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Agra-Elite Flour
MBA 992: VENTURE MANAGEMENT
BY: ANDREW ARDELL
JUNE 3RD 2016
Agra-Elite Flour 2016
1.0
Executive Summary
Pulses are a seed that is harvested from a leguminous pod in a variety of different plants
(Statistics Canada, 2015). Pulses primarily include seeds as Peas, Lentils, Beans, and Chickpeas.
The Pulse industry is growing exponentially on a global level due to the increasing demand for
high protein meat substitutes. Most of Canada’s pulses are exported into global markets such
as India and Asia. Through extensive research an opportunity has been identified, to serve the
growing demand for pulse flour products in Canadian gluten free products. The gluten free
market in Canada is growing at a rate of 26% per year with sales growing from $27 million in
2012 to $460 Million in 2014 (Agriculture and Agri-Food Canada, 2015). This business plan will
outline a strategic plan to capitalize on serving the growing pulse and gluten-free markets.
Agra-Elite Flour meets the demand for high quality, natural, organic, gluten free flours to
consumers in North America. These flours will be made of four pulse products that are:
Chickpeas, Lentils, Yellow Peas, and Soybeans. These flours will be produced at a processing
plant to be constructed near Vanscoy, Saskatchewan. The market that Agra-Elite flour will be
targeting is the gluten free consumer through gluten free food producers and food wholesalers.
Agra-Elite flour will sell these flours in bulk to wholesalers, such as bulk barn, and to gluten free
food producers.
The products will be sold business-to-business and marketed strategically through lead
generation, inbound marketing, online marketing, and search engine marketing. The products
will be sold for $68.25 per 25 Kg Bag with price reductions offered through the advanced pricing
strategy. The projected sales generated as an internal rate of return is 37.2% with a 5-year
average net income of $111,581.00. This return is relatively high but there is also a high risk
associated with a start up business in this industry. This business plan outlines the risks and
critical variables along with outlining mitigating strategies for each.
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Table of Contents
1.0
Executive Summary ............................................................................................................... 1
Table of Figures ............................................................................................................................... 3
Table of Tables ................................................................................................................................ 4
2.0 Business Overview .................................................................................................................... 5
2.1 Product Overview ................................................................................................................. 5
2.2 Industry Overview ................................................................................................................. 5
2.3 The Opportunity.................................................................................................................... 6
Operations Plan............................................................................................................................... 7
1.1 Location and Facility ............................................................................................................. 7
1.2 Facility Layout & Functions ................................................................................................... 8
1 - Raw Product Storage ......................................................................................................... 9
2 – Milling Process .................................................................................................................. 9
3 – Office ............................................................................................................................... 14
4 – Finished Product Storage ................................................................................................ 14
1.3 Capital Expenditures ........................................................................................................... 14
1.4 5-year Production Plan ....................................................................................................... 17
Production Projections ......................................................................................................... 17
Cost of Goods Sold .................................................................................................................... 19
Utilities Summary .................................................................................................................. 19
Cost of Goods Sold Summary................................................... Error! Bookmark not defined.
2.0 Human Resources Plan ........................................................................................................... 21
2.1 Human Resources Architecture .......................................................................................... 21
2.2 Job Descriptions .................................................................................................................. 21
2.3 Performance Management ................................................................................................. 22
2.4 Board of Directors ............................................................................................................... 22
5.0 Marketing Plan ........................................................................................................................ 23
5.1 Segmentation and Targeting............................................................................................... 23
5.1.1 Segment: Gluten Free Food Producers ........................................................................ 23
Agra-Elite Flour 2016
5.1.2 Segment: Bulk food Retailers....................................................................................... 24
5.1.3 Future Segment: East Indian Bazaars .......................................................................... 24
5.2 Marketing Mix ..................................................................................................................... 24
5.2.1 Positioning ................................................................................................................... 25
5.2.2 Product ......................................................................................................................... 27
5.2.3 Price ............................................................................................................................. 28
Promotion ............................................................................................................................. 28
Place ...................................................................................................................................... 29
5.2 Marketing Strategy Tactics ................................................................................................. 29
5.2.1 Website Marketing ...................................................................................................... 29
5.2.2 Search Marketing ......................................................................................................... 30
5.2.3 Inbound Marketing ...................................................................................................... 30
5.2.4 Social Media Marketing ............................................................................................... 31
5.2.5 Lead Generation and Analytics .................................................................................... 31
5.2.6 Marketing Strategy Conclusion .................................................................................... 32
5.3 Marketing Budget ............................................................................................................... 34
5.4 Sales Projections ................................................................................................................. 34
6.0 Accounting & Financial Plan.................................................................................................... 35
6.1 Financial Structure .............................................................................................................. 35
6.2 Capital Budget ..................................................................................................................... 35
6.3 Financial Analysis ................................................................................................................ 36
6.3.1 Revenue Estimates ....................................................................................................... 36
6.3.2 Revenues Per Product Line .......................................................................................... 37
6.4 Financial Performance ........................................................................................................ 38
6.5 Break Even Analysis ............................................................................................................ 39
6.6 Sensitivity Analysis .............................................................................................................. 40
6.6.1 Low Sales Scenario ....................................................................................................... 41
6.6.2 High Sales Scenario ...................................................................................................... 41
6.7 Risk Analysis ........................................................................................................................ 41
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7.0 Conclusion ............................................................................................................................... 42
Works Cited ................................................................................................................................... 43
Appendix A .................................................................................................................................... 44
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Table of Figures
Figure 1: Location of Facility ........................................................................................................... 7
Figure 2: 3200 sqft Building to be constructed............................................................................... 8
Figure 3: Pre Cleaned and Sorted Lentils ...................................................................................... 10
Figure 4: Cleaned and Sorted Lentils ............................................................................................ 11
Figure 5: De-Hulled Lentils ............................................................................................................ 12
Figure 6: Split Lentils ..................................................................................................................... 12
Figure 7: Lentil Flour ..................................................................................................................... 13
Figure 8: Milling Machine ............................................................................................................. 13
Figure 9: 25 Kg Bagged Finished Product...................................................................................... 14
Figure 10: Competitor Map........................................................................................................... 26
Figure 11: Positioning Map ........................................................................................................... 27
Figure 12: Debt to Equity .............................................................................................................. 35
Figure 13: Sales Trend Analysis ..................................................................................................... 37
Figure 14: Revenue Per Product Line ............................................................................................ 38
Figure 15: Break Even Analysis ..................................................................................................... 40
Figure 16: Wheat Flour Nutrition.................................................................................................. 44
Figure 17: Quinoa Flour Nutrition ................................................................................................. 45
Figure 18: Lentil Flour Nutrition.................................................................................................... 46
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Table of Tables
Table 1: Capital Investment .......................................................................................................... 15
Table 2: Capital Investment Summary .......................................................................................... 16
Table 3: 5 Year Production Projections......................................................................................... 17
Table 4: Hours worked per Employee........................................................................................... 18
Table 5: Salaries and Wages ......................................................................................................... 18
Table 6: Utilities Summary ............................................................................................................ 20
Table 7: Potential Customer Type................................................................................................. 24
Table 8: Competitor Analysis ........................................................................................................ 25
Table 9: Pricing .............................................................................................................................. 28
Table 10: Marketing Budget ......................................................................................................... 34
Table 11: Sales Projections ........................................................................................................... 34
Table 12: Proportionate Sales Per Product Type .......................................................................... 36
Table 13: Financial Projections ..................................................................................................... 36
Table 14: COGS, Gross Profit, Net Income Expectations .............................................................. 37
Table 15: Revenue Per Product Type ............................................................................................ 37
Table 16: Financial Performance of Investment ........................................................................... 38
Table 17: Break Even Analysis ....................................................................................................... 39
Table 18: Sensitivity Analysis ........................................................................................................ 40
Table 19: Risks and Mitigation Strategies ..................................................................................... 41
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2.0 Business Overview
2.1 Product Overview
Agra-Elite Flour includes a manufacturing process to produce 4 main products:




Lentil Flour
Chick Pea Flour
Soy bean Flour
Yellow Pea Flour
These products are made from all organic, natural, and locally grown seed. These flours are
used as inputs in gluten free, high protein, organic foods that are becoming more and more
popular among todays population.
