................................................................................ 21
     2.7.5 Target Markets ................................................................................................. 21
     2.7.6 Service Features ............................................................................................... 22
     2.7.8 The Opportunity ............................................................................................... 22




MBA 821 College of Commerce, University of Saskatchewan                                                                            1
Seeds Ltd.


  2.8 Marketing Strategies ............................................................................................ 22
     2.8.1 Sales and Profit Objectives .............................................................................. 22
     2.8.2 Channels of Distribution .................................................................................. 22
     2.8.3 Pricing Policy ................................................................................................... 23
     2.8.4 Market/Product/Service Mix ............................................................................ 23
     2.8.5 Selling and Advertising.................................................................................... 25
  2.9 Marketing Plan Budget ........................................................................................ 25
3.0 FINANCIAL PLAN .................................................................................................. 26
  3.1 Equity and Debt Mix ............................................................................................ 26
  3.2 Financial Analysis and Overall Financial Performance.................................... 26
  3.3 Economic Forecast ................................................................................................ 27
  3.4 Ratio Analysis ........................................................................................................ 27
  3.5 Scenario Analyses.................................................................................................. 28
  3.6 Sensitivity Analyses............................................................................................... 29
     3.6.1 Break-even - Capacity...................................................................................... 29
     3.6.2 Break-even – Cleaning Price ........................................................................... 29
     3.6.3 Break-even – Packaging Price ......................................................................... 29
  3.7 Contingency Plan .................................................................................................. 31
4.0 CONCLUSIONS ....................................................................................................... 32
5.0 REFERENCES .......................................................................................................... 33
6.0 APPENDICES ........................................................................................................... 34
Appendix A:       Detailed Costs of Land and Buildings ............................................... 34
Appendix B:       Plant Flow Chart ................................................................................. 37
Appendix C:       Seed Cleaners in Saskatchewan ......................................................... 38
Appendix D:       Financial Plan Spread Sheets……………………………………..…40




MBA 821 College of Commerce, University of Saskatchewan                                                                       2
Seeds Ltd.


List of Figures
Figure 1.1:   New Plant Building & Floor Plans ............................................................. 2
Figure 1.2:   Wind and Screen ......................................................................................... 3
Figure 1.3:   Screens for Wind and Screen ...................................................................... 3
Figure 1.4:   Large Indent ................................................................................................ 4
Figure 1.5:   Outlet of Destoner ....................................................................................... 4
Figure 1.6:   Gravity Table .............................................................................................. 5
Figure 1.7:   Packaging .................................................................................................... 5
Figure 1.8:   Organizational Structure ........................................................................... 10
Figure 2.1:   Graph of Revenue by Year ....................................................................... 22
Figure 2.2:   Distance Hauled Compared to Cost per Tonne......................................... 24
Figure 3.1:   Annual Break-even Tonnage .................................................................... 29
Figure 3.2:   Required Cleaning Price to Break-even .................................................... 30
Figure 3.3:   Required Packaging Price to Break-even ................................................. 31


List of Tables

Table 1.1:    Land and Building Costs ............................................................................. 7
Table 1.2:    Equipment Costs. ........................................................................................ 8
Table 1.3:    Working Capital. ......................................................................................... 8
Table 1.4:    Capital Budget Summary ............................................................................ 8
Table 1.5:    Cash Conversion Cycle ............................................................................... 9
Table 1.6:    Cost of Goods Manufactured ...................................................................... 9
Table 1.7:    Hourly Wages and Hours Worked per year. ............................................. 12
Table 1.8:    Employee Wages and Benefits ................................................................. 12
Table 1.9:    Management Salary and Benefits ............................................................. 12
Table 1.10:   Five Year Projection – Total Labour and Management Costs .................. 12
Table 2.1:    Revenue by Business Unit ........................................................................ 22
Table 2.2:    Percent of Price of Product ....................................................................... 25
Table 3.1:    Breakdown of Funding ............................................................................. 26
Table 3.2:    Summary of the Financial Situation (Base case scenario) ........................ 27
Table 3.3:    Critical Ratios ........................................................................................... 27
Table 3.4:    Risk Analysis ............................................................................................ 28
Table 3.5:    Scenario Analyses ..................................................................................... 28




MBA 821 College of Commerce, University of Saskatchewan                                                                     3
Seeds Ltd.


INTRODUCTION
       Seeds Ltd. is an on farm seed cleaning and packaging plant located in
Saskatchewan. They clean cereals, pulses and oilseeds to customer’s standards. They
also provide packaging in poly and paper bags in 25, 55, and 1000 pound bags. Bulk
shipments and 2000 lb totes are also offered.
       Currently, the plant operates with four machines that clean the seeds. The first
machine screens and separates the seeds by width. The second machine separates the
seeds by length, and the third machine separates by density. The final machine is a
gravity table and it separates small light material from the seeds. Once the seeds are
cleaned, quality tests are completed based on the type of seeds needed and the level of
purity demanded by the broker. Seeds has two quality control tests including a moisture
tester and purity tester. On average, due to quality requirements, the machine can clean
200 to 300 bushels per hour.
       The current plant is not able to clean all products to customer specifications. In
addition, customer specifications are getting more stringent for quality. In order for
Seeds Ltd. to meet these requirements, new equipment is needed. This business plan is
for a proposed expanded seed cleaning plant complete with equipment capable of
meeting current and future customer needs.


1.0 OPERATIONS PLAN
   1.1 Site Plan and Five Year Development
       Figure 1.1 shows the layout of the proposed new plant. Equipment from the
existing plant will moved to the new site. The current site doesn’t have the required
space for this expansion. The new site is on the Seeds farm, but away from the farm
yard. The new site was chosen to keep the operation on the family farm but have it far
enough away from the Seeds residence.


   1.2 Work Plan and Flow of Work
       The new plant will consist of two cleaning lines in parallel, a packaging line and a
potential color sorter (Appendix B). The first line capacity of 250 bushels per hour will



MBA 821 College of Commerce, University of Saskatchewan                                  4
Seeds Ltd.


consist of the equipment that is running in the current plant. This line will run grades that
it currently is capable of running at rate to specifications. The second line of 250 bushels
per hour will have newer equipment with the ability to clean grades that the current plant
cannot clean at design rate.


Figure 1.1:    New Plant Building & Floor Plans


                                            Long Term
                                             Storage




                    Warehouse

                                                                                Future
                                                                              Development
                                                                                 Area




                                                                                 Screenings

      Shipping                 Processing
                                                                                  Raw
                                                                                 Materia
                                                                                    l
                                                                                                  Screening
                                                                                 Storage
                                                                                                  s Burning
                                                                          Receiving                  Area

                                              Bulk Shipping



       1.2.1 Description of Machinery
       Aspirator: Aspirators are used to separate dust and chaff from the grain. It
operates by blowing air through the seed and separating the light dust from the heavier
seed (1).
       Debearders: After excessive trash has been removed by scalping, debearders are
used to remove awns or beards and other appendages from seed that are difficult to clean
with air-screen separators. Debearders use a beater that rotates inside a steel cylinder. The



MBA 821 College of Commerce, University of Saskatchewan                                       5
Seeds Ltd.


beater uses projecting posts that are positioned to move the seed mass through the
cylinder. Stationary posts on the steel cylinder prevent the seed mass from rotating with
the horizontal shaft and provide vigorous rubbing action between the moving and
stationary posts, other seed, and appendages. A weighted discharge gate controls the
amount of time the seed mass remains in the unit. A debearder is a very versatile machine
that has been used successfully on many types of seed (1).
       The wind and screen (figures 1.2 and 1.3): The wind and screen uses a
combination of air, gravity, and screens to separate seed based on size, shape, and density
(2). The rate of feed, airflow, oscillation of the screens, and screen pitch are adjustable
(3). The incoming seed is first screened for oversized material, then the accepts are
screened for undersized material. Fans blow the trash and impurities out of the unit. The
screens used in this unit are changed based on the product being screened.


