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BBUUSSIINNEESSSS PPLLAANN
Entrepreneurial Finance
MBA -5B
Submitted to:
Sir. Ajab Khan Burki.
By
1. Maryam Ahmed
2. Usman Shabbir.
3. Neelofar Niazi.
EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY
“From seed to Shelf, Organic Farming, Good for nature, Good for health”
Fresh living is a new farming venture that is focusing on producing and selling organic vegetables in
Islamabad.
Organic vegetables are produced without the use of chemical fertilizers and pesticides and non-
genetically engineered seeds, thus organic vegetables are free from harmful effects of toxins and are
more nutritious.
The vegetable industry is an ever growing business and demand is directly proportional to increase in
population. The structure of the industry has remained same for many decades now. The prices of
vegetables vary in different localities and profit margins are considerable especially for middle men.
Keeping in vogue with international trends, and with increased awareness about the benefits of using
organic vegetables, affluent and health conscious people living in Islamabad have desire to consume
organic vegetables. Company is focusing on this niche market and customers will be attracted by
promotional activity. Sales strategy focus on use of direct sales through company website and
indirect sales through existing brick and mortar vegetable retailers who will be offered 15% of
commission on sale price for carrying the company’s products.
The management team comprises business management students, who will manage the intricate and
innovative selling process. The production team will comprise of skilled manpower, supervised by a
diploma holder in agriculture.
The company intends to construct the required infrastructure on the farm. Most of the production
machinery will be acquired. The employees required for the production will be permanently
employed and to cater with the variation in production daily laborers will be hired when required.
The financial plan, calculated on basis of some assumptions mentioned in the relevant chapter show
promising result. ROI for the first five years are 1.5%, 29.29%, 21.46%, 20.08%, and 18.91%
respectively. It is estimated that the business will manage to get investment breakeven based on cash
flows in 3.13 years.
Page i
TABLE OF CONTENTS
11.. IINNTTRROODDUUCCTTIIOONN ..........................................................................................................................1
1.1 Company description ................................................................................................................... 2
1.2 What is organic food? .................................................................................................................. 2
1.3 Company history ......................................................................................................................... 2
1.4 Mission statement ........................................................................................................................ 2
1.5 Vision .......................................................................................................................................... 2
1.6 Goal ............................................................................................................................................. 3
1.6.1 Personal ................................................................................................................................... 3
1.6.2 Business................................................................................................................................... 3
1.6.3 Strategic................................................................................................................................... 3
1.7 Purpose ........................................................................................................................................ 3
1.8 Product and services .................................................................................................................... 3
1.9 Current status ............................................................................................................................... 3
1.10 Legal status .................................................................................................................................. 3
22.. IINNDDUUSSTTRRYY AANNAALLYYSSIISS .................................................................................................................4
2.1 Industry size and growth rate ....................................................................................................... 5
2.2 Nature of Participants and Industry Structure ............................................................................. 5
33.. MMAARRKKEETT AANNAALLYYSSIISS ...................................................................................................................6
3.1 Ideal Customer ............................................................................................................................. 7
3.2 Market Segmentation and Target Market Selection .................................................................... 7
3.2.1 Chain Ratio.............................................................................................................................. 7
3.2.2 ATAR Model .......................................................................................................................... 8
44.. MMAARRKKEETT NNEEEEDDSS,, TTRREENNDDSS,, && DDEESSCCRRIIPPTTIIOONN .............................................................................9
4.1 Market Needs ............................................................................................................................. 10
4.2 Market Trends ........................................................................................................................... 10
4.3 Market Description .................................................................................................................... 10
4.3.1 Demographics ....................................................................................................................... 10
4.3.2 Psychographics ...................................................................................................................... 10
4.3.3 Behavior ................................................................................................................................ 10
4.3.4 Geographic ............................................................................................................................ 10
4.4 Competitor Analysis .................................................................................................................. 10
4.4.1 Differentiators ....................................................................................................................... 10
4.4.2 Direct competitors ................................................................................................................. 11
4.4.3 Indirect competitors .............................................................................................................. 11
55.. MMAARRKKEETTIINNGG PPLLAANN ...................................................................................................................12
5.1 Overall Market Strategy ............................................................................................................ 13
5.1.1 Core Strategy ......................................................................................................................... 13
5.1.2 Core message ........................................................................................................................ 13
5.1.3 Positioning goal ..................................................................................................................... 13
5.1.4 Core Branding Elements ....................................................................................................... 13
Page ii
5.2 Price Rationale ........................................................................................................................... 13
5.3 Marketing Material .................................................................................................................... 14
5.3.1 Marketing kit ......................................................................................................................... 14
5.4 Lead Generation Plan or Business Creation .............................................................................. 15
5.4.1 Lead Generation Strategy ...................................................................................................... 15
5.4.2 Push strategy from distributor(s) i.e. vegetable shops ........................................................... 16
5.4.3 Referrals ................................................................................................................................ 16
5.5 Lead Conversion Plan ................................................................................................................ 16
66.. SSAALLEESS SSTTRRAATTEEGGYY ....................................................................................................................17
6.1 Sales process .............................................................................................................................. 18
6.1.1 Indirect sales .......................................................................................................................... 18
6.1.2 Direct sales ............................................................................................................................ 18
6.2 Transaction ................................................................................................................................ 18
6.3 Follow – up ................................................................................................................................ 18
6.4 Service Experience .................................................................................................................... 18
6.5 Loyalty Product/Service Offerings ............................................................................................ 18
6.6 Marketing calendar .................................................................................................................... 19
6.7 Marketing Tools and Budget ..................................................................................................... 19
77.. OORRGGAANNIIZZAATTIIOONNAALL PPLLAANN .........................................................................................................20
7.1 No. of Employees ...................................................................................................................... 21
7.2 Organizational Chart.................................................................................................................. 21
7.2.1 CEO ....................................................................................................................................... 22
7.2.2 CFO / CTO ............................................................................................................................ 22
7.2.3 CMO ...................................................................................................................................... 22
7.2.4 COO ...................................................................................................................................... 22
7.2.5 Delivery Boys ........................................................................................................................ 23
7.2.6 Tractor driver ........................................................................................................................ 23
7.2.7 Pickup driver ......................................................................................................................... 23
7.2.8 Harvesters .............................................................................................................................. 23
7.2.9 Laborers (daily basis) ............................................................................................................ 23
7.2.10 Account office ....................................................................................................................... 24
7.2.11 Staff supervisor ..................................................................................................................... 24
7.2.12 Security guards ...................................................................................................................... 24
7.2.13 Office attendant ..................................................................................................................... 24
7.3 Payment Salaries ....................................................................................................................... 24
7.3.1 Staff requirement ................................................................................................................... 25
7.4 Expansions ................................................................................................................................. 25
7.5 Level of motivation ................................................................................................................... 26
88.. PPRROODDUUCCTTIIOONN PPLLAANN .................................................................................................................27
8.1 Area requirement ....................................................................................................................... 28
8.2 Usages details ............................................................................................................................ 28
8.3 Infrastructure requirements ........................................................................................................ 29
8.3.1 Irrigation source and energy source ...................................................................................... 29
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8.3.2 Seed store and organic manure shed ..................................................................................... 29
8.3.3 Water channels ...................................................................................................................... 29
8.3.4 Fencing .................................................................................................................................. 29
8.3.5 Farm Security ........................................................................................................................ 29
8.3.6 Administrative (office) building ............................................................................................ 30
8.3.7 Machinery sheds .................................................................................................................... 30
8.3.8 In farm roads ......................................................................................................................... 30
8.4 Machinery requirements ............................................................................................................ 30