2.2 Industry Overview
Pulses are a seed that is harvested from a leguminous pod in a variety of different plants
(Statistics Canada, 2015). Pulses primarily include seeds as Peas, Lentils, Beans, and Chickpeas.
The pulse industry in Canada has grown exponentially in the past few years due to high demand
for high protein products. Western Canada’s pulse industry was just a blip on the cropping
radar almost 20 years ago. Now pulse production is flourishing across the country, with farmers
growing all types of pulse crops, processors and packaging, shipping peas and lentils in bulk,
and value-added agri-business promoting pulses as a food ingredient. The industry has
embraced growth (Barber, 2012). Given Saskatchewan is the largest pulse producer in Canada,
79.3% of Canadian pulses grown in Canada (Statistics Canada, 2015), opportunities of significant
value have presented themselves in the past 10 years. Alliance Grain traders entered the
market 10 years ago primarily as a value added business and have experienced successful
business development and exponential growth annually. Many value added consumers have
entered the market in the past 10 years primarily as pulse splitters to begin the processing
aspect for the international markets. In 2015 Canada exported more than 6 million tonnes of
pulse seeds worth nearly $4.2 Billion (Pulse Canada, 2015). This results in the export market
being significantly saturated and not a place for a small business to enter effectively due to high
competition and high barriers of entry.
An area that is relatively unpopulated in the pulse market is value added services of complete
processing within Canada.
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2.3 The Opportunity
Pulse flours are an extremely popular ingredient to be added to gluten free products due to the
high protein content of pulses (CIGI, 2014). The Canadian International Grains Institute has
carried out many studies in the identification of areas in which pulse flours can be added to
gluten free products. They have identified a significant opportunity for these flours to be added
and increase the protein and nutrients in gluten free foods. The Gluten free food consumer
market in Canada consists of 10 million Canadians and is growing at a 26% rate annually. The
sales of Gluten Free products have grown exponentially from $27 million in 2012 to $460
million in 2014. This market segment is growing due to the increased celiac disease awareness
and avoidance of gluten for other reasons (Agriculture and Agri-Food Canada, 2015).
Consumers have seen the trend of super foods being added into everyday foods from the
development of quinoa in the previous 5-10 years. We believe this will become even more
prominent as consumers demand higher quality and more nutritious foods all the time and will
be even more evident with pulses. This is primarily due to the fact Pulses contain much more
protein content than other grains used in different products. Currently, lentil flour contains 20
times the protein of wheat flour, and twice the protein of quinoa flour (Refer to Appendix A).
Food producers are looking to add pulse flour as a super-food to supplement current food
products as well as make foods fully from pulse flours. Some of these products are chips,
breads, crackers, pastas and many more.
We at Agra-Elite Flour believe that there is a significant opportunity within Canada in the pulse
and gluten free markets and that now is the time to become a player in these industries. The
two industries are both expanding exponentially within Canada, target market wise as well as in
revenue. This provides a great opportunity for the emergence of Agra-Elite Flour.
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Operations Plan
1.1 Location and Facility
The operations will take place at a facility 27 km south west of Saskatoon, Sk as seen in figure
below. The decision to operate in this location was made because Andrew Ardell currently
farms in this area and has many connections to potential raw product suppliers in the area. A 4
acre parcel of land will be purchased to have the facility constructed upon. The facility will be a
3200 ft2 steel building. The building will be constructed on a 6” thick concrete pad, and will be
fully insulated. The building will include:
-
1 man door
4 windows
1 20’ wide by 18’ tall Overhead Door
An example of the building can be seen in the figure below.
Figure 1: Location of Facility
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Figure 2: 3200 sqft Building to be constructed
1.2 Facility Layout & Functions
The facility will include seed processing equipment, raw storage, finished product storage, and
an office space. The facility layout can be seen in the figure below.
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Agra-Elite Flour 2016
2
2
1
The
4
3
Building includes one 15’ wide by 18’ high overhead door that allows the bagged pallets of
flours to be loaded into trucks to be shipped.
Each of the sections of the facility will be described below as outlined by the corresponding
number.
1.2.1 Raw Product Storage
This section consists of the receiving and storage of the raw product (Pulse Seeds). The bin
capacity holds 136 ton (5000 bushels). This amount of raw product accounts for 163 hours of
plant run time, which is over five weeks of projected production in the first year and two weeks
of projected production in year 5. The product is loaded into the storage bin from the delivering
truck, and then is conveyed into the cleaning and sorting machine as needed in the process.
1.2.2 Milling Process
There are 6 main steps in the process:
Step 1 – Cleaning and Sorting
The seed goes through a cleaning and sorting machine where it is separated from any dirt and
contaminants that may be immersed in it. The seed is sorted to remove any low quality seeds,
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or off color seeds. The pure seed is then loaded into the surge bin where it can be loaded into
the mill. The difference between seed before and after cleaning can be seen in the figures
below.
Figure 3: Pre Cleaned and Sorted Lentils
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MBA 992 – Venture Management Business Plan
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Figure 4: Cleaned and Sorted Lentils
As you can see, after the cleaning and sorting process the off-color and miss-shaped seeds are
removed from the bulk product leaving a clean and pure product to produce flour.
Step 2 – De-Hulling Process
Pulse seeds all have a thin skin-like film around the outside of the seed. To create high quality
flour products this skin needs to be removed before the seed is processed. This is called DeHulling. The seed moves through rotating members that remove the skin from the seed,
preparing it to be milled. The seed enters the process as shown in Figure 4, then moved
through and is finished and ready for milling as seen in the figure below.
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Agra-Elite Flour 2016
Figure 5: De-Hulled Lentils
Step 4 – Splitting
The seed then moves into the splitting machine in which the whole de-hulled seed is split into
halves. These halves allow the milling machine to work much more efficiently. An example the
finished split lentils made from the lentils shown in Figure 5 can be seen below.
Figure 6: Split Lentils
Step 5 – Milling
The split lentils are then ran through the mills where they are ground up and screened until
they reach the appropriate particle size for the flour. The grinders are two rough rollers rotating
opposite of each other at high speeds that force the particles to shrink to pass through the
opening. The lentils then pass through a series of screens that allow the small particles through
to final product; also the larger particles pass through the process again to ensure they are
constant particle size. The finished product can be seen in the figure below.
