BUSINESS PLAN

BUSINESS PLAN

FOR

BUDS OF THE SEVENTH RAY HEMP FARM AND STORE

CHEVEZ M. MOORE M.S.

SEPTEMBER 9, 2015

Executive Summary

Buds Of The Seventh Ray Hemp Farm and Store is an exciting new company that meets an undenialable and sustainable need for quality grown and sold hemp in Oregon. The close proximity to Portland ensures a steady flow of customers. BSRHF and Store is a start-up grower and distributor of exotic and local hemp for medical and individual consumers. BSRHF and store will be located in Troutdale, Oregon and serves the whole Willamette Valley and others. BSRHF’s and store objectives are to develop a product-based company whose goal is to exceed customer’s expectations, increase production efficiency by 10% a year, and lastly, develop a sustainable farm and store business, able to survive off their cash flow.

Products

BSRHF and Store will grow and sell a mix of exotic hemp marijuana, oils, and bakery medical green buds. These buds, oils and bakery products will include but are not limited to: red, blue,yellow, purple, white, brown, dark and light greens, orange, and rainbow colors and flavors. These buds will be grown for use in recrational and medical uses, purchased by the end consumer as well as by medical establishments who then prescribe it to their patients.

The Market

BSRHF and Store has decided to target two distinct market segments, individual customers and the medical communities. The individual customers will purchase buds, oils and bakery products from our farm and store, and at the Tuesday and Saturday Farmer’s Market as well as online. This segment is growing at 12% and has 12,000 potential customers. The second segment is local clinics. This market is smaller at only 28 potential customers, but is more consistent in demand throughout the year.

Competitive Edge

BSRHF and Store has two competitive edges that will help them maintain strong growth rates, increasing their market penetration. The first edge is quality. BSRHF and Store prides themselves on the high quality of exotic hemps, oils and bakery products. Marijuana that do not meet BSRHF and Oregon State’s high standards of quality are rejected as imperfects and go to a not-for-profit co-op. BSRHF and Store’s second competitive edge is our flexibility. The entire farm has been set up to allow them to change crops or scale existing crops to meet demand. This is highly unusual as most farms are unable to change crops mid year.

Management

BSRHF and Store is led by Chevez M. Moore, M.S. whom initially got her start in growing while working and studing agricultural, and landscaping at a greenhouse while in SpringDale Job Corp. After college, Chevez started her own landscape company. This experience is what solidified Chevez’s desire to continue working in an agricultural capacity. Soon after her experience at the small seed Company she decided to enroll in Warner Pacific College Master of Management and Orgainzational Leadership Program. Chevez’s Masters provided her with requisite detail and skills to develop her own farm business. Chevez has also smoked Marijuana for 30 years and knows her stuff.

1.1 Objectives

The objectives for the first three years of operation include:

  1. To create a product-based farm/company whose goal is to exceed customers’ expectations.
  2. The utilization of excotic buds, oils and bakery products in at least 20% of the farmers markets in Oregon as listed in local paper’s reviews.
  3. To increase the efficiency of our production by 10% a year.
  4. To develop a sustainable farm, and store surviving off its own cash flow.

1.2 Mission

BSRHF and Store’s mission is to provide the highest-quality hemp,oils and bakery products. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall in to place. Our services will exceed the expectations of our customers.

Company Summary

Buds of the Seventh Ray Hemp Farm and Store’s, soon to be located in Portland and Troutdale, OR, is a grower and seller of exotic salad field greens. BSRHF grows a wide variety of field greens including red, yellow, white, purple,green, orange, blue hemp, oils and bakery products. BSRHF sells the greens both at farmer markets as well as direct to stores and clinics.

The business will be based out of Chevez home. The office will be within her home and the greenhouse will be on her adjoining 5 acres of land.

2.1 Company Ownership

BSRHF and Store will be a sole proprietorship with Chevez as the founder and owner. Chevez hopes to get funding for the business with a $50,000 personal family investment loan with exit/repayment initially scheduled for year five.