8.4.1 1 Tractor (Fiat 240) ............................................................................................................... 30
8.4.2 1 Rota Vator (Tractor Mounted) ........................................................................................... 30
8.4.3 1 cultivator (Tractor Mounted) .............................................................................................. 30
8.4.4 1 Seed Drill (Tractor Mounted) ............................................................................................. 31
8.4.5 Ridger .................................................................................................................................... 31
8.4.6 1 Mould Bold Plough ............................................................................................................ 31
8.4.7 1 Chopper .............................................................................................................................. 31
8.4.8 Pickup van-Suzuki ................................................................................................................ 31
8.4.9 Knapsack hand sprayer-steel body ........................................................................................ 31
8.5 Average product of various vegetables farmed organically ...................................................... 31
8.5.1 Scale ...................................................................................................................................... 31
8.5.2 Summer vegetables ............................................................................................................... 32
8.5.3 Winter Vegetables ................................................................................................................. 32
8.6 Production Process .................................................................................................................... 33
8.6.1 Soil preparation ..................................................................................................................... 33
8.6.2 Sowing................................................................................................................................... 33
8.6.3 Water application .................................................................................................................. 33
8.6.4 Plant protection ..................................................................................................................... 33
8.6.5 Harvesting ............................................................................................................................. 33
8.6.6 Grading/Washing/packaging ................................................................................................. 33
8.6.7 Transport ............................................................................................................................... 34
8.6.8 Production and Delivery Process .......................................................................................... 34
8.6.9 Total Fixed Asset .................................................................................................................. 35
99.. FFIINNAANNCCIIAALL PPLLAANN .....................................................................................................................36
9.1 Assumptions .............................................................................................................................. 37
9.2 Contingency Plan ....................................................................................................................... 39
9.3 Exit strategy ............................................................................................................................... 39
1100.. EEXXHHIIBBIITT((SS)) ................................................................................................................................. I
10.1 Fresh Living – Organic food, Business Model ............................................................................. I
10.2 Market Comparison .....................................................................................................................II
10.3 Cost of Land .............................................................................................................................. III
10.4 Cycle Plantation Cost ................................................................................................................ IV
10.5 Production Cost per Kg (Summer Vegetables) ......................................................................... VI
10.6 Production Cost per Kg (Winter Vegetables) ........................................................................... VII
10.7 Complete Cost of Vegetables ................................................................................................. VIII
10.8 Income Statement ...................................................................................................................... XI
Page iv
10.8.1 Monthly ................................................................................................................................. XI
10.8.2 Yearly ................................................................................................................................... XII
10.9 Statement of Retained Earnings ............................................................................................. XIII
10.11 Sales Schedule .................................................................................................................... XIV
10.12 Wages and Commission Schedule ...................................................................................... XV
10.13 Cash Budget ....................................................................................................................... XVI
10.14 Balance Sheet .................................................................................................................... XVII
10.14.1 Monthly ............................................................................................................................. XVII
10.14.2 Yearly .............................................................................................................................. XVIII
10.15 Cash Flow Statements ........................................................................................................ XIX
10.15.1 Monthly .............................................................................................................................. XIX
10.15.2 Yearly .................................................................................................................................. XX
10.16 Expected value of growth ................................................................................................... XXI
10.17 Sustainable Growth ............................................................................................................ XXI
10.18 Break-even Time ............................................................................................................... XXII
10.19 Survival Revenue .............................................................................................................. XXII
10.20 Financial ratios ................................................................................................................ XXIII
10.21 Venture Valuation ........................................................................................................... XXIV
10.22 In case of Equity investment .............................................................................................XXV
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1.1 Company description
Fresh living is a farming company that is focused on producing and selling organic vegetables
that are produced by using environmentally friendly farming techniques and without the use of
chemical fertilizers and pesticides, in local market. Vegetables currently available in local
market are inorganic that are produced by using chemical fertilizer and pesticides. The
vegetable retail business is a fragmented business that follows a 4 tier approach. Fresh living
is vertically integrated where production of organic vegetables is done on leased farm and
product is sold to final customer thus reducing the tier of whole sellers (shown in Exhibit 1).
This provides company control over production to ensure quality of the product and is
financially beneficial for the company as it removes the tier of whole sellers where profit
margins are considerable. Before we launch upon the technical aspect of business below we
briefly explain what organic food and what are its benefits.
1.2 What is organic food?
Organic vegetables are grown on such lands which are free from chemicals fertilizers,
pesticides, and any other environmental and health damaging agent for at least three years as
well as no chemical is used in its production. Moreover, these vegetables are not genetically
engineered as genetically engineered vegetables seeds are not used for production. Organic
food is healthier because it does not contains chemical that are left in vegetables due to use of
chemical fertilizers and pesticides but these vegetables also contains higher amount of trace
minerals, anti-oxidants and vitamin C. Studies conducted in the west have proved time and
again that organic vegetables tastes better than in-organic vegetables. In-organic production
techniques effect the environment because of excessive use of pesticides and fertilizers, which
results in environmental pollution, pollutes farm and kills wild life i.e. beneficial insects,
micro-organisms. Organic farming reduces soil erosion and improves soil fertility. Organic
production techniques are also beneficial for farmers as it saves them from the toxin exposure
which they have to cope with in in-organic production techniques.
1.3 Company history
Fresh living is a newly formed company, with an aim and purpose of promoting organic
farming and production in Pakistan.
1.4 Mission statement
“To make aware about and to promote healthy lifestyles”
1.5 Vision
Fresh living’s vision is to create awareness among people that organic food is good for them,
animals, and environment.
3
1.6 Goal
1.6.1 Personal
To reach salary of Rs. 200,000 by the start of second year.
1.6.2 Business
To recover at least 15% of initial investment.
Expanding geographical segment to at least 3 sectors within a two year.
To keep the maximum revenue in business for future growth.
1.6.3 Strategic
To be a top provider of fresh and healthy organic vegetable(s) on the customer’s doorstep.
To build a strong repute in market.
1.7 Purpose
Fresh living’s purpose is to provide nutritious organic vegetables to their customers.
Management at “Fresh Living” also wants to create awareness in consumers about the benefits
of organic food for humans, animals, and environment and about harmful effects of inorganic
eatables.
1.8 Product and services
We will aim to provide very pure, high quality, free of contamination and bacteria seasonal
organic vegetables to our customers. Our product line will initially consists of vegetables sold
through brick and mortar shops and delivered at the customers’ doorstep in proper packaging
which will keep them fresh.
1.9 Current status
The current status of the company is that the basic feasibility is complete and the project is
ready for the launch.
1.10 Legal status
The company is a partnership based business with three owners with equal share in the
ownership. The owners are also office bearers holding key management positions in the
company.
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2.1 Industry size and growth rate
Vegetables are one of the most used edible items in south Asia, thus one of the major FMCG
and regular part of local diet. As the population keeps on increasing, the demand for
vegetables is also increasing. Though the organic vegetable segment is new, but since the
purchasing power of the consumers has increased considerably, the potential for growth within
a niche segment is very high.
2.2 Nature of Participants and Industry Structure
The vegetable retail business is a fragmented business that follows a 4 tier approach (shown in
Figure 1) that involves farmers (grower vegetables on small self-owned farms), wholesalers
(purchase vegetables in bulk from the farmers), vegetable retailers (shop owners who retail
vegetables to final customer) and customers (the end users of vegetables). The current industry
structure relies on traditional brick and mortar businesses with no particular advertising or
differentiation of a target segment. Vegetable business is considered to be a homogeneous
product business.
Figure 1
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3.1 Ideal Customer
The ideal customers of “Fresh living” are health conscious households, patients, and senior
citizens living in posh areas of the city, which have some knowledge about the harmful effects
of inorganic products and have purchasing power to buy premium priced organic vegetables.
3.2 Market Segmentation and Target Market Selection
Organic vegetables are expensive to produce because their production time is comparatively
more than inorganic vegetables. Moreover, the yield of organic vegetables is comparatively
less which increases the cost and consequently the price. Thus the product cannot be marketed
to a wider consumer base. Initially the target segment will be a niche segment residing in a
particular geographical location that is the posh sectors of Islamabad i.e. F-6 and F-7. To
further elaborate the target segment, we have used Chain Ratio and ATAR model.
The population according to the 1998 census of F-6 and F-7 was 16,791 and 11,817
respectively. The average growth rate of population of Islamabad as identified in 1998 census
was 5.75% per annum. The average house hold comprised of 6 members. To get the average
population of Islamabad in 2013, we have compounded the annually growth rate and have
come up with following calculations:
Growth Rate factor = (1+g) n
= (1+0.0575)14
= 2.1873
Population of F-6 = Population * Growth Factor = 16,791 * 2.1873 = 36,728
Population of F-7 = Population * Growth Factor = 11,817 * 2.1873 = 25,848
Total Population = Population of F-6 + Population of F-7 = 62, 576
3.2.1 Chain Ratio
Target Market = 62, 576 * 0.4875 = 30, 505.8
Target Market = 62, 576 * 0.478125 = 29919.15
Sales through Shop
People interested in organic food 75%
Access to product 65%
Income to purchase the product 100%
Total 0.4875
Sale through Home Delivery
People interested in organic food 75%
Access to product 85%
Income to purchase the product 75%
Total 0.478125
8
3.2.2 ATAR Model
Sales through Shop
Awareness Trial Availability Repeat Total
70% 30% 60% 20% = 0.0252
Customers = 30, 505.8 * 0.0252 = 768.74616
House Holds = 768.74616 / 6 = 128.12436
Sale through Home Delivery
Awareness Trial Availability Repeat Total
70% 10% 100% 15% = 0.0105
Customers = 29919.15 * 0.0105 = 314.15108
House Holds = 314.15108 / 6 = 52.36
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44.. MMAARRKKEETT NNEEEEDDSS,, TTRREENNDDSS,, && DDEESSCCRRIIPPTTIIOONN
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4.1 Market Needs
With increased awareness and globally shrinking gap of communications, affluent people,
members of high society and people living in posh areas are getting aware of health benefits of
organic edibles. Thus the need for organic edibles is arising in local market.