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Agra-Elite Flour 2016
Figure 7: Lentil Flour
The milling machine used can be seen in the figure below, and will be described in more detail
in Capital Expenditures.
Figure 8: Milling Machine
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Agra-Elite Flour 2016
Step 6 – Bagging
The finished product flour is then ran through the bagging machine where it is bagged into 25
kg bags of finished product ready to be sold.
Figure 9: 25 Kg Bagged Finished Product
1.2.3 Office
The office is a 12’x12’ room consisting of a lunch/break room. There is also a desk and a
computer to allow for urgent business matters to be taken care of.
1.2.4 Finished Product Storage
The finished product will then be stacked on pallets are stored in this area of the building. The
Pallets can be stacked 3x high, which are 120 bags per stack (40 per pallet). The Product will
then be shipped out of the overhead door.
1.3 Capital Expenditures
The capital expenditure required to bring a pulse processing plant into service is quite large and
can be seen outlined below.
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Table 1: Capital Investment
Capital Investment
Building 80'x40'x20'
Materials
Installation
Finishings
Concrete Pad
Insulation
Building Total
Equipment
Cleaning & Sorter
Milling Line
Bagging Unit
Bucket Elevators
Surge Bins
Electrical Install
15' Conveyor
Raw Product Bin
(8 tons)
Chuting
Sorter
Miscellaneous
Parts
Equipment Total
Operations &
Office
Safety Apparel
Desk, chair, tables
Spare Parts
2016 GMC Sierra
2008-2012
Delivery Van
Website
Exhibit Stand
Cash Float
Bags (10000 units)
15
$48,000.00
$35,000.00
$25,000.00
$38,400.00
$25,000.00
$171,400.00
$25,000.00
$50,000.00
$14,250.00
$10,000.00
$15,000.00
$7,500.00
$5,000.00
$13,000.00
$1,500.00
$35,000.00
$5,000.00
$181,250.00
$750.00
$1,500.00
$12,375.00
$34,100.00
$70,000.00
$10,000.00
$10,000.00
$50,000.00
$1,000.00
MBA 992 – Venture Management Business Plan
Andrew Ardell
Agra-Elite Flour 2016
Operations &
Office Total
Total
20% Contingency
Total Capital
Investment
$189,725.00
$542,375.00
$108,475.00
$650,850.00
Table 2: Capital Investment Summary
Building - 80'x40'x20'
Equipment – 20 Mton Capacity
Operations & Office
20% Contingency
Total Capital Investment
$171,400.00
$181,250.00
$189,725.00
$108,475.00
$650,850.00
The total capital required to build the required facility is $542,375.00. To comprehensively
prepare during the projection phase, a 20% contingency is added to the estimate to ensure the
project completion in the case of any unexpected costs or mishaps during the construction and
start-up. Agra-Elite flour will add 20% to the total capital required to ensure they have
adequate capital to finish the construction in the case any of these events occur. The final total
capital investment required to construct the facility is $640,850.00.
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Board Of
Directors
Andrew Ardell
General Manager
Sales & Marketing
Manager
Plant Manager
Product Marketing:
Product Sales:
- Andrew Ardell
S&M Manager
Flour Mill Operator:
- Sales & Marketing
Manager
Plant Manager
Product Feed &
Storage:
Operator
1.4 5-year Production Plan
Production Projections
The production and workforce plan is built off of 5 year projections in production targets. These
production projections are shown in the table below:
Table 3: 5 Year Production Projections
Year 1
Planned
Capacity
Tonnage
Capacity
Peas
Lentils
Chickpeas
Soybeans
%
Year 2
Year 3
Year 4
Year 5
10%
13%
16%
18%
19%
Tonne
1300.01
1733.35
2600.03
3466.7
3466.7
Tonne
Tonne
Tonne
Tonne
325
325
325
325
433.34
433.34
433.34
433.34
650.01
650.01
650.01
650.01
866.68
866.68
866.68
866.68
866.68
866.68
866.68
866.68
* Production percentages based on 16 hour day of milling for 100% capacity
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As shown in Table 3, the production targets for the plant are set to increase to 100% capacity in
the first 5 years of operations. To facilitate the growth, employees of Agra-Elite Flour will also
need to be added throughout the first 5 years of operations. The plant capacity target is
producing ¼ of the capacity of each type of pulse flour (Pea, Lentil, Chickpea, and soybean) in
the first 5 years. These numbers can be seen in Table 3 above.
To efficiently align with the production targets of Agra-Elite flour the employees required can
be seen outlined in the table below:
Table 4: Hours worked per Employee
Operations Plan
Year 1
Year 2 Year 3 Year 4 Year 5
Plant Run Time per week(Hr)
30
40
60
80
80
Hourly Employees
Hourly
Plant Manager per week(Hr)
30
40
40
40
40
Plant Manager 2 per week(Hr)
0
0
20
40
40
Laborers/week(Hr)
70
80
100
120
120
Salaried Employees
Annually
General Manager/Week (Hr)
60
60
60
60
60
Sales and Marketing/Week (Hr)
0
0
40
40
40
As can be seen in Table 4, the running hours during production of the plant increases the
amount of employees required to operate it increase as well. In year one and two the plant
requires one plant manager and two laborer’s to facilitate production. In year 3, a second part
time plant manager as well as part time laborer is added. These additions then become full time
employees in years 4 and 5 to facilitate 16 hours of plant operations, 5 days a week. As for
employees on salary, a sales and marketing employee is added in year 3. This employee is
expected to work 40 hour weeks. In years 1 and 2 the general manager will act as the sales and
marketing personal.
The plant employees are paid an hourly wage, while the others are on salary. The expected
salaries and wage dollars can be seen in Table 5 below.
Table 5: Salaries and Wages
Hourly
Employees
PM Wage Per
Hour
18
Year 1
Year 2
Year 3
Year 4
Year 5
$
$
$
$
$
Hourly
18.00
19.90
MBA 992 – Venture Management Business Plan
21.90
23.99
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Andrew Ardell
Agra-Elite Flour 2016
Laborers Wage
$ 15.00 $ 15.75 $ 16.54 $ 17.36
$ 18.23
per hour
Salaried
Annual
Employees
General
Manager Salary
$70,000.00 $80,500.00 $91,525.00 $103,101.00 $115,256.00
S&M Manager
$55,000.00 $60,250.00 $65,762.00 $71,550.00 $77,628.00
Salary
The wages are all set to increase with an inflation rate of 2% each year. The plant manager’s
wage will increase $1.00 on top of the inflation each year he/she remains with the company.
The salaried wages are set to increase with inflation each year at 2% plus 5% increase. Salaried
employees wages also include a 10% annual bonus upon achieving performance metrics laid
out for them during performance evaluations.
Cost of Goods Sold
During the first 5 years of operations, expenses and cost of goods sold are set to increase.
These increases are based on plant operating hours, inflation, and sales and marketing
expenses. As the target capacities increase, the utilities will increase from a rise in
consumption. The Cost of goods sold will increase as the amount of raw materials being
consumed by the plant each year rises.
