FreshWater FlashFreezers Business Plan
FreshWater FlashFreezersBusiness Plan
Commerce 447Submitted to: Marv Painter
Submitted by: Michael Huck
03 December 2009Table of Contents
Page1.0 Executive Summary 22.0 About the Author 3
2.1 Mission Statement 32.2 Goals and Objectives 3
3.0 Introduction to Commercial Fishing 44.0 Operations Plan 4
4.1 Organizational Structure 44.2 Site Plan and Work Plan 54.3 Quality Control 64.4 Average Business Assessment 74.5 Supply Analysis 84.6 Service Providers 84.7 Capital Budget 94.8 Environmental Limitations 9
5.0 Human Resources Plan 105.1 Summary of Compensation 11
6.0 Marketing Plan 116.1 Market Overview 116.2 Marketing Mix 116.3 Competitive Analysis 136.4 Porter’s 5 Forces Analysis 146.5 Projections of Revenues and Marketing Expenses 16
7.0 Financial Plan 167.1 Debt and Equity Financing 167.2 Dividend Policy 167.3 Economic Forecast 167.4 Ratio Analysis 177.5 Financial Analysis 177.6 Break-Even Analysis 18
8.0 Summary of Business Plan 18
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1.0 Executive Summary
FreshWater FlashFreezers examined the current means of commercial fishing within the province of
Saskatchewan and saw a gap which with the right people and the right innovation could be filled. The
commercial fishing industry in the northern administration district region of Saskatchewan used to
attribute 6,000,000 kilograms of fish to the market each year. Over the past decades number has
declined to less than half that. Commercial fishermen are few and a trend towards urbanization and
employment in the forestry and mining industry coupled with stagnant fish prices and lack of fisher
mobility has created a dismal looking future.
FFWF will focus on operating under all guidelines set forth by the Fisheries Act of Canada, attaining
harvests in a responsible and sustainable manner. Operating solely in the spring to fall seasons has
created a competitive advantage through innovation as there are reduced competition for quotas and
improved access to remote lakes. Having commercial grade freezing technology allows FFWF the ability
to stay at shore-side locations for greater periods of time because the worry of fish decaying in the
warm weather is minimal. This allows for large shipments of fish which reduce the transportation costs,
improve operational efficiency, and ultimately a higher return in revenue.
The FFMC has a mandate to purchase all fish legally caught by commercial fishers in the interior of
Canada and in the year 2008 they had revenues of over $63,000,000 to markets around the world.
FFWF is in a position where its gains are only limited by the amount of fish it has the ability to harvest.
With unused quotas on 900 lakes within Saskatchewan, there is no shortage of fishing to be done.
The business requires $400,000 start up capital, in which $150,000 will be financed through equity with
the remainder coming in the form of long term debt. Analysis of the finances shows that the venture
carries a high level of risk which is reduced over time. With high salaries and regular dividends after the
third year of operations FFWF proves is economically feasible.
FFWF looks forward to the its future and is confident that with the proper planning and care there is the
ability to become a market leader in the commercial fishing industry of Saskatchewan.
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2.0 About the Author
This plan has been created by Michael A.C. Huck; a
fourth year management major enrolled in the
Edward’s School of Business of the University of
Saskatchewan. Michael plans on finishing his
bachelor level studies at age 21 by the end of 2010
and then work overseas on a global exchange for 18
months. Upon return to Canada, Michael hopes to
pursue a master level diploma in Environmental
Management. Michael possess experience in cold
storage, having worked full time for Western
Canada’s largest cold storage facility, and has been
fishing Saskatchewan waters since he was able to hold up
a rod.
2.1 Mission Statement
FreshWater FlashFreezers (FFWF) has a mission to bring nourishment to the lives of people around the
globe using Saskatchewan’s abundant renewable resources. FFWF is committed to the harvesting of
pristine fish in a responsible and sustainable manor, taking out of the waters only what can be afforded
to remove. Utilizing innovative shore-side measures, FFWF strives to become a market leader in
Saskatchewan.
