PALM OIL BUSINESS PLAN SIMPLIFIED

PALM OIL BUSINESS PLAN SIMPLIFIED

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Palm Oil Business Plan Simplified - This is a Palm Oil Business Plan. It is a simplified model. It is a step by step approach to writing any business plan. It is therefore adaptable to any other business idea. It is indeed a simplified model.

This model will answer such questions on:
how to start palm oil investment in Nigeria,
oil palm production,
oil palm processing etc.

INTRODUCTION:

To start with Palm oil is an edible vegetable oil derived from the mesocarp (reddish pulp) of the palm fruit. Thus,Palm oil is naturally reddish in colour because of a high beta-carotene content. Palm fruit forms in bunches and it’s the fruit of the palm tree. Palms are a member of the evergreen group of plants. Such plants don't lose their leaves in any particular season of the year. There are several species of palm trees, most of them exist in tropical, subtropical, and warm temperate climates regions. Palms oil trees are one of the best known and most widely planted tree for economic reasons.

Oil Palm Business
PALM OIL READY FOR SALE

Palm Oil Business Plan Simplified

Consequently,the production of palm oil under goes a well articulated process. The high oil yield of the trees and its use in food products and in the manufacturing industries for production of variety of goods has encouraged its wider cultivation, leading to it becoming a big trading business in all most all parts of west African and other parts of the world.

There are over four aspects of businesses involved in this single commodity. These are:

  • Palm Plantation business 
  • Palm oil Processing (production) 
  • Palm oil marketing. –and 
  • Palm kernel processing and marketing.
As you can see,each of these aspects is a big business in Nigeria. Whichever one you get involved in, you need to do your business plan. Remember that the first page of your business plan is your Title page.

ALSO REA: Feasibility Study on Oil Palm

TITLE PAGE

This page will show what the booklet is all about. The whole page is devoted to it. So it will have something like this:
(BUSINESS LOGO)





TWO BROTHERS TRADING COMPANY LIMITED



PALM OIL BUSINESS PLAN 




(AUTHOR) 

Now give it a good boarder line and you are done.
 

Palm Oil Business Plan Simplified





Yea. You are through with your Title page. The next page will be devoted to notices and warnings concerning the use and misuse of the business plan.


TERMS AND CONDITIONS OF USE / LEGAL NOTICE


This page will sound like this:

“As at the time of writing this business plan / feasibility study, the author/publisher strives to be as accurate and complete as possible, notwithstanding, this business plan / feasibility study does not warrant that all the contents within are 100% correct due to prevalent economic changes from time to time.

The author/publisher will not be liable for any losses or damages of any kind incurred by the reader whether directly or indirectly arising from the use of the data and information found in this business plan / feasibility study. The reader should therefore understand that the information provided by Two Brothers Trading Company in this business plan/feasibility studies is confidential. The reader, hereby agrees that he/she will not discuss or exchange the information herein without the express written permission of Two Brothers Trading Company”

You could add other things, but you have giving the warning on the confidentiality of this document.



Palm Oil Business Plan Simplified

The next page is your content page.

CONTENT PAGE

Just like any other book all the chapters, topics, sub-topics, tables, and graphs will be listed here. Major contents , and page references will look like this:
               

                                                                                                Page

Title Page………………………………………………………..iii

Legal Notice……………………………………………………..iv

1.Executive Summary ………………………………………..1

1.1 Name of business………………………………………….2 


1.2 Nature of business………………………………………..3

1.3 Office Address……………………………………………….4

2.Company Description ………………………………………5

3.Products and Services ………………………………………8

4.Marketing Plan…………………………………………………12

5.Operational Plan………………………………………………14

6.Management & Organization…………………………...16

7.Start-up Expenses & Capitalization…………………..20

8.Financial Plan ……………………………………………………24

The next topic is the Executive Summary.