The Suppliers of the raw products to Agra-Elite Flour will be four main farms in the Vanscoy, Sk
area. These are farmers in which Andrew Ardell will buy a 10% equity stake in the business to
tie them to the business operations and provide a constant supply of raw product. These
equity-holding farms will also occupy the board of directors for the company. By having these
farmers involved in the business they will be inclined to provide a high quality product as they
are closely tied to the performance. These four main suppliers are: Ardell Seeds Ltd, Ardell
Holdings, C2 Farms, and Carter Farms. The benefit to using these suppliers is that they will allow
pay as needed contracts where the raw product needed can be bought throughout the year as
required to eliminate the chance of being stuck sitting on a large quantity of raw inventory. This
also eliminates the pressure of Agra-Elite Flour having to purchase the entire raw product
inventory immediately following the harvest of the grain, as this would create an extremely
inefficient inventory turnover ratio.
The utilities summary can be seen below. The numbers shown are estimates for the first year of
operations. The full 5 years of utilities costs can be seen in the cost of goods sold summary.
Utilities Summary
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Table 6: Utilities Summary
Utilities Summary
Electrical
Milling Unit
Bagging Machine
Bucket Elevators X 2
Conveyor
Plant lighting - 25 lights
Total Kw
Plant lighting - 25 lights
Total Annual Cost
Heating - Annual Cost
3200 sqft
Water & Sewer
3200 sqft
56.90 KW
1.10 KW
1.10 KW
0.55 KW
3.20 KW
62.85 KW
250.00 KW
$4,774.84
$1,600.00
$480.00
The utility cost estimates are based off the Saskpower rate for power paid at Ardell Seeds Ltd.
This rate is 4.87 cents per KWh. This is the rate charged to any farm across Saskatchewan per
KWh. The total dollar estimate is based off of the plant operating hours per week for year one.
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2.0 Human Resources Plan
2.1 Human Resources Architecture
Board Of
Directors
Andrew Ardell
General Manager
Sales & Marketing
Manager
Plant Manager
Product Marketing:
Product Sales:
- Andrew Ardell
S&M Manager
Flour Mill Operator:
- Sales & Marketing
Manager
Plant Manager
Product Feed &
Storage:
Operator
2.2 Job Descriptions
General Manager
The general manager is responsible for business development and operations. This person is
required to oversee daily operations to ensure the production targets are being achieved. They
are responsible to ensure the Plant employees are familiar with the HACCP and ISO regulations
that are required in flour production. The general manager is the acting sales and marketing
manager for the first 5 years of production.
Sales and Marketing Manager
Develop distribution channels through sales and marketing. Manage the product sales and
product marketing personal through goal setting and evaluation. Mentor them as well as
develop their sales and marketing strategies.
Plant Manager
Oversee all production operations in the plant. Specifically in charge of the process of milling
the product and ensuring the quality standards are being met. In charge of ensuring the
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laborers in the plant are working safely and efficiently. In the first 5 years of operations the
Plant Manager is also the Flour Mill Operator.
Product Feed and Storage
This person is a laborer who is responsible for handling the storage of finished product in bags,
stacked on pallets. They are also in charge of shipping and receiving any raw or finished
products.
Product Sales
Responsible for consistantly reaching out to individuals and companies looking to buy our flour.
Also responsible for reaching out to new and potential clients.
Product Marketing
The duties involve using the four P’s of marketing to successfully and efficiently market AgraElite Flour products to the targeted segment. This marketing will also involve attending trade
fairs to advertise the company’s vision and quality products.
2.3 Performance Management
The hourly employees will receive annual performance reviews from the general manager.
During these reviews the person’s skills and abilities will be reviewed, as well as their
competency on the job, and the level of achievement in developmental goals in which are set at
the beginning of each calendar year. An annual bonus of up to 10% will be awarded based on
the scores during this time.
The marketing and sales employees will receive quarterly performance evaluation. These
employees will have sales and marketing targets set for them in which they are required to
meet. If these goals are not being met, it will be at this time that a solution will be set in place
to achieve them. If the targets are being met or exceeded, then the general manager will decide
if it is feasible to set the targets higher. At the end of the fiscal year, based on the performance
of the employee meeting sales and marketing targets a bonus of up to 20% will be awarded to
the employee.
2.4 Board of Directors
The board of directors will be comprised of the general managers of the main suppliers of raw
product to Agra-Elite Flour. A person will be appointed from each of the four farms outlined in
the operations plan: C2 Farms, Carter Farms, Ardell Seeds Ltd, and Ardell Holdings. These
individuals are integral in the business and will have invaluable contacts and personal to bring
to the business. As mentioned before, each of these persons will have a 10% equity stake in the
company.
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5.0 Marketing Plan
Agra-Elite Flour meets the demand for high quality, natural, organic, gluten free flours to
consumers in North America. These flours will be made of four pulse products that are:
Chickpeas, Lentils, Yellow Peas, and Soybeans.
5.1 Segmentation and Targeting
The market that Agra-Elite flour will be targeting is the gluten free consumer market through
gluten free food producers and food wholesalers. Exactly how this will be accomplished will be
discussed later in the marketing strategy section.
The development of the gluten free market sector in North America is growing substantially
and is an excellent opportunity for Canada’s agriculture and Agri-food sector to capitalize on it.
The Gluten free food consumer market in Canada consists of 10 million Canadians and is
growing at 26% annually. The sales of Gluten Free products have grown exponentially from $27
million in 2012 to $460 million in 2014. This market segment is growing due to the increased
celiac disease awareness and avoidance of gluten for other reasons (Agriculture and Agri-Food
Canada, 2015). Growth is primarily due to the increased availability of gluten free products at
mainstream retail outlets across the country, which coincidentally is one of the segments in
which we will be targeting.
Agra-Elite flour will be targeting two main segments of the gluten free market. These Segments
are: Gluten Free food producers and Bulk food Retailers.
5.1.1 Segment: Gluten Free Food Producers
These are organizations that are actively producing gluten free food substitutes to traditional
foods most commonly ate by the population containing gluten. Some of these foods include
pastas, chips, crackers, breads, and many others. These companies are becoming more and
more prevalent as more people realize the excellent business opportunity available to this
growing market. Tolerant foods is among the largest of these food producers and has had most
of their products accepted to be sold in Costco Wholesale Stores. The list of these food
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producers is endless; a few can be seen in the table below. If you would like to look at a more
extensive list please refer to the link: http://www.glutenfreefind.com/listings-manufacturersand-distributors.
Table 7: Potential Customer Type
Company Name
Tolerant Foods
Kashi Foods
Purest Foods
Goodbye Gluten
Barilla Pasta
Mediterranean Snack Foods
Products
Pasta, Chips, Crackers
Gluten Free food bars
Chips, Bread, Crackers
Bread
Pastas
Chips, Crackers
5.1.2 Segment: Bulk food Retailers
These organizations are outlets that sell food in bulk quantities to consumers. They carry a very
large number of products from nuts, to candy, spices, pastes, drinks, pastas, flours and many
more. They are the Bulk Barns, Nutter’s, Strictly Bulk, and many others across Canada. These
stores routinely offer gluten free flours such as lentil, chickpea, soybean, and yellow pea. Due
to the growing demand for these gluten free flowers, the bulk food retailers are a prime market
to supply the consumer directly with our products.
