rhonda ehalt jeff prosko braden hudye terrance mckee
DESCRIPTION
Rhonda Ehalt Jeff Prosko Braden Hudye Terrance Mckee. 45’ cutting width reduced wheel tracks increased operating speed safer transport Improved contouring ability Fewer passes Reduced inputs cost of the XP Chopper. “ A revolution in organic weed control”. - PowerPoint PPT PresentationTRANSCRIPT
Rhonda EhaltJeff Prosko
Braden HudyeTerrance Mckee
•
• “A revolution in organic weed control”
45’ cutting width reduced wheel tracks increased operating speed safer transport Improved contouring ability Fewer passes Reduced inputs cost of the XP Chopper
Machine Construction
Machine Construction
Weed Bashing
Construction Costs
Complete Machine including all: Steel Hydraulic Components Mechanical Components Paint and Decals Labor
Comes to a total cost of $21,048
Start Up Working Plan (Year 1) Engineer develops a working blue print Research and Development with 45’ model (side by
side plot trials) Field demos Attend Trade Shows (new inventions at Farm
Progress) Goal: to sell 5 machines in year 1
Working Plan (Year 2+) Once established as a reputable company sales will
continue to increase on a yearly basis
Attend Saskatoon, Brandon, and Red Deer Trade Shows in January
Early Spring will consist of taking and delivering orders to our dealers
R and D manager and summer student will manage side by side plot trials across prairies
Working Plan continued Marketing Manager and summer student will be in
charge of taking orders and all public relations
Marketing Reps will put on field demos across the prairies
Marketing Reps will continue attending trade shows throughout the summer and develop advertisements
Continue developing new and improved models
Site Plan
Operating Expenses
Building Expenses CostsBuilding lease $24,000 Taxes $1,100 Natural Gas $2,600 Power $1,200 Insurance $500Phone $2,400
Total
$31,800
Operating Expenses continued
Travel Costs CostsTruck License $1,000 Trailer License $300 Truck Repairs $2,000 Trailer Repairs $1,000 Fuel (30,000miles)(15mpg) $4,500 Hotels (15 nights) $1,500 Meals (45 meals) $4,500 Trade show fees (5 shows) $5,000 Total Operating Costs $52,500
Organizational Structure
President and Vice President
SecretaryAdministration
Marketing Manager
R & D Manager
Summer Student R&D Technician
Summer Student Marketing Technician
Human Resource Plan
2 Share Holders (President and Vice President) Company Profits split 50-50 between share holders 5 positions
President (Marketing Manager) Vice President (R and D Manager) Secretary/Administrator 2 Summer Students
Human Resource Plan President and Vice President are sole investors and
each own 50% of the Company President will have the responsibilities of Marketing Vice President will have the responsibilities of
Research and Development Full time Secretary will be hired to handle
administration and bookkeeping (Accountant will be hired for tax filing)
Part time research and marketing assistants will be hired during the busy season (University Summer Students)
Human Resource Plan Salary Unemployment
Insurance Canada Pension
Holiday Pay
TOTAL
President (Marketing Manager)
$50,000 $1,700 $1,900 $3,000 $56,600
Vice President (R & D Manager)
$50,000 $1,700 $1,900 $3,000 $56,600
Secretary Administration
$21,600 $734.40 $820.80 $1,296 $24,451
Part-time Marketing Technician
$9,600 $576 $10,176
Part Time R & D Technician
$9,600 $576 $10,176
XP Choppers will pay out $158,003 per year in wages
The Marketing Mix
Products and Services – Organic in-crop weed control system with many advantages over traditional systems.
Pricing - No direct competition making XP Choppers a price establisher, will use premium pricing.
Promotion – More effective weed control, higher ground speeds, reduced wheel tracks.
Place – Western Canadian organic farmers.
Segmentation, Targeting and Positioning Segmentation – 45’ model being built to
service the needs of larger organic farms, smaller models will be built in the future.
Targeting – Leading edge organic producers who desire improved weed control.
Positioning – Long term sustainability by controlling weeds effectively without the use of chemical.