1.00 EXECUTIVE SUMMARY

As the name implies this gives the summary of all you have in this business plan. Therefore in few sentences summarise all you have here. Remember, it is the last to be written. Think about it, the revenue figures, income statements, capital requirement, and their uses plus other information that should be here, are not ready with me now. So I must wait until I get them before I can now quote them here.

Palm Oil Business Plan Simplified

Illustration:

“This project is to establish a Palm oil Trading Company in Eziala, Imo State Nigeria. For Two Brother Trading Company Ltd. The purpose of this business plan is to raise N5,000,000 for the establishment of the said trading company. The major product to be marketed is Red Palm Oil. This business plan will show the expected financials and operations over the next three years.. This project will need a start-up capital of N10,000,000, which is required to finance both current and non-current assets. Two Brothers Trading Company Limited has an authorized and fully issued and paid up share capital of N1,000,000.The directors have also decided to introduce further N2,000,000 venture capital each to augment with the N5,000,000 to be borrowed.”

“The start-up expenditure is going to be N3,000,000 for fixed assets, and N1,000,000 for other expenses including incorporation expenses and other start-up logistics which will certainly be capitalized and amortized in the first three years of the business. The balance of N6,000.000 is to serve as the working capital of the business”.

“The business is expected to have a total turnover of N40,000,000 per annum. The cost of sales is expected to be N25,000,000 per annum. That gives a gross profit margin of N15,000,000. The operational expenses ( inclusive of salaries , other admin expenses and tax payments) is estimated at N7,000,000 while depreciation for fixed assets and the amortised expenses will amount to N1,000,000. This leave N7,000,000 as net profit.

On the whole these give 37.5% gross margin, 17.5% net margin and 70% return on investment.”

Now note that no investor will resist the proposal of investing in this business where it will get 70% returns on his investment, and his interest is always guaranteed. In fact he is also certain that the loaned capital will be repaid in peace. Yes, the executive summary has done its job. Going through other aspects of this plan will be just to confirm these facts, and that is why they have to be shown very clearly in this plan. So other aspect of this executive summary continues as follows.

Palm Oil Business Plan Simplified

1.1 Name of business:
The name of the company is TWO BROTHERS TRADING COMPANY LIMITED

1.2 NATURE OF BUSINESS:
TWO BROTHERS TRADING COMPANY LIMITED was incorporated on the 6th of March 2017 with a share capital of one million Naira. The primary object clause of the company is Oil Palm Trading, “to carry on business of trading, marketing, sales and distribution of general goods, such as cement and blocks, commission agents, manufacturers’ representatives, general suppliers and general contractors.”

1.3 Business Address
The business address is Eziala, Imo State Nigeria

1.4 OBJECTIVE
The objective of this business as indicated in this business plan and feasibility study include:- To make palm oil available to the members of the public at a very affordable price.
You can now list out other objectives.


1.6 VISION
To become a household name in palm oil distribution in Imo state area of Nigeria. Achieve sales and services and profit growth goal of 120%, in the next three years.

1.7 MISSION STATEMENT
: TWO BROTHERS TRADING COMPANY LIMITED mission is to become the recognized leader in its targeted local market in palm oil distribution, and to give customer optimum satisfaction, through its innovative, quality, and timely service delivery.

1.8 Purpose of the Business plan
The purpose of this plan is to solicit for a loan of N5,000,000, and for the business plan to serve as management guideline in the running of the business in the next three years.

1.9 Expansion plan:
It is hoped that if the projected return is maintained three more branches will be opened in the 4th year of the establishment of this business.

You are done with the executive summary. You can now go over to point two which is company description.

 Palm Oil Business Plan Simplified


2.00 COMPANY DESCRIPTION/PROFILE:
TWO BROTHERS TRADING COMPANY LIMITED was incorporated on the 6th of March 2017 with RC No3333 and a share capital of One million Naira of one Naira per share. It is made up of two directors as the shareholders. The primary object clause of the company is Palm oil trading “to carry on business of trading, marketing, sales and distribution of general goods, such as cement and blocks, commission agents, manufacturers’ representatives, general suppliers and general contractors.