Figure 1.2:    Wind and Screen




Figure 1.3:    Screens for Wind and Screen




MBA 821 College of Commerce, University of Saskatchewan                                  6
Seeds Ltd.


        Large Indent (figure1.4): The indent unit separates grains based on size and
shape. It is a rotating cylinder that picks up the right size and shape of grain and the grain
is carried on the screen. As the screen rotates it carries the grain until it reaches a point in
the rotation where it falls out. When it falls out it is caught by the accepting tray. The
rejects are discarded at the bottom of the drum.

Figure 1.4:     Large Indent




        Small Indent: The small indent uses the same separation principle as the large
indent, only it selects smaller grain sizes.
        Destoner: The basic principle of the destoner is to effectively separate heavier-
than-product debris (figure 1.5), such as glass, stones and metal from a large amount of
light product (4).


Figure 1.5:     Outlet of Destoner




MBA 821 College of Commerce, University of Saskatchewan                                       7
 Seeds Ltd.


       Gravity Table (table 1.6): Gravity tables separate materials that are similar size
and shape but have different densities. Seed is placed on the inclined, oscillating table.
The denser material sinks to the bottom of the pile and is carried to the top of the table.
The lighter material rolls down the incline and is rejected at the bottom of the table.


Figure 1.6:    Gravity Table




.


       Packaging (figure 1.7): A number of Seeds ’s customers want product in bags.
The packaging equipment drops a measured amount of seed into each bag. The operator
then guides the bag into the sewing machine where it is sealed. Two operators stack the
bags onto pallets.


Figure 1.7:    Packaging




MBA 821 College of Commerce, University of Saskatchewan                                   8
Seeds Ltd.


        1.2.2 HACCP Compliance
        Seeds Ltd. ensures that its products are cleaned and handled in a way that meets
inspection regulations. The main concerns are the rodent and bird control and the new
plant design has made improvements in this area. The new plant also has limited point of
entries for the employees and reduced traffic in the office. Furthermore, employees
change clothes when they enter the plant and the clothing are such that they do not have
pockets. Canadian Food Inspection Agency (CFIA) in Regina was contacted and was
informed that there is currently no certification procedure for seed cleaning plants.
However, upon volunteering an inspection, an inspector will visit the plant and perform
an inspection without charge (6).


        1.2.3 Average Week, Month
        The company starts operations between 8:00-8:30 everyday. The plant operator,
warehouse technologists, and President are the first ones on site. The shifts vary between
8 to 10 hours per day. The hours will depend on the amount of products delivered and
type of services required. Duties for the month are typically known in advance. A typical
week will begin with a delivery of products to the plant; the client is responsible for
delivering the product on site. Once the product has been delivered, the plant operator
starts the cleaning process. The operator must ensure that product is placed into the
machines for cleaning, set the appropriate cleaning specifications, and oversee the
cleaning process throughout the week. As the product is being cleaned, the warehouse
technologists are packaging cleaned product from current or previous orders as specified
by clients. Product that is not required to be packaged is stored in bins. The packaging is
very labor intensive as it requires 5 employees to package and store the product. The
employees package 16 bags per minute and orders will vary depending on the size of the
load.


   1.3 Supply Analyses
        The majority of clients are attracted through seven brokers. The brokers identify,
locate and direct customers to Seeds Ltd. The brokers have established relations with




MBA 821 College of Commerce, University of Saskatchewan                                  9
Seeds Ltd.


clients from Canada, US, and Japan. The remainder of the service time is provided to
local customers. These clients contact Seeds Ltd. directly.
         The company buys pallets, bags, and shop supplies from various suppliers.
Machine parts, forklifts and other equipment are bought by searching the internet, and
through equipment supplier contacts.


   1.4 Service Providers
         The equipment is maintained in-house. If there are any breakdowns or troubles
with the machines, the organization has the knowledge to repair the problem.
         The company has hired a certified accountant and a lawyer to deal with legal and
accounting and tax issues.


   1.5 Land and Building Costs
         Detailed cost of land and building is given in Appendix A. Tables 1.1 through 1.4
shows the capital costs of the expanded plant. Since this business is a fee for service
arrangement, the working capital requirements are relatively low.


Table 1.1:   Land and Building Costs
 Description                     Cost
 Land                                   $5,000
 Site work                              $50,000
 Building                               $175,000
 Concrete, foundation & floor           $90,000
 Electrical                             $154,000
 Plumbing                               $26,000
 Office, lab, coffee & control room     $54,000
 Total                                  $554,000




MBA 821 College of Commerce, University of Saskatchewan                                10
Seeds Ltd.


Table 1.2:   Equipment Costs.
 Description                      Cost
Burner                            $39,000
Scales                            $21,000
Large seed line                   $137,800
Small seed line                   $254,600
Bagging line                      $340,800
Color Sorter                      $29,400
Conveying                         $90,500
Bins                              $470,000
Dust system                       $34,000
Total                             $1,417,100


Table 1.3:   Working Capital.
 Description                      Cost
Cash                              $      0
Accounts Receivables              $78,776
Inventories                       $20,209
Accounts Payable                  ($45,619)
Total Net Working Capital         $53,336


Table 1.4:   Capital Budget Summary
 Description                     Cost
Land                              $   5,000
Building                          $549,000
Equipment                         $1,417,100
Total                             $1,971,100
Net Working Capital               $   53,336
Total Capital Required            $2,024,436




MBA 821 College of Commerce, University of Saskatchewan   11
Seeds Ltd.


   1.6 Working Capital Planning
       Seeds Ltd. has a 30 day collection policy (table 1.5). Overdue debts are taxed and
customers are flagged for future services. The company is efficient with collecting
payments. The company has established good relations with its suppliers and payments
are made on time to avoid interest charges. The company does not own any of the
product it cleans and packages. The only inventory they hold are material needed to
clean and package product. This includes bags, pallets, labels and other shop supplies.
The company has estimated that the cash conversion cycle will be close to zero.


Table 1.5:   Cash Conversion Cycle
Average Days inventory        0
Average Days Receivables         30
Average Days Payables            30
Total Cash Conversion Cycle       0


       Table 1.6 shows the cost of goods manufactured (COGM) based on an 11 month
operating year. It shows that this is a capital intensive business because overhead is the
highest portion of the COGM, making up 54% of the total.


Table 1.6:     Cost of Goods Manufactured
                                      Cost Per         # of
Description                               Month      Months Cost Per Year
Total Direct Expenses                    $22,353        11         $245,880
Total Direct Labour & Benefits           $11,486        11         $126,345
Total Overhead Costs                     $39,740        11         $437,140
Total Cost of Goods Manufactured         $73,579                   $809,365




MBA 821 College of Commerce, University of Saskatchewan                                12
Seeds Ltd.


   1.7 HUMAN RESOURCE PLAN


Figure 1.8:      Organizational Structure
                                      President



    Administrative                     Director                     Assistant
      Assistant


                                    Plant Operator



                                                  Warehouse Technologist



                                                  Warehouse Technologist




       1.7.1 Job Descriptions
President
   o Oversees overall operations of the company including:
             o    Strategic planning
             o    Line operations & Bagging
             o    Pricing
             o    Machinery Purchase
             o    Hiring of Staff
Administrative Assistant
   o Responsible for daily office activities including:
             o    Scheduling clients
             o    Maintaining stakeholder relationships
             o    Bookkeeping
             o    Accounting
             o    Packaging cleaned product


MBA 821 College of Commerce, University of Saskatchewan                         13
Seeds Ltd.