2.2 Goals and Objectives
The goals and objectives of this business plan are to highlight the opportunity which is still available in
an industry which has been declining over the past decades. Through innovative means, spring and fall
fishing in Saskatchewan can once again be seen as a way to make an earnest living. This plan will outline
challenges and opportunities in operations, marketing, and financing for the company. A five year
financial projection model has been prepared which showcases all applicable costs, revenues, taxes,
future cash flows, critical variables, break-even points as well as the internal rate of return on equity
investment.
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3.0 Introduction to Commercial Fishing
At the turn of the 20th century inhabitants of the region now know as Saskatchewan began to
commercially fish waters generally around Ile-A-La-Crosse and Buffalo narrows regions. Fast forward 70
years and the industry is flourishing. Over 500 lakes and rivers were being fished. At this time, 1969, the
federal government established the Freshwater Fish Marketing Corporation (FFMC), this caused a
centralization of fish processing in Winnipeg, for the largest percentage of freshwater commercial
fishing is done in Manitoba. Soon after, the government implemented a policy which stated that all fish
sold must be processed through the FFMC or be issued a permit by them to sell to distributors. This
caused 12 northern Saskatchewan plants to close. It was no longer feasible to catch fish in many remote
lakes due to the long shipping distance. Since the 1970s, there has been a steady decline. In 1998-99,
90% of the fish caught came from only about 50 lakes. Fast forward to present time and the industry is
still not as strong as it could be, commercial fishermen are few and a trend towards urbanization and
employment in the forestry and mining industry has created a dismal looking future. However as the
province has developed over the years, so has access to many of these remote lacks, creating an
opportunity to once again restore the economic viability of commercial fishing in Saskatchewan’s north.
4.0 Operations Plan
4.1 Organizational Structure
FFWF will be set up as a Canadian-controlled private corporation. Presented below are several of the
reasons behind this decision:
It permits the achievement of significantly lower tax rates as a result of the small-business
deduction on the first $500,000 of active business profits. This operates as a tax deferral, rather
than a tax saving, because the lower tax rate will ultimately be followed by a second level of tax
to the shareholder when after-tax corporate profits are distributed or when the shares are sold.
The increased cash flow produced by the reduced tax rate can be reinvested in business
expansion or in passive investments that result in greater ultimate returns on investment.
Increased cash flow at the early stages of a business reduces the risk of failure. Increased cash
flow also makes for greater borrowing capacity in that it increases FFWF’s ability to repay debt
obligations.
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Further, the corporation has the option to provide the owner/manager with various types of
employment benefits which are fully deductible from the corporation’s income but are not
taxable to the employee.
The corporate structure, which imposes a two tier system of taxation, gives the shareholder the
right to choose when the second level of tax on dividend distributions will occur. In a year in
which the owners other sources of income are very low, a dividend can be made that results in a
lower rate of tax than would normally apply.
Also, FFWF will be eligible capital gain deduction by the net capital gains realized on properties
over their lifetime to a maximum of $750,000. Qualified fishing property includes real property,
eligible capital property (quotas), and shares of a fishing corporation as well as a an interest in a
fishing partnership.
Besides the financial benefits of incorporating, through this action the owner is at reduced liability which
can be beneficial if FFWF fails to persist in the long-term.
4.2 Site Plan and Work Plan
FreshWater operates as a small commercial fishing team. There will be no permanent site as operations
will commence at different bodies of water around the province. Included below is a projected shore
camp layout for operations.
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The site will generally be set up similar to that as laid out above. It is important to have the preparation
tent, freezer, and cold storage all located close to a docking point on the water front. This is to diminish
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Spiral Freezer
Cold Storage Truck
Boats
Prep Tent
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the length of time it takes to get the fish from water to cold storage which increases overall efficiency of
operation.
Once the site is set up, the harvesting of fish can commence. The following is an outline of the steps of
work that would be done from harvest to shipping.
a. Team scouts waters for targeted fish areas using lake maps and sonar detection.
b. Specialized gill nets are deployed in the waters
c. 8-10 hours later gill nets are hauled in on boat and fish are untangled from net and placed in
storage tanks after going initial screening for targeted type.
d. Team docks and the fish are brought to the preparation tent.
e. Fish are sorted by type, weighted and recorded, and separated into batches for freezing.
f. Fish are then run through the spiral freezer.
g. Once frozen, fish are loaded into 620 kg capacity insulated totes located in cold storage on site
until a full load is confirmed.
h. Once a full load comprised of approximately 7,440 kgs the fish are transported to one either
Prince Albert or Saskatoon to be inspected by an FFMC purchasing agent.
i. Fish are then sent to processors; generally Freshwater Fish Marketing Corporations Winnipeg
location at FFMC’s cost.