4.2 Market Trends
People living in posh areas and following international trends and are getting more health
conscious. With increased awareness, backed by requisite purchasing power people living in
selected areas are making a conscious effort to use products that are more beneficial for health.
4.3 Market Description
4.3.1 Demographics
The target market of “Fresh Living” comprises of Patients, Senior citizens, households and
foreigners.
4.3.2 Psychographics
Aware about the importance of health, these people make conscious effort to use products that
are beneficial for health of an individual.
4.3.3 Behavior
These people have the requisite purchasing power and can afford to buy vegetables at
premium prices.
4.3.4 Geographic
Our ideal customers are located in posh sectors of Islamabad i.e. F-6 and F-7.
4.4 Competitor Analysis
4.4.1 Differentiators
a) Differentiating and introducing organic vegetables for the first time.
b) Delivery of fresh organic vegetable at door step.
c) Creating awareness among people about the benefits of using organic vegetables.
11
4.4.2 Direct competitors
The concept of delivering fresh vegetable at the door step is new and unique in Islamabad. Our
concept is innovative in sense that we are creating a service model which servers a niche in
market by providing them a product which is not differentiated by traditional whole sellers
and retailers. We being the first movers in this business will adopt different strategies to create
value for our clients. Initially, we do not have any direct competitors, who can affect our
business.
4.4.3 Indirect competitors
We do have indirect competitors, who are the traditional vegetables retailers (shop keepers) in
Islamabad and Rawalpindi and are located in small markets, Sunday markets and big stores
like Metro, Barsa cash & carry, Sabzzi Mandi, and so on.
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CCHHAAPPTTEERR 55
55.. MMAARRKKEETTIINNGG PPLLAANN
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5.1 Overall Market Strategy
5.1.1 Core Strategy
We intend to become the choice organic vegetable organization in twin cities initially and in
the country in long run. We intend to identify aspired customer needs regarding organic
vegetables and endeavor to fulfill them in a socially responsible manner that is beneficial for
society and natural eco system in the long run.
5.1.2 Core message
"To keep the body in good health is a duty, otherwise, we shall not be able to keep our mind
strong and clear".
5.1.3 Positioning goal
The goals of management at “Fresh Living” to position its product are:
1. Fresh organically produced vegetables that is good for health.
2. Premium product that offers good value for money.
3. Produced using methods that are environment friendly and help protect eco system in long
run.
5.1.4 Core Branding Elements
1. Color
The color used for Fresh living is green which represents nature. It is a symbol of harmony,
freshness, growth, and fertility. It has a strong emotional association with safety.
2. Logo
3. Slogan
“From seed to Shelf, Organic Farming, Good for nature, Good for health”
5.2 Price Rationale
Compared with in-organic vegetables, Organic vegetables take more time to grow and have
less yield; our strategy would be to charge a 10% premium price from our customers who are
14
willing to pay a little extra for the quality fresh vegetables supplied directly from farm, and are
free from harmful toxins and rich in nutrients.
The positioning of our brand as a premium product, delivering quality is of vital importance
and one of the reasons of setting a premium price, so that the perceived value is high in the
minds of customers. Our indirect competitors are not offering home delivery service to their
customers, and one reason of the premium price is that we are offering more service to our
customers and also have to incorporate part of its cost in price.
Sensitivity analysis including (what-if scenarios) shall be conducted to seek how prices
will affect current and future profitability at each level between cost and market demand.
5.3 Marketing Material
5.3.1 Marketing kit
Our marketing kit will be comprised of following materials and mediums:
1. Pamphlets
We will distribute our pamphlets to home, offices, restaurants, etc and will paste our
pamphlets in all small and big markets.
2. Social media
Social media is very popular means of targeting intended customer segment. Our customers
are educated, affluent and tech savvy, most of them have access to internet. Keeping this in
view, we will purchase ads of facebook, and the cost plan of these ads will be CPM.
a) CPM method
CPM (cost per Millie or cost per 1000) is a commonly used advertising measurement in radio,
television, newspapers and magazines. Similar approach is also followed by social media for
paid advertisement and we will use this method for our promotional campaign on social
media.
3. Samples
Initially, to give our customers a feel of the difference in organic and inorganic vegetables we
will distribute free samples.
4. Website
The company will maintain an interactive web site where customers will be able to find
relevant information about organic food and cooking recipes etc. The site will also serve as a
contact point between customers and company as customers will be able to place their orders
on the website. For uninterrupted service, the company will get its domain registered and
hosted by a reputable web hosting company.
15
5. Facebook Fan page
The management will maintain a facebook fan page. The page will also have information
relevant to organic food. Customers will also be able to leave their feedback and comments on
the page.
6. Panaflex banners and standees
To make customers aware of our products at vegetable shops which form the indirect channel
of selling customers products, marketing team will get panaflex banners and standees printed
for the purpose of displays in these shops.
7. Article in “You” magazine
“You” magazine is a weekly publication with “THE NEWS”. The magazine is targeted at
women and housewives with articles that are of particular interest to them. Since housewives
and women are responsible of kitchen related matters in Pakistan, we have developed an
article about benefits of Organic vegetables in particular and Organic food in general and we
will get it published in you magazine to create awareness in our target segment.
8. Personal selling
Initially, the management team intends to do personal selling in the geographical location
where our target segment is located. The goal is to create maximum possible awareness.
Pamphlets and free samples will be distributed in these sessions.
9. Helpline
Company will maintain a UAN helpline. The management team will answer queries of the
customers during the office timings.
10. Trained delivery boys
Delivery boys will be trained to the extent that they have information about organic vegetables
and their benefits, so they can comfortably answer the questions and queries of existing and
potential customers.
11. Testimonial plan
We intend to get regular feedback from our customers and their testimonials will be used in
our promotional material such as pamphlets, social media, or on company website etc.
5.4 Lead Generation Plan or Business Creation
5.4.1 Lead Generation Strategy
1. Free Offering for Suspects
Fresh living will give pamphlets and brochures to the people.
16
2. Trail Offerings for Prospects
Fresh living will offer free samples of organic vegetables so that people will try it.
3. Core Offerings for Prospects and Clients
Initially, Fresh living will deliver its products. In long run, we plan to introduce loyalty cards
for our permanent clients.
5.4.2 Push strategy from distributor(s) i.e. vegetable shops
Pursuing the push strategy, our packaged product will be available in local market vegetable
shops along with inorganic vegetables for those customers who are not aware about our
product as well as for those who will seek our product as result of our promotional campaign.
5.4.3 Referrals
Whenever, our customers will refer a new customer to us (i.e. word of mouth) from among
their friends and family.
5.5 Lead Conversion Plan
Fresh living plans to maintain the helpline open for limited hours every day on which
customer(s) may call and ask for information related to organic food as well as health tips. The
customer service officer at “Fresh living” will ask them for their addresses informing them
that we will gift them a free sample of organic vegetable(s) for once so that they can try and
feel the difference.
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18
The sales strategy of “Fresh Living” is to push its product by using indirect sales channels and
to pull customers to direct and indirect channels by targeted promotional campaign in the
geographical segment.
6.1 Sales process
Sales process at “Fresh Living” is based on two methods i.e. indirect and direct sales.
6.1.1 Indirect sales
Indirect sales will be made through the existing vegetable retailers who already have shops in
the geographical area we intend to target. “Fresh Living” will provide these shop keepers 15%
commission.
6.1.2 Direct sales
The direct sales will be made through the company managed website and telephone order.
6.2 Transaction
The transaction of indirect sales will at the sale point where the product will be left with shop
keepers for selling and everyday cash will be collected from them for the days sales.
For direct selling our delivery boy will collect the payment at the time of delivery. The
company in long run intends to incorporate credit and debit card payment facility on its web
site for the ease and convenience of its customers.
6.3 Follow – up
Record will be maintained of direct sales and regular customers and from time to time, a
representative of “Fresh living” will call the customers to get their feedback about the product.
6.4 Service Experience
More focused towards service the management at “Fresh living” will make every possible
effort to provide its customers with best possible service by ensuring that they get the best
quality product and promptly at time. To enhance and improve service experience customers
will be provided with suggestion cards so that they may fill the cards resulting in valuable
feedback and suggestions which will help to make our product and service better.