Director
   o Oversees monthly operations:
             o     Receiving and general assistant
Plant Assistant
   o Assists with daily operations including:
             o     Facility maintenance
Plant Operator
   o Oversees daily operations of plant equipment including:
             o     Movement of product
             o     Quality control
             o     Packaging
Warehouse Technologists
   o Responsible for daily processes including:
             o     Packaging and shipping product
             o     Assisting Plant Operator
             o     Facility maintenance


       1.7.2 Planned Additions
       The expansion of the facility may require hiring another warehouse technologist.
The additional expenditure on wages and benefits will be approximately $40,000 a year.
However, anticipated increases in efficiency may eliminate this necessity. The financial
plan does not include a third technologist.


       1.7.3 Training
       Employee training is conducted on site.          Trainees observe and assist with
operations until they are reliably skilled.          Knowledge is passed down through
experienced workers and daily activities. There is no additional cost to training.


       1.7.4 Labour & Management Costs
       Tables 1.7 through 1.10 illustrate the labour and management costs incurred
during the year.



MBA 821 College of Commerce, University of Saskatchewan                              14
Seeds Ltd.


Table 1.7:     Hourly Wages and Hours Worked per year.
 Employee                   Hourly Wages      Hours per year
President                      N/A – Salary         2750
Plant Operator                 $14.00               1471
Warehouse Technologists        $13.25               1471
Administrative Assistant       $14.00               1925


Table 1.8:     Employee Wages and Benefits
                Administrative       Plant                 Warehouse
                 Assistant               Operator          Technologists
 Wages           $26,950                 $20,594           $38,982
 EI (2.73%)      $736                    $    562          $ 1,064
 CPP (4.95%) $1,334                      $ 1,019           $ 1,930
 WCB
 (5.12%)         $1,380                  $ 1,054           $ 1,996
 Holiday Pay
 (5.80%)         $1,563                  $ 1,194           $ 2,261
 Total Costs     $31,963                 $24,424           $46,233


Table 1.9:     Management Salary and Benefits
Staff              Salary
President           $50,000
EI (2.73%)          $ 1,365
CPP (4.95%)         $ 2,475
WCB (3.12%)         $ 1,560
Total Costs         $55,400


Table 1.10:    Five Year Projection – Total Labour and Management Costs
Year                2008          2009         2010        2011         2012
Total Costs         $159,026      $162,524     $166,100       $169,754     $173,488




MBA 821 College of Commerce, University of Saskatchewan                               15
Seeds Ltd.


         1.7.5 Human Resource Strategy
         The company motivates its employees through fair wages and extra curricular
activities. The company has organized weekly dinners, movie days, and trips outside of
the province. This has resulted in a low turnover rate and high employee satisfaction.


2.0 MARKETING PLAN

   2.1 The Marketing Mix (4 P’s)

         2.1.1 Products and Services
         Seeds Ltd. processes various grains for various brokers, traders and grain
producers. Their services include cleaning, storage and packaging. The expanded plant
will increase the size and the scope of the operation. Their capacity will increase from
250 bushels per hour to over 500 bushels per hour. They are planning to add new
equipment, spirals and a color sorter, to achieve higher cleanliness levels. They are also
considering automating their packaging line.


         2.1.2 Pricing
         Seeds ’s prices their products on a cost plus basis. The price chart that they
currently use is based on time to process each different product. It is not known if these
prices are high, low or at par with competitors. Seeds ’s has a three month backlog and a
number of customers commented that they wanted more access to their cleaning
schedule. This suggests that the pricing is at least at par with the competition and may be
lower.


         2.1.3 Promotion
         Seeds does not advertise in any media. They rely on referrals from brokers and
competitors. They have enough of a backlog that they are not looking for extra business.




MBA 821 College of Commerce, University of Saskatchewan                                  16
Seeds Ltd.


       2.1.4 Place
       Seeds is located in Saskatchewan. It is located on the family farm. This is a
good location for the business because it is close to the production of the crops and it
avoids business tax.


   2.2 Segmentation
       The market is segmented by geographical location and brokers quality. The
location heavily affects demand for Seeds ’s services. Customers will only enter into
contracts with seed cleaning facilities if freight rates are economical in that area. Seeds ’s
market is in the surrounding area . The larger the crop yield in surrounding areas, the
larger the potential demand. Certain locations yield different types of crops and this will
also affect demand.
       The market is also divided by different brokers. All brokers have individual
specifications and diverse needs including different capacity requirements, quality
specifications, turnaround times, and the types of crops to be processed. These different
needs will affect demand for Seeds ’s services.


   2.3 Targeting
       To determine the target market for Seeds Ltd, research was conducted to analyze
industry growth in the organic crop industry. Data was obtained from on-line sites and
the University of Saskatchewan Agriculture department.           Furthermore, brokers and
competitors in Saskatchewan were surveyed to determine characteristics of the seed
cleaning industry (details below).


   2.4 Positioning
       Seeds Ltd. wants to build a reputation as a company that provides consistent high
quality standards. They want to be a reliable company that can cater to the high quality
needs of organic food commodity brokers. The company wants to appear approachable,
professional, and dependable. Most importantly, Seeds wants people to think “quality”
when the company’s name is mentioned.



MBA 821 College of Commerce, University of Saskatchewan                                    17
Seeds Ltd.


   2.5 SWOT Analyses

       2.5.1 Internal Strengths
       Human Resources
       The president has been involved in the seed cleaning business for over twenty
years and he is very knowledgeable about the industry. His engineering background also
serves as a benefit as he is able to lower costs by maintaining and upgrading machinery
in-house. This is very cost effective as the machine life is increased and production
capacity is enhanced. His knowledge of the industry will be applied to the new plant by
optimizing processes and organizing the plant in the most efficient way. The president is
intensively involved in daily operations and this has allowed him to build close
relationships with his staff and train employees efficiently. The company has built a
strong reputation for treating their employees well. This has led to low turnover rates and
allows the company to be selective in their hiring. Competitors are not as effective in
retaining and attracting employees.
       Physical Resources
       The company has the ability to process a large variety of products, both large and
small seeds. The new site will further enhance this ability by increasing production
capacity and quality standards. This increases the company’s target market because not
all competitors offer these services.    The company also provides packaging which
differentiates them from other competitors.      Not all seed cleaning plants offer this
service. This benefits the company by generating more revenues and providing a value-
added service to its customers.
       The company’s solid reputation for providing quality products and great service
has the ability to sustain and grow business. The company is well known in the
community and has a strong relationship with local customers.            They have also
established excellent relations with seven brokers. The ability to consistently maintain
good service and high-quality standards has been effective in attracting these customers.
This has led to consistent revenues and profits. The company has never incurred losses
since 1985.




MBA 821 College of Commerce, University of Saskatchewan                                 18
Seeds Ltd.


