Section 1

Team 5
Fall 2014

Business Plan
Business Name: Organic by Nature, LLC
Business Idea: Greenhouse Rental Space and Organic Oyster Mushroom Cultivation

Team Members:
Email address
Adrian Bailey

____________________________________ baile2am@dukes.jmu.edu

Lindsey Bass

____________________________________ bass2Le@dukes.jmu.edu

Madison Biernacki ____________________________________ biername@dukes.jmu.edu

Spencer Hearne

____________________________________ hearnesb@dukes.jmu.edu

Gregory Hobson

____________________________________ hobsongp@dukes.jmu.edu

Michael Tucker

____________________________________ tuckermg@dukes.jmu.edu

Caitlin Urwin

____________________________________ urwinca@dukes.jmu.edu

Section 1
Team 5
Fall 2014

Table of Contents
Executive Summary.....3
Introduction.....4
Who would be interested?.....4
Competitive Strategy.5
Market Segments..6
Promotional Strategy..7
Pricing Strategy..............8
Cash Handling Policy...11
Quality Assurance....11
Process Map13
Triple Bottom Line.14
Resources14
Financial Analysis...15
Organizational Chart and Employee Salaries Table15
Breakeven Analysis16
Conclusion.16
Financial Statements...17
Financial Assumptions20
Bibliography....22

Section 1
Team 5
Fall 2014

Section 1
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Fall 2014

Introduction
Organic by Nature will provide the residents of the Seattle Metropolitan area with the opportunity
to pursue their own cultivation of organic produce and plants. Organic eating and cultivation are a
growing trend in the United States today, as organic products are now available in roughly 20,000
natural food stores and account for over 4% of the total United States food sales (USDA). Although
eating organically is, on average, 20% more expensive making the pledge to eat this way will likely
save the customer money over time as a result of not eating out, but rather cooking from scratch
(OCA). Currently 45% of the American population is actively seeking to include organic foods in
their diets; therefore, we can successfully aid in the customers attempt to pursue this organic
lifestyle (Gallup). With the ever-growing Green Initiative, the high population of young, trendy
individuals and wealthy urbanites in Seattle, our company will thrive by providing its customers with
opportunities to participate in this movement more actively and effectively; and more importantly,
organically. Located in the heart of the city, the residents of Seattle, plagued by poor weather and
limited access to fertile land, will be able to purchase a membership to cultivate their own 8ft by 3ft
plot of land within our large-scale greenhouse. Our membership packages range from $350 to $475,
with varying levels of consultations, soil options, plant sitting, etc. In addition to the memberships,
we will also be growing oyster mushrooms; the second most produced edible mushroom,
representing 25% of total world production of cultivated mushrooms (Andres, 2012). The
mushrooms that we cultivate will be directly sold to local organic restaurants, at a price of $6 per
pound. This business-to-business sector of our company will provide us with an extra source of
revenue, with oyster mushrooms typically exceeding $17,500 worth of harvest from a 10ft by 10ft
space (Wallin).
Who would be interested in our available greenhouse rental plots?
Our service appeals directly to the Seattle community. With the total population currently at
652,405 residents in Seattle, according to the U.S. Census Bureau, our demand can be gathered from
this initial number. According to the 2014 Gallup Poll, 54% of the population on the West Coast
tries to actively include organic food in their diet; which narrows our target market to 352, 299. As
stated by the U.S. Gardening Statistics, 23% of the population on the West coast participates in
home gardening. Based off of our already narrowed target market of 352,299, we can now narrow it
down to 81,029 after accounting for the consumer interests in growing their own products. And
finally, the United States Census Bureau claims that 50.5% of the Seattle population resides in