2.2 Start-up Summary

Mixed Greens Salad Gardens’ start-up costs will include all the equipment needed for the home-based office, the construction of the greenhouse and all the necessary equipment, and other essentials for growing.

The home office equipment will be the largest chunk of the start-up expenses. This equipment includes a computer system, fax machine, office supplies, cellular phone, and pager. The computer should have at least a 500 megahertz Celeron/Pentium processor, 64 megabytes of RAM (preferably 128), 6 gigabyte hard drive, and a rewritable CD-ROM for backing up the system. The home office will also require a few pieces of furniture such as a desk, chair, and book shelf to transform a standard room into an office. Lastly, an additional land phone line will be required.

The greenhouse will need the following equipment: a 25′ x 100′ greenhouse structure made out of poly carbonate, a ventilation system, a heater, a mister system, supplemental lighting, fertilizer injector, pruners, pots, trays, soil, seeds, and assorted chemicals.

Please note that of the $25,300 of long-term assets, $20,000 will be depreciated straight line for 27.5 years (real estate) and the remaining $5,300 will be depreciated on a seven year straight-line schedule.

Start-up Requirements

Start-up Expenses

Legal

$300

Stationery

$200

Insurance

$200

Untilities Upgrades

$150

Rent

$250

Expensed Computer Equipment

$3,500

Other

$500

Total Start-up Expenses

$5,100

Start-up Assets

Cash Required

$34,700

Start-up Inventory

$0

Other Current Assets

$500

Long-term Assets

$25,300

Total Assets

$60,500

Total Requirements

$65,600

Start-up Funding

Start-up Expenses to Fund

$5,100

Start-up Assets to Fund

$60,500

Total Funding Required

$65,600

Assets

Non-cash Assets from Start-up

$25,800

Cash Requirements from Start-up

$34,700

Additional Cash Raised

$0

Cash Balance on Starting Date

$34,700

Total Assets

$60,500

Liabilities and Capital

Liabilities

Current Borrowing

$5,000

Long-term Liabilities

$0

Accounts Payable (Outstanding Bills)

$0

Other Current Liabilities (interest-free)

$0

Total Liabilities

$5,000

Capital

Planned Investment

Heidi Ponic

$50,000

Investor 2

$10,000

Other

$0

Additional Investment Requirement

$600

Total Planned Investment

$60,600

Loss at Start-up (Start-up Expenses)

($5,100)

Total Capital

$55,500

Total Capital and Liabilities

$60,500

Total Funding

$65,600

Market Analysis Summary

BSRHF will be focusing on two distinct users of greens, individual consumers, and restaurants. The consumer market is seasonal so we will have production shifts during the consumer off season and all of the production will go toward wholesale store distribution. During the spring and the summer BSRHF will be serving both the consumer markets through farmer market stands and the stores through direct distribution.

4.1 Market Segmentation

BSRHF and Store has two distinct customers:

  1. Individual Consumers. This group of people buy exotic salad greens because they have a more sophisticated pallette. Average Americans have been raised on HEMP and this is their green of choice (unfortunately). When people from this class get a little “crazy” they might even try . These people are typically unsophisticated or unadventurous in terms of culinary habits. These are NOT the people BSRHF serves. BSRHF is going after people that appreciate healthier, tastier alternatives to the standby of iceberg lettuce. This group of consumers is more likely to make their own meals instead of going out, appreciates fine dining, and generally is from a higher socio/economic class. BSRHF’s field hemp, oils and bakery products are more expensive than choices like lower grades or homegrown, therefore one can conclude that the consumer typically makes more money if they are willing to pay significantly more for their hemp and hemp products, and second, people with more sophisticated palates typically are more educated.
  2. Clinics Not all clinics use exotic field greens mixes, generally it is a clinic of fine that serves the finer hemp. To be even more specific, it is typically an adventurous American or nouveau cuisine clinic as opposed to a nicer clinicst that appreciates the exotic hemp mix. For what ever reason (probably attributable to demand of their customers), the medical and individual clinics even the finer ones tend to serve “peasant hemp.” The clinic are a year round customer which is helpful to balance the seasonal demand of individual consumers (group 1 above). Another advantage of having the clinic as a customer is that even though they get a better price,

