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					Spraying




                Michael Bender
  Ag Ec 495        Nathan Allen
                  Steven Myers
              December 4, 2007
                 Overview
 Introduction
 Operations Analysis
 Human Resources
 Marketing Analysis
 Financial Analysis
               Introduction
 What is Vegetation Control?
   Custom spraying service provided to oil and
    gas industry
   Goals and objectives are to focus on
    customer service, environmental stewardship,
    and quality workmanship
   Headquarters in Alberta
             Operations Plan
 Organizational Structure
   will be a private corporation
       Five people on board of advisors
       Manager (president) will be in charge of both
       duties
       Service staff will consist of two spray truck drivers
       as well as a secretary
       Company will employ four people to start with
Site plan located in Alberta
     Breakdown of Spray Unit

 Options and features
 Capacities
 Cost of Purchase
 Importance of GPS and Mapping
         Capital Budget

Description                      Cost ($)

Building Costs                   $    4,449

Equipment Costs                  $   42,034




Total Working Capital            $    6,359

Total Land and Equipment Costs   $   46,483

Total Capital Required           $   52,842
       Cost of Goods Sold
Description                       Cost ($)
Beginning Inventory           +      -
Costs of Goods Manufactured   +   $208,276
Costs of Goods Available          $208,276
Ending Inventory              -      -
Cost of Goods Sold                $208,276
           Overhead Costs
Variable Overhead Costs   Cost ($)
Truck Maintenance             7,000
Total Variable Costs          7,000




Fixed Overhead Costs
Lease on Building             2,000
Vehicle Insurance             1,600
Cell Phones                   1,600
Capital Cost Allowance        5,926
Total Fixed Costs            11,126
Total Overhead Costs         18,126
        Direct Materials
Direct Materials           Cost ($)

Fuel                       43,148

Chemical                   66,120

Water                      350


Meals and Accommodations   13,632

Personal Protective Gear   1,950

Total                      125,200
              Direct Labour
Labour Costs                           Rate       Cost ($)

Total Direct Labour                    $20/hr*      56,321




Benefits

Employment Insurance                     1.87%       1,053

Canada Pension Plan                      4.53%       2,551

Holiday Pay                              5.80%       3,267

Workers Compenasation                    3.12%       1,757

Total Direct Labour and Benefits                  $64,949
*Assuming 60 hour weeks with 20 hours per week of 1.5 time wage
         Cash Management

 Little cash on hand due to accounts payable
  coming due before accounts receivable
 Have to plan in the case of receivables not
  getting paid
 Line of credit may be essential to cover cash
  shortfall during startup phase
       Inventory Management
 Inventory on hand will be chemicals that are
needed for the week along with extra safety
supplies that will be needed
 How we determined a week’s inventory
     .5 acres per site
     .4 L Glyphosate + 1L of Dicamba
     150 sites sprayed per week
     Resulting in an inventory of 30L glyphosate, and 75L
    of dicamba
        Inventory Management

 Easy access to herbicides that are being used will
  help to keep inventory to a minimal
 Keep herbicide on truck that will be used for the
  week
 Inventory turnover will be within a week as product
  will be used up at this rate
         Accounts Payable
 Managed to avoid paying interest
 Credit Card used to purchase herbicides
  and safety supplies, meals and hotel
  accommodations
 Fleet Card for purchase of fuel
 These payables will be due within 30 days
 Challenge to obtain enough credit during
  start up
           Human Resources