        2.5.2 Weaknesses
        The company’s location is a primary weakness. Their target market is reduced
because of the plants physical location. High freight charges and longer travel times
make it too expensive for customers to ship product to Seeds Seeds. Their production
capacity is also lowered because the plant can only be accessed by truck; they are not
close to any railways. However, location can be viewed positively. The smaller target
market contains fewer competitors; other small companies outside of Assiniboia are
unable to enter this market due to the high freight costs, and large competitors will not
compete on a lower capacity basis.          Seeds   is able to service customers in their
surrounding area quickly and efficiently.
        Due to the population of the surrounding area, the number of employees available
to hire is lower. It is also harder to attract quality personnel due to the location. There
are only 5 staff members and they are all required to work in order for the plant to be
productive. If an employee quits or misses work due to sickness, it puts a heavy load on
the other employees and production slows down. Since the president is involved in daily
operations, he does not have the time to strategically manage the company. He is also
mainly responsible for training employees, and it can take up to a year to get a new
member fully trained.
        Seeds cannot finance the expansion; in order to expand capacity, the company
must purchase new machinery which will require a large amount of capital.              The
company must generate over 2 million dollars for this expansion and they may have
difficulty raising this capital.
        The size of the company is also a weakness. The new plant can be considered one
of the many smaller operations in Saskatchewan. Seeds can only process medium sized
orders. They do not have efficient turnaround time for large orders.


        2.5.3 Opportunities
        In order to gain a competitive advantage the company must focus on increasing its
quality standard for exports and pulse crops. The emerging trend in the organic and
export markets is of higher purity without a price increase. The new plant will increase
quality control and overall standards of cleaning. This is a great opportunity for the



MBA 821 College of Commerce, University of Saskatchewan                                 19
Seeds Ltd.


company to build a stronger reputation for delivering high quality products. This will
also be a chance to eliminate inefficient, low quality processors. Many competitors are
unaware of tightening purity standards. Seeds ’s new equipment will enable them to pick
up business when competitors are unable to meet specifications.          If Seeds    can
successfully maintain high standards they will be able to increase market share and grow
revenues.
       The company’s current operations are operating at capacity and they are unable to
keep up with demand. The new site will increase capacity and provides the company
with an opportunity to earn new business. An increase in capacity will also enable the
company to improve its turnover time. These new capabilities will allow the company to
build stronger relationships with its brokers.
       The organic industry has been increasing at a rate of 15-20% over the last fifteen
years. Saskatchewan consumption is estimated to grow by more than 20% annually
between now and 2015 (7).
       There may be an opportunity to survey customers or brokers to find a way to
identify the target market more precisely. If the company is able to learn more about its
customers and their preferences, it could gain a competitive edge over others. This
information may help Seeds branch into trading in the future.


       2.5.4 Threats
       The power of the buyer is a threat. The brokers control what product goes to
Seeds. Only a small percentage of business is local, and the remainder is through these
seven brokers. If the company is unable to meet the brokers requirements, or if the
brokers want better rates, the company has little bargaining power.
       Competition is very fierce in this industry. Competitors are located nearby and
are constantly improving their business process and quality standards. Industry demands
for quality are increasing and if Seeds is unable to keep up they will quickly lose
business. Brokers are very demanding and quality standards are consistently growing.
Large competitors have the power to move into this area to increase market share. These
big players have the resources to buy out the smaller competitors.




MBA 821 College of Commerce, University of Saskatchewan                               20
Seeds Ltd.


       The environment is a threat. In the past, droughts have decreased business.
Droughts will affect most competitors and Seeds must position itself financially to be
able to withstand lower revenues. There are also industry wide container shortages.
These are vital to the company’s ability to store and ship inventory.
       The target market is hard to identify, so it’s difficult to isolate the market that
offers the greatest sales and profit potential. The company must be very attentive to sales
orders and competitor trends. Because of the inability to isolate the target market,
fluctuations in demand are a threat. If the company is unable to produce close to capacity
it may not be able to cover all costs.
       It will be difficult to manage the new plant. The new facility is larger and the
employees will be physically separated. The president must organize daily operations
efficiently, otherwise operations will slow down.
       The price of fuel will influence freight rates. If prices go up then it will be more
expensive to ship grain to Seeds ’s. However, this could make the company more
valuable because their variety of services saves freight costs.


   2.6 Projection of Revenues and Marketing Expenses
       The current projection of revenues is $1 million in sales per year, not including
price increases.


   2.7 Market Analyses

       2.7.1 Past Performance
       The Seeds family began operations in 1985 with a capacity of 75 bushels/hour.
The target market was initially local farmers and the company tried advertising in
neighborhood papers to increase demand. But the majority of their sales came through
word of mouth contact. The company increased business by dealing with commodity
brokers; these brokers had a wide range of contacts and were able to consistently supply
customers. Competitors were fairly small and operated at low capacities.
       As demand for seed cleaning grew, Seeds ’s plant capacity was increased
progressively (figure 2.1). In 1997 the company was incorporated as SeedsLtd. They



MBA 821 College of Commerce, University of Saskatchewan                                 21
Seeds Ltd.


have been competing using a low cost strategy and profits have been steady. The
company processed 4500 tones of seed in 2005-2006 and had revenues of $340,000.
Currently, Seeds has relations with seven brokers, capacity is at 500 bushels/hour, and
they offer cleaning services for over 20 varieties of seeds. The planned expansion will
increase productivity and further improve seed cleaning quality.


Figure 2.1:                   Graph of Revenue by Year

                                                 Delorme Revenue by Year

              $500,000


              $450,000


              $400,000


              $350,000


              $300,000
  Revenue/$




              $250,000


              $200,000


              $150,000


              $100,000


               $50,000


                  $-
                       2000          2001        2002                2003                 2004        2005    2006

                                               Cleaning   OCIA Certified    PCERT Certified   Other




                 2.7.2 The Market
                 Seed cleaning for the organic market has large potential in terms of size and
growth in the future. Saskatchewan has more than half (295,000 hectares) of all certified
organic land in Canada. Furthermore, the organic industry has grown 15 – 20% annually
and this trend is expected to continue (7). The total size of the potential market is the
organic crop region. Unfortunately, because of the nature of the industry it is difficult to
identify this specific number of organic acres. However, the forecast for Saskatchewan
suggests that this is a growing industry province wide and is a viable target market.



MBA 821 College of Commerce, University of Saskatchewan                                                      22
Seeds Ltd.



       2.7.3 Competition
       Appendix C shows a list of seed cleaners in Saskatchewan, this list may not be
complete. Many seed cleaning facilities are on farm sites. Although Canada is the largest
pulse exporter and processor (surpassing India) and Saskatchewan grows over 90% of the
Canada’s lentils (8), there is large competition between the seed cleaners. There are a few
large plants that are externally funded and others who have pooled resources that have a
large share of the market. It is very hard to determine exactly the market share of the
various facilities because they are not willing to release any information and their
customer base. Most facilities are not specific for which seeds they will clean. Price wise
through phone conversations with Seeds ’s competitors it was determined that there is
more mark up of oilseeds and pulses and less for cereals. Therefore, most cleaners will
prefer to clean these seeds if there facility is equipped. The facilities were not willing to
release what process they were using to clean these seeds.
       The organic industry is growing fast and a number of Seeds ’s competitors are
registered with OCIA (Organic Crop Improvement Association) (Appendix C). They are
certified to clean organic seeds. Most cleaners try to reach at least 99.95% purity and
some have 99.99% purity. The facilities are very conscious of their reputation in terms of
quality and purity of the cleaned product.
       Through phone interviews with Saskatchewan seed cleaners it was realized that
the majority of the facilities do not have a color sorter and do not have future plans to
acquire it. It seems that color sorting is mostly required for the cleaning of lentils.
       It is now hard to become a large seed cleaner in Saskatchewan. To establish a
plant it requires equipment, land and good reputation. As Seeds is already an established
seed cleaner there is a large opportunity for Seeds to enter the pulse and lentil cleaning
market. Saskatchewan grows over 90% of the Canadian pulse, there an opportunity for
Seeds to gain more of the market (8). Having a color sorter is also an advantage for
Seeds . Many smaller plants or even larger ones do not have a color sorter and most lentil
customers prefer color sorting.