The process which has been identified above is unique to this region of the world. Currently,
commercial fishers in northern Saskatchewan have not had access to an onsite freezer and cold storage.
This limits the amount of fishing which can be achieved because operations are interrupted by the
necessity of transporting the fish before they spoil. As of now, the fish are placed into coolers filled with
ice and water, while this preserves the fish for a short period, there is not the ability to achieve the high
level yields which FFWF can.
4.3 Quality Control
As FFWF will be dealing with a product which will be provided to consumers as a food item it is
important to create a safe environment for the product. It is essential to comply with or exceed industry
standards. This entails chilling fish as soon as possible after a catch and keeping harvest away form
outside contaminants. There will be no formal training or structure in the first years on operations
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although FFWF had identified the possibility to register for HACCP (Hazardous Analysis and Critical
Control Points) certification in the future if expansion into processing becomes possible and warranted.
4.4 Average Business Assessment
FFWF is set up as a small organization and operates as a commercial fishing outfit during the spring and
fall fishing seasons, with limited operations during the summer season. While 71% of Saskatchewan’s
commercial fishing occurs during the winter months when the lakes are frozen, FFWF will not operate in
these months for the first years of operation. This is for a few reasons, one, commercial license quotas
for individual lakes are at reduced competition during high temperate months, two, the competitive
advantage of freezing the fish on site is diminished as the cold temperatures allow for longer
preservation periods and three, further capital requirements are needed for winter fishing and four, this
provides FFWF employees to pursue other ventures in the winter months.
During the operational months of May through October, the following will be required of the manager
of FFWF prior to site set up.
Scout out advantageous waters where commercial fishing licenses are available, focusing on
northern pike and whitefish quotas.
Apply for licenses to Fisheries Department for waters which are targeted
Apply for fuel tax exemption permit from Saskatchewan government
Apply for subsidies and bursaries allocated to commercial fishers available for current year.
Once site is set up the following tasks would need to be completed by either the manager or the helper.
Tour water with fish finding equipment and map out primary and secondary net locations
Positioning nets at night in intended marks
Hauling in the nets and harvesting fish from the nets during the morning, and completing
primary screening of fish
Weighing and sorting fish, preparing a record of these in log book
Loading fish into spiral freezer and placing in cold storage
Monitor temperature of insulated totes within the storage truck, making sure temperatures do
not rise above 32°F.
File commercial fishing report to Fisheries Canada office
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Following site close, operations will be moved to another location where the site tasks would be
repeated. In order to continuously achieve strong yields, it is expected that the operations will be
moved approximated 5 times throughout the season. This not only creates a sustainable means of
operation, never fishing over quota on bodies, but it was provides access to more fish thus creating a
higher revenue stream.
4.5 Supply Analysis
In order for FFWF to operate it will need inputs which can be purchased from businesses in
Saskatchewan. In order to operate the freezer, liquid carbon dioxide must be purchased and picked up
from Air Liquide Canada, located in Saskatoon, SK. The costs have remained tied steady with no severe
spikes and the supply is expected to remain at high levels over the long term. The fuels required for
operating the reefer storage, boats and trucks can be purchased from several providers located in
Saskatchewan. These fuels, unleaded gasoline and diesel are subject to frequent price changes but the
supply of these is not in risk in the long term. These are the primary inputs which FFWF relies upon for
operations.
4.6 Service Providers
FFWF is a small business and does not possess a lot of service providers. Those whom will be relied upon
for business are outline below:
Liquid carbon dioxide provider - Air Liquide Canada (Saskatoon)
Freezer service - Advanced Equipment Inc. Contractor
(Saskatoon)
Vehicle Service - Hino Motors Ltd. (Saskatoon)
Accounting and general maintenance – FFWF
4.7 Capital Budget
Early boat full with fish Pile of Whitefish Early cold storage shed
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The following is a list of capital items which will be required in the first year of operations for FFWF.