Market Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Potential Customers

Growth

CAGR

Individual Consumers

12% 12,000 13,440 15,053 16,859 18,882 12.00%

Clinic

8% 28 30 32 35 38 7.93%

Other

0% 0 0 0 0 0 0.00%

Total

11.99% 12,028 13,470 15,085 16,894 18,920 11.99%

4.2 Target Market Segment Strategy

BSRHF and Store’s target market segment strategy is fairly easy. Our two different customer groups purchase from two distinct locations so it is quite easy to target them individually.

Individuals. These customers will be buying BSRHF products from the different farmer markets located in Portland, OR. The main one is “The Farmers Market” held downtown twice a week in the spring, summer, and the early autumn. This market gets quite a bit of traffic because there is a nice selection of different farmers and products and it is in a central location in the heart of Oregon. Additionally, there are several other smaller farmer markets that exist in outlining communities. By setting up a booth in these markets, there is already a steady flow of interested customers. There obviously is a fee to set up a stand, but what you get for the fee is all of your marketing taken care of and a line of customers. In addition to individuals frequenting the farmer markets, some restaurants will go there as well. This occurs when a store/farm needs certain ingredients but did not have the time to order it in advance.

Store .BSRHF will target these customers by introducing BSRHF and their products to the restaurants through meetings with the buyers at each restaurant. There are about 25-30 different farmers markets in Oregon that use marijuana in their lives and BSRHF intends to approach these to form long-term relationships.

4.3 Industry Analysis

There are three different types of competitors that BSRHF and Store faces:

  1. Supermarkets. These stores sell a salad greens mix to consumers. The advantage of the supermarket is convenience. There are many supermarkets around the city and they are open many hours during the day. Their disadvantage is price and quality. The quality and variety lower than the standards set by the offerings of BSRHF and other similar local farmers. The cost is higher, usually 15% more.
  2. Similar local farmers. These are very similar operations to BSRHF, sometimes larger and sometimes smaller. There appears to be room in the market for multiple farmers as most of the farmers sell out their products each day at the farmer markets.
  3. Large distributors. An example of this would be Food Service of America (FSA) which buys a wide variety of products and quality of produce from farmers and distributes them to restaurants. The produce is not usually local, and is a few more days older from the field compared with the local farmers. The price is comparable and the quality can be comparable, but not necessarily. The disadvantage of a food distributor is the lack of flexibility relative to a local grower when serving local customers.

Buying patterns are based on the customer’s desires. What is meant by this is that lower-end store(or at least market that are less concerned about quality) will not bother to get greens from local farmers, there is no need for them to. This pattern is similar for the individuals. There are some individuals that are content with the offerings from supermarkets. There are others that appreciate the difference in quality and are willing to schedule a trip to the farmers market to meet their weekly needs.

Strategy and Implementation Summary

BSRHF will be aggressively courting the farmer markets to ensure the ability to have a booth at the markets. Additionally, BSRHF will be aggressive in going after the local restaurants that have a consistent need for the greens. Through an assurance of top-shelf service and superior customer service and reliability,BSRHF will continue to grow its number of clients.

5.1 Competitive Edge

Buds of the Seventh Ray Hemp Farm and Store’s competitive edge has two main aspects: quality and flexibility.

  1. Quality. While the quality of the other local farmers is quite good, Chevez extensive educational background and practical experience  provides her with tools to create a superior product.Chevez is a perfectionist and her striving for perfection will lead BSRHFand Store to developing a product that will be a notch better than the competition.
  2. Flexibility. With BSRHF being both small and local in nature, it will be able to be flexible in meeting customer’s demands. For instance, if a local restaurant has customers that prefer more arugula in their Hemp, BSRHF can rapidly shift production to meet the needs of that customer. Most of the farmers, and all of the distributors, typically have their production schedules set up for maximum yield and are unable to modify crop production very much. Chevez is less concerned about maximizing yield, she is more concerned with pleasing the customer. She believes, rightfully so, that talking care of the customer is the most important thing.