MBA 821 College of Commerce, University of Saskatchewan                                   23
Seeds Ltd.


          2.7.4 Customers
          The brokers are the primary customers. They move product to Seeds one to three
times a month. The brokers contact Seeds directly and place orders over the phone.
          The major factors that influence the decision to schedule orders with Seeds is
location, processing availability and processing ability. The location is a factor because
crop delivery and pickup must be close enough to cover freight costs. If the distance is
too great, then the broker will contract with another seed cleaning facility. Processing
availability is the amount of time that Seeds has to finish the order. If Seeds is unable to
meet time requirements or is booked, then the broker will go elsewhere. The third factor,
processing ability, refers to the type of seeds that Seeds can process. If Seeds is not
capable of cleaning a certain type of seed to certain specifications, then the broker will go
to the competition.
          Buyers have high quality standards and require that Seeds            meet quality
specifications and provide quick service. Seeds provides high standards of cleaning for
orders of all sizes. The company is able to offer quick turnaround time for medium sized
orders.


          2.7.5 Target Markets
          Seeds will target organic food commodity brokers who demand high quality
standards for a variety of crop types. Specifically, Seeds will target brokers who export
seeds and have medium sized order requirements. This market has the highest revenue
potential because of the demand for high quality organic seeds and medium sized orders.
This is the best market for Seeds to focus on. The brokers in the organic industry insist
on high quality standards and are willing to pay a premium for quality. The organic
industry is growing and the processing for organic crops is more complicated and time
consuming than traditional crops. It is becoming more difficult to attain higher quality
levels of cleaning for organic crops. Seeds is able to meet these requirements and will be
able to attract these customers.




MBA 821 College of Commerce, University of Saskatchewan                                   24
Seeds Ltd.


         2.7.6 Service Features
         Seeds Ltd. processes seeds to quality standards specified by customers. The
company offers value-added services by providing packaging of seeds and on-site
inventory storage.
         Seeds will be able to offer higher quality products and essentially be a one-stop
shop for customers. They can provide high quality seed cleaning, packaging, and product
storage.


         2.7.8 The Opportunity
         Seeds    has an opportunity to increase market share and develop better
relationships with their brokers. If the company can consistently maintain high quality
standards and provide quick turnaround time, they will be able to gain a sustainable
competitive edge.


   2.8 Marketing Strategies
         2.8.1 Sales and Profit Objectives
The following table 2.1 has the projected yearly revenue by business unit.


Table 2.1:   Revenue by Business Unit
 Business Unit        Revenue
 Large Seed Plant          $   283,156
 Small Seed Plant          $   277,616
 Color Sorter              $      18,524
 Packaging                 $   466,280
 Total                     $ 1,045,576


Seeds ’s objective is a 20% pre-tax profit on sales of $1,000,000.


         2.8.2 Channels of Distribution
         Seeds provides processing services and customers are responsible for delivery
and pickup of products.


MBA 821 College of Commerce, University of Saskatchewan                                25
Seeds Ltd.


       2.8.3 Pricing Policy
       Seeds will use a cost based approach in its pricing policy. The company will
charge a slight premium for its high quality services. Different seeds require different
operating procedures. The prices will be set according to how long the whole cleaning
process takes. Large seeds are generally easier to clean and they are priced lower than
small seeds which are more difficult to clean.
       The company will control its costs by continually monitoring machine efficiency
and labor hours required. Seeds will use its experience to maintain standard cleaning
times for the variety of seeds cleaned.


       2.8.4 Market/Product/Service Mix
       Seeds is one of many small cleaners in Saskatchewan. Seeds ’s advantages over
these competitors are cleanliness, OCIA certificate and a wide range of services from
cleaning to packaging. Seeds ’s Seeds Ltd. cannot effectively compete with the high
volume cleaners because of economies of scale and access to rail transportation. Freight
costs will limit competition. Figure 2.2 shows that the further away the crop, the more
expensive it is for customers to use them. It is possible that higher freight rates will
increase the value that Seeds ’s provides for their customers. They can combine cleaning,
color sorting and packing at a single location where their competitors can only do one or
two of the steps.
       For the above reasons, Seeds should concentrate on high margin grades that they
are capable of providing superior service. The new plant will be able to clean a wide
range of products at a higher rate than their current plant. They can pursue a number of
different grades if they wish.     The following table 2.2 shows Seeds ’s prices as a
percentage of the market value of the product. It suggests that they could increase price
in spelt and lentils with a good chance of acceptance by customers. There may be room
to move on mustard, wheat and peas as well. The other commodities are likely to be
price elastic. Any price increase would greatly decrease demand.
       In summary, the target market for Seeds is low volume, high purity seeds. The
spice, pulse organic and export markets fits Seeds capabilities.




MBA 821 College of Commerce, University of Saskatchewan                               26
Seeds Ltd.


Figure 2.2:                     Distance Hauled Compared to Cost per Tonne

                                               Saskatchewan Bulk Transportation Rates


                   $35.00




                   $30.00

                                                                y = 0.0867x + 3.7724

                   $25.00
  Cost per tonne




                   $20.00




                   $15.00




                   $10.00




                    $5.00




                     $-
                            0       50       100             150              200       250   300   350
                                                            Distance hauled / miles




MBA 821 College of Commerce, University of Saskatchewan                                                   27
Seeds Ltd.


Table 2.2:      Percent of Price of Product
 Product           Seeds Percent of Price
 Spelt                         1.5%
 Lentils                       2.0%
 Mustard                       3.2%
 Wheat                         3.7%
 Peas                          3.8%
 Rye                           5.7%
 Barley                        5.8%
 Flax                          6.3%
 Durum                         7.1%
 Triticale                    10.7%
 Oats                         13.1%
 Coriander                    No Data


         2.8.5 Selling and Advertising
         Seeds ’s selling and advertising is fairly simple. The company provides services
for brokers. The brokers provide Seeds with all its customers. Seeds uses the brokers as
a tool to reach its market.


   2.9 Marketing Plan Budget
         Seeds doesn’t advertise in any media. They have relied on business relationships
and referrals of customers and competitors over the years. They attend one trade show
per year. This cost will be approximately $10,000/yr.




MBA 821 College of Commerce, University of Saskatchewan                               28
Seeds Ltd.


3.0 FINANCIAL PLAN

   3.1 Equity and Debt Mix
       Seeds is considering an equity and debt mix totaling $2M to finance the new
plant as shown in Table 3.1. The first $598,000 comes from equipment from the existing
seed cleaning plant. The remainder will be financed through venture capital or debt.
Analysis of the various available venture funds for a Saskatchewan small Agribusiness
showed that Saskatchewan Entrepreneurship Fund would be available. The range of
funding is from $100,000 to $1M. There is an option of buy out. This is financed through
the Credit Union and Saskatchewan Prairie Financial. Also, the brokers who Seeds
already does business with could be approached for this portion of the funding. For the
remaining $837,591, banks could be approached for debt financing. This balance of debt
and equity financing was done to ensure that Gerald Seeds retains controlling interest in
Seeds Ltd.


Table 3.1:   Breakdown of Funding
 Finance Source                          Cdn $
 Seeds Equity                            $   598,000
 Venture Capital                         $   588,875
 Long Term Debt                          $   837,591
 Total Financing                         $ 2,024,466


   3.2 Financial Analysis and Overall Financial Performance
       The base case scenario for Seeds ’s Seeds Ltd. is shown in Table 3.2. The IRR of
27% is a good rate of return for this type of business. The NPV is $302,737 at a rate of
return of 20%.