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apartments; creating a finalized target market of 40,920 people. With an average plot price of $395
and four growing seasons per year, our overall market potential based off of this target market is
$64,653,600 (determined based off of the market potential formula) (Mundy, 2014).
Who would be interested in our mushrooms?
To determine the number of potential restaurants interested in the business-to-business sector of
our company, we first examined the restaurants located in Seattle that are certified organic, which is
approximately 47 (Health). Based upon this number we can target our market from 47 to 38
restaurants by accounting for the percent of restaurants that utilize mushrooms in their day-to-day
menu, which is 81% (Blended, 2014). This statistic represents the number of restaurants nationwide;
therefore, we can only assume that this percentage would depict the minimum of the organic
restaurants in Seattle that would be interested in our organic oyster mushrooms. Aside from
expected restaurant interest, we also plan to sell to individual customers, including plot consumers,
as well as any others interested in our product. According to USDA statistics, mushrooms were the
fourth-leading vegetable commodity in terms of farm cash receiptsexceeded only by potatoes,
tomatoes, and lettuce. Nearly 10% of Americans consume mushrooms in any given day and around
59% of fresh mushroom purchases are for household consumption (ERS, USDA). With this
knowledge and predicted mushroom sales of 55,350 pounds in year 1, we can calculate that 32,657
pounds of mushrooms will be sold for household use which will generate $195,939 of revenue. As
Organic by Nature expands and becomes a more established company, we can forecast substantial
increases in revenue from the sale of oyster mushrooms.
Competitive Strategy - Why would our target market be interested?
We will compete in the marketplace by tapping into the niche markets of organic and gardening
enthusiasts through our renting of greenhouse plots and our sale of organic oyster mushrooms.
What differentiates our service of renting out greenhouse garden plots to customers is that we offer
individual freedom within the customers garden space, as well as providing superior growing
conditions for any plants or produce. Community gardens and other services that provide
customers with their own garden space cannot deliver the ideal growing environment that our
company is capable of with our greenhouse. The other function of our company is the sale of our
on-site, organically grown oyster mushrooms. Producing organic mushrooms for sale is a service
provided by other businesses, but few of those grow their own product in certified organic facilities
and sell directly to the customer. This differentiating characteristic gives us a competitive advantage

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in that our mushrooms are guaranteed fresh and local. Also, having our company specialize in one
product ensures quality and consistency, whereas many other companies focus on numerous
products. Furthermore our all-organic policy differentiates us from many large corporate retailers.

Figure 6-2

Figure 6-1
Perceptual Map - Mushrooms

Perceptual Map - Customer Plots

As seen in Figure 6-1, our company has few competitors in terms of independence given to the
customer; while we may have strong competition in the organic market, we are unique with our
combination of an organic process and a specialized product. Organic by Nature does not rely on
classes or a community outlook to provide our customers with a quality gardening experience.
Instead, we have positioned ourselves as a forward-thinking and specialized company that gives
customers a place to accomplish something on their own in a state-of-the-art facility. While our
pricing may be higher, we offer a unique, superior quality service and product. Truly, our only
competition in gardening is derived from the companies who instruct the customer on how to
construct a garden on his or her own; however, those are not threats of direct competition, but
rather substitutes. For the aspect of our company that provides the sale of organic oyster
mushrooms, we have taken a position that differentiates us from companies such as Amazons
Angelinas Gourmet and Wholefoods with our decision to specialize. Furthermore, we are situated
in the market as a certified purely organic seller, whereas many companies have not taken the all
organic stance that we believe many customers will recognize and appreciate.
Market Segments
Based upon our established target market of 40,920 people, our company has decided to focus its
marketing efforts on the following five segments, in the hopes of optimizing our potential customer
base. We have constructed these defined segments based upon income, educational level, age,
location, and personal interests.