A combination of quality and flexibility will create a sustainable competitive advantage that will allow BSRHFand Store to succeed.

5.2 Sales Strategy

BSRHF’s sales strategy will be based on visibility, consistency, and strategic relationships.

  • Visibility. BSRHFand Store, will need to generate visibility that sets them apart from the other local farmers that sell at the market. This in part will be done through the use of a colorful, distinct booth set-up that stands out among the other farmers. This visibility will create recognition for BSRHF and Store.This is important because the produce of the different farmers appears to be the same. The differences are discovered upon tasting the produce in your home. If BSRHFand Store stands out in terms of the booth appearance, the repeat customer will more easily make the connection between the unusual booth and BSRHF’s product.
  • Consistency. In addition to product consistency, BSRHFand Store will have consistency in regards to their presence at the farmer markets. It is much easier to build awareness and loyalty if people can reliably expect to see BSRHF and Store every week in the same place.
  • Strategic relationships. This will be the key for restaurant sales. As stated before, restaurant sales are a consistent income that help reduce the seasonality of BSRHF and Store sales. Forming mutually beneficial, strategic partnership will be of upmost importance for building a good revenue base.

5.2.1 Sales Forecast

The first month will be used to set up the greenhouse and get things underway. There will not be sales activity until month three when the first greens will be sprouting. Month three will see a steady increase in production and sales, and this will continue until month nine when the consumer sales will be significantly decreasing due to the closing of the farmer markets. From month nine to 16 Mixed Greens Salad Gardens will have an increase in restaurant sales to offset the elimination of the consumer sales. By month 17, restaurant sales will decrease slightly to accommodate for the ramping up of consumer sales again.

Sales Forecast

Year 1

Year 2

Year 3

Sales

Individual Consumers

$23,154 $40,519 $70,908

Restaurants

$58,558 $81,981 $114,774

Total Sales

$81,712 $122,500 $185,682

Direct Cost of Sales

Year 1

Year 2

Year 3

Individual Consumers

$2,778 $4,862 $8,509

Restaurants

$7,027 $9,838 $13,773

Subtotal Direct Cost of Sales

$9,805 $14,700 $22,282

5.3 Milestones

MGSG will have several milestones early on:

  1. Business plan completion. This will be done as a road map for the organization. While we do not need a business plan to raise capital, it will be an indispensable tool for the ongoing performance and improvement of the company.
  2. Greenhouse set-up.
  3. First batch of greens sold.
  4. The end of the consumer season and the ramping up of the restaurant supply cycle.

Milestones

Milestone

Start Date

End Date

Budget

Manager

Department

Business Plan Completion

1/1/2001 1/1/2001 $0

Heidi

N/A

Greenhouse Setup

1/1/2001 2/1/2001 $0

Heidi

N/A

First Batch of Greens Sold

4/1/2001 4/1/2001 $0

everyone

N/A

End of the Consumer Season and the Ramping up of the Restaurant Supply Cycle

9/1/2001 9/1/2001 $0

everyone

N/A

Totals

$0

6.1 Personnel Plan

The staff will consist of Chevez working full time. While the bulk of the time Chevez will spend managing the operation, she will always spend a few hours a week tending to the plants. In addition to all of the general management required for the production of the greens,Chevez will be setting up strategic relationships with local customers.  BSRHF and Store will have to hired two full-time gardeners beginning in the middle of the first month, and will hire a part-time helper by month four. The gardeners will be primarily responsible for the raising of the field buds, while the part-time help will be used to help staff the farmers market booth, store and bakery for the consumers in the selling of the Maijuana.