MBA 821 College of Commerce, University of Saskatchewan                               29
Seeds Ltd.


Table 3.2:      Summary of the Financial Situation (Base case scenario)
 Year                            2008           2009           2013                  2017
 Sales                            $958,445       $1,068,579       $1,165,763     $1,271,785
 COGS                             $809,365       $ 913,151        $ 726,990      $ 709,413
 Gross Profit                     $149,080       $ 155,427        $ 438,772      $ 562,372
 Expenses                         $111,138       $ 109,591        $ 101,471      $    89,375
 Net Income Before Taxes          $ 37,942       $     45,836     $ 337,301      $ 472,997
 Income Tax                       $ 3,794        $      4,584     $    33,730    $    65,549
 Net Income                       $ 34,148       $     41,253     $ 303,571      $ 407,448
 Net Cash Flow to Equity          $291,760       $ 357,428        $ 378,330      $ 393,298
 Net Present Value (NPV)          $302,737
 IRR                                  27%


   3.3 Economic Forecast
         For long term debt the interest rate was set at 8%. For all inputs the inflation was
kept constant at 2.2% for 10 years.


   3.4 Ratio Analysis
Table 3.3:     Critical Ratios
 Liquidity                            2008             2009            2013           2017
 Current Ratio                          8.6             15.7            42.6           66.3
 Debt Structure Ratio                   5%               6%              8%            13%
 Debt/Asset Ratio                      41%              39%             24%            11%
 Gross Profit Margin                   16%              15%             38%            44%
 Net Profit Margin                      4%               4%             26%            32%
 Return on Assets                       5%               5%             13%            11%
 Return on Equity                       3%               3%             14%            11%
 Cost of Debt                           8%               8%              8%             8%
 Turnover Ratio                        46%              51%             41%            31%
 Debt Servicing Ratio                 -77%               9%              8%             8%
 Cash Flow to Total Debt               46%              57%             77%           125%
 Interest Coverage Ratio              587%             726%            974%          1543%
 Debt Carrying Capacity
 (D/E=.5)                         $(241,851)         $(190,781)       $416,342   $1,385,278




MBA 821 College of Commerce, University of Saskatchewan                                       30
Seeds Ltd.


        The critical variables were assessed by determining how the NPV is affected in
different scenarios. The values of various variables were reduced to a point where the
NPV=0. This is shown in Table 3.4.


Table 3.4:        Risk Analysis
 Variable                                  Percent Change to NPV of $0
 Capacity                                  -14%
 Cleaning Price                            -14%
 Packaging Price                           -17%
 Number of Employees                       124%
 Wage rates                                124%
 Interest rate                             143%
 Inflation rate                            174%
 Tax rate                                  169%


   3.5 Scenario Analyses
        In the worst case scenario the company will lose over 1 million dollars and get a
negative return on investment. For this scenario to occur, the company must operate at
80% capacity, reduce the packaging price by 5%, and increase the grade changes to three.
This indicates a very high risk level and the company’s best case scenario may not
represent a high enough return to justify the risk. This is shown in Table 3.5.


Table 3.5:        Scenario Analyses
 Variable                     Base Case             Worst Case      Best Case
 Capacity %                       80%               80%             100%
 Capacity                         27.8              24.2            27.8
 Grade Changes                    1                 3               0
 Packaging Price                  $38.86            $36.91          $40.80
 NPV                              $302,737          ($797,017)      $1,401,832
 IRR                              27%               -4%             50%



MBA 821 College of Commerce, University of Saskatchewan                               31
Seeds Ltd.


                     3.6 Sensitivity Analyses
                         3.6.1 Break-even - Capacity
                         Figure 3.1 shows the capacity utilization required for Seedsto break-even. It is
calculated in three ways: IRR=0%, cash flow break-even and net income break-even.
The amount required for net income break-even declines over the years because of the
decreasing depreciation expense.

Figure 3.1:                         Annual Break-even Tonnage
                                                     Break Even Yearly Tonnage


                     25000



                                                                                                IRR
                                                                                                Cash Flow
                     20000
                                                                                                Net Income
  Annual Tonnage/t




                     15000




                     10000




                      5000




                        0
                             2008      2009   2010   2011    2012          2013   2014   2015       2016     2017
                                                                    Year




                         3.6.2 Break-even – Cleaning Price
                         Figure 3.2 shows the cleaning price required for Seedsto break-even.                       It is
calculated in three ways: IRR=0%, cash flow break-even and net income break-even. As
with capacity, the amount required for net income break-even declines over the years
because of the decreasing depreciation expense.




MBA 821 College of Commerce, University of Saskatchewan                                                               32
Seeds Ltd.


Figure 3.2:                                  Required Cleaning Price to Break-even
                                                                        Break Even Price


                               $25.00



                                                                                                        IRR
                                                                                                        Cash Flow
                               $20.00
                                                                                                        Net Income
  Average Cleaning Price/$/t




                               $15.00




                               $10.00




                                $5.00




                                 $-
                                          2008    2009    2010   2011       2012          2013   2014   2015         2016   2017
                                                                                   Year




                                      3.6.3 Break-even – Packaging Price
                                      The third critical variable identified was the price received for packaging. Figure
3.3 has these results. The direct materials cost is added as a reference. It is added
because Seeds ’s Seeds would simply not run the packaging operation for prices below
this level.




MBA 821 College of Commerce, University of Saskatchewan                                                                            33
Seeds Ltd.


Figure 3.3:                                   Required Packaging Price to Break-even
                                                                        Break Even Price


                                $40.00

                                                                                                                IRR
                                $35.00                                                                          Cash Flow
                                                                                                                Net Income
                                                                                                                Direct Material Cost
                                $30.00
  Average Packaging Price/$/t




                                $25.00



                                $20.00



                                $15.00



                                $10.00



                                 $5.00



                                  $-
                                           2008   2009    2010   2011        2012          2013   2014   2015        2016         2017
                                                                                    Year




                                3.7 Contingency Plan
                                       SeedsLtd. has a very well diversified operation which consists of seed cleaning,
color sorting and packaging. Table 3.5 showed that cleaning volume, cleaning price and
packaging price are the critical variables. Gerald Seeds ’s strategy to protect these
variables is to invite brokers to invest in the business. The brokers, as owners, would
have an incentive to maximize the usage of the seed cleaning plant. In addition, Mr.
Seeds can get reliable price and volume projections before construction begins. In
addition, Seeds Ltd. has not been able to accept the maximum available packaging
business. Therefore in circumstances where the seed cleaning operations reach the worst
case scenario, Seeds can fall back on increasing the packaging. This will sustain the
business until the time that other operations catch up.




MBA 821 College of Commerce, University of Saskatchewan                                                                                  34
Seeds Ltd.


4.0 CONCLUSIONS
       This business plan shows that this expansion has an attractive rate of return (IRR
= 27%) and a positive net present value of $302,737 at 20% return. The financial plan
depends heavily on Seeds ’s ability to achieve cleaning volume and service prices. The
financing of the project is designed to protect these critical variables. The rest of the plan
relies heavily on the technical expertise of the design, operation and control of the
equipment. Gerald Seeds ’s experience and education make him ideally suited to run this
type of enterprise. The employees working for Seeds ’s Seeds Ltd. are experienced,
skilled and motivated to make this business succeed. Finally, this business plan utilizes
less than one third of the potential capacity of the equipment. This means that this
business can easily scale up to future volume demands. By adding more shifts, the
company can achieve an even greater return.