5.1.3 Future Segment: East Indian Bazaars
Following the first 5 years of operations, Agra-Elite Flour will be looking for growth
opportunities. The opportunity of selling their flours in East Indian grocery stores across the
country will be a market segment experimented with at that time. Pulse flours, and especially
chickpea flour or “Besan” as they refer to it, are staple ingredients in their daily diets. The
growing East Indian populations in North America will again provide an opportunity to enter a
growing segment of the gluten free market.
5.2 Marketing Mix
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Agra-Elite Flour 2016
5.2.1 Positioning
Competitors
Given the high level of attractiveness of the growing market segment, an organization can
expect to face a fair amount of competition when operating within this segment. This is the
case for Agra-Elite Flour. There are about 15 pulse flour producers across Canada; primarily
from western Canada to Ontario. Many of these competitors offer retail to bulk sized
quantities, but focus primarily on one of the two. Seen below is a competitor analysis of
organization, location, and offerings.
Table 8: Competitor Analysis
Organization
Location
Can Mar Grain
Products Ltd
Diefenbaker Seed
Processors Ltd
Great Western Grain
Co Ltd
Infra-Ready Foods
Regina, Sk
K2 Milling Ltd
Beeton, ON
Northern Quinoa Corp
Saskatoon, Sk
Jamestown Mills
Jamestown Line,
ON
Portage La
Prairie, MB
Best Cooking Pulses
Inc
Elbow, Sk
Lloydminster, Sk
Saskatoon, Sk
Products: Lentil,
Chickpea, Yellow
Pea, Soybean
Lentil
Customer: Bulk,
Retail, Both
Chickpea, yellow
Pea
Chickpea, Yellow
Pea
Lentil, Chickpea,
yellow Pea and
others
Lentil, Chickpea,
Yellow Pea,
Soybean and others
Lentil, Chickpea,
and Yellow Pea
Chickpea, Lentil
Retail & Bulk
Lentil, Chickpea,
Yellow Pea,
Soybean and others
Retail & Bulk
Retail
Retail
Retail
Bulk
Retail
Retail & Bulk
These competitors serve primarily bulk international customers, or small retail customers. The
figure below shows the spread of customers across western Canada.
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Agra-Elite Flour 2016
Figure 10: Competitor Map
Position
The segment of customers between bulk and retail within North America is a relatively
unpopulated area not primarily served by any competitors. This is the best location in the
market; therefore setting up Agra-Elite Flour’s position is vital. In analyzing the positioning map
this can be seen, as a new player in the industry will want to compete in a relatively
unpopulated area of the Positioning map during the entrance.
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Agra-Elite Flour 2016
Figure 11: Positioning Map
5.2.2 Product
Agra-Elite Flour will be producing high quality, natural, organic and gluten free pulse flour.
These flours are produced using high quality milling equipment following HACCP and ISO
standards of quality production. The four types of flour produced will be lentil, soybean,
chickpea, and yellow pea. These are the four most prominently bought pulse flour products.
These flours will be packed in 25 kg bags. These 25 kg bags best fit our demographic we are
serving and align with the positioning in the market. In years 3-5 we hope to serve customers in
larger orders, and sell in 1 metric tonne super-sacks. Until these years, if customers would like
larger orders of one metric tonne, this is simply just a 40-25kg bag pallet.
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Agra-Elite Flour 2016
5.2.3 Price
Agra-Elite Flour will be using a low price entry to market to allow for an aggressive value
proposition to their customers. We will be pricing close to bulk-international pricing, but also
allow larger North American customers access to this pricing. These customers are used to
having to pay a premium to obtain their raw products and will acknowledge our pricing strategy
adds significant value to their business.
The pricing strategy used will apply a price of $68.25 per 25 kg bag of each type of flour. This
pricing will remain constant across all four flour products. Most retail flour producers have
different prices for each product, due to their demand and access to the products. Given AgraElite Flour’s strategic partnerships with farmers in the area, we will not have any issues with
obtaining products required. This will be another great addition to the value proposition
offered, as customers will see this as a more convenient and constant pricing strategy.
Agra-Elite Flour plans to offer an advanced wholesale pricing option to encourage new and
existing customers to purchase larger orders. This pricing strategy will help produce larger
orders, which will drop the gross margin slightly, but end up in much higher revenues from the
larger orders. The pricing strategy can be seen in the table below.
Table 9: Pricing
Price Per Bag
$68.25
$66.25
$64.25
$62.25
$55.00
Bags per order
0-9 Bags
10-19 Bags
20-29 Bags
30+ Bags
Super Sack (equivalent of
40 bags)
Promotion
The products will be promoted and advertised through business to business marketing tactics.
These are primarily digital such as a website, search marketing, inbound marketing, social
media marketing, and lead generation and analytics. There will also be non-digital marketing
utilized as well. This will be discussed in more detail below in section 5.2 Marketing Strategy.
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Agra-Elite Flour 2016
Place
This product will be sold online on the company website, through phone sales, and at trade
shows. The product is all produced and stored on location near Vanscoy, Sk. It is shipped out
from the plant delivering in 2-4 weeks from the time of an order placed. The product is shipped
out in Agra-Elite Flours delivery van and delivered directly to the buyer’s location.
5.2 Marketing Strategy Tactics
The marketing strategy is built around business to business marketing to build a customer
network and database. This involves a marketing blitz in years 1-3, followed by a reduction to
about half the marketing in years 4 and 5. The idea is to recruit customers through awareness
campaigns and marketing in years 1-3. Then upon obtaining these customers, the recruitment
efforts will be cut back and a focus on maintaining customer satisfaction will become more
apparent. When the customer network has been developed, it is much easier to reach out to
them regarding new products, sales, specials, and anything else that may increase or maintain
sales.
The business-to-business marketing strategies we will use are primarily search engine
marketing, website marketing, inbound marketing, social media marketing, and through lead
generation and analytics. These marketing strategies align best with Agra-Elite Flour’s sales
targets and will prove to recruit our customers best.
5.2.1 Website Marketing
The central hub of our marketing strategy is to have our current customers and future
customers visit our website. The website must be an effective use of our customer’s time. The
website will offer detailed information on all the products offered by Agra-Elite Flour. The
website will contain a blog that is updated daily with the current news and events in regards to
pulse flours, pulse industry, and gluten free food markets. This will drive customers to our site
more frequently to stay up to date with the current news and events in the industry. The
website will also include the purchasing function for customers to make their flour orders
online quick and easy. When customers visit the ordering screen, or the blog they will be
prompted to sign up for an account. This will allow us to retain customer information of those
who visit the site, and help develop our customer network. The website will contain a feedback
option in which customers can offer feedback on what they like or do not like, as well as offer
suggestions as to what they think we could change. It is extremely important that the website is
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Agra-Elite Flour 2016
professional, credible, and offers all information our customers need to establish a strong sense
of the way we operate and our principles. The website is the central hub of the business for
customers to understand the company and products, it is extremely important it is maintained
diligently. To understand if the website is serving the customer’s needs we will be consistently
asking ourselves 7 questions when analyzing the website:
-
Is the site credible?
Is the site trustworthy?
Is this a professional company?
Is this company stable?
Is this a company I could work with?
Does this site answer my questions?