Note: Costs rounded to the nearest hundred.
Item Cost $ Provider Location2001 Peterbilt 378 32 000.00 Autotrader.ca Saskatoon, SK2008 Hino Reefer Truck 30 000.00 Hino Motors Ltd. Saskatoon. SKPortable Work Tent 5 000.00 Wholesale Sports Outfitters Saskatoon, SKIQF Spiral Freezer 173 000.00 Advanced Equipment Inc. Vancouver, BC2 -2006 14’ Aluminum Misty River Boats with Trailers
12 500.00 12 500.00
FFWF & Northstar Sports
Turtle Lake, SKNorth Battleford, SK
Insulated Fish Totes 1 100.00 Commercial-fishing.net CanadaFish Finder 1 700.00 Wholesale Sports Outfitters Saskatoon, SK100’ Nylon Gill Nets-3”, 4”, 5” Mesh
1 500.00 Commercial-fishing.net Canada
Life Jackets, Flags, Radios, Oars, Scales, Misc. Tools, etc.
10 000.00 Various Saskatchewan
Total Capital Costs 279 300.00
There is currently limited future capital costs projected in the near future for FFWF. All the major
components for operations are provided in the first year.
The following table outlines projected 5 year operating costs based on a harvest of 73,200 kilograms.
For sensitivity analysis please see attached working financial excel file.
Year 2010 2011 2012 2013 2014Cold Storage 2,928 2,987 3,046 3,107 3,169 Labour 39,400 46,800 53,240 58,240 62,240 Gasoline & Diesel 9,516 9,706 9,900 10,098 10,300 Licenses 217 221 226 230 235 Insurance 4,500 4,590 4,682 4,775 4,871 Liquid Carbon Dioxide 7,111 7,253 7,398 7,546 7,697 Maintenance and Repair 14,000 14,280 14,566 14,857 15,154 Total Operating Expenses 77,672 85,837 93,058 98,854 103,666
4.8 Environmental Limitations
In order to operate as a commercial fisher in Saskatchewan a license must be acquired for each body of
water operated on. The average price of such a license is $31.00 a piece. It should be noted that each
licensed water body possess a limitation quota on maximum harvest of each species. Once a certain
species is at its limit the water is shut down for the season. This is why it is important to strategically
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locate waters with limited if no commercial outfits are operating on. Further, fishing using nets cannot
be done during extreme weather for safety reasons, and therefore FFWF can only operate during
reasonable weather.
5.0 Human Resources Plan
As shown prior in the operations plan, FFWF operates with an integrated small outfit. The set up of such
an organization allows decisions to be made in real time as the manager is on location at all times.
Communication challenges between management and labour will therefore be reduced as decisions can
be conferred with ease. While the manager carries out the jobs which need to be completed prior to
and post camp set-up, the labour and manager share job duties during camp. Detailed descriptions of
jobs are provided below.
Manager
The manager possesses the greatest amount of responsibility for he must operate as both an
administrator as well as a labourer. However he is in a position to see the greatest rewards. The
manager will be responsible for assembling financial statements on a yearly basis. Further, He will be
responsible for filing taxes and applying for bursaries, grants and subsidies as well. Communication
between FFWF and FFMC and their agents will also be a responsibility of this position. Further he will be
responsible for all the scouting of waters and applications for licenses, arranging pick-up of supplies and
be responsible for on going daily decisions. While many jobs are also shared along with labour, the tasks
involved in labour are explained below.
Labourer
Labour will be required for more of the hands on duties involved in FFWF’s operations. This position
does not require any educational requirements. However, a person in this position has to be patient and
carry a high level of core competencies to fulfill this job successfully. Also required would be a 1A
driver’s license. Daily and weekly responsibilities include laying nets, hauling and sorting fish, operation
of freezer, monitoring equipment and daily cleanup and maintenance.
Historically in the commercial fishing industry labour help has been trained on-site as there are no
courses offered at any educational institute. Paid position training will be on site training coinciding with
regular operations.
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5.1 Summary of Compensation
Provided in the operating expenses was a combined sum of manager and labourer wages. Depicted
below is the individual compensation attributed to each position.