6.5 Loyalty Product/Service Offerings
“Fresh Living” will give discount offers to those customers who are loyal to our product and
are regular buyers. The offering will be planned according to the response “Fresh Living” will
receive after its launch.
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6.6 Marketing calendar
To reinforce the image of the company and enhance awareness in the market the management
at “Fresh Living” intends to distribute pamphlets/brochures from especially in early months
and then from time to time in geographical area where it intends to initially launch its product.
6.7 Marketing Tools and Budget
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7.1 No. of Employees
Our business is based on partnership. There are three partners who will be investing equally in
this business. Each partner has an equal percent of share which is 33.3%. Each partner will
assume an important position in the organization each having the authority according to their
post.
Apart from the management staff the organization is divided into two activities i.e. production
and selling. The selling department will initially have 5 employees which include the
management positions of CEO, CFO/CTO, CMO, COO as well as 2 delivery boys. Initially
management officers will be three and from among them one will also serve as the CEO. The
production activity will be overseen by the CTO and it will have 17 employees. The duties of
each of the employees along with organizational budget are explained in detail below.
7.2 Organizational Chart
COO Neelofar Niazi
Tractor Driver Pickup Driver Harvester (3)
Labourer Office Attendant Security Guard
Delivery Boy
1
Delivery Boy
2
CEO
CFO / CTO Usman Shabbir
CMO Maryam Ahmed
Staff Supervisor Accountant
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7.2.1 CEO
CEO being highest ranking officers and administrator will be in charge of total management
of the organization; having the vast range of responsibilities as a communicator, decision
maker, leader, manager and executor. He will also oversee day to day operations and
motivation of employees. Chief Executive Officer will develop annual planning guidelines;
will oversee the development of the corporation’s annual service, will make plans and
recommend strategies to achieve the organizations goals and objectives.
CEO will be selected from among the partners with the consent of all and will consult other
partners before making a key decision. He is liable to take affirmative consent from other
partners before execution of all major activities.
7.2.2 CFO / CTO
Usman shabbir is a partner in venture “Fresh Living”. He will act as CFO (Chief Financing
Officer) for the organization. He will deal and supervises accounting and financial matters and
will also act as chief financial spokesperson for the organization. His responsibilities also
include financial planning, financial forecasting and record keeping. He will deal with all
external parties for matters such as raising funds for the organization. CFO will report directly
to the President (CEO), will assists the Chief Operating Officer (COO) and Chief Marketing
Office (CMO) on all strategic and tactical matters related to budget management, cost benefit
analysis, forecasting needs and the securing of new funding.
The CFO will also be the bearer of the office of the CTO (Chief Technical Officer). He will
oversee the production activity. In this capacity, he will be responsible of the planning the
production process, overseeing from time to time production activity to ensure that the process
are running according to the plan. He will deal with all matters regarding the production
activity.
7.2.3 CMO
Maryam Ahmad, another partner in the venture will act as CMO (Chief Marketing
Officer). She will be the executive, responsible for marketing activities, growth and
marketing strategy. She will also share part of responsibilities of sales management,
product development, distribution channel management, marketing communication
which will include advertisement and promotion campaign, customer services and
customer relationship management. Market and customer needs will be identified by
her that will help management team to make decisions about which market or segment
to enter, and which product should be developed. She is also member of executive
team and will report to the CEO.
7.2.4 COO
Neelofar Niazi, partner in the venture is the chief operating officer (COO). She will manage
day to day activities and will monitor the daily operations of the company. She is responsible
23
for operations management; development, design and improvement of the systems, so to
create and deliver the firms product and services to customers. Her primary concern will be
operations and she will ensure that day to day activities are performed efficiently. She will
oversee the packaging and distribution of goods and services to the customers by deliver boys.
7.2.5 Delivery Boys
We will hire two delivery boys, at the start of business whose job will be to deliver orders to
the customer. The duty of delivery boy will also include packaging of the food.
1. Packing Staff
Packing staff will pay strict attention to the grade and quality of produce. Vegetables will be
cleaned and graded to comply with quality regulations. Special consideration will paid to the
cleaning, grading of produce.
2. Delivery personnel
They will handle the fruits and vegetables carefully with clean gloves to ensure the maximum
protection all times.
7.2.6 Tractor driver
The company will hire a tractor driver, who will be responsible of preparation of land for
vegetable sowing. He will also perform all activities on the farm that are related to use of
tractor.
7.2.7 Pickup driver
The pickup driver will be responsible for all the activities that involve the use of pickup van
on the farm. He will also be responsible of delivering the vegetables to the office in city for
sales as well as to the shops that will form the indirect sales channel.
7.2.8 Harvesters
Harvesters will be responsible for day to day production related activities on the farm. After
sowing process is complete, they will be responsible for the harvesting (picking) of the
vegetables from the fields. These harvesters will be permanent employees.
7.2.9 Laborers (daily basis)
As the picking process is not on daily basis and requires variable manpower, the company will
hire laborers on daily wage basis when required. This is important to mention here that the
nature of work does not require skilled workers so an ordinary labor is capable enough to
perform this work.
24
7.2.10 Account office
The accounts officers will be responsible of maintaining accounts related to the farm and
production process.
7.2.11 Staff supervisor
Staff supervisor will be a diploma holder in agriculture with relevant vegetable production
experience. He will oversee the work of sowing, watering, plant protection and harvesting of
vegetables. He will supervise the activities of all the manpower involved in the vegetable
production process.
7.2.12 Security guards
Security guards will be responsible of the security of the farm premises. They are required
because of the farm machinery that will be permanently stationed on the farm.
7.2.13 Office attendant
The duty of the office attendant will be to facilitate the farm staff in their day to day working
by doing petty work that is usually required in offices.
7.3 Payment Salaries
Sr.
no
Designation Monthly
salary
No of
Employees
Total
Monthly
Salary
Total
annual
salary
Salary Per
Production
Cycle*
1 Chief Executive
Officer
10000 1 10000 120000 60000
2 Chief Financial
Officer /CTO
10000 1 10000 120000 60000
3 Chief Marketing
Officer
10000 1 10000 120000 60000
4 Chief Operational
officer
10000 1 10000 120000 60000
5 Delivery boys 8000 2 16000 192000 48000
Total 48000 6 56000 672000 288000
*Production Cycle= 6 Months
25
7.3.1 Staff requirement
Organizational staff for production
Sr.no Designation
Monthly
Salary
No of
Employees
Total
Monthly
Salary
Total
Annual
Salary
Salary Per
Production
Cycle*
1 Tractor Driver 12000 1 12000 144000 72000
2 Pickup Driver 12000 1 12000 144000 72000
3
Harvester
(permanent) 10500 3 31500 378000 189000
4
Labourer (on daily
basis)* 5250 7 36750 441000 220500
5 Account Officer 11000 1 11000 132000 66000
6 Staff Supervisor 18000 1 18000 216000 108000
7 Security Guards 8000 2 16000 192000 96000
8 Office Attendant 5500 1 5500 66000 33000
Total: 142750 1713000 856500
7.4 Expansions
The partnership business is initially being started in which every partner has a share of 33.3%.
It is planned initially to take some loans. The partners intend not to take their profit for at least
first 2 years so that enough cash is left in the business for expansion purposes. After the
breakeven point or when most of the costs are recovered and partners agree among themselves
that the time is good to takeout cash from the venture the partners will divide profit among
themselves according to their share percentage in the business. Partners can alter the division
percentage with mutual consent and agreement if need arises.
26
7.5 Level of motivation
To properly motivate employees the management will set their pays according to prevalent
market standards. Depending on the response we get from the market and how business is
projected to do in the long run. We will also pay out bonuses and provide other facilities like a
free meal to staff members. The nature of our model has a mixture of product and service so
the motivation of staff is of extreme importance for delivery of value to end customer.
27
CCHHAAPPTTEERR 88
88.. PPRROODDUUCCTTIIOONN PPLLAANN
28
8.1 Area requirement
The above figure displays the blue print of the farm. The farm will be made on an area of 15
Acre and 3 canals. The perimeter of the farm will be fenced. An 8 foot wide road will run
along the perimeter for ease of the movement and operational purposes. In the north east side
of the farm most of the infrastructure will be built, which includes tube well, machinery shed,
seed store and canopied corridors for manure preparation, and on site office building. A guard
post will be in the center of the farm and another in the administrative block mentioned above.
Basic area required = 15 acres + 3 canals
8.2 Usages details
The basic area has to be divided in to two portions of 9 acres (A) and 6 acres (B). The
plantation of vegetables has to be done in area A initially (summer), while area B is to be
prepared for the next sowing (winter). The reason for this division is that while area A is still
in the last phase of production the season for the next crop comes in. So to save time the next
crop is planted in area B while area A prepared again for coming plantation.