Job Descriptions
 Manager (president)
   Will oversee the business
   Hire seasonal staff
   Daily tasks include, organizing inventory,
    planning daily activities of the spray trucks, as
    well as keeping in contact with clients as well
    as suppliers
   Salary will be $4500 per month
          Human Resources
Job Descriptions
   Spray truck drivers
     Duties include traveling to oil and gas sites that will
      be sprayed
     Carrying out the task of spraying, as well as mixing
      chemicals
     Record keeping that will be required
     Wage will be $20 per hour and time and a half for
      overtime
         Human Resources
Job Descriptions
 Secretary
   Will work part time approx. 20 hours per week
   Duties will be taking calls, organizing
    meetings, book keeping, invoicing and billing
   Wages will be paid hourly at a rate of $12 per
    hour
Marketing Plan
                 The 4 P’s
Products and Services
 Custom Spraying Service
   Vegetation control in industrial situations such
    as oil and gas wells
   Site evaluation to access the product that
    needs to be applied
   Safety orientated
   specializes in spraying and focuses on quality
                   The 4 P’s
Price
 Competitive Pricing
   Many established competitors in business
   All vegetation control has relatively similar
    strategy (no differentiation)
   Price that will be charged is $80 per site
   Chemical price will be $68.88 per acre
                           The 4 P’s
Promotion
 Trade shows
    Make initial contact with potential clients
    Show case services
    Emphasize high quality service, attention to detail and focus

 Signage on trucks
    Mode to “get name out”
    Visual images often stick with people
    Trucks cover large area during spraying season

 Pamphlets with literature on services provided
    Breakdown of services provided
    Position o as a higher quality service provider in comparison to
     competitors
                  The 4 P’s
Place
 will target oil and gas sites in Alberta
 Geographic factors will limit the area that
  can service
   Strive to keep resources efficient and effective
                SWOT Analysis
Human Resources-Strengths
 Strong Management Skills
    Hired employee's don’t need extensive training
    Work is relatively basic
    Day to day actions repetitive
 Management has key contacts in Agricultural and Oil
  and Gas Industry
    Useful resources
    Opens doors to new possibilities
 Few employees
             SWOT Analysis
Human Resources-Weaknesses
 Few employee’s
   Short staffed
   Services may be restricted
 Management has little knowledge in accounting
   Outsource accounting
 Working long hours
   Worker fatigue and stress
   Possible liability
 Possible lack of safety personnel
               SWOT Analysis

Physical Resources-Strengths
Majority of equipment brand new
 Little down time for maintenance
 Increase efficiency
Precise and user-friendly spraying equipment
 Increase efficacy
GPS and mapping technology
 Can be used in disputes
             SWOT Analysis
Physical Resources-Weaknesses
Using previously owned trucks
    Higher repair costs
    May lead to increased downtime
    May need to upgrade in near future
  External Threats and Opportunities

Opportunities
 Oil and Gas sector growing (market trends)
    Alberta- growing and established
    Saskatchewan- low establishment of oil sites
        Huge potential for market boom
 New products/Services
    implement mowing service as well
    Customers are looking for ways to reduce costs and hassle
    ATV mounted sprayers
 Customers
    Commercial buildings and other industrial sites
 Government policy change
    Any changes made to oil industry will impact markets
External Threats and Opportunities
External Threats
 Customers
    Larger base customers may desire services out of our region
    Becoming selective of who is hired
 Government policy change and competition
    Alberta government raised royalties/this may slow down oil production
    Saskatchewan- Sask. Party winning election
        Party platfom/ different ideas
 Competition
    Many well established companies
    Largest threat 12 large companies
        Approx. 20 provincial competitors
 Environmental Threats
    Temperature, wind speed, precipitation affects agrochemicals
                           Competition
   Major Competitors                          Minor Competitors
      West Country Oilfield Services               Clarke Vegetation Control
      Ace Vegetation                               Vanguard Vegetation Control
      Precision Oilfield Services                  Excel Vegetation Services
      Spray-Rite Vegetation Control Inc.           Ace Vegetation Control Service
      DDK Oilsite Services                         Blueweed Services
      Weed Wackers                                 SPS Well Service
      All Pro Vegetation Management                Target Vegetation Control Ltd.
      Precision Vegetation Control
      Altec Vegetation Management
       Corp.
      TMT Vegetation Management Ltd.
      Cunningham Vegetation
       Management
      Site Rite Vegetation Management
                    Taber