Am I in the right place?
If any of these questions do not leave us feeling that the customer will answer yes, changes will
be made in that regard to ensure that the site maintains its effectiveness.
5.2.2 Search Marketing
Through the use of search engine optimization (SEO) marketing we will aim to target our
customers and attract them to our website. Given this is a B2B marketing plan, the search
volumes are lower but through effective use we will be able to target a tightly-knit market.
Google Adwords will be used as a search-marketing tool as well, as we can even further target
our customers this way.
5.2.3 Inbound Marketing
Inbound marketing is using content to attract customers to our business through different
stages of the purchasing tunnel. In Agra-Elite Flour’s case this will be the use of the website
blog, Trade Shows, social media marketing, videos and SEO’s. As talked about previously the
website blog will be updated daily with current news on pulse flours, pulse industry, and gluten
free food market.
Agra-Elite flour will have its marketing and sales rep attending 12 trade shows per year in years
1-3, and 6 per year in years 4-5. At these trade shows we will have a booth, with posters that
accurately depict Agra-Elite Flour’s products and value propositions to customers. The
marketing and sales rep will have all the up to date information on pricing, delivery dates, and
purchases. The rep will hand out brochures to customers, and have as many prospective
customers provide there information (email and phone) so we can add them to our customer
database. This will be a very effective form of inbound marketing, as we will have some of our
most knowledgeable staff there to answer any and all questions customers may have.
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Andrew Ardell
Agra-Elite Flour 2016
SEO marketing will be an effective inbound driving force as noted before. As well as social
media marketing through LinkedIn and Facebook, utilizing these platforms we will be able to
drive customers to our website; this will be discussed in section 5.2.4. We will also post videos
of major production practices from milling and shipping products to harvesting the raw product
in the fields. This will show our customers how their products are made, and where they are
coming from.
5.2.4 Social Media Marketing
Agra-Elite flour will use two main types of social media marketing: Facebook and LinkedIn. We
will have a public and a private Facebook page. The public Facebook page will be for any
customers inquiring about our company, where we are located, and what we do. We will post
information about products offered and major production goals along the way. This is an
excellent place to post videos and pictures as well. The public site will drive these prospective
customers to our website for more information, in hopes they will provide their information to
us to be added to our customer database. The private Facebook page will be a page for people
currently in our customer database. They will have to be accepted into the group by our
marketing staff. This page will release information on specials or promotions that includes
semi-proprietary information like pricing. This type of information we don’t want released to
the general public but just to our current customer base. We will also be sending out the same
information via email to our customers in our database.
We will create a LinkedIn business profile using the premium business option. Our sales and
marketing staff will also have personal LinkedIn profiles made. The business profile will post
information about our products, as well as current information about the pulse flours, pulse
industry, and gluten free food markets that pertain to our business. This will allow current and
prospective customers to follow our business and the industry’s activities. In doing this we will
be able to see who is interested in our business and contact them directly. Currently LinkedIn is
widely used by many successful companies to update customers on many different aspects of
the business from CSR activities to production. It is essential we have a strong LinkedIn
presence.
5.2.5 Lead Generation and Analytics
Lead generation and Analytics is a bit of a liaison between social media marketing, search
marketing, inbound marketing and website marketing. These marketing strategies are used to
generate leads that will build the customer database. The goal of search engine marketing,
inbound marketing, and website marketing is to connect with the customers and obtain their
information so we can then send them information on new products and promotions.
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Agra-Elite Flour 2016
We will also be pushing sales of products at this time, but we want to ensure we make the
connection. Through trade shows, inbound marketing strategies, SEO’s, and our website we will
drive customers to purchase our products through the website while building a customer
database.
Some extra lead generation strategies that will take place is cold calling to set up meeting with
prospective customers about our products. These customers will be considered by our sales
and marketing personal via web searches, or LinkedIn. They will be contacted to find out if they
currently use products our company produces or if they might use them in the future. If the
answer to this question is yes then our marketing and sales personal will set up a time to meet
with their team and discuss further how Agra-Elite Flour can meet their pulse flour
requirements. The sales and marketing personal will also focus on nurturing current
relationships with customers in the database, and provide meetings and discussions to ensure
we are meeting their pulse flour requirements.
5.2.6 Marketing Strategy Conclusion
To conclude the marketing strategy section we will again highlight the main goals of the
strategy. The marketing strategy end goal is to create sales, but there are a few main steps
along the way for this to happen. In all of the marketing strategies used, the goal is sales but
also it is equally as important to obtain prospective customer information to add to our
customer database. Whether its social media marketing, inbound marketing, search marketing
or website marketing we will be pursuing customer’s information (email and phone) to build
our database. When the database is built it is much easier to reach out to our customers
through emails and calling. This in turn is why we estimate the marketing costs to decrease in
years 4-5. It is in these years that we can market through email and the website more
effectively now that we have a way to contact our target market directly and easily. This can be
seen depicted in the diagram below.
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Andrew Ardell
Agra-Elite Flour 2016
Sales and Marketing
Team
Marketing Strategy
33
MBA 992 – Venture Management Business Plan
Customer Database
Andrew Ardell
Agra-Elite Flour 2016
5.3 Marketing Budget
Table 10: Marketing Budget
Marketing
Costs
Sales Meetings
(30 per yr)
Fuel
Food
Hotel
Miscellaneous
Total Annually
Trade Shows
Weekly
Year 1
Year 2
Year 3
Year 4
Year 5
30
$ 300.00
$ 300.00
$ 300.00
$ 100.00
$ 30,000.00
$9,000
$9,000
$9,000
$3,000
$30,000
$9,000
$9,000
$9,000
$3,000
$30,000
$9,000
$9,000
$9,000
$3,000
$30,000
$9,000
$9,000
$9,000
$3,000
$30,000
$9,000
$9,000
$9,000
$3,000
$30,000
Each show
$6,696.00
12 shows/year
$80,352.00
$80,352.00
$80,352.00
$80,352.00
$40,176.00
$40,176.00
Cell Phones
$2,400.00
$2,400.00
$2,400.00
$2,400.00
$2,400.00
$2,400.00
Computers (2)
$1,000.00
$1,000.00
$1,000.00
$1,000.00
$1,000.00
$1,000.00
Social Media
Google
AdWords
$$195,000.00 $195,000.00 $292,500.00 $195,000.00 $97,500.00
LinkedIn
$12,000.00
Total Marketing Costs
$48,750.00
$12,000.00 $12,000.00 $12,000.00 $12,000.00 $12,000.00
$320,752
$418,252
$320,752
$183,076
$134,326
5.4 Sales Projections
Table 11: Sales Projections
Year
25 Kg Bags Sold Per year
Price Per Bag
Revenue per Product Line
Yellow Peas
Lentils
Soy Beans
Chickpeas
34
Financial Projections
2017
2018
13750
17875
68.75
70.13
$141,796.88
$378,125.00
$141,796.88
$283,593.75
$188,022.66
$501,393.75
$188,022.66
$376,045.31
MBA 992 – Venture Management Business Plan
2019
21450
71.53
$230,139.73
$613,705.95
$230,139.73
$460,279.46
2020
23595
72.96
$258,216.78
$688,578.08
$258,216.78
$516,433.56
2021
24774.75
74.42
$276,550.17
$737,467.12
$276,550.17
$553,100.34
Andrew Ardell
Agra-Elite Flour 2016
Revenue Total
Total Cost of Goods Sold
Total Expenses
Taxes
Net Income
$945,312.50
$368,671.88
$704,734.54
$ $(128,093.91)
$1,253,484.38
$488,858.91
$868,078.21
$ $(103,452.75)
$1,534,264.88
$598,363.30
$830,565.88
$ $105,335.69
$1,721,445.19
$671,363.62
$731,864.45
$24,000.77
$294,216.35
$1,843,667.80
$719,030.44
$702,001.00
$52,829.55
$369,806.82
6.0 Accounting & Financial Plan
6.1 Financial Structure
The financial structure of the company would be composed of 45% equity and 55% bank debt.