The 3 canals of land are for the onsite vegetable nursery where seedling (paneri) for some
vegetables is prepared. This helps in ensuring quality of the end product and considerable cost
savings.
Road 8`
Guard Post
1. Office Building
2. Machinery Shed
3. Seed Shed
4. Organic Menure
Shed
29
8.3 Infrastructure requirements
8.3.1 Irrigation source and energy source
For proper irrigation of the planted area and to meet the water requirements, an onsite well is
required. The construction of the well for solar powered water pumping system is to be
according to following specifications:
The basic well will be dug up to 35 feet into the ground after which it is further dug using
boring technology to a depth of ≥190 feet. The purpose of this depth is to ensure that water
source lasts for a long period of time. This well/ solar powered tube well has to be
installed at a point in north east of the farm at a slightly higher place.
The well dug according to these specifications will give enough water for a 5” inch outlet
from a depth of 60 feet from 9 am to 6 pm. This source of water is sufficient for the irrigation
need of 20 acres of land.
The electricity for the irrigation system as well as for the other needs of the farm will be
provided by an additional facility with extra batteries at the solar power plant. The system
produces sufficient power to meet the need of water pumping system as well as other electric
need of the farm. The capacity of the system can be increased by installing additional
batteries. Batteries having limited life have to replaced after 3 years and the replacement is
cost is around Rs. 0.040 mil (40000).
The initial cost of setting up this solar water irrigation plant is Rs 1.6 million.
8.3.2 Seed store and organic manure shed
To store the seed and on site store has to build. The store will be on area of 35`*18` along with
canopied corridor. This will meet the storage requirements of organic procedure. The shed is
for the making organic manure by stashing different organic material there. The expenditures
regarding the construction are Rs. 0.25M (250000).
8.3.3 Water channels
Initially the water channels will be made according to the need of field conditions, but after 3
years the water channels will be cemented to reduce water losses. The channels will be formed
from north with an inclination towards south.
8.3.4 Fencing
The farm will be fenced using cement poles and barbed wire. The cost of setting up such
parameter fencing in related farms is roughly Rs. 0.3M (300000).
8.3.5 Farm Security
Two post for the security staff will be constructed, one at the entrance and one at another
convenient location in the farm to prevent the theft of vegetables from the farm. An elevated
30
security post will be constructed in the middle of the farm where roads separating each acre
intersect.
8.3.6 Administrative (office) building
The administrative building will be constructed to facilitate the onsite staff members who will
be there during working hours.
8.3.7 Machinery sheds
Machinery sheds will be constructed for the agricultural machinery and for tools and
equipment.
8.3.8 In farm roads
Eight 8 feet wide roads will be constructed in the farm along the perimeter.
Sr No. Dimensions Price (Rs)
1. Seed store and canopied corridor (35` * 18`) 250,000
2. Machinery Shed (72` * 20`) 150000
3. Farm Security (6` * 6`) 30,000
4. Office Facility (35` * 18`) 350000
5. Cost of Road 8` 40,000
6. Fencing 300,000
7. Tube well and solar pumping 1,600,000
8.4 Machinery requirements
8.4.1 1 Tractor (Fiat 240)
Tractor is required for the preparation of the land and for other operations at the farm.
8.4.2 1 Rota Vator (Tractor Mounted)
To cut, pulverize and mix the previous crop debris with the soil.
8.4.3 1 cultivator (Tractor Mounted)
To prepare rows up 9-13 inch apart.
31
8.4.4 1 Seed Drill (Tractor Mounted)
To pore, vegetable seeds from various holes in seed box for sowing.
8.4.5 Ridger
To make ridges, at 45cm – 75 cm apart for sowing of vegetables.
8.4.6 1 Mould Bold Plough
To make shuffle the soil.
8.4.7 1 Chopper
To chop grass and other plant waste to use in organic fertilizer.
8.4.8 Pickup van-Suzuki (to be used for transportation purposes)
To deliver the vegetables to office located in city and, to make supply rounds to distributors
for delivery of vegetables.
8.4.9 Knapsack hand sprayer-steel body (To be used for plant protection
purposes)
Shoulder mounted sprayer to spray plant protection on plants, has capacity of holding 12-16
liters of water.
8.5 Average product of various vegetables farmed organically
8.5.1 Scale
The average product in table below is based upon product in a normal 4 month season
(exceptions mentioned specially in table) in an area of 272 sqft (1 Marla).
32
8.5.2 Summer vegetables
Summer vegetables are normally planted in month of February. The list of vegetable is as
follows:
Sr. no Vegetable name Time period Quantity Pickings
1. Bitter gourd 4 months 50 Kg
2. Sponge gourd 4 months 60 Kg
3. Okra 7 months 9 Kg per picking 7 picking / month
4. Egg plant 4 months 50 Kg
5. Green chilies 6 months 20Kg per picking 7 Picking per month
6. Onions 4 months 35 Kg
7. Garlic 4 months 35 Kg
8. Tomato 4 months 55 Kg
9. Long gourd 4 months 55-60 Kg
10. Cucumber 4 months 50 Kg
11. Potatoes 6 months 25 Kg
8.5.3 Winter Vegetables
Winter vegetables are normally planted in the months of October till December. The list of
vegetables is as follows:
Sr. no Vegetable name Time Period Quantity Pickings
1. Turnip 4 months 55 Kg
2. Radish 4 months 55 Kg
3. Carrot 4 months 60 Kg
4. Spinach 4 months 36 Kg 6 picking per month
5. Coriander 4 months 36 Kg 6 picking per month
6. Peas 4 months 20 Kg
7. Beat root 4 months 55 Kg
8. Salad 4 months 36 Kg 6 picking per month
9. Maithi 4 months 36 Kg 6 picking per month
10. Podina 4 months 36 Kg 6 pickings per month
33
8.6 Production Process
The production process starts in the month of January for summer vegetables, and in the
months of September/October for winter vegetables. Various steps in the process are
explained as follows:
8.6.1 Soil preparation
These steps encompass two activities. The first is tilling of soil which is done with the help of
cultivator. The second step is putting manure in the tilled soil which is left for at least a month
before vegetable seeds are sowed in the prepared land. Before the seeds are sowed land is
prepared for sowing using ridger which makes ridges 45-75 cm apart. This space between the
plants is important for their growth. The activity of preparation of land takes 2h of tractor
work/acre.
8.6.2 Sowing
For summer vegetables sowing is done in the month of February and for winter vegetables it is
done in the month of October. This is done with the help of tractor mounted seed drill and
takes 1 ½ to 2 hours of time per acre.
8.6.3 Water application
For summer vegetables water has to be applied every 7-10 days during the whole cycle of
production. For winter vegetables water is applied every 15 days during the cycle. Water
application takes 2 hours per acre.
8.6.4 Plant protection
Protection medications are sprayed on plants 8-10 times for summer vegetables. For winter
vegetables 4 sprays are required. It takes roughly 0.5 hours to spray medication in 1 acre.
8.6.5 Harvesting
Harvesting of vegetables starts 1 ½ month after sowing. On normal days it takes about ½ to 1
hour for harvesting activity per acre for one person.
8.6.6 Grading/Washing/packaging
In this step the harvested vegetables will be washed with fresh water. Harmed/degraded
vegetables will also be removed from the harvested vegetables. Vegetables for sale through
indirect channel (shops) will be packed on the farm before transportation to the city office.
34
8.6.7 Transport
Vegetables will be transported to the city office. The pickup driver will deliver the vegetables
on the shops and will leave the vegetables in office for home delivery and cooking as required.
