Golden FlaxProcessing Ltd.

Business PlanBusiness Plan

Prepared by:Prepared by:Oksana Akhova, Éric Lefol and Sarah SchusterOksana Akhova, Éric Lefol and Sarah Schuster

April 05, 2007April 05, 2007

Site PlanSite Plan

Product Product descriptiondescription

Golden Flax: toasted, ready to eat, unique “nutty” flavour, healthy (Omega-3, Fibres)

Toasting at “InfraReady” : unique process with high temperature for a short time

Packaging: Vacuum packed in aluminized plastic to keep flax air-tight and avoid exposition to light

Operation PlanOperation Plan

Organizational StructureOrganizational Structure Average work day, and Average work day, and activitiesactivities Cash Conversion CycleCash Conversion Cycle Capital Budget ProjectionCapital Budget Projection

Organizational StructureOrganizational Structure

Owner/Manager Owner

Administrative Assistant

Operation Plan:

Average Work Day and Average Work Day and Yearly Schedule of ActivitiesYearly Schedule of Activities

Winter Winter vs.vs. Summer commitment Summer commitment

Monthly activities include Monthly activities include Trade Shows and Taxes! Trade Shows and Taxes!

Operation Plan:

ActivitiesActivities$ 0.20 $ 0.14 $ 0.55

$ 1.43

$ 0.01

$ 0.14

$ 0.04

Operation Plan:

Cash Conversion CycleCash Conversion Cycle

Average Days Average Days Inventory Inventory

180 days180 days

Average Collection Average Collection Period Period

30 days30 days

Average Days Average Days PayablesPayables

30 days30 daysCCC = 30 + 180 – 30 = 180 daysCCC = 30 + 180 – 30 = 180 days

ReceiveReceivedd

3030 181800

210 210 daysdays

Account Account ReceivablReceivabl

ee

AccounAccount t

PayablPayablee Packaged Toasted Seed in InventoryPackaged Toasted Seed in Inventory

Operation Plan:

Capital Budget projectionCapital Budget projection20072007 20082008 20092009 20102010 20112011

Capital BudgetCapital Budget          

CashCash $ 11,443 $ 11,443 $ 7,158 $ 7,158 $ 16,255 $ 16,255 $ 34,763 $ 34,763 $ 60,503 $ 60,503

Accounts Receivable Accounts Receivable $ 877$ 877 $ 3,354 $ 3,354 $ 6,842 $ 6,842 $ 10,469 $ 10,469 $ 14,238 $ 14,238

InventoryInventory $ 4,994 $ 4,994 $ 18,456 $ 18,456 $ 34,600 $ 34,600 $ 51,372 $ 51,372 $ 68,327 $ 68,327

Accounts Payable Accounts Payable $ (1,081)$ (1,081) $ (3,030)$ (3,030) $ (4,910)$ (4,910) $ (7,530)$ (7,530) $ (10,465) $ (10,465)

LandLand $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

EquipmentEquipment $ 1,900 $ 1,900 $ 1,710 $ 1,710 $ 1,539 $ 1,539 $ 1,385 $ 1,385 $ 1,247 $ 1,247

Total Owner EquityTotal Owner Equity $ 18,133 $ 18,133 $ 27,650 $ 27,650 $ 54,327$ 54,327 $ 90,459$ 90,459 $ 133,850$ 133,850

Cost of Goods SoldCost of Goods Sold $ 4,648 $ 4,648 $ 17,027 $ 17,027 $ 38,421 $ 38,421 $ 62,221 $ 62,221 $ 86,614 $ 86,614

ExpensesExpenses

Administration salaries Administration salaries $ 6,055 $ 6,055 $ 10,459$ 10,459 $ 9,977 $ 9,977 $ 17,593$ 17,593 $ 28,754 $ 28,754

Marketing expensesMarketing expenses $ 1,833 $ 1,833 $ 2,957 $ 2,957 $ 5,212$ 5,212 $ 7,411 $ 7,411 $ 9,648 $ 9,648

Total Adm. & Mark. Exp.Total Adm. & Mark. Exp. $ 7,888 $ 7,888 $ 13,416 $ 13,416 $ 15,189$ 15,189 $ 25,004$ 25,004 $ 38,402$ 38,402