2.1 Directors:

Here give the names and details about the two directors including their professional and other life experiences that ill promote the business or show that they can manage the business.

 

READ ALSO:Break-even analysis for Business plan

3.0 PRODUCTS AND SERVICES:

In this part you must take time to explain the following as much as are relevant here, one after the other. You can do this under certain sub-heading as:

3.1 Procurement

3.2 Whole-Sales

3.3 Retailing

3.4 Production Or Manufacturing Process.



Questions to answer here include:

i. Are products or services in development or existing (and on the market)?

ii. What is the timeline for bringing new products and services to market?

iii. What makes your products or services different?

iv. Are there competitive advantages compared with offerings from other competitors?

v. Are there competitive disadvantages you will need to overcome? and how?

vi. Is price an issue?

vii. Will your operating costs be low enough to allow a reasonable profit margin?

viii. How will you acquire your products?

ix. Are you the manufacturer?

x. Do you assemble products using components provided by others?

xi. Do you purchase products from suppliers or wholesalers?

xii. If your business takes off, is a steady supply of products guaranteed?

Do the same to all other points that are not yet covered as in the content list above – points 4 to 6. You may need to make contacts if you can't get it or if you want to contract the writing of one to a professional. I want us to do some illustrations about certain financial estimates of this business plan especially those highlighted in the executive summary above. 

Palm Oil Business Plan Simplified


7.0 START-UP EXPENSES & CAPITALIZATION:

We have to remember that N10,000,000 is what is required for this business. Therefore we must show the start-up capital expenditure and start-up expenses
TABLE 1: EQUITY CONTRIBUTION



PALM OIL BUSINESS PLAN SIMPLIFIED

TABLE 2: START-UP EXPENSES


PALM OIL BUSINESS PLAN SIMPLIFIED

Remember that every pre-operational expenses are capitalized. Therefore, the tangible fixed assets of Wheel barrow, containers, other fixed capital, and shop fittings will be depreciated in accordance with relevant accounting standards for such items. The other items of Shop rent will be charged to the relevant trading period, the same could be done for miscellaneous expenditure or it could be amortized over some period according to the company accounting policy. If admin expenses has a long term effect it will be amortized over some periods too.
 

 Palm Oil Business Plan Simplified

 8.0 FINANCIALS:

This is where you will do your financial reporting as they relate to the estimated activities of the incoming business.

8.1 Operational Expenses:.

Let’s do the proposed operational expenses here.


TABLE 3: Estimated Operational Expenses.


PALM OIL BUSINESS PLAN SIMPLIFIED

Detailed analysis of each of these expenditure items should be given.

8.2 DEPRECIATION:

Here you will state the method you are using to depreciate the fixed assets and amortize the capitalized expenditure. Depreciation could be at straight line method, sum of digit method, diminishing balance method or any other method. Any method used must be stated and at what rate. Using straight line method at 25% for fixed assets, and 20% for furniture and fittings is appropriate. It means equal amount each year. The company may decide to write off the intangible assets in the first year or amortize it for say 3 years at different rates or equal rate.

There should be a table for the calculation here.

Even though it should be worked out here, but we had stated in the executive summary that depreciation is N1,000,000. We will keep to it.

What is important now is the estimation of turnover and cost of sales.

8.3 TURNOVER/REVENUE ESTIMATION:

Here there is need to make reliable forecast by month, quarter of the year and yearly too. We had estimated N40,000,000 as total turnover in the executive summary, and that is what we shall use.

The point I’m making is that it's this part of the business plan that generates all those figures quoted in the executive summary. That is why they must be shown clearly.
8.3.1 COST OF SALES.

Here you must tabulate in quantity, price per unit etc. to give total purchases in say weekly, monthly and yearly. All other direct marketing expenses are brought in here. Carriage inwards is always part of the purchases. We had estimated this to be N25,000,000 in the executive summary.