Major Competitors
Minor Competitors
Marketing Plan Budget
   Advertising
   Brochures/Business Cards/Flyers       $    1,250
   Truck Decals                          $     900
   Total Advertising                     $    2,150
   Promotion
   Web Page                              $    3,000
   Travel Expenses                       $    5,250
   Cell Phones                           $    1,600
   Trade Shows                           $    5,000
   Total Promotion                       $   14,850
   Development
   Insurances (Spray and App. License)   $    6,000
   Insurances (Certificate of
        Recognition)                     $     600
   Insurances (Corporate Start Up Fee)   $    5,000
   Insurances (Business License)         $     500
   Human Resources Training Costs        $    1,000
   Utilities Expense                     $    6,000
   Total Development                     $   19,100
   Total Marketing Expenses              $   36,100
Financial Plan
                     Critical Variables

Critical Variables      Base Case     Allowable Change %

       Wages               24.45             27.00%



   Number of Sales        2,400.00           -8.74%



        Fuel              43,184.00          15.86%



    Selling Price          80.00             -4.45%



    Chemical Sold         1,200.00          -22.95%




    Chemical Price         68.88            -10.95%
                           Financial Feasibility
Year                                   2008                2009               2010                 2011                  2012

Sales                               $ 274,650.00     $ 280,143.00         $ 285,745.86        $ 291,460.78          $ 297,289.99
Cost of Sales                       208,275.72       216,635.64           217,993.09          220,212.46            223,071.12
Gross Margin                         66,374.28           63,507.36         67,752.77           71,248.31             74,218.87
Expenses                             60,241.89           61,446.73         62,675.66           63,929.17             65,207.76

Net Income (Loss) Before Tax         $6,132.40           $2,060.64         $5,077.11           $7,319.14             $9,011.12
Income Tax                             613.24             206.06              507.71               731.91             901.11

Net Income (Loss) After Tax          $5,519.16           $1,854.57         $4,569.40           $6,587.23             $8,110.00


Net Cash Flow to Equity              $ 5,519.16          $2,415.22        $(4,851.81)         $(10,040.22)          $(13,727.31)



 Year                                  2013                 2014                 2015                 2016                  2017

 Sales                          $ 303,235.79         $ 309,300.51          $ 315,486.52         $ 321,796.25          $ 328,232.17
 Cost of Sales                       226,411.91          230,123.92           234,128.86            238,371.55           242,813.18

 Gross Margin                        76,823.88            79,176.59           81,357.66             83,424.70             85,418.99
 Expenses                            66,511.91            67,842.15           69,198.99             70,582.97             71,994.63
 Net Income (Loss) Before Tax        $10,311.97           $11,334.44          $12,158.67            $12,841.72            $13,424.36
 Income Tax                           1,031.20            1,133.44             1,215.87              1,284.17             1,342.44
 Net Income (Loss) After Tax         $9,280.77            $10,201.00          $10,942.80            $11,557.55            $12,081.92


 Net Cash Flow to Equity        $      (16,325.02)   $      (18,128.01)   $     (19,347.65)    $      (20,136.04)    $      (20,602.99)
                                 Breakeven Analysis
                    100.00


                     95.00


                     90.00
Selling Price ($)




                                                                              Cash Flow
                                                                              Net Income
                     85.00
                                                                              Economic
                                                                              Base
                     80.00


                     75.00


                     70.00
                             1   2   3   4   5           6   7   8   9   10
                                                 Years
                  Scenario Analysis
                            Risk Analysis
                                                           Best
                                   Worst Case    Base     Case
Variable                             (-10%)      Case     (10%)
Number of Sales                        2160       2400     2640
Average Price                           72         80       88
IRR                                   -41.83     19.60%   75.40%
NPV                                  -128,479      -673   117,463
Two critical variables used (10%) change
IRR and NPV are extremely sensitive to change
              Conclusion
 Over the next ten years NewCo is
  projected to have a Internal Rate of Return
  (IRR) of 19.6%
 NewCo will prove to be a feasible
  business if sales objectives can be met
 Focusing on new customer relationships
  will be important to the success of the
  company
Questions

				
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