Business Plan for a Small Business - Essay Example

PLAN SUMMARY This plan contains background and brief of business, vision and objectives, a 3-year profit forecast, business strategies to be employed to actualize the targets, and possible risks and strategies of overcoming them. Background of Business All Stars Farms is presently solely owned and financed by personal savings. The company is registered with the local authorities under the small business category. This plan is part of the company’s business expansion plans. The owner intends to revive his father’s moribund company that has been marked for delisting at the Corporate Affairs Commission (CAC)—the national regulatory body in charge of registration and monitoring of limited liability companies operating at national and international levels. A board of directors comprising 3 directors with limited share holdings will be reconstituted to meet the requirements of CAC. BUSINESS LOCATION All Stars is entirely into agricultural production. The company purchased a plot of land in a village in Toro Local Government Area of neighbouring Bauchi State for the construction of fish ponds, livestock house, and 2 small warehouses. The company’s farm is located in another village in Bassa Local Government Area of Plateau State. The choice of the location was influenced by factors such as availability of cheap land and proximity to natural stream for perennial source of water. An administrative office is located in the city-centre of Jos. Except for animal feed concentrates and fertilizer, all other inputs and supplies are sourced locally within the village community. VISION To be among the top ten producers, processors and marketers of fruits, vegetables and animal products in the Middle Belt region of Nigeria in the next 10 years. OBJECTIVES a. To be producing 10 tonnes of fresh carrot, cabbage, egg plant, cucumber, strawberry and mangoes annually. b. To generate profit for the expansion and sustenance of the business. c. To provide employment for at least 30 workers in the next 3 years, and at least 75 workers in the following 7 years. d. To empower youth by providing cheap and good fingerlings for starting small farms. e. To be a market outlet for farm produce of peasants. BUSINESS FINANCING The business is currently financed using personal savings. Thus far over $8,700.00 has been invested from this source. To expand the business, however, the company has sought for a loan of $12,711.00 from 2 banks. This loan is payable in one year. The interest rate on the loan component from a private commercial bank ($8,474.50) is 17% while that on the credit component from an Agricultural and Cooperative bank ($4,236.50) is 8%. The transformation of the business into a Limited Liability Company will require constitution of a board of director. Each member of the board is expected to have limited number of shares as provided by law. This will also raise the running capital for the business. BUSINESS DESCRIPTION All Stars Farms is essentially into agribusiness. It has 3 major sections: the fish farm, a livestock and vegetable farm. The company’s production is seasonal and mainly for the open market. There is no plan for processing in this phase of the company’s expansion. Therefore, profitability of the business largely depends of accurate timing of sales at the peak of the season. The company has already purchased a land and constructed ponds, small warehouses and livestock house. Rent only covers land for growing vegetables and it is paid for only six months. Only payroll tax is paid. 5% of the wages of all staff is deducted and remitted on monthly basis. PRODUCTS 1. Vegetables i. Carrots ii. Cabbage iii. Cucumber iv. Strawberry 2. Cat Fish (Fresh) 3. Cows (live) MARKET ANALYSIS Generally, the market for vegetables and meat is increasing with the general expansion in the size of the middle-class in Nigeria. As the economy continues to grow (IMF estimates 9% growth and single digit inflation1), the middle class will continue to expand and there will increase in the demand for food items which will give families and individuals balanced diets. The unique altitude feature of Plateau State and adjoining plains provides a favourable climate and vegetation for growing tropicalized species of fruits, vegetables and abundant grazing land for livestock and less Tse-tse fly. This has made farm produce from the state more marketable. Thus, produce from our farms can readily be absorbed in the market. For now, our customers are dealers, who serve as middlemen in the business chain. However, as our company grows, we would