The debt financing will be obtained through farm credit Canada at a rate of 6.25%. This relates
to a $250,000.00 equity investment, and $308,770.00 Debt investment to the company. The
debt will be paid off over a period of 10 years. No additional debt is planned to be acquired in
the following 5 years. An operating line of credit of $250,000.00 will need to be acquired to
help deal with liquidity and solvency issues in the first 1-3 years.
Bank debt
31%
Bank debt
Equity
Equity
69%
Figure 12: Debt to Equity
6.2 Capital Budget
The facility will operate in a location near Vanscoy, Saskatchewan in on a 4-acre parcel of land
with a new building constructed on it. The building will be constructed at a cost of $171,400.00
and include plant equipment inside valued at $181,250.00. The plant equipment will all be
purchased new and has been sourced by an overseas vendor to be shipped here. The
remainder of the capital budget is $189,725.00 and contains everything from a company
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MBA 992 – Venture Management Business Plan
Andrew Ardell
Agra-Elite Flour 2016
vehicle, delivery van, to office supplies and equipment, and spare plant parts and equipment.
The capital budget also includes a $50,000.00 float to help with any inventory purchasing and
holding issues. The total capital budget comes out to $542,375. A 20% contingency was then
added to bring the total capital allowance to $650,850.00. This is the total amount to be split
between the debt and equity financing.
6.3 Financial Analysis
6.3.1 Revenue Estimates
Agra-Elite Flour has one source of revenue only, the selling of lentil, chickpea, yellow pea, and
soybean flour. The sales of these products are split up in the following way:
Table 12: Proportionate Sales Per Product Type
Pulse Type
Percent of Sales
Lentil
40
Yellow Pea
15
Chickpea
30
Soybean
15
The table below outlines the financial projections we can expect in the first five years of
operations.
Table 13: Financial Projections
Year
25 Kg Bags Sold Per year
Price Per Bag
Revenue per Product Line
Yellow Peas
Lentils
Soy Beans
Chickpeas
Revenue Total
Total Cost of Goods Sold
Total Expenses
Taxes
Net Income
36
Financial Projections
2017
2018
13750
17875
68.75
70.13
$141,796.88
$378,125.00
$141,796.88
$283,593.75
$945,312.50
$368,671.88
$704,734.54
$ $(128,093.91)
$188,022.66
$501,393.75
$188,022.66
$376,045.31
$1,253,484.38
$488,858.91
$868,078.21
$ $(103,452.75)
MBA 992 – Venture Management Business Plan
2019
21450
71.53
2020
23595
72.96
2021
24774.75
74.42
$230,139.73
$613,705.95
$230,139.73
$460,279.46
$1,534,264.88
$598,363.30
$830,565.88
$ $105,335.69
$258,216.78
$688,578.08
$258,216.78
$516,433.56
$1,721,445.19
$671,363.62
$731,864.45
$24,000.77
$294,216.35
$276,550.17
$737,467.12
$276,550.17
$553,100.34
$1,843,667.80
$719,030.44
$702,001.00
$52,829.55
$369,806.82
Andrew Ardell
Agra-Elite Flour 2016
The figure below illustrates the trends we can expect from revenues, COGS, and net income.
$2,000,000.00
Agra-Elite Flour Trend Analysis
$1,500,000.00
Revenue Total
$1,000,000.00
COGS &
Expenses &
Taxes
$500,000.00
$1
2
3
4
5
$(500,000.00)
Figure 13: Sales Trend Analysis
It can be seen from the trend analysis that in years one and two the business will experience
negative net income. This is primarily due to the high marketing cost in these years in obtaining
the customer network as noted in section 5.2 Marketing Strategy. In years three to five the
business will begin to experience higher sales and a significant drop in marketing costs that will
push the net income into a profitable margin.
Table 14: COGS, Gross Profit, Net Income Expectations
Sales
2016
945,313
2017
1,253,484
2018
1,534,265
2019
1,721,445
2020
1,843,668
COGS
368,672
488,859
598,363
671,364
719,030
Gross Profit
Net Income
576,641
(128,094)
764,625
(103,453)
935,902
105,336
1,050,082
294,216
1,124,637
369,807
6.3.2 Revenues Per Product Line
The table below represents the revenues per product type we can expect in the first five years
of operations.
Table 15: Revenue Per Product Type
Yellow Peas
Lentils
37
15%
40%
2017
$141,796.88
$378,125.00
2018
$188,022.66
$501,393.75
2019
$230,139.73
$613,705.95
MBA 992 – Venture Management Business Plan
2020
$258,216.78
$688,578.08
2021
$276,550.17
$737,467.12
Andrew Ardell
Agra-Elite Flour 2016
SoyBeans
Chickpeas
Total Revenue
15%
30%
100%
$141,796.88
$283,593.75
$945,312.50
$188,022.66
$376,045.31
$1,253,484.38
$230,139.73
$460,279.46
$1,534,264.88
$258,216.78
$516,433.56
$1,721,445.19
$276,550.17
$553,100.34
$1,843,667.80
The figure below illustrates the revenues per product that can be expected in the first five years
of operations.
Revenue Per Product Line
$800,000.00
$700,000.00
$600,000.00
$500,000.00
Yellow Peas
$400,000.00
Lentils
SoyBeans
$300,000.00
Chickpeas
$200,000.00
$100,000.00
$2017
2018
2019
2020
2021
Figure 14: Revenue Per Product Line
6.4 Financial Performance
The initial capital expenditure of $650,850.00 is split as 31% bank debt and 69% equity as
mentioned before. For an equity investment of this type the investors will want to see a return
on investment of roughly 25% or higher to take on this level of risk. The table below outlines
the financial performance indicators that can be expected from this investment.
Table 16: Financial Performance of Investment
Equity Investment
Average 5YearIncome
Net Present Value
IRR
38
$450,000.00
$111,581.00
$1,233,099.5
37.2%
MBA 992 – Venture Management Business Plan
Andrew Ardell
Agra-Elite Flour 2016
Net Payback
$7,012,982.00
The average 5-year income is $111,581.00. This includes negative net incomes in years one and
two of the venture, with the net income becoming positive in years three to five. The present
net value of the equity investment is valued at $1,233,099.50. This value may seem high to
some investors but I believe it is reasonable for the risks being taken on during this venture.
Internal rate of return (IRR) is used in capital budgeting as a metric to measure the profitability
of potential investments. The IRR of this venture is 37.2%. Which also may seem high but it is
again fairly reasonable considering the risk in this venture weighed against the potential profits.