Operation Plan:

SummarySummary Look into lowering Packaging CostLook into lowering Packaging Cost Lower Average Day in InventoryLower Average Day in Inventory Keep good ratio between Owners’ Keep good ratio between Owners’

Equity and Expenses & CostsEquity and Expenses & Costs

Human ResourcesHuman Resources

Shareholders’ agreementShareholders’ agreement 50/50 net profits50/50 net profits Building arrangementsBuilding arrangements

Wages for 2006Wages for 2006WageWage EIEI CPPCPP WCCWCC TotalTotal

LabourLabour 823823 2222 4141 4242 928928ManageManage

rr4,4844,484 8787 222222 260260 5,0535,053

SecretarSecretaryy

1,0201,020 2020 5050 5959 1,1501,150

TotalTotal 6,3276,327 129129 313313 361361 $ $ 7,1317,131

Marketing PlanMarketing Plan The Marketing Mix The Marketing Mix

(Product, Pricing, Promotion, Place)(Product, Pricing, Promotion, Place)

Segmentation, Targeting, and Segmentation, Targeting, and PositioningPositioning

SummarySummary

The Marketing Mix: The Marketing Mix: ProductProduct Golden Toasted FlaxGolden Toasted Flax

• Omega-3 Fatty AcidsOmega-3 Fatty Acids• FibresFibres

ZPP Image and ServiceZPP Image and Service• Sold only in Health Food StoresSold only in Health Food Stores• Quality control (Colour, Toasting)Quality control (Colour, Toasting)• Naturally grownNaturally grown

Marketing Plan:

The Marketing Mix: The Marketing Mix: PricingPricing The Competition in SKThe Competition in SK

• CanMar Products Ltd.CanMar Products Ltd.• Northern Quinoa CorporationNorthern Quinoa Corporation

Pricing StrategyPricing Strategy• Parity Pricing Parity Pricing • Price TakerPrice Taker

Marketing Plan:

The Marketing Mix: The Marketing Mix: ProPromotionmotion

From our Farm to your HomeFrom our Farm to your Home Selling & AdvertisingSelling & Advertising

• Health BenefitsHealth Benefits• DifferentiationDifferentiation• Tools (trade shows, web-site, direct Tools (trade shows, web-site, direct

advertising, pamphlets)advertising, pamphlets)

Marketing Plan:

The Marketing Mix: The Marketing Mix: PPlacelace

Health Food Stores in Health Food Stores in SaskatchewanSaskatchewan

Health Food Stores in the PrairiesHealth Food Stores in the Prairies NetworkNetwork

Marketing Plan:

Segmentation, Targeting, and PositioningSegmentation, Targeting, and PositioningMarketing Plan:

SummarySummaryBased on:Based on: STRENGTHSSTRENGTHS in reputation, enthusiasm, and healthy product claims, in reputation, enthusiasm, and healthy product claims, WEAKNESSESWEAKNESSES in competitive pressure, risk associated with outsourcing, in competitive pressure, risk associated with outsourcing,

limited production capabilities, limited advertising of product and health limited production capabilities, limited advertising of product and health benefits,benefits,

OPORTUNITIESOPORTUNITIES in higher margin selling to health food stores, and in higher margin selling to health food stores, and innovation of diversification,innovation of diversification,

THREATSTHREATS in existing and new competition, and other available sources of in existing and new competition, and other available sources of Omega 3Omega 3

ZPP should:ZPP should: Approach the retailer Nutter’sApproach the retailer Nutter’s Seek approval of Golden Flax with a brokerSeek approval of Golden Flax with a broker Continue to approach Saskatchewan health food storesContinue to approach Saskatchewan health food stores Follow up with the shakerFollow up with the shaker

Marketing Plan:

Financial PlanFinancial Plan

Financial resultsFinancial results Critical variables Critical variables

analysisanalysis Break-even analysisBreak-even analysis Scenario analysisScenario analysis

GoalsGoals

Price per bag (1 Pound): $4.54Price per bag (1 Pound): $4.54

Year 2007 2008 2009 2010 2011Quantity (tons) 1.00 3.75 7.50 11.25 15.00#units 2,350 8,813 17,625 26,438 35,250