SWOT AnalysisInternal Strengths and Weaknesses
Human Resources (Strength) Well educated staff. (Weakness) Possible conflicts (two equal
partners) Physical Resources
(Strength) Welding shops, location, building. (Weakness) Quality control issues.
Financial Resources (Strength) Low overhead, investors run company (Weakness) Two-Three year break even period.
SWOT AnalysisExternal Opportunities and Threats
Opportunities Increasing number of
organic farms (5%/yr) Increased consumer
demand for organics. Premium prices No direct competition
Threats Many variable affecting
producer income. Possibility of biological
herbicides. Renewed emphasis on
convention practices.
Market Analysis
The Market – 1500 organic farms in western Canada consisting of approx. 1,500,000 acres as of 2005 (OCPP, 2005)
Competition – Close direct competition consists of farmers using existing swather tables.
Customers - Organic producers looking for improved methods of mechanical weed control.
Target Markets – Will start out in western Canada and eventually move into the United States and Australia.
Market Analysis (cont’d)
Product/Service Features - The XP Chopper is the first machine of its kind, it is designed to bash the structure of the weed as opposed to cutting the stem clean, causing the plant to die or re-grow at a much slower rate.
Opportunity – One of a kind machine entering into an untapped market.
Sales Forecast Projected units
sold Projected number of farms (5% growth)
Percent of market growth
Total market share
Year 1 5 1500 0.3% 0.3% Year 2 30 1575 1.9% 2.2% Year 3 60 1654 3.6% 5.7% Year 4 80 1737 4.6% 10% Year 5 91 1824 5% 15% Year 6 96 1915 5% 19% Year 7 101 2011 5% 23% Year 8 106 2112 5% 27% Year 9 111 2218 5% 31% Year 10 117 2329 5% 34% Total 797
Marketing Strategy
Sales Objectives – to sell 797 units in 10 years capturing 34% of total market share.
Profit Objectives – 125% of the cost per unit.
Channels of Distribution – Year one sell directly to customers, in year two will establish a dealer network consisting of existing equipment dealers.
Marketing Strategy (cont’d) Pricing Policy – pricing will be based on the
cost of the machine (25% Markup) XP Choppers
Cost to build $ 21,048 x 25 % = $ 5,262 profit Dealership:
Cost to buy $ 26,310 x 25% = $ 6,578 profit Machine Retails at $ 32,890
Selling and Advertising
Attend agricultural tradeshows Booth with video of machine, brochures, research, etc.
Arrange field days/demonstrations Write press releases and submit to Grainews,
Western producer, Top Crop Manager, etc. Feature the machine on the prairie farm
report. Attend organic crop growers conferences
Marketing Plan BudgetTRAVEL EXPENSES Vehicle repairs, maintenance and license $3,000 Trailer repairs, maintenance and license $1,300 Fuel $4,500 Accommodations (8 shows @ 3 nights) $2,400 Meals $1,000 Sub Total $12,200 Promotion and Development Trade show entries (8 shows @$1500) $12,000 Trade show booth (model, tv/vcr, display) $2,000 Video Production $300 Brochures $100 Web Page $1,000 Newspaper Advertising $5,000 Field Demos (6 locations) $6,000 Swather fuel and repairs (field demos) $1,400 Sub Total $27,500 Total Marketing Cost $40,000
Financial Plan
The initial start up cost is $350,000 $300,000 will come from owner’s equity The remaining $50,000 will be long term debt The $50,000 loan will be amortized over 5
years at an average interest rate of 7% Annual loan payment will be $12,195 for 5
years.