6.5 Break Even Analysis
In this section I will describe the key performance metrics for Agra-Elite Flour to meet these
financial estimates. The break even analysis is based on how many 25 kg bags of pulse flour will
be required to be sold each day to achieve the projected sales revenues. The table and figure
below outline the expectations for the base case in bags sold per day each year, as well as the
number of bags required to be sold each day each year to break even.
Table 17: Break Even Analysis
Base Case Bag/week
Breakeven Bag/week
39
264
397
344
461
MBA 992 – Venture Management Business Plan
413
425
454
353
476
321
Andrew Ardell
Agra-Elite Flour 2016
Net Income Breakeven
Number of Customers per day
600
461
413
397
400
425
300
200
476
454
500
353
344
321
264
100
0
1
2
Base Case Bag/year
3
4
5
Year
Breakeven Bag/year
Figure 15: Break Even Analysis
It can be seen that the break-even analysis reflects the net income estimates for the first five
years of operations. As seen in section 6.3.1, Agra-Elite Flour expects a negative net income in
the first two years of operations with year three being the year net income moves to a positive
value. This is reflected in the figure above, as the base case for sales is lower than the breakeven case for years one and two. In year three the base case surpasses the break-even case
that translates into a positive net income.
For an in depth financial analysis of the venture please refer to the financial model submitted
with business plan.
6.6 Sensitivity Analysis
The sensitivity analysis outlines the expectations for any variance in the sales estimates. For
example, if you sell more or less product than expected. The variable for the sensitivity analysis
is based on the amount of bags sold per day. The growth estimates remain constant between
the different cases, with the amount of bags sold per day in year 1 being the varying factor.
Table 18: Sensitivity Analysis
Bags Per Week
216
240
40
Plant
Capacity
8.4%
9.4%
Average 5-Year Net
Income
$(34,162.00)
$41,336.00
Net Payback
$3,621,290.00
$5,291,660.00
MBA 992 – Venture Management Business Plan
IRR
19.6%
28.3%
Year 5 Owners
Compensation
$104,622.00
$104,622.00
Andrew Ardell
Agra-Elite Flour 2016
264
288
313
10.3%
11.2%
13.1%
$111,581.00
$181,140.00
$248,562.00
$7,012,982.00
$8,865,347.00
$10,543,944.00
37.2%
46.8%
56.3%
$204,622.00
$298,319.00
$451,226.00
It can be seen that with just a slight change in bags sold per day it creates a large variance
either positively or negatively on the financial performance of the venture.
6.6.1 Low Sales Scenario
The worst-case scenario analyzed is sales down as low as 216 bags sold per week (45 bags per
day). In this case, the venture is not feasible as the average 5 year net income is negative with
significant negative cash flows. This results in a low IRR of 19.6%, which would be too low for
equity investors to be willing to take on the risk of investing in this venture.
The next lowest scenario, selling 240 bags per week (50 bags per day), results in a low but
positive average 5-year net income. The business would incur significant negative cash flows,
but would be able to weather the storm using the operating line of credit at this time. The IRR
of this scenario is 28.3%, which is high enough to attract equity investors. The first five years of
this venture may be a little tight financially but upon establishing a customer base the benefits
are substantial in the future years.
6.6.2 High Sales Scenario
In both of the high sales scenarios the IRR is substantially higher than the base case. The
average 5 year net income is significantly larger as the fixed costs are being covered much
easier leaving the business with more cash on hand. These scenarios are extremely positive, as
it would foster expansion of the business through building a second facility in another province
much sooner than expected.
6.7 Risk Analysis
The table below outlines some significant risks that Agra-Elite Flour can expect to face in the
first five years of operations as well as the mitigation’s to these.
Table 19: Risks and Mitigation Strategies
Risk
Raw Product Quality
Low-Med Barriers to Entry
Sales Volumes
41
Mitigation
Raw Product Producer Relationships
First in Space
Producer Relationships
Following through with Marketing Plan
MBA 992 – Venture Management Business Plan
Andrew Ardell
Agra-Elite Flour 2016
Liquidity/solvency Problems
Product Quality
Price Fluctuations
Operating Line of Credit
HACCP & ISO Certified
Estimates of raw product made at highest price historically
Strategic Product producer relationships
The strategic relationships with the raw product producers will primarily mitigate these risks. By
allowing each of the four farmers to own 10% of the venture through equity investment, AgraElite Flour can protect its raw product prices in the event of a large price fluctuation. Having
these strategic relationships also protects Agra-Elite Flour from raw product quality issues as
the farmers are closely tied to the performance of the company and will ensure they are doing
the necessary due diligence to maintain the high quality of the products they are growing for
the business.
7.0 Conclusion
After thoroughly analyzing internal and external factors that Agra-Elite Flour will face in the first
five years of operations it is apparent that the business is feasible. In the case the owner of this
plan chooses to proceed it can be used to now obtain the proper equity investment from the
strategic partners – raw product producers. Upon receiving the equity investment, the plan can
then be provided to debt financing institutions to obtain the necessary financing. This venture is
scaled as a medium to high risk with a potential for a high IRR. I strongly advised serious
consideration to any investor wishing to pursue a potentially profitable business.
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MBA 992 – Venture Management Business Plan
Andrew Ardell
Agra-Elite Flour 2016
Works Cited
Agriculture and Agri-Food Canada. (2015, 12 08). Gluten Free in the Marketplace. Retrieved 04
10, 2016, from Agriculture and Agri-Food Canada: http://www.agr.gc.ca/eng/industry-marketsand-trade/statistics-and-market-information/by-product-sector/processed-food-andbeverages/reports-and-resources-food-processing-innovation-and-regulations/gluten-freeclaims-in-the-marketplace/?id=1397673574797
Barber, J. (2012, 01). Farm Forum. Retrieved 05 25, 2016, from Canadas Pulse Industry Adapts
to meet Demand: http://farmforum.ca/article/canada%E2%80%99s-pulse-industry-adapts-tomeet-demand/
CIGI. (2014). CIGI. Retrieved 5 25, 2016, from Development of Gluten Free Products using pulse
Ingredients: https://cigi.ca/wp-content/uploads/2015/01/PF-Gluten-Free-1Pager_Final_14102801.pdf
Pulse Canada. (2015). Pulse Canada. Retrieved 05 25, 2016, from Pulse Industry:
http://www.pulsecanada.com/pulse-industry
Statistics Canada. (2015). Pulses in Canada. Retrieved 05 25, 2016, from Statistics Canada:
http://www.statcan.gc.ca/pub/96-325-x/2014001/article/14041-eng.htm
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MBA 992 – Venture Management Business Plan
Andrew Ardell
Agra-Elite Flour 2016
Appendix A
Nutrition Content of Wheat, Quinoa, and Pulse Flours:
Figure 16: Wheat Flour Nutrition
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Andrew Ardell
Agra-Elite Flour 2016
Figure 17: Quinoa Flour Nutrition
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MBA 992 – Venture Management Business Plan
Andrew Ardell
Agra-Elite Flour 2016
Figure 18: Lentil Flour Nutrition
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MBA 992 – Venture Management Business Plan
Andrew Ardell