Sales: Sales:

Financial Plan:Financial Plan:

Financial overviewFinancial overviewYear Year 20072007 20162016

        SalesSales $10,669 $10,669 $191,257 $191,257 COGSCOGS 4,6844,684 107,867107,867Gross ProfitGross Profit 6,0216,021 83,39083,390ExpensesExpenses 7,8887,888 42,25042,250Net Income Before TaxNet Income Before Tax (1,867)(1,867) 41,14041,140Income TaxIncome Tax 00 4,1144,114Net Income After TaxNet Income After Tax (1,867)(1,867) 37,02637,026Ending Retained Ending Retained

EarningsEarnings ($1,867)($1,867) $175,429$175,429

Net Present Value (NPV) Net Present Value (NPV) 53,67453,674 Internal Rate of Return (IRR) on Equity Investment Internal Rate of Return (IRR) on Equity Investment 55.60%55.60%

External Rate of Return (ERR) on Equity Investment External Rate of Return (ERR) on Equity Investment 31.00%31.00%

Financial Plan:Financial Plan:

The Critical Variables The Critical Variables AnalysisAnalysis

The most critical variable for ZPP is price per The most critical variable for ZPP is price per unit. A drop from $4.54 to $3.91 (14%) drives unit. A drop from $4.54 to $3.91 (14%) drives the NPV from $53,674 to zerothe NPV from $53,674 to zero

The second critical variable is number of The second critical variable is number of packages sold. 34% of decrease of this packages sold. 34% of decrease of this variable brings NPV to zerovariable brings NPV to zero

The least critical variable is secretarial salary. The least critical variable is secretarial salary. It is needed to be changed by 336% to bring It is needed to be changed by 336% to bring NPV to zero.NPV to zero.

Financial Plan:Financial Plan:

Break-even analysisBreak-even analysis

3.00

3.50

4.00

4.50

5.00

5.50

6.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Financial Plan:Financial Plan:

NPV=0

NPV=53,674

2007200

8 2009 2010 2011201

2 2013201

4 2015 20164.54 4.63 4.72 4.82 4.91 5.01 5.11 5.22 5.32 5.433.91 3.99 4.07 4.15 4.23 4.32 4.40 4.49 4.58 4.67

Price

per

uni

t, Pr

ice p

er u

nit,

$$

Break-even analysisBreak-even analysis

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Financial Plan:Financial Plan:Pa

ckag

es so

ldPa

ckag

es so

ld

2007200

8 2009 2010 2011 2012 2013 2014 2015 2016

2,350 8,813

17,625

26,438

35,250

35,250

35,250

35,250

35,250

35,250

1,552 5,819

11,637

17,456

23,275

23,275

23,275

23,275

23,275

23,275

NPV=0

NPV=53,674

SummarySummary Price is the most critical variable for the Price is the most critical variable for the

business. If this variable change by -business. If this variable change by -14% brings ZPP business to NPV=0.14% brings ZPP business to NPV=0.

Sales level is the second critical variableSales level is the second critical variable ZPP’s business is able to generate ZPP’s business is able to generate

positive NPV under projected sales and positive NPV under projected sales and price at $4.54price at $4.54

Financial Plan:Financial Plan:

Recommendations Recommendations Look into lowering Packaging CostLook into lowering Packaging Cost Lower Average Day in InventoryLower Average Day in Inventory Keep good ratio between Owners’ Equity, and Keep good ratio between Owners’ Equity, and

Expenses & CostsExpenses & Costs Approach the retailer Nutter’sApproach the retailer Nutter’s Seek approval of Golden Flax with a broker Seek approval of Golden Flax with a broker Continue to approach Saskatchewan health food stContinue to approach Saskatchewan health food st

ores ores Maintained level of sales as outlined in the Maintained level of sales as outlined in the 

break-even analysis break-even analysis Seek possibilities to increase price per unit if Seek possibilities to increase price per unit if 

volume of sales drops volume of sales drops

Acknowledgments Acknowledgments Bill Brown and classmates Bill Brown and classmates

Thank YouThank You