Position Compensation Hours/Week 2010 2011 2012 2013 2014
Manager Salary 60 $25 000 $30 000 $35 000 $40 000 $44 000
Labourer Wage 40 $14 400 $16 800 $18 240 $18240 $18,240
Wages for Labourer start at $15.00 / hour with an increase to $17.50 in year 2 and $19.00 in year 3
onward.
Employee benefits are further being considered. However, time will have to dictate this decision. As
FFWF operates seasonally, alternate employment with a benefit package will likely be realized.
6.0 Marketing Plan
6.1 Market Overview
As aforementioned, the commercial fishing industry in Saskatchewan was once a strong industry but in
the past decades has declined. Currently there are an estimated 613 commercial fishermen operating in
the province annually. According to the Fresh Water Fish Marketing Corporation they combined for a
total of 2,450,234 kilograms of fish for export and 145,094 kilograms were sold in province on peddler’s
license in 2008. Saskatchewan once provided over six million kilograms of fish to the market but this has
declined for many reasons. There has been a decline in the amount of fishermen, many are seeking
other means of work, rising costs associated with catching and transportation combined with stagnant
fish prices has created in many eyes an uneconomical venture.
6.2 The Marketing Mix
Product
The good which is provided is renewable freshwater fish located within the waters of Saskatchewan. The idea is to
provide fish which have a high demand, for those are the fish which carry the highest price, which provides higher
returns on inputs. The accompanied chart identifies the types of fish which are most sought after in Saskatchewan
waters by current commercial fishers based on a study by Environment Saskatchewan.
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Pricing
The intention of FFWF is to sell all their catch to the Freshwater Fish Marketing Corporation. The FFMC’s
mandate is to purchase all fish lawfully fished and offered for sale; to create an orderly market; to
promote international markets; to increase fish trade; and to increase returns to fishers.
Average price of fish/ kilogram 2010 2011 2012 2013 2014
Pickerel 3.50 3.57 3.64 3.71 3.79
Trout 0.62 0.63 0.65 0.66 0.67
Northern Pike 0.78 0.80 0.81 0.83 0.84
Whitefish 1.09 1.11 1.13 1.16 1.18
Other 0.50 0.51 0.52 0.53 0.54
Average price of fish 1.30 1.32 1.35 1.38 1.40
Projected Inflation of Prices 2.0% 2.0% 2.0% 2.0% 2.0%
The above table takes uses a six year historical average to conclude 2010 initial prices. Years following
are adjusted at 2.0%; the rate of inflation of the financial model. Generally, initial prices are set for each
species by estimating its market value, subtracting its projected processing and operating costs.
Promotion
As Freshwater Flash Freezers operations are not directed to primary consumers but towards the FFMC
whom has a mandate to buy one hundred percent of the harvest, little promotion is needed. However
FFWF wants to be seen in the public eye as a responsible business that prides itself on sustainable
practices. By operating in northern Saskatchewan where there are increased levels of unemployment
and poverty FFWF is sure to be welcomed for the economic expenditures which it will incur.
Place
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Operations of FFWF will take place in waters primarily in northern Saskatchewan.
Display to the left is what is referred to as the Northern
Administrative District (NAD). 37,000 inhabitants live in
this region. Of this 86.3% are aboriginals. This compares
to a provincial average of 13.3%. Primarily, FFWF will
target accessible waters with open quotas in this area.
It will be important to portray FFWF as a group that is
designated to helping the areas in which it operates.
FFWF will attempt to support locally whenever possible in
its operations.
6.3 Competitive Analysis
FFWF is in the business of commercial fishing in a province which has a strong history of these
operations. The majority of operations of commercial fishing are taken place in the NAD region as
depicted above. According the Government of Saskatchewan there are approximately 613 commercial
fishers operating in borders. Depicted below is a chart analyzing this population of commercial fishers.
2008 Results 2005 ResultsMedian Age 49 45Sex 89% Male 90% MaleAboriginal/ Métis Heritage 72% 75%Education < than High School 70% 74%Fishing Primary Income 57% 52%Median Fishing Income $10 000 $10 000Average Weeks of Fishing 12.4 13.2Deliver All Fish to FFMC 61% 59%Collecting EI Benefits 48% 49%Collecting Social Assistance 19% 20%
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Due to price restrictions and familiarity many of these fishers do not travel far from their homes to
conduct operations. A majority of these fishers join a co-op which provides them with support but
reduces their potential profits through adding additional costs on the market chain. In order to
demonstrate where a majority of the competition will be operating the following list of fisheries along
with their produced weight is shown.