8.6.8 Production and Delivery Process
Soil Tilling Menuring Soil Preparation Sowing Watering
Plant Protection Harvesting Washing Delivery Packaging
Shops / Home Delivery
35
8.6.9 Total Fixed Asset
Cost of Farm Machinery
Sr.No Machine No of
units
Price Total
cost
Depreciation
Period (yrs)
Yearly
depreciation
Monthly
depreciation
1 Tractor 1 600000 600000 7 85714.28571 7142.857143
2 Rota Vator 1 32000 32000 7 4571.428571 380.952381
3 Cultivator 2 17000 34000 7 4857.142857 404.7619048
4 Chisel Plough 1 18000 18000 7 2571.428571 214.2857143
5 Seed Drill 1 55000 55000 7 7857.142857 654.7619048
6 Mould Bold
Plough 1 19000 19000 7 2714.285714 226.1904762
Ridger 1 35000 35000 7 5000 416.6666667
7 Chopper 1 45000 45000 7 6428.571429 535.7142857
8 Pickup Van 1 650000 650000 7 92857.14286 7738.095238
9 Knapsack Hand
Sprayer 2 2500 5000 7 714.2857143 59.52380952
10 Solar powered
Water Pump 1 1200000 1200000 7 171428.5714 14285.71429
11 Additional
Batteries 2 40000 80000 7 11428.57143 952.3809524
Sub Total: 15 2773000 396142.8571 33011.90476
depreciation formula Straight line
Cost Of fixed Infrastructure
Sr.No Facility No of
units
Price Total cost Depreciation
Period
Yearly
depreciation
Monthly
depreciation
1 Water Well 1 400000 400000 7 57142.85714 4761.904762
2
Seed Store and
Manure shed
(35*18) 1 250000 250000 7 35714.28571 2976.190476
3 Fencing 1 300000 300000 7 42857.14286 3571.428571
4 Farm Security 2 30000 60000 7 8571.428571 714.2857143
5 Office Facility 1 350000 350000 7 50000 4166.666667
6 Machinery
Shed 1 150000 150000 7 21428.57143 1785.714286
7 In Farm Road 1 40000 40000 7 5714.285714 476.1904762
Sub Total: 1550000 221428.5714 18452.38095
Total Fixed Asset Investment: 4323000
Total Depreciation (yearly) 617571.4286
Total Depreciation (monthly) 51464.28571
working capital 1677000
total investment 5115000
investment per person 1500000
Loan from Bank 615000
36
CCHHAAPPTTEERR 99
99.. FFIINNAANNCCIIAALL PPLLAANN
37
9.1 Assumptions
For the purpose of making financial projection several assumptions are taken which are as
follows:
1. The initial investment is expected to be Rs. 5.115 million out of which Rs. 4.5 million will
be provided by the owners and 0.615 million will be taken as loan against some personal
property of the owners.
2. Out of the initial investment, 4.232 million will be spent on building the farm
infrastructure and acquiring agricultural machinery and rest will be kept as working capital
for the smooth functioning of the organization.
3. It is assumed that 0.615 million taken as loan from bank will be used to pay advance rent
of 123 canals of farming area. The interest rate on the loan is taken from ZTBL i.e. 12.5%.
4. The 10% growth rate is calculated on the basis of weighted probability distribution and
three possible scenarios are shown in exhibit.
5. Vegetable industry is highly fragmented and frequent rate fluctuations are common, that
the rates that are calculated are best possible estimations under the given circumstances.
6. The price of the product is set on the basis of the price taken from Kohsar market + 10%
addition is made in that price.
7. It’s assumed that an average house hold comprises of 6 people, and the same method has
been used in chain ratio and ATAR analysis earlier in the document to identify the number
of customer households.
8. It is assumed that for summer season, the average consumption of vegetables in a
household of 6 is 58 kg per month (for detailed description consult the exhibit). And we
are pricing that package for Rs. 4818.
9. It is assumed that for winter the average consumption of vegetables in a household of 6
will be 42 kg per month. And we are pricing that package for Rs. 3465.
10. Financial calculations are based on assumption that households not individual will
purchase vegetables. For ease of revenue calculation a consumption package is designed
and the price of that consumption package is calculated. This price is used to get the sales
revenue. (see exhibit)
11. For financial projections, we have assumed that out of all target customers in initial month
are 8 household customers and 13 customers who will purchase from shops. These
customers will reach to 52 and 135 respectively by the end of first year. From this point
onwards, we have assumed that our customers will grow by 10% in subsequent years.
12. For ease in setting the price it is assumed that there are 2 production cycles in a year and
each cycle has an average yield of vegetables.
38
13. A consolidated COGS is calculated which comprises cost of production of vegetables,
organizational cost per kg, of production per cycle (organizational cost per cycle/ avg
production per cycle), promotional expense per kg, packaging expense per kg. COGS are
used in contingency plan, in case our products are not sold as expected.
14. The initial outflow for the plantation cost is very small and the cycle plantation cost is
spanned over the period of six months. So for the ease of calculation, we have taken cost
of goods sold directly at the beginning of the sale cycle.
15. The method of depreciation is assumed to be 7 years straight line.
16. The marketing expense amount are very small and will be outlaid when we start selling
because of it very minuet nature, we have taken average monthly expense for
advertisement.
17. An average packing cost of Rs. 7/ kg is used for the purpose of financial calculations. The
package material is easily available so it does not require keeping it in inventory.
18. We assumed that the short term financial needs will be met by an angel investor who will
provide us short term loans when we require them. For the purpose of smooth running of
the business, we have assumed that the business will have 100,000 of cash at the beginning
of each month. The rate of this short term loan will be 12.5%.
19. An average cost of Rs.0.5/kg for advertising is used for the purpose of financial
calculations.
20. For the purpose of financial calculations the COGS is increased 10 % till year 5 however
the price of vegetable package will remain fixed for this period.
21. We have assumed that it will take us five days to collect the payment from shops so our
account receivable will be five days worth of sale of each month.
22. The wages and the commissions will be paid immediately so we will have any accruals
regarding both of them.
23. Since our business is of such a nature that we cannot keep our items in inventory. In
contingency plan, we have calculated a price that covers our all cost but in the financial
plan we have not incorporated that part because of ambiguity about what the actual
situation will be.
24. For pre-money valuation, though the growth rate is 10% from year 2 onwards, we have
assumed that the investors required rate of return will change from 35% to 40% after the
break-even. Hence, we have taken year 4 as the steeping stone year because in that year,
the rate will change.
25. For the purpose of ratio calculations, wherever applicable we have used average balances
rather than taking end of the year data except year 1.
39
26. For the purpose of valuation of the venture, we have done two valuations i.e. first
valuation is on the basis of constant growth rate which we assumed that we will reach in
the beginning of year 2, and the second valuation is based on the assumption that after the
business will reach its break-even, the investor required rate of return will fall down from
35% to 20% and will remain so indefinitely.
27. For the yearly projections after year 2, percentage of sales method is used.
28. In first year’s net income calculations, the tax applied to different months is according to
the proportion of income that month contributed to total taxable income.
29. Just to show that if we are not taking loan and instead have provided an investor to buy the
equity share, the last exhibit shows the equity share owners have to give out to the new
investors for short and long term loans.
30. Detailed financial statements are shown in the exhibits.
9.2 Contingency Plan
In every business, there are several factors that can affect the performance of the business. To
cater to these lapses, contingency measures have to be thought to reduce the losses to a
minimum. Vegetables are perishable and cannot be stored for long period of time. Moreover,
the production of vegetables is variable and it cannot be said that a fixed amount will be
produced on daily basis. To cater these contingencies, we have calculated separate COGS that
comprises of cost of production of vegetables, organizational cost per kg of production per
cycle (organizational cost per 6 month cycle/ avg production per cycle), promotional expense
per kg, packaging expense per kg. This COGS gives us a reference price that covers roughly
all the cost incurred in production of vegetables. In case our products are not sold in our target
segment or in days where it may happen that we have much in excess production than
required, we will sell vegetables at this price or at a price close to reference price to cover the
basic costs, and prevent business from shutdown.
9.3 Exit strategy
In case the business fails to perform as expected, the management intends to plant an
inorganic vegetables in the land till the tenure for which land is leased.
I
1100.. EEXXHHIIBBIITT((SS))
10.1 Fresh Living – Organic food, Business Model
Selling
Website
Direct sales through website with
customization Options.
Business to
Business
Directly selling to
hospitals and
restaurants.
Business to
Customer
Customer(s),
patients, House
Holds, old people.
Distribution
Network
Using existing
vegetable and food
sellers to push the
product.
Self Production
1. Cost of Acquiring Land
a. Purchasing.
b. Rent/lease.
2. Cost of Production
a. Actual Production.
b. Transportation and Delivery.