8.4 INCOME STATEMENT

This is where you show whether the business is making business or not. In this our example, we will use the figures already derived to prepare this.

TABLE 4: Income Statement

TURNOVER/REVENUE

40,000,000
Less cost of sales

25,000,000
Gross Profit

15,000,000
Less: Admin Expenses
5,750,000

          Loan interest
    750,000

Accumulated Depreciation
1,000,000
7,500,000
Profit before tax

7,500,000
Taxation

500,000
Net Profit after tax

7,000,000



Palm Oil Business Plan Simplified

Details of the admin expenses must be shown. Such expenses as auditors fees, consultants fees especially for writing this business plan must be indicated. Directors allowances, salaries and wages must be shown in details. That will help the financial analysis of the operations. If the admin expenses takes over 80% of the gross profit, it calls for re-examination.

We have been able to derive all the figures we expressed in the executive summary. One thing you must know is that the figures and all the expressions in the business plan must be coherent and in alignment with one another. No figure should be imposed any how without prove.

8.5 ACCOUNTING RATIOS:

This is a mathematical expression of how viable a business is.

8.5.1 GROSS PROFIT MARGIN: This shows the relationship between the turnover and the gross profit generated. In other wards, it shows if the cost of sales is too high in relation to the selling price.

It is expressed as
 
    Gross profit        X 100       that is       15,000,000     x 100 = 37.5%
    Turnover                                              40,000,000

Gross profit is sales less cost of sales.

8.5.2 NET PROFIT MARGIN:

Net profit (after tax) margin shows the relationship between the turnover and the net profit. It is a ratio to watch because if a business has a gross margin ratio of say 37% and comes to 6% net profit margin or even get loss, the business management has to look inwards to find out what eats up the profit. It could be that the administrative expenses are too high/reckless.

Palm Oil Business Plan Simplified

It is calculated as follows:
Net profit after tax     x 100
    Turnover



= 7,000,000      x 100 = 17.5%

   40,000,000
8.5.3 RETURN ON INVESTMENT( ROI):

Truly this is the ratio that the investor is looking at.
It is expressed as

Net Profit x 100    i.e. 7,000,000 x 100 = 70%
Capital employed      10,000,000


I have to admit here that this figure may be high for such a retail business. But if it happens in reality it is a good business adventure.

THREE YEAR BUSINESS PLAN

Remember that this business plan is supposed to be for 3-year start-up. What I have done for this first year on operational expenses should be done for the other two years and presented in tabular form. Then the Income statement will also be presented in the same tabular form. This will enable appraisal of the business over the three years using the various financial ratios.

This is where we shall stop for this moment. All other elements of this business plan will be handled in my next write up on business plan feasibility studies. We are suppose to draw the balance sheet and the cash flow statement, and may be statement of changes in equity and other accounting statements. All of these we shall be dealing with later. You can make contacts for further questions or make comments through the comment platform in this website. You could follow us or like us by clicking any of the social media button above. For regular up-date on this website fill in the follow-by-email platform under this page.

In the beginning I highlighted the following business lines as possible businesses that are related to palm oil business. 

Palm Plantation business

Palm oil Processing (production)

Palm oil marketing. and

Palm kernel processing and marketing.

Incidentally what we have dealt with here today only relate to palm oil marketing. My promise is that I will handle them one after the other after the next topic ‘ business plan feasibility study’. Encourage me by sending feedback via the comment platform. You can ask questions which I could incorporate in the other write-ups. If you can write, do so; submit articles for publication in this blog through the submit article platform. Your article will be edited and published in your name.

4 comments:

  1. thank you for this study, and i would like us to see one on one pls can you make it possible. my phone no is 08123993550

    ReplyDelete
  2. thank you ... please keep up with your publications. perhaps you try and own a journal or text. great work.

    ReplyDelete

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