Summary of Financial ResultsYear 2006 2007 2008 2009 2010
Sales Revenue 131,550 805,086 1,610,17
2 2,146,35
9 2,448,996
COGS 137,537 652,983 1,283,756
1,726,562
1,981,574
Gross Margin (5,987) 152,103 326,416 419,797 467,422 Expenses 202,886 206,265 209,681 213,133 216,619 Net Income Before Tax
(208,872) (54,161) 116,735 206,664 250,803
Income Tax 0 0 0 6,544 27,187 Net Income After Tax (208,872) (54,161) 116,735 200,121 223,616 Dividends 0 0 0 0 0 End Retained Earnings
(208,872) (263,034) (146,298) 53,822 277,438
Summary of Financial ResultsYear 2011 2012 2013 2014 2015
Sales Revenue 2,583,691 2,712,87
5 2,848,51
9 2,990,94
5 3,140,492
COGS 2,105,726 2,213,907
2,318,452
2,429,055
2,546,422
Gross Margin 477,965 498,968 530,067 561,890 594,071 Expenses 220,138 224,541 229,031 233,612 238,284 Net Income Before Tax
257,827 274,428 301,036 328,278 355,786
Income Tax 27,948 29,748 32,850 41,524 50,282 Net Income After Tax 229,879 244,680 268,186 286,754 305,504 Dividends 153,584 173,311 240,720 258,789 272,550 End Retained Earnings
353,733
426,102 453,567 481,532 514,487
Net Present Value (NPV) of Equity Investment 310,719 Internal Rate of Return on Equity Investment 35.7% External Rate of Return on Equity Investment 24.4%
Summary of Financial Ratios
2006 2008 2010 2012 2014 Liquidity Ratios Current Ratio 7.41 2.29 4.46 4.85 4.87 Activity and Operating Ratios Total Asset Turnover .93 5.72 3.32 3.00 3.06 Inventory Turnover 3.89 9.94 11.55 11.68 11.67 Average Days Inventory 94 37 32 31 31 Leverage Ratios Debt Ratio 35.4% 45.4% 21.8% 19.7% 20.1% Debt to Equity 54.8% 83.2% 27.9% 24.6% 25.2% Profitability Ratios Gross Profit Margin -4.6% 20.3% 19.1% 18.4% 18.8% Net Profit Margin -158.8% 7.2% 9.1% 9.0% 9.6% Return on Total Assets -148% 41.5% 30.3% 27.1% 29.3% Return on Equity -229.2% 75.9% 38.7% 33.7% 36.7%
Risk AnalysisCritical Variables
Critical Variables
020406080
100120140160
1 2 3 4 5 6 7 8 9 10Years
Qua
ntity
of S
ales
I.R.R 50%I.R.R. 36% BaseI.R.R. 0%
Breakeven Analysis Economic Breakeven
the percent of markup on the cost of goods manufactured can be reduced from the current 25% down to a 13% markup before a 0% I.R.R. is reached
Cash Flow Breakeven In order for the company to avoid a negative cash
balance, the percent of markup can only drop by 1% from 25 down to 24
Breakeven Analysis
Income Breakeven needs to maintain a minimum 20% markup to
achieve a minimum income in order to avoid a negative return to equity.
Sensitivity Analysis Base Case uses the current 25% Markup on the cost
of goods manufactured Best Case scenario the markup has been raised
from 25% to 45% Worst Case scenario the markup has been dropped
by 10% down to 15%
Best Case +20% Base Case Worst Case -10% Mark Up 73.2 % I.R.R. 35.7% I.R.R 1.6% I.R.R. Quantity of Sales 43.6 % I.R.R. 35.7% I.R.R 30.0 % I.R.R. Mark Up and Sales 85.4% I.R.R. 35.7% I.R.R. -5.3% I.R.R.
Sensitivity Analysis
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Mark Up Quantity of Sales Mark Up andSales
I.R.R
. Best +20%BaseWorst -10%
Summary In order for XP Choppers to meet and
maintain their cash flow requirements in the beginning, the initial sales targets must be met. A 25% markup over the cost of production must also be maintained.
XP Choppers can potentially decrease the cost of production based on volume sales and manufacturing contracts, lowering our cost of goods sold.
Summary This allows room to increase the markup,
while still achieving the same list price, thereby increasing the company’s revenue and profit margins.
If these objectives are met will be a highly profitable business, delivering an outstanding internal rate of return of 35.7%, and a 24.4% external rate of return, proving to be a sound financial investment.