secure direct market for supplies to Hotels and other food processing industries. FORECAST FOR COST OF SALES, SALES REVENUE AND FIXED EXPENSESFOR THE FIRST FINANCIAL YEAR (2008/09) Cost of sales, Sales Revenue and Fixed Expenses for Financial Year 2008/09 ( USD ) MONTH Jun. Jul. Aug. Sept Oct. Nov. Dec Jan. Feb. Mar. Apr. May Total Sales Revenue 1608 2118 8305 1002 1694 1016 9152 296 25191 Cost of Sales 3542.4 279.66 237.29 313.6 288.14 398.3 406.78 296.61 211.6 67.7 6042.1 Fixed Expenses Wages 350 350 350 350 350 350 240 240 170 170 170 170 3260 Payroll Tax 17.5 17.5 17.5 17.5 17.5 17.5 12 12 8.5 8.5 8.5 8.5 163 Rent 301.69 301.69 301.69 301.69 301.69 301.69 200 200 200 200 200 200 3010.1 Depreciation 1455 1455 Bank Interest 1006.9 1006.9 Insurance 1322 1322 Utilities 38 38 38 38 38 38 38 38 38 38 38 38 456 Telephone 32 32 32 32 32 32 32 32 32 32 32 32 384 Miscellaneous 30 30 30 30 42.5 42.5 42.5 42.5 42.5 42.5 42.5 42.5 460 769.19 769.19 769.19 769.19 781.69 781.69 564.5 564.5 491 491 491 4274.9 11517 11517 PROFIT* ACCOUNT FOR FINANCIAL YEARS 2009-2011 ( USD ) FINANCIAL YEAR 2008/09 2009/10 2010/11 Sales Revenue 25191 31671 47780 Cost of Sales 6042.1 7998.23 13006.72 Fixed Expenses 11517 13001.09 16825.39 Profit 7631.9 10671.68 17947.89 *Profit= Sales Revenue – (Cost of Sales + Fixed Expenses) (McKeever, 2007: 103; O’Donnell, 1991: 131) BUSINESS STRATEGY FOR ACHIEVING 135.270% GROWTH IN NET PROFIT To achieve the projected 135.17% annual growth in profit after tax, the company would have to produce or harvest at slightly odd periods. Our farming season for the vegetables begins with the rains. Normally, vegetables are grown mostly after the rains and prices collapse due surplus supplies in the market. Our company intends to use improved varieties that can stand the vagaries of the weather during the rainy season. For the fish and livestock farms, cost of animal feed will be less during rainy season due to abundance of grasses and low prices of cereals used in producing feed. The animal dung collected at the end of the first year will augment fertilizer used in the farm. Apart from ensuring environmental sustainability; the mixed farming practice will reduce the cost of sales and supplies by about 13-25% thereby increasing the sales revenue and ultimately the profit margins. The company will rely largely on casual labour and will take advantage of the cheap and available labour in the rural area. Also, the company intends to obtain only 50% of the initial loan after the first year and subsequently (in the third financial year) finance business with the profit generated. The company will approach the banks after the first 3 years for loan to finance further expansion (including processing) and diversification. The expansion plan also involves exploring other market outlets instead of relying on open market. The company would then employ capable hands that can aggressively market the company’s products and secure contracts for supply of fresh vegetables, meat and diary products. RISKS AND STRATEGIES FOR OVERCOMING THEM The major risks involved in this business is the spread of crop and animal epidemic, and flooding (in the case of vegetable farm). Producing during rainy season reduces the first risk considerably while locating the farm some metres away from the bank of the stream reduces the second risk. The vegetable farm is rain-fed and tropical rains usually have high variability. This risk can be averted. The company has already purchase pumping machines. In case of dry spells, the water pumping machines would be used to water the farm using water from the stream. Also the company has picked an insurance policy that covers all buildings, appliances and machines. REFERENCE Fullen, Sharon L. and Podmoroff, Dianna How to Write A Great Business Plan for Your Small Business in 60 Minutes or Less Ocala, Atlantic Publishing Company, 2006. Preview available at http://books.google.com/books?id=01pvhctcbOAC&printsec=frontcover&dq=how+to+write+a+business+plan&ei=eAMOSJ3dNYz8tQOn6bGLBg&sig=mXrA5AEnIaRu-zBmj2nCpuc5DIQ McKeever, Mike P. How to Write A Business Plan Berkeley, Nolo Press 2007. Preview available at http://books.google.com/books?hl=en&lr=&id=Ig8JgC6aXE4C&oi=fnd&pg=PA1&dq=how+to+write+a+business+plan+mckeever+2007&ots=GbB1SWG3-6&sig=lB2lTwXzODOmUwu3ODFEZpy7XzI O’Donnell, Michael Writing Business Plans That Get Results Columbus, McGraw-Hill, 1991. Preview available at http://books.google.com/books?hl=en&lr=&id=vHFmPKbEE24C&oi=fnd&pg=PR7&dq=writing+business+plan+Michael+O%27Donnell&ots=rKQ_hAw9u6&sig=xH_dXySEiTL9PoRvZPmW4YLuWxU#PPA63,M1 Read More