Fish Plant Weight in kilograms Location & Weight in kilogramsChurchill Fisheries 644.378 Beaver Lake -88,882
La Ronge – 373,752 Pelican Narrows – 188,744
Deschambault Lake Fisheries 125,644 DeschambaultFFMC- The Pas, Manitoba 3,815 The Pas, MBKinoosao Co-op 303,089 Co-op PointHunter Fish Agencies 747,239 Big River – 15,833
Canoe Lake – 25,730Dore Lake – 5, 250Isle a la Crosse-293, 376Patuanak - 12,937Pinehouse – 170,103Wollaston – 224,010
J. Waite Fisheries Inc. 592,252 Buffalo NarrowsNorthwest Co-operative Fisheries 10,825 Leaf Rapids, SKWest Boundary Fish Co-op 22,975 PiercelandTotals 2,450,236
6.4 Porters 5 Forces Analysis
Bargaining power of buyers
The bargaining power of the buyers is high because they are the ones whom set the price for the fish
which are being harvest buy the commercial fishers. Fishers have no means to differentiate their catch
from those of competitors and are therefore in a low bargaining positing with the buyers in terms of
price. However the mandate of the FFMC is to purchase all fish lawfully fished and offered for sale; to
create an orderly market; to promote international markets; to increase fish trade; and to increase
returns to fishers. This also reduces the bargaining power of the FFMC for they are legally required to
purchase all fish which are presented to them.
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Bargaining power of suppliers
The inputs required to successfully run FFWF are limited. The power of the liquid carbon dioxide supplier
is relatively low. Industry market rates dominate this product and price jumps are not overly volatile in
products history. Commercial fishing licenses are monitored through the government of Saskatchewan
and currently there is low demand for them. Therefore it seems that the bargaining power of suppliers is
relatively low.
Threat of substitutes
There are many substitutes for the fish product. Pork, beef, chicken, and wild game are all readily
available substitutes. However, fish has proved a staple in many people’s lives and consumption is
usually balanced across these categories. Also fish has proven to aid in a healthy diet, high in proteins
and omega vitamins. There has been a shift in many households to make an effort to eat more fish.
Barriers to entry
There are limited barriers to entry in this industry. A person need only apply for a commercial license
and invest in operational equipment. In fact, there are several incentives supplied by the government in
order to attract new and maintain commercial fishers in the province. Tax incentives and exemptions
and operational subsidies provided by the government helps foster profitability in the commercial
fishing sector of Saskatchewan.
Competition intensity
There is a relatively low level of competitive intensity. As FFMC is required to purchase all the fish that
can be caught in a legal manor it appears that competition does not take up any of FFWF`s market share.
Surprisingly, the more fish harvested out of Saskatchewan the better, this allows the FFMC to more
aggressively market the product which in turn creates more worldwide demand, raising final payments.
Also with FFWF operating in the summer months, there is little competition for commercial licenses
across Saskatchewan.
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6.5 Projections of Revenues and Marketing Expenses
The following is based on 2008 Saskatchewan Delivers to the FFMC and a projected harvest of
73,200kgs.
Expected Total Annual Revenues
Fish Species 2010 2011 2012 2013 2014
Pickerel 46,372 52,030
58,377
62,522
66,961
Trout 5,491 6,161 6,913 7,404 7,930
Northern Pike 7,879 8,841 9,919
10,623
11,378
Whitefish 29,202 32,765
36,762
39,373
42,168
Other 6,917 7,761 8,708 9,326 9,989
Total revenue 99,090 110,785
123,907
132,476
141,652
Freshwater Flash Freezers has minimal advertising needs. FFWF only promotional costs are graphics on
the side of vehicles which is included in vehicle cost in the capital budget and business cards which can
be produced at home for a minimal amount.