Personnel Plan

Year 1

Year 2

Year 3

Chevez

$20,000 $20,000 $20,000

Gardener

$15,650 $16,500 $17,500

Gardener

$15,650 $16,500 $17,500

Part-time Baker/store

$0 $9,000 $9,500

Part-time Helper/store

$6,750 $0 $9,000

Total People

4 5 6

Total Payroll

$56,050 $57,000 $70,500

Financial Plan

The following sections will outline the important financial information.

7.1 Important Assumptions

The following table highlights some of the important financial assumptions.

General Assumptions

Year 1

Year 2

Year 3

Plan Month

1

2

3

Current Interest Rate

10.00% 10.00% 10.00%

Long-term Interest Rate

10.00% 10.00% 10.00%

Tax Rate

25.42% 25.00% 25.42%

Other

0 0 0

7.2 Break-even Analysis

The Break-even Analysis below indicates the monthly sales needed to break even.

Break-even Analysis

Monthly Revenue Break-even

$8,294

Assumptions:

Average Percent Variable Cost

12%

Estimated Monthly Fixed Cost

$5,299

7.3 Projected Profit and Loss

The following table will indicate projected profit and loss. Our losses at start-up are evident, as is the turn of the corner in July when we become profitable.

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales

$81,712 $100,500 $122,682

Direct Cost of Sales

$9,805 $14,700 $22,282

Other

$0 $0 $0

Total Cost of Sales

$9,805 $14,700 $22,282

Gross Margin

$71,906 $107,800 $163,400

Gross Margin %

88.00% 88.00% 88.00%

Expenses

Payroll

$40,050 $50,000 $50,500

Sales and Marketing and Other Expenses

$0 $0 $0

Depreciation

$2,532 $2,532 $2,532

Leased Equipment

$0 $0 $0

Utilities

$2,000 $2,000 $2,000

Insurance

$1,400 $1,400 $1,400

Rent

$3,000 $3,000 $3,000

Payroll Taxes

$2,608 $5,200 $5,925

Other

$0 $0 $0

Total Operating Expenses

$50,590 $60,132 $60,357

Profit Before Interest and Taxes

($15,683) $15,668 $40,043

EBITDA

($13,151) $18,200 $30,575

Interest Expense

$370 $140 ($20)

Taxes Incurred

$0 $3,882 $14,758

Net Profit

($16,053) $11,646 $43,305

Net Profit/Sales

-19.65% 9.51% 23.32%

7.4 Projected Cash Flow

The following chart and table will indicate projected cash flow.

Pro Forma Cash Flow

Year 1

Year 2

Year 3

Cash Received

Cash from Operations

Cash Sales

$32,685 $49,000 $60,273

Cash from Receivables

$36,451 $37,222 $60,,685

Subtotal Cash from Operations

$69,136 $90,223 $121,958

Additional Cash Received

Sales Tax, VAT, HST/GST Received

$0 $0 $0

New Current Borrowing

$0 $0 $0

New Other Liabilities (interest-free)

$0 $0 $0

New Long-term Liabilities

$0 $0 $0

Sales of Other Current Assets

$0 $0 $0

Sales of Long-term Assets

$0 $0 $0

New Investment Received

$0 $0 $0

Subtotal Cash Received

$69,136 $90,223 $121,958

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

$40,050 $50,000 $60,500

Bill Payments

$20,537 $20,751 $29,778

Subtotal Spent on Operations

$53,587 $50,751 $60,278

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

$0 $0 $0

Principal Repayment of Current Borrowing

$2,400 $2,400 $800

Other Liabilities Principal Repayment

$0 $0 $0

Long-term Liabilities Principal Repayment

$0 $0 $0

Purchase Other Current Assets

$0 $0 $0

Purchase Long-term Assets

$0 $0 $0

Dividends

$0 $0 $0

Subtotal Cash Spent

$70,987 $,121 $149,078

Net Cash Flow

($26,851) $5,072 $35,879

Cash Balance

$7,849 $12,920 $48,800

7.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Assets

Current Assets

Cash

$7,849 $12,920 $48,800

Accounts Receivable

$12,576 $18,854 $28,578

Inventory

$1,438 $2,156 $3,268

Other Current Assets

$500 $500 $500

Total Current Assets

$22,363 $34,430 $81,145

Long-term Assets

Long-term Assets

$25,300 $25,300 $25,300

Accumulated Depreciation

$2,532 $5,064 $7,596

Total Long-term Assets

$22,768 $20,236 $17,704

Total Assets

$45,131 $54,666 $98,849

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities

Accounts Payable

$3,084 $3,373 $5,051

Current Borrowing

$2,600 $200 ($600)

