Angry Buffalo Company – “Embracing Indigenous Nourishment of the Prairies” - Deason
Business Plan
Prepared for: Dr. Marv Painter
Prepared by: Joey Deason
Table of Contents
Table of Figures: 3
Executive Summary 4
Introduction 6
1.1 Industry Overview 6
1.2 Mission Statement 7
1.3 Goals and Objectives 8
Operations Plan
2.1 Business model logistics 9
2.2 Organizational Structure 10
2.3 Location & Site Plan 10
2.4 Floor Plan & Technical Process 12
2.5 Capacity & Average Business Day 14
2.6 Supply Analysis 15
2.7 Capital Budget 16
2.7.1 Lot/Building Costs: 16
2.7.2 Equipment Costs: 17
2.7.3 Working Capital 17
2.8 Cost of goods sold 18
Human Resources Plan
3.1 Employee Structure 21
3.2 Job Description 22
3.3 Employee expenses 23
Marketing Plan
4.1 Market research 25
4.2 Segmentation, Targeting & Positioning 26
4.3 Marketing Mix 27
4.3.1 Product/ Value Proposition 27
4.3.2 Price 29
4.3.3 Placement/Distribution 30
4.3.4 Promotion 31
Financial/Accounting Plan
5.1 Capital/Financing budget 34
5.2 base case volume projections 35
5.3 revenue/Net income projection 36
5.4 Cash FLow Projections 37
5.5 Balance sheet, income statement & Cash flow 37
5.6 Net income break even 39
5.7 Sensitivity analysis 40
5.8 Critical Risk Factors 41
5.9 Assessing Feasibility 42
Summary 43
References………………………………………………………………………………………………………………..44
Appendicies 45
Appendix A: 45
Appendix B: 46
Table of Figures:
Figure 1: HHW Price By Year 6
Figure 2: Inbound/Outbound Logistics 9
Figure 3: Location 10
Figure 4: Lot View 11
Figure 5: Floor Plan 12
Figure 6: Capital Budget 15
Figure 7: Growth Projection 17
Figure 8: Cost of Goods Sold 18
Figure 9: Employee Structure 20
Figure 10: Employee Expenses 22
Figure 11: Business Logo 26
Figure 12: Value Proposition 27
Figure 13: Price VS. Uniqueness 28
Figure 14: Differentiation Chart 29
Figure 15: Capital Budget 33
Figure 16: Financing Budget 33
Figure 17: Base Case Volume Projection 34
Figure 18: Revenue Projections 35
Figure 19: Net Income Projections 35
Figure 20: Projected Yearly and Cumulative Cash Flows 36
Figure 21: Balance Sheet 37
Figure 22: Income Statement 37
Figure 23: Cash Flow Statement 38
Figure 24: Net Income Break Even 38
Figure 25: Sensitivity Analysis 39
Figure 26: Unit Cost of Production 40
Executive Summary
Angry Buffalo is a Saskatoon based bison meat processing company that will produce third-pound bison sirloin burgers. Bison trim and sirloin meat will be outsourced from local Saskatchewan bison ranchers in the form of raw sirloin and trim cuts, and will be processed into burgers at the Angry Buffalo facility. The burgers will consist of trim and sirloin meat in a 50-50 ratio. The burgers will be sold to up-scale and trendy bars/restaurants in the city of Saskatoon, with the projection to expand in the Regina market in 2020. Angry Buffalo will be constructed as a private corporation, giving ownership limited liability, as well as an advantage in terms of the small-business private corporation tax break.
Total capital costs total $686,828. This will be financed by a $300,000 bank loan, with the remaining $386,828 being provided by Joey Deason as an equity investment. The capital costs include the construction of the building and servicing the lot with natural gas, electricity and water. It will also be used to cover all of the production equipment needed for the burger making process.
A 2400 sqft processing facility will be built on family-owned land located off of highway 41 roughly two kilometers north-east of the Saskatoon city limits. This location is projected to see a substantial increase in traffic due to the new north bridge being built. This will help the company’s facility to gain visual exposure. All of the processing will take place within the facility, and the finished product will be delivered to restaurants and bars by truck. Upon inception, the founder/manager Joey Deason will be conducting all labor throughout the value chain, until sufficient demand justifies additional employment.