Customer(s)
Patient(s) Household(s)
Senior Citizen(s)
II
10.2 Market Comparison
III
10.3 Cost of Land
cost of Land
Lease price per canal for 5 years Land to be Leased Total
5000 123 Canals 615000
IV
10.4 Cycle Plantation Cost
No. Preparation of Soil / Per acre / 5 Month Organic (Rs) In organic (Rs)
1 Disk Plough 800 800
2 2 Ploughings and Planking 1200 1200
3 Rota Veter 1000 1000
4 Ridger 700 700
5 Bed Shopper 300 300
6 Ditcher 200 200
Sub Total: 4200 4200
No. Vegetable Plantation Organic (Rs) In organic (Rs)
1 Seed 1200 1200
2 Labour 1000 1000
3 Irrigation 800 800
4 Plant Protection* 400 17500
5 Fertilizer* 4000 8600
6 Transportation (300 * 15* 5) 22749.75 22749.75
Sub Total: 30149.75 51849.75
Total per Acre Cost of vegetable Plantation: 34349.75 56049.75
Total per Marla Cost of Vegetable Plantation:* 214.6859375 350.3109375
V
*
Plant Protection Inorganic: (350 *10 *5)= 17500
Fertilizer Inorganic: (4100 +3500 +1000)= 8600
Cost per cycle of plantation (Cost of Land)
1 Rent of Land/ Canal
Rent of
Land/Acre
(Acre=8
Canal)
Tenure of lease
(years )
Cost of
Land
per
Year
No of
plantations
cycles per
year
Cost Per
Plantation
cycle
5000 40000 5 8000 2 4000
2 No of Marla in an Acre
Cost of
Organic
Plantation /
Acre
Cost of Organic production/
Marla
Cost Of
Inorganic
Production/
Acre
Cost of
Inorganic
Productio
n/Marla
160 34350 214.6875 56050 350.3125
Note: The Cost of per Acre plantation includes Cost of Preparat ion of Land for Plantation per Cycle and Cost of Plantation;
and its Protection per Cycle.
VI
10.5 Production Cost per Kg (Summer Vegetables)
Summer Vegetables
Sr.
No
Vegetable
name
Production
Time
(months )
Pickings
per
month
Yield
per
picking
(Kg)
Production
per Marla
(Kg)
Plantation
+ land
Cost/Marla
per cycle
Avg
Production
Area(Marla)
Expected
Yield
(kg) Per Kg Cost
avg purchase per
household per
month
COGS (for
accounts)
1 Onion 4 35 214.6875 185.6365714 6497.28 6.133928571 6 36.803571
2 Potato 6 25 214.6875 259.8912 6497.28 8.5875 6 51.525
3 Tomato 4 55 214.6875 118.1323636 6497.28 3.903409091 6 23.420455
4 Cucumber 4 50 214.6875 129.9456 6497.28 4.29375 6 25.7625
5 Lady Finger 7 7 9 441 214.6875 14.73306122 6497.28 0.486819728 6 2.9209184
6 Bitter
Gourd 4 50 214.6875 129.9456 6497.28 4.29375 6 25.7625
7 Brinjal 4 50 214.6875 129.9456 6497.28 4.29375 6 25.7625
8 Garlic
(thom) 4 35 214.6875 92.81828571 3248.64 6.133928571 3 18.401786
9 Sponge
Gourd 4 60 214.6875 108.288 6497.28 3.578125 6 21.46875
10 Long Gourd 4 55 214.6875 118.1323636 6497.28 3.903409091 6 23.420455
11 Green
Chillies 6 7 20 840 214.6875 1.289142857 1082.88 0.255580357 1 0.2555804
Total cycle Yield: 62807.04 58 255.50401
VII
10.6 Production Cost per Kg (Winter Vegetables)
Winter Vegetables
Sr. No
Vegetable Name
Production Time(months)
Pickings Per
Month Yield per
Picking(Kg)
Production per Marla
(Kg)
plantation + land
Cost/Marla per cycle
Avg Production
Area(Marla) Expected Yield (kg) Per Kg Cost
avg purchase per household
per month COGS (for accounts)
1 Turnips 4 55 214.6875 118.1323636 6497.28 3.903409091 6 23.42045455
2 Radish 4 55 214.6875 118.1323636 6497.28 3.903409091 6 23.42045455
3 Carrot 4 60 214.6875 108.288 6497.28 3.578125 6 21.46875
4 Spinach 4 6 36 864 214.6875 7.52 6497.28 0.248480903 6 1.490885417
5 Coriander 4 6 36 864 214.6875 1.253333333 1082.88 0.248480903 1 0.248480903
6 Pea 4 20 214.6875 324.864 6497.28 10.734375 6 64.40625
7 Salad 4 6 36 864 214.6875 2.506666667 2165.76 0.248480903 2 0.496961806
8 Maithi 4 6 36 864 214.6875 7.52 6497.28 0.248480903 6 1.490885417
9 Beat root 4 55 214.6875 59.06618182 3248.64 3.903409091 3 11.71022727
Total cycle Yield: 45480.96 36 148.1533499
VIII
10.7 Complete Cost of Vegetables
Summer Vegetables
Sr
.
N
o
Vegetable
name
Production
Time
(months )
Pickings
per
month
Yield
per
pickin
g (Kg)
Producti
on per
Marla
(Kg)
Plantation +
land
Cost/Marla
per cycle
Per Kg
Cost
product
ion
Cycle salary
Cost of
Organizatio
n of Per Kg
yield
Packing
cost (per
kg)
Per Kg
Cost
Promot
ion
Total
cost avg
purchase
per
househol
d per
month
cost of
packag
e
(COGS
)
Price Pack
age
price
1 Onion
4 35 214.6875
6.13392
857 19.17778644 7 0.5 32.812 6 196.87 61.6 369.6
2 Potato 6 25 214.6875 8.5875 19.17778644 7 0.5 35.265 6 211.592 59.4 356.4
3 Tomato
4 55 214.6875
3.90340
909 19.17778644 7 0.5 30.581 6 183.487 66 396
4 Cucumber 4 50 214.6875 4.29375 19.17778644 7 0.5 30.972 6 185.829 88 528
5
Lady
Finger 7 7 9 441 214.6875
0.48681
973 19.17778644 7 0.5 27.165 6 162.988 88 528
6
Bitter
Gourd 4 50 214.6875 4.29375 19.17778644 7 0.5 30.972 6 185.829 88 528
7 Brinjal 4 50 214.6875 4.29375 19.17778644 7 0.5 30.972 6 185.829 66 396
8
Garlic
(thom) 4 35 214.6875
6.13392
857 19.17778644 7 0.5 32.812 3 98.4351 198 594
9
Sponge
Gourd 4 60 214.6875
3.57812
5 19.17778644 7 0.5 30.256 6 181.535 88 528
10
Long
Gourd 4 55 214.6875
3.90340
909 19.17778644 7 0.5 30.581 6 183.487 88 528
11
Green
Chillies 6 7 20 840 214.6875
0.25558
036 19.17778644 7 0.5 26.933 1 26.9334 66 66
Total cycle Yield: 339.32 58 1802.82 87 4818
IX
Winter Vegetables
S
r.
N
o
Vegeta
ble
Name
Productio
n
Time(mon
ths)
Pickin
gs Per
Mont
h
Yield per
Picking(
Kg)
Producti
on per
Marla
(Kg)
plantati
on +
land
Cost/Ma
rla per
cycle
Per Kg
Cost
Cycle
salary
Cost of
Organizat
ion of Per
Kg yield
Packi
ng
cost
(per
kg)
Per Kg
Cost
Promoti
on
Tota
l
cost avg
purcha
se per
househ
old per
month
cost
of
packa
ge
(COG
S)
Pric
e
Packa
ge
price
1 Turnips
4 55 214.6875
3.90340
909
26.483609
84 7 0.5
37.8
87 6
227.3
22 66 396
2 Radish
4 55 214.6875
3.90340
909
26.483609
84 7 0.5
37.8
87 6
227.3
22 44 264
3 Carrot
4 60 214.6875
3.57812
5
26.483609
84 7 0.5
37.5
62 6
225.3
7 99 594
4 Spinach
4 6 36 864 214.6875
0.24848
09
26.483609
84 7 0.5
34.2
32 6
205.3
93 44 264
5 Corian
der 4 6 36 864 214.6875
0.24848
09
26.483609
84 7 0.5
34.2
32 1
34.23
21 77 77
6 Pea
4 20 214.6875
10.7343
75
26.483609
84 7 0.5
44.7
18 6
268.3
08 220 1320
7 Salad 4 6 36 864 214.6875
0.24848
09
26.483609
84 7 0.5
34.2
32 2
68.46
42 77 154
8 Maithi 4 6 36 864 214.6875
0.24848
09
26.483609
84 7 0.5
34.2
32 6
205.3
93 44 264
9 Beat
root 4 55 214.6875
3.90340
909
26.483609
84 7 0.5
37.8
87 3
113.6
61 44 132
Total cycle Yield:
332.
87 42
1575.