7.0 Finance Plan
7.1 Debt and Equity Financing
Total capital required to commence operations is $400,000, with $150,000 being financed through
equity and the remainder being financed with debt. The equity financing will be raised through the
owner. Once the $150,000 in equity financing is raised, FFWF will look towards to banks in order to
secure long term debt of $250,000.
7.2 Dividend Policy
Dividends will be paid out at owner’s discretion. FFWF operating as a privately controlled Canadian
corporation is in a position to invest in similar eligible corporations and receive tax benefits on the
capital gains. However, there is a considerable amount of retained earnings after 3 years. Dividends of
$20,000 are likely to be paid out each year, starting in 2012.
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7.3 Economic Forecasts
The financial model was created using several estimates and theorizations. The most critical variable in
the model is the price of fish. Using the Fresh Water Fish Marketing Corporations financial statements,
the price of fish was established. This rate was taken as a 6 year moving average. The price was then
adjusted in the following 4 years using a hypothesized compounding rate of inflation of 2.0%.
7.4 Ratio Analysis
Leverage and profitability ratios depicted below were solved for this business plan. The debt
ratio starts off quite high during the first year of operations, but continues to decline as years of
operations pass. This shows that FreshWater FlashFreezing is forecasted to make enough money each
year to pay down long term debt and still build up a retained earning. The extremely high debt to equity
Ratio reflects that a large portion of the company’s assets were financed through debt. This creates an
added level of risk to the organization which is somewhat offset by anticipated low interest rates in the
future. The interest debt interest rate used in the model was 4.0% which is quite close to the 2009 prime
plus one rate.
Below is a three year period of leverage and profitability ratios calculated:
Leverage Ratios 2010 2011 2012Debt Ratio 58.8% 53.7% 51.0%Debt to Equity 142.3% 116.0% 104.1%Profitability RatiosNet Profit Margin 18.3% 19.0% 21.0%Return on Assets 4.30% 5.2% 6.7%Return on Equity 10.8% 11.1% 13.1%
The profitability ratios start off at a respectable amount and continue to climb in the future. Considering
the high salary being achieved and the dividend pay-outs this is very acceptable.
7.5 Financial Analysis
While it is apparent that this business plan creates a valid opportunity, it does not declare whether this
venture is economically feasible. Carrying a required return on investment (ROI) of 20%, this venture
provides an internal rate of return (IRR) of 69.3%. Further the terminal value at the end of 5 years is just
shy of $200,000. This combined with positive cash flows and net income every yeardeems the venture
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financially feasible. The seasonality of the work, the relatively high salary and dividend pay-outs, coupled
with the freedom of doing what one enjoys makes this venture more than just financially feasible.
7.6 Break-Even Analysis
One of the most critical variables is the amount of fish caught, for that is ultimately the deciding factor
on how much revenue can be achieved. While operations will be targeted towards higher revenue
earning fish, the financial model has been based on Saskatchewan’s historic resuluts. The net income
break even point for first year is 288 kilograms. This amount decreases each year to a break even of 203
kilograms in 2014.
8.0 Summary of Business Plan
This business plan has shown that FFWF has the an opportunity to operate successfully, although at a
higher degree of risk, in an industry which is dismally portrayed by many. The opportunity to harvest
Saskatchewan’s fish, in a responsible and sustainable manner also has the ability to meet the desired IRR
of 20%. Having virtually no marketing costs, and operating with only one buyer whom possesses a
mandate to purchase all fish harvest provides further incentive to look beyond the plan and into start-
up. The person who would be held in highest account would be the owner, whom also has the most to
gain through company success. I will be able to succeed in this industry because of an innovative
approach to operations which creates a sustainable advantage. The success of the business hinges upon
the amount of and species of fish caught. While this is not entirely controllable, with proper planning
ambiguity can be mitigated and success achieved.
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ReferencesFishing on Deep River<http://www.jkcc.com/fishing.html>
Industry Profile- Commercial Fishing< http://www.sasknetwork.ca/html/Home/lmi/sectorstudies/sscommercialfish.htm>
Fresh Water Fish Marketing Corporation< http://www.freshwaterfish.com/english.htm>
Fishery Canada Regulations and Fines< http://www.qp.gov.sk.ca/documents/gazette/part2/1996/g2199617.pdf>
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