The goal of Angry Buffalo’s marketing is to create a perception of superiority and ultimate quality. The burgers will be made from 100% all organic, grass fed, free range bison meat with no fillers, and will be outsourced from only local Saskatchewan bison ranchers. The company aims at harnessing loyalty Saskatchewan consumers have towards locally produced products, as well as appealing to those who appreciate optimal quality, natural meat choices, and humanely treated animals. Angry Buffalo will also aim to instill a sense of exclusivity by choosing only a handful of restaurants/bars in each city to offer the product.
Angry Buffalo will be sponsoring the Saskatoon Hilltops and Huskies football teams in Saskatoon, as well as the Regina Rams once that market is entered. This is aimed at fostering a sense of community support, and will help to expose the company, and propel a positive reputation through word of mouth. Ultimately, Angry Buffalo will strive to gain the perception of being a Saskatchewan-rooted company that provides an exceptionally high quality, unique burger to Saskatchewan folks.
With the current business model, Angry Buffalo is not a feasible business. The company is unable to generate positive net incomes after the first five years. This is largely due to the expensive cost of the direct materials (bison meat). With the base case volume projections (3,650 boxes in year one) at a selling price of $64.00 dollars per box, the net income break even volume is four to five times higher than year one’s projected volume. The company would need to sell over 500 burger patties per day in order to break even. Furthermore, It is unlikely that the selling price can be further amplified, as the burgers would already be selling at a 35% premium relative to other burgers on the target restaurant’s/bar’s menus.
Introduction
1.1 Industry Overview
Saskatoon is a great environment for Angry Buffalo to be established. Saskatoon is home to a large number of opportunities in the form of trendy restaurants and bars that may be looking to differentiate themselves by promoting a unique Saskatchewan grown product. These opportunities can be taken advantage of and used to leverage Angry Buffalo’s strengths of producing high quality and unique burgers. Also, being a new venture, these factors can be used to minimize Angry Buffalo’s internal weaknesses of lacking customer channels and established consumer relationships by taking advantage of sales opportunities (see appendix A).
The price of bison meat has gradually increased over the last decade, and is manifested in the price trend of “hot hanging weight” (HHW). From 2005 to the present, bison HHW increased from $1.75 per pound to roughly $4.00 per pound [1]. Some sources indicate that $4.00 is a stable price, but there may be a risk of future volatility[2]. To mitigate this risk, price hedging may be an effective way to achieve more stable costs of direct materials.
Figure 1: HHW Price By Year
1.2 Mission Statement
Angry Buffalo’s mission statement is as follows:
“For Saskatchewan burger lovers who strive to challenge the boundaries of quality and taste, Angry Buffalo is committed to ethically and responsibly delivering the savory essence of indigenous prairie protein, to be enjoyed in-between a bun.”
1.3 Goals and Objectives
Angry Buffalo’s goal is to be considered a renowned burger provider of exemplary quality and uniqueness. Angry Buffalo will strive to:
· Achieve sustained profitability
· Never cut any corners in terms of quality
· Stay true to Saskatchewan roots, and support local bison ranchers
Operations Plan
2.1 Business model logistics
Angry Buffalo’s business model logistics consists of a straightforward process. The company’s inbound/outbound logistics can be summarized in the following simple chain of events illustrated in figure:
Figure 2: Inbound/Outbound Logistics
Raw bison meat will be purchased from Saskatchewan bison ranchers. The meat will be processed into burgers and packaged into boxes of 12, and distributed to restaurants and bars in Saskatoon.
2.2 Organizational Structure
Angry Buffalo will be established as a private corporation. Operating in this organizational structure will provide benefits in the form of limited liability, and reduced corporate level tax. There will not be a board of directors upon inception, as the company will operate on a small scale with no risk of agency problems, or issues that a board of directors is designed to mitigate. A certified chartered accountant will be hired to provide expertise in managing the companies accounting needs.
2.3 Location & Site Plan
The Angry Buffalo facility will be located about three kilometers northeast of the Saskatoon city limits at the intersection of highway 41 and Agra road. The land is currently owned by Paul Deason, father of Joey Deason, and is in the process of being commercially zoned for agriculture support business, as it is identified as a future growth area for the city’s expansion plan. With the projection for Saskatoon’s north bridge to be completed in 2017, this location will experience amplified traffic, providing good exposure for the company’s facility.