46
79.4
44 3465
X
Cycle salary cost of Organization on Avg per Kg Yield (Summer)
Cycle salary cost of
Organization/Total Yield Cycle= 19.177786
Cycle salary cost of Organization on Avg per Kg Yield (Winter)
Cycle salary cost of
Organization/Total Yield Cycle= 26.48361
XI
10.8 Income Statement
10.8.1 Monthly
XII
10.8.2 Yearly
XIII
10.9 Statement of Retained Earnings
Projected statement of retained earnings
Time 0 Year 1 Year 2 Year 3 Year 4 Year 5
Beginning balance 0 0 78246 1860269.496 3537726.95 5469488.377
Net income current year 0 78246 1782023.496 1677457.455 1931761.43 2211495.793
subtotal 0 78246 1860269.496 3537726.951 5469488.38 7680984.17
owners take 0 0 0 0 0 0
ending balance 0 78246 1860269.496 3537726.951 5469488.38 7680984.17
Owners Equity 4500000 4500000 4500000 4500000 4500000 4500000
Total Equity 4500000 4578246 6360269.496 8037726.951 9969488.38 12180984.17
XIV
10.11 Sales Schedule
XV
10.12 Wages and Commission Schedule
XVI
10.13 Cash Budget
XVII
10.14 Balance Sheet
10.14.1 Monthly
XVIII
10.14.2 Yearly
Projected Balance sheet
Beginning
Year 2
Ending
Year 2
Beginning
Year 3
Ending
Year 3
Beginning
Year 4
Ending
Year 4
Beginning
Year 5
Ending
Year 5
Current assets
Cash 1100606 3589206 3589206 5993033 5993033 8649744 8649744 11533378
Accounts receivable 107993 141984 141984 156182 156182 171801 171801 188981
Total current assets 1208599 3731190 3731190 6149215 6149215 8821545 8821545 11722359
Prepaid Rent 440750 317750 317750 194750 194750 71750 71750 0
machinery 2773000 2773000 2773000 2773000 2773000 2773000 2773000 2773000
fixed assets 1550000 1550000 1550000 1550000 1550000 1550000 1550000 1550000
Accumulated depreciation 779103 1396671 1396671 2014239 2014239 2631807 2631807 3249375
Net fixed assets 3984647 3244079 3244079 2503511 2503511 1762943 1762943 1073625
Total assets 5193246 6975269 6975269 8652726 8652726 10584488 10584488 12795984
Current liabilities
Accounts payable
Accrued wages and commissions payable
Loan 615000 615000 615000 615000 615000 615000 615000 615000
Total liabilities 615000 615000 615000 615000 615000 615000 615000 615000
Owners’ equity 4500000 4500000 4500000 4500000 4500000 4500000 4500000 4500000
Retained Earnings 78246 1860269 1860269 3537726 3537726 5469488 5469488 7680984
Total equities 4578246 6360269 6360269 8037726 8037726 9969488 9969488 12180984
Total equities & liabilities 5193246 6975269 6975269 8652726 8652726 10584488 10584488 12795984
XIX
10.15 Cash Flow Statements
10.15.1 Monthly
XX
10.15.2 Yearly
Projected Cash Flow Statement
Year 2 Year 3 Year 4 Year 5
Cash flows (CF) from activities
Net income 1782023.496 1677457.455 1931761.426 2211495.793
Adjustments to net income for CF
Depreciation expense 617568 617568 617568 617568
Change in Accounts Receivable -33991.425 -14198.4425 -15618.28675 -17180.1154
Rent paid
(+)Change in prepaid rent 123000 123000 123000 71750
Change in Accounts Payable
Change in accrued liabilities
Total adjustments 2488600.071 2403827.013 2656711.139 2883633.678
Net cash flow from operations
Cash flows from investing 0 0 0 0
Capital expenditures (CAPEX) 0 0 0 0
Net cash used by investments 0 0 0 0
Cash flows from financing 0 0 0 0
Equity issues 0 0 0 0
short term loan 0 0 0 0
Net cash flows from financing 0 0 0 0
Net change in cash 2488600.071 2403827.013 2656711.139 2883633.678
Beginning cash balance 1100606 3589206.071 5993033.084 8649744.223
Ending cash balance 3589206.071 5993033.084 8649744.223 11533377.9
XXI
10.16 Expected value of growth
10.17 Sustainable Growth
ECONOMIC SCENARIO
PROBABILITY OF
OCCURRENCE × SALES GROWTH
RATE = COMPONENTS TO SUM %
Rapid growth 0.25 × 15% = 3.75
Average growth 0.5 × 10% = 5
Slow growth 0.25 × 5% = 1.25
1 Expected value (Sum) = 10
Sustainable growth
Year 1 Year 2 Year 3 Year 4 Year 5
Ending Equity 4578245.44 6528517.028 8760374.5 11301976 14184295.7
Beginning Equity 3885918.4 4578245.44 6528517 8760374.5 11301975.9
Retention rate 1 1 1 1 1
Sustainable growth(g)% 15.12210407 29.87311788 25.476736 22.488116 20.3204999
XXII
10.18 Break-even Time
10.19 Survival Revenue
Breakeven time
Outflow inflows Net cash flow Breakeven(Years)
year 1.5 -5362253.95 1347862.57 -4014391.38
3.134734272 year 2.5 -4014391.38 2488600 -1525791.38
year 3.5 -1525791.38 2403827 878035.62
Survival Revenue
COGS VCRR Salaries
Office
Expense Advertising
transportation
& delivery Packaging
Interest
Expense CFC
Survival
Revenue EBDAT
November 0 0 16000 0 0 0 0 6406 22406 22406 0
December 0 0 28000 0 0 0 0 6406 34406 34406 0
January 0 0 28000 0 0 0 0 6406 34406 34406 0
February 0 0 77500 10,000 0 0 0 6406 93906 93906 0
March 5110 0.053030303 111000 10,000 1160 4500 8120 6406 141186 149092.42 0
Month 1 10220 0.053030303 198750 25000 1160 9000 16240 6406 266776.053 281715.51 0
Month 2 14052.5 0.053030303 198750 25000 1595 9000 22330 6406 277133.553 292653.03 0
Month 3 17885 0.053030303 198750 25000 2030 9000 28420 6406 287491.053 303590.55 0
XXIII
10.20 Financial ratios
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA (for calculations) 1083797.27 2959472.4 3267719.61 3606791.57 3979770.72
Ratios
Interest Coverage = EBITDA/Interest 8.48704264 38.49720156 42.50692172 46.91761389 51.7693753
Gross Profit Margin= Net Sales - Cost of Goods Sold /
Net Sales 95.30122895 95.12676566 95.12676566 95.12676566 95.1267657
Net Profit Margin= Net Income / Net Sales 1.379144239 17.43171924 14.91714206 15.61690311 16.2530495
Total-Debt-to-Total-Assets Ratio = Average Total
Debt/Average Total Assets 0.118423 0.1010805 0.07870491 0.0159846 0.013152
Return on Assets = Net Income/Average Total Assets 1.5066895 29.289087 21.4673406 20.083588 18.917461
Return on Equity=Net Income/Average Owners' Equity 1.7090845 32.582549 23.3012647 21.455417 19.967934
Ratios January February March month 1 month 2 month 3 month 4 month 5 month 6
Current Ratio = Current
Assets/ Current Liabilities 48.124769 6.2250279 3.4708387 2.3264807 1.9795643 1.993834 2.382138 3.74456 37.5571
Quick Ratio = Current
Assets - Inventories
Current Liabilities 48.124769 6.2250279 3.4708387 2.3264807 1.9795643 1.993834 2.382138 3.74456 37.5571
XXIV
10.21 Venture Valuation
Variables
Growth Rate (g)% 10
Required rate of investors for first 3 years % 35
Required rate of investors for after breakeven % 20
Cash Flows Year 1 1347862
Cash Flows Year 2 2488600
Cash Flows Year 3 2403827
Cash Flows Year 4 2656711
Cash Flows Year 5 2883633
stepping stone year 4
Pre Money Valuation (1)
Time 0 Yr 1 Yr2
Annual Cash Flow 1347862 2488600
Terminal Value 9954400
Total Flow to Discount 11302262
Present Value 8,372,045.93
Pre Money Valuation (2)
Time 0 Yr 1 Yr2 Yr 3 Yr 4 Yr 5
Annual Cash Flow 1347862 2488600 2403827 2656711 2883633
Terminal Value 28836330
Total Flow to Discount 1347862 2488600 2403827 31493041
Present Value 12,822,473.82
XXV
10.22 In case of Equity investment
initial investments of owners 4500000
expected income in year 5 2200000
Investor willing to pay 615000 350000
Return on every rupee of investment in industry (assumption) 0.2
price of venture at the end of five years 11000000
investor's required rate of return 0.35 0.2
number of shares issued to owners at the beginning of the venture 4500000
Acquired percentage by the investor 0.250698233 0.038182
new shares to be issued 1505591.07 241616.3
total outstanding shares after first investor 6005591.07 6328046
share Price 0.408477449 0.387663
Pre-money valuation 1838148.522 2359483
Post-money valuation 2453148.522 2453149
present value of the future value 2453148.522