Other Current Liabilities

$0 $0 $0

Subtotal Current Liabilities

$5,684 $3,573 $4,451

Long-term Liabilities

$0 $0 $0

Total Liabilities

$5,684 $3,573 $4,451

Paid-in Capital

$60,600 $60,600 $60,600

Retained Earnings

($5,100) ($21,153) ($9,507)

Earnings

($16,053) $11,646 $43,305

Total Capital

$39,447 $51,093 $94,398

Total Liabilities and Capital

$45,131 $54,666 $98,849

Net Worth

$39,447 $51,093 $94,398

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 0161, Farms, as part of Vegetables and Melons, Not Elsewhere Classified, are shown for comparison.

Ratio Analysis

Year 1

Year 2

Year 3

Industry Profile

Sales Growth

0.00% 49.92% 51.58% -4.60%

Percent of Total Assets

Accounts Receivable

27.87% 34.49% 28.91% 12.90%

Inventory

3.19% 3.94% 3.31% 14.40%

Other Current Assets

1.11% 0.91% 0.51% 28.90%

Total Current Assets

49.55% 62.98% 82.09% 56.20%

Long-term Assets

50.45% 37.02% 17.91% 43.80%

Total Assets

100.00% 100.00% 100.00% 100.00%

Current Liabilities

12.59% 6.54% 4.50% 31.10%

Long-term Liabilities

0.00% 0.00% 0.00% 20.50%

Total Liabilities

12.59% 6.54% 4.50% 51.60%

Net Worth

87.41% 93.46% 95.50% 48.40%

Percent of Sales

Sales

100.00% 100.00% 100.00% 100.00%

Gross Margin

88.00% 88.00% 88.00% 32.00%

Selling, General & Administrative Expenses

107.19% 78.41% 64.56% 20.70%

Advertising Expenses

0.00% 0.00% 0.00% 0.20%

Profit Before Interest and Taxes

-19.19% 12.79% 31.26% 1.70%

Main Ratios

Current

3.93 9.64 18.23 1.65

Quick

3.68 9.03 17.50 0.88

Total Debt to Total Assets

12.59% 6.54% 4.50% 51.60%

Pre-tax Return on Net Worth

-40.70% 30.39% 61.51% 2.20%

Pre-tax Return on Assets

-35.57% 28.41% 58.74% 4.50%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

-19.65% 9.51% 23.32%

n.a

Return on Equity

-40.70% 22.79% 45.88%

n.a

Activity Ratios

Accounts Receivable Turnover

3.90 3.90 3.90

n.a

Collection Days

56 78 78

n.a

Inventory Turnover

10.89 8.18 8.22

n.a

Accounts Payable Turnover

10.58 12.17 12.17

n.a

Payment Days

27 29 25

n.a

Total Asset Turnover

1.81 2.24 1.88

n.a

Debt Ratios

Debt to Net Worth

0.14 0.07 0.05

n.a

Current Liab. to Liab.

1.00 1.00 1.00

n.a

Liquidity Ratios

Net Working Capital

$16,679 $30,857 $76,694

n.a

Interest Coverage

-42.39 111.92 0.00

n.a

Additional Ratios

Assets to Sales

0.55 0.45 0.53

n.a

Current Debt/Total Assets

13% 7% 5%

n.a

Acid Test

1.47 3.76 11.08

n.a

Sales/Net Worth

2.07 2.40 1.97

n.a

Dividend Payout

0.00 0.00 0.00

n.a

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