MBA 821 College of Commerce, University of Saskatchewan                                    35
Seeds Ltd.


5.0 REFERENCES

1. Cimbria Data Sheet for Pre/After cleaner ASPIRATOR CR 163. Taken February 6,
2007 from http://www.cimbria.com/files/CMA_products_data_163.pdf

2. Revegetation Equipment Catalog. Taken February 6, 2007 from
http://reveg-catalog.tamu.edu/12-Seed%20Processing.htm

3. Revegetation Equipment Catalog. Taken February 6, 2007 from
http://reveg-catalog.tamu.edu/12-Seed%20Processing.htm

4. Revegetation Equipment Catalog. Taken February 6, 2007 from
http://reveg-catalog.tamu.edu/12-Seed%20Processing.htm

5. Can-Seed Equipment Ltd. Website, Taken February 6, 2007 from
http://www.canseedequip.com/index.php?id=260

6. Canadian Food Inspection Agency. http://www.inspection.ca.
Contact: Mr. Dave Winsel in Moose Jaw, Saskatchewan.
Telephone number (306) 630-7226.

7. Information taken from the following link:
http://www.agr.gov.sk.ca/docs/organics/organicdirectory01.asp

8 Saskatchewan Pulse Growers. http://www.saskpulse.com/industry




MBA 821 College of Commerce, University of Saskatchewan                           36
Seeds Ltd.



6.0 APPENDICES

Appendix A: Detailed Costs of Land and Buildings
                                                         Market         Seeds 's
                                                         Price          Price
 Land                                                    $5000         $5000
 Site work
       Remove top soil                                   $10,000.00    $10,000.00
       Install gravel                                    $30,000.00    $30,000.00
       Pack Gravel                                       $10,000.00    $10,000.00
       Construct approach
 Building                                                $175,000.00   $175,000.00
 Concrete, foundation & floor
       Dig pilings and pour concrete                     $30,000.00    $5,000.00
       Prepare bin pad and concrete                      $60,000.00    $30,000.00
       Prepare plant pad and concrete                    $22,500.00    $12,000.00
       Prepare warehouse pad and concrete                $63,000.00    $32,000.00
       Prepare scale structure and concrete              $15,000.00    $8,000.00
       Prepare scale pad and concrete
       Prepare burner & bin pad and concrete             $6,000.00     $3,000.00
 Electrical
       Arrange temporary power                           $4,000.00     $4,000.00
       Main and MCC equipment and motors and actuators   $230,000.00   $30,000.00
       Plant, warehouse, scale lighting                  $20,000.00    $20,000.00
       Install plant electrical                          $200,000.00   $100,000.00
 Plumbing
       Air compressor install                            $10,000.00    $10,000.00
       High pressure air lines                           $5,000.00     $1,000.00
       Heating in-floor                                  $10,000.00    $10,000.00
       Plumbing & controls                               $5,000.00     $5,000.00
       Natural gas backup
 Total Costs                                             $910,500.00   $500,000.00

Burner & Equipment
     Burner                                              $25,000.00    $25,000.00
     Bins                                                $14,000.00    $14,000.00
     Conveying




MBA 821 College of Commerce, University of Saskatchewan                              37
Seeds Ltd.



 Equipment
     Truck scale electronics                      $13,000.00    $13,000.00
     Truck scale steel                            $15,000.00    $8,000.00
     Large seed line
         Aspirator                                $8,000.00     $8,000.00
         Surge bin                                $1,000.00     $1,000.00
         De-bearder                               $13,400.00    $13,000.00
         Wind & Screen                            $68,000.00    $34,000.00
         Large Indent                             $39,200.00    $19,600.00
         De-stoner                                $47,400.00    $23,700.00
         Hopper                                   $500.00       $500.00
         Gravity Table                            $56,000.00    $28,000.00
         Bulk weigh scale                         $10,000.00    $10,000.00

 Small seed line
           Aspirator                              $8,000.00     $8,000.00
           Surge Bin                              $1,000.00     $500.00
           Large Indent                           $39,200.00    $39,200.00
           Small Indent (new segment)             $8,600.00     $8,600.00
           De-bearder                             $13,400.00    $13,400.00
           De-stoner                              $47,400.00    $47,400.00
           Surge bin                              $500.00       $500.00
           Gravity Table                          $56,000.00    $56,000.00
           Wind & Screen                          $68,000.00    $68,000.00
           Gravity Table                          $11,000.00    $11,000.00
           Spirals                                $2,000.00     $2,000.00
           Bulk weigh scale
 Bagging line
           Magnet                                 $2,000.00     $2,000.00
           Bagger                                 $125,000.00   $125,000.00
           Mini-Bulk Bagger                       $12,000.00    $12,000.00
           Sewing Machine                         $0.00         $0.00
           Metal detector                         $13,000.00    $13,000.00
           Palletizing Robot                      $135,000.00   $158,823.53
           Forklift push pull                     $10,000.00    $10,000.00
           Packaging storage                      $0.00         $0.00
           Finished product storage               $20,000.00    $20,000.00
 Color sorting line
           Color Sorter                           $25,000.00    $29,411.76




MBA 821 College of Commerce, University of Saskatchewan                       38
Seeds Ltd.



 Conveying
      Receiving product 7000 Bus./hr.A76          $23,000.00      $5,000.00
      Receiving Cleaned product 1500 Bus./hr.
                        conveyor                  $5,000.00       $1,000.00
                        elevator                  $15,000.00      $3,000.00
      Large seed line 6 x 800 Bus./hr.            $36,000.00      $3,000.00
      Small seed line 9 x 800 Bus./hr.            $54,000.00      $4,500.00
      Color sorting line                          $5,000.00       $2,000.00
      Cleaning to temp storage air                $30,000.00      $30,000.00
                               elevator           $15,000.00      $3,000.00
      Bulk Shipping Conveyor to load containers   $10,000.00      $2,000.00
      Temp storage to shipping                    $20,000.00      $4,000.00
      Temp storage to bagging                     $15,000.00      $3,000.00
      Screenings                                  $30,000.00      $30,000.00
 Bins
      Receiving                                   $80,000.00      $80,000.00
      Temp storage                                $320,000.00     $320,000.00
      Shipping                                    $64,000.00      $30,000.00
      Screenings                                  $40,000.00      $40,000.00
 Dust system
      Large seed line                             $10,000.00      $10,000.00
      Small seed line                             $10,000.00      $10,000.00
      Color sorting line                          $10,000.00      $10,000.00
      Bagging                                     $4,000.00       $4,000.00
 Office, lab, coffee & control room
      Framing                                     $20,000.00      $2,000.00
      Plumbing                                    $10,000.00      $5,000.00
      Electrical                                  $5,000.00       $2,000.00
      Heating, A/C                                $5,000.00       $5,000.00
      Interior finishing                          $10,000.00      $10,000.00
      Furniture                                   $15,000.00      $15,000.00
      Computers & Office Equipment                $15,000.00      $15,000.00
                                                  $1,783,600.00   $1,471,135.29




MBA 821 College of Commerce, University of Saskatchewan                           39
Seeds Ltd.