Figure 3: Location
The 2400 square foot facility will be located on a three-acre sub-divided lot. There will be a grid access road to the premises running south of Agra road. The building will be oriented as shown, with a company sign in the corner of the lot, visible from the highway. There will be a gravel parking lot on the north side of the building, with gravel running around the east perimeter to the loading area, and behind towards the storage garage.
Figure 4: Lot View
2.4 Floor Plan & Technical Process
The main entrance will be located at the north end of the facility, closest to the parking lot. Upon entry, the production horseshoe will be visible, with the manager’s office and employee locker room located to the west. The restroom will be located at the southwest corner of the building.
Figure 5: Floor Plan
The floor plan is used to illustrate the logistics of the production process. The two input materials used for production of the burgers are raw bison sirloin and bison trim meat. These two inputs will be taken in from the back entrance on the south side of the building so they can be immediately stored in the 80 square foot fridge. The raw materials will first be taken from the fridge to the grinding station where they will be weighed, and then inserted into the meat grinder. The ground meat will be composed of sirloin and trim meat, amalgamated in a 1/1 ratio by mass. From the grinding station, the ground meat hybrid will be inserted into the automatic burger patty machine. The meat will then be formed into third-pound patties, with the machine automatically inserting paper sections between each patty. The patties will then be collected by the packaging employee and combined into boxes of 12 patties. Packaging boxes will be accessible from the dry storage area, just north of the packaging station. Once packed, the boxes will be taken to the 80 square foot freezer, and stored until they are ready to be delivered. The loading bay will be equipped with a garage door and a ramp, so the delivery truck can back up for easy accessibility.
2.5 Capacity & Average Business Day
Production volume for the first year of business is projected to be 3650 boxes, or 70 boxes per week on average (see appendix). Given the capabilities of the production machinery, this volume can be handled by the manager without any assistance. Furthermore, the facility is capable of increasing its output by a substantial amount before any further investment into expansion is necessary. Monday will be the designated production day, where the entire volume for the upcoming week will be produced. If short notice orders are made, the manager has the flexibility to produce extra volume to meet unexpected demand common to new businesses.
A typical production Monday will consist of the following activities:
8:00am:
Manager arrives at facility.
8:00am – 8:30am:
Manager refers to inventory level and upcoming delivery orders to determine the volume needed for the coming week.
8:30am – 12:30pm, 1:00pm - 4:30pm:
Manager will produce ~70 boxes of burgers (average week’s volume)
70 boxes x 12 pattys per box x 1/3 lbs per patty = 280 lbs. of meat that must be ground. Grinder is capable of grinding 990 lbs. per hour. The grinding process will take about 17 minutes.
840 pattys need to be made. Patty maker is capable of making 2000 pattys per hour. Patty making process will take about 25 minutes.
The remaining 6.75 hours will be allocated to transferring raw meat from fridge to production line, filling the grinder, filling the patty maker, packaging the burgers into the boxes and transferring finished boxes to the storage freezer.
4:30pm – 5:00pm
A plastic curtain suspended to the ceiling will be drawn around the perimeter of the production horseshoe to contain projecting fluids during the cleanup process. Equipment will be sprayed with cleaning agents and rinsed down with a pressure washer. Gravity will pull water to a floor drain located in the center of the production horseshoe. Ending raw materials and finished goods inventory will be documented and manager will lock up and leave the facility. At the end of production day, 70 boxes will have been produced in 8.5 hours, corresponding to a production rate of 8.25 boxes per hour.
Max Capacity of the plant with only the manager conducting all of the production is around 350 boxes per week. This corresponds to approximately 18,000 boxes per year. This is calculated by assuming the manager produces boxes five working days a week for 8.5 hours per day, and uses the remaining days for delivery and administrative work. If sufficient personnel were hired upon demand for additional volume, the plant could easily handle twice this volume. With this being said, it is unlikely that expansion to the production capabilities of the plant would ever be required given its high volume capacity.
2.6 Supply Analysis
Angry Buffalo will purchase raw bison trim and sirloin from The Meridian Bison Company, a bison ranch located 10km north of Prince Albert, SK. Prices for direct materials have been verbally confirmed by Josee Dube’ company owner. Bison trim can be purchased for $7.26 per pound, and sirloin for $18.00 per pound. Shipping costs are estimated by Bouvry Exports to be $0.44 per pound.