Appendix B: Plant Flow Chart


                       DELORME SEEDS LTD.
                             PLANT FLOW CHART
        RECEIVING                              RECEIVING
                            ASPIRATOR            CLEAN
                                               PRODUCT


         STORAGE
          L1 - L4              Bin                         Shipping           Shipping
          S1 - S4



        ASPIRATOR
                              Large
                              Indent                                      Bulk Shipping
                                                           Bagged
                                                                             Storage
                                                           Storage
                                                                            Bins 1 - 4

                              Small
              Bin
                              Indent
                                                           Bagging


                                              Gravity
        Debearder           Debearder
                                              Table

                                                                 Bulk weigh
         Wind &                                                    Scale
                             Destoner
         Screen



             Large           Wind &         Split              Bulk Temporary
             Indent          Screen        Product              Storage Bins
                                                                   A1 - A8
                                                                  B1 - -B8
                                                                   C1 - C8
         Destoner              Bin                                 D1 - D8




                             Gravity
              Bin
                             Table


             Gravity                          Bulk weigh
                              Spirals
             Table                              Scale


        Bulk weigh
          Scale




MBA 821 College of Commerce, University of Saskatchewan                  40
Seeds Ltd.



Appendix C: Seed Cleaners in Saskatchewan

Seed Cleaning Operation Location                  Market    Primary Interest           Certification
                                                  Share
All-Sort Seed Cleaning            Hague           <1%       Custom Cleaning            OCIA
Argail enterprises Ltd            Beechy          <1%       Custom Cleaning            OCIA, APG
Birch Rose Acres Ltd              Star City       <1%       Custom                     OC/PRO
Bob’s Seed Cleaning               Fir mountain    <1%       Custom                     OCIA
Crystal Springs Organic Farms     Kipling         <1%       Cleaning/bulk shipments    OCIA
Davey’s Seed Cleaning             Strasbourg      <1%       Seed Cleaning              OC/PRO
Eskdale Seed Farm Ltd.            Leross          >1%       Organic Seed Cleaning      OCIA
Fowler Seeds Ltd                  Central Butte   <1%       Custom Cleaning
Galarneau Seeds                   Radville        <1%       Custom cleaning
Grains N’ Things                  Kerrobert       <1%       Custom Cleaning            OCIA
Kintyre Farms Ltd                 Glenside        <1%       Small lots, small seeded   pending
                                                            crops
Klevgaard Farm                    Swift Current   <1%       Color Sorting              OCIA
Lakeside Organics                 Morse           <1%       Custom Cleaning


Lepp’s Seeds Ltd.                 Hepburn         Top 5%    Custom Cleaning,           OCIA
                                                            Conventional seeds
Lily & Rose Seed Processors       Lemberg         <1%       All organic grains &       OCIA
                                                            oilseeds
McDougal Acres                    Moose Jaw       Top 5%
MJ Sutter Organic Farms           Shaunavon                 Cereals and Lentils        OCIA
Mobile Grain                      Moose Jaw       2%        All seeds. Not organic
Naturally Nutritious Foods Inc.   Spalding        N/A       Organic Seeds              OCIA
                                                            Wrong phone number
Northwest Organic Community       Maymont         <1%       Custom Cleaning            OCIA
Mills Coop
Peter Seed Farm                   Assiniboia      <1%       Custom Cleaning, Sale
                                                            of Pedigreed
Prairie Pulse                     Regina          10%
SaskCan Processors                Regina          30%       All seeds not organic
Simpson Seeds                     Pasqua          Top 15%   Special Crop Processing;




MBA 821 College of Commerce, University of Saskatchewan                                     41
Seeds Ltd.

                                                            Select Seed growers
Southview Seed Cleaning         Tompkins         <1%        Seed Cleaning            OCIA
Smith Seeds                     Limerick         <1%        Pedigreed Sales; Pulse
                                                            Crop Processing
Stringer Farm                   Ponteix          <1%        Custom Cleaning          OCIA
Sundwall Seed Service           Goven            <1%        Seed Cleaning            unknown
Sunrise Organics                Lisieux          <1%        Custom Cleaning          OCIA
TK Martin Organics Inc.         Radville         <1%        Certified Cleaning       OCIA
Walker Seed                     Regina           10%
White Mud Trading Co. Inc.      Frontier         <1%        Seed Cleaning            OC/PRO




EXECUTIVE SUMMARY

        In the seed cleaning industry quality and purity of the cleaned product is of utmost
importance. Progressively the customer’s standards and regulations have been getting
more stringent for quality. Seeds Ltd. wishes to continue to meet the requirements of the
regulatory bodies and of their customers. To satisfy this need a larger plant which can
house new equipment is necessary. This business plan was developed for a new seed
cleaning plant that will be capable of meeting current and future customer needs.


Operations and Human Resources Plan:
        Bird Seeds Ltd. has designed a layout for the future plant and the site chosen is
on the Bird        family farm in Saskatchewan. The new plant’s work plan and flow will
consist of two lines which will be capable of cleaning the seeds to a higher grade with
increased capacity of 500 bushels per hour as compared to the 200 to 300 bushels per
hour cleaned currently. To further increase product purity and work efficiency, there are
plans of adding a color sorter and automation of the packaging line. In the future plant,
improvements will be made to comply with HACCP regulations. Currently there is no
formal certification for HACCP for seed cleaning plants.
        For the new plant the total cost for the building and land is expected to be
$554,000, total equipment cost is $1,417,100 and the total net working capital is expected
to be $53,336. Overall, total capital required would be $2,024,436. Five year projections



MBA 821 College of Commerce, University of Saskatchewan                                  42
Seeds Ltd.


for labour and management costs are shown in this business plan. For this, the total cost
incurred the first year is estimated to be $159,026.
       The current human resources strategy at Bird Seeds Ltd. has proven to be highly
successful with low turnover rate and therefore expected to continue.


Marketing Plan:
       The services offered by Bird          Seeds Ltd. are seed cleaning, storing and
packaging. Upon market and environment analysis it was determined that the target
market for Bird Seeds is low volume, high purity seeds. The spice, pulse organic and
export markets fits Bird Seeds capabilities. The pricing for the service is lower or at par
with the competitors. Currently, there is no promotion, but for the new facility to operate
at capacity advertisement for the improved services is required. Bird Seeds Ltd. wants
people to think “quality” associated with their name. The marketing budget is set at
$10,000 per year.
       Bird Seeds’ greatest strength is their consistent high quality service. If Bird can
successfully maintain high standards, the market share will increase and revenues will
grow. The primary weakness is the plant’s physical location, however, with fewer
competitors this can be viewed positively. Among the opportunities that are available,
the organic market has largest potential in terms of size and growth in the future although
competition is significant. Another avenue for growth is in the pulse and lentil cleaning
markets.
       With the new plant the total revenue expected is $1,045,576. This will be realized
when Bird Seeds uses a cost based approach in its pricing policy.


Financial Plan:
       Finances will be obtained by an equity and debt mix totaling $2M to finance the
new plant. The first $598,000 will come from equipment from the existing plant. The
remainder will be financed through venture capital or debt. Ten year projections have
been made for Bird Seeds Ltd. The base case scenario for Bird ’s Seeds Ltd. shows an
Internal Rate of Return of 27% which is a good rate of return for this type of business and
the Net Present Value $302,737 at a rate of return of 20%.



MBA 821 College of Commerce, University of Saskatchewan                                 43
Seeds Ltd.


       Risk analysis revealed three critical variables and they are capacity, cleaning price
and packaging price. Break-even analyses were performed on these variables. The
financing of the project is designed to protect these critical variables.
       This business plan utilizes less than one third of the potential capacity of the
equipment. This means that this business can easily scale up to future volume demands.
By adding more shifts, the company can achieve an even greater return. Bird         will be
able to offer higher quality products and essentially be a one-stop shop for customers.
They can provide high quality seed cleaning, packaging, and product storage.
       The conclusion of this business plan is that the new expansion of Bird Seeds Ltd.
is a feasible endeavor in the base case scenario.




MBA 821 College of Commerce, University of Saskatchewan                                  44

								
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