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1) Therapeutic Gardeners - represents those who enjoy hands-on projects and selffulfilling activities. While some of these gardeners have a background in the craft, there are
many others who wish to strengthen their knowledge in this field. These potential
customers are open to learning and growth, and also use gardening as a therapeutic tool and
view gardening as a hobby with psychological benefits. Typically these gardeners are those
who have the resources necessary to give a hobby the time and investment needed.
2) Young and Trendy Individuals - attempt to participate outside of the cultural
mainstream. According to Forbes magazine, Seattle is one of the trendiest cities in the
nation. These 20-something year-old adults act as the innovators and early adopters in the
diffusion of innovation, and value keeping up with new trends and ideas. These trends are
not limited to fashion and music, but expand to political, economic, cultural and lifestyle
trends as well; one of these major trends being the Green Initiative to whom we cater.
3) Gentle Green Giants - are participants in the Green Initiative. Studies have shown that
Seattle is the 8th greenest city in the nation, and a substantial number of locals are committed
to a cleaner environment and conservation (SVOBODA, 2008). Their immense
commitment to helping conserve the environment drives their motivation to be selfsufficient. These Seattle natives seek new, efficient ways to reduce their carbon footprint.
4) Wealthy Urbanities - those individuals that reside in the city and do not have the
necessary property or means to cultivate their produce, but have the available discretionary
income. 51% of these Seattleites live in apartments making this segment a large portion of
Seattles overall population of 652, 405 people (U.S. Bureau of Labor Statistics).
5) Organic Restaurateurs - the business-to-business mushroom cultivation sector will
focus its marketing strategy on organic restaurants. There are roughly 47 organic restaurants
in Seattle, creating a substantial market for the sale of quality organic products (Health). In
addition, the restaurants would save on shipping costs by purchasing our local produce.
Promotional Strategy
Our company will spread information about our organization through the use of local radio, print,
and digital advertisements. According to John Hill, Director of Corporate Services at Seattles
KUOW (NPR affiliated), a start-up company typically spends 10% of revenue on promotion. In
order to reach a large portion of our target market, we will be purchasing radio mentions from this
station. The base plan ($4,586) we will purchase is a 16-slot plan that includes 6 morning drive
mentions, 4 afternoon drive mentions throughout the workweek, and 6 weekend mentions. They
can be spread out over the course of 1-4weeks, dependent upon sales (Hill, October 8, 2014).
Organic by Nature will also utilize print and digital advertisements that will be displayed in Seattle
Magazine. The advertisements will consist of a one-third of a page feature, four times a year in the
print version of the magazine at a cost of $2,995 annually. We will also be purchasing top tile
advertisement space on the Seattle Magazine website at a cost of $500 a month. We chose to place
advertisements with both KUOW and Seattle Magazine due to the exposure it would give us with
our target market considering they both cater to well-educated and upper class individuals (Kueber,

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2011). Unlike other news stations, KUOWs NPR newscasts appeal to a more liberal,
environmentally conscious audience, which targets our other segments. Finally, we have created an
informational website that contains all company pricing, features, and a method by which to contact
us. This website will be published upon the first day of our promotional campaign. Our promotional
objectives consist of: catching the attention of a large percentage of our target market, minimizing
advertising costs while maximizing reach, and reflecting our company in a positive manner. We will
be able to achieve these goals through the utilization of our market analysis, cost analysis, and
competitive strategy. One large promotional campaign will be launched with the goal of reaching all
organic enthusiasts, not a specific demographic. The campaign will communicate to our target
market our dedication to an organic lifestyle and the tools we provide for them to achieve the same
goal. We will aim this toward the residents of Seattle who have an affinity for gardening and stress
the fact that we can provide that to them in an optimal setting. This campaign will help to position
our company as a high quality, organic, community that offers the best in individualized service.
Our promotional budget for each year is listed as the following: Year 1: $42,370, Year 2: $54,434,
Year 3: $65,115, Year 4: $66,422, Year 5: $67,741.
Product and Branding Strategy
Our product and branding strategy involves pushing the product onto our customers by
promoting to our specific market segments and expecting a positive reaction. Our promotion of
independent freedom and certified organic status will intrigue customers; therefore, drawing them
into our business over our competitors. The branding strategy we will use to reach our target market
is multiproduct branding under our company name: Organic by Nature. Since we are a smaller
company appealing to a limited market, promoting our services and selling our product under our
company name will give us the most recognition while establishing Organic by Nature as a local
leader in Seattles organic food movement. Additionally, we plan to create brand equity through our
logo. Since we are providing a service and a low key product (oyster mushrooms), perceptual
benefits through packaging are not necessarily a strong marketing tool to benefit our company.
Instead, we have focused on capturing customers through our name recognition and our logo which
was designed with the intentions of catching the potential customers eye and sparking interest as to
what our products and services consist of.
Package Pricing
Our company offers the following three packages to our customers depicted in Figure 9-1. The

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packages run over the span of three-months, or rather one growing season. Customers may begin
purchases two weeks prior to the growing season, which commence on the 14th of the specified
starting month of the growing season. The growing seasons are as follows: January - March, April June, July - September, and October - December. If there are open plots and customers would like
to start a package after the start of the growing season, they may speak to a manager about obtaining
a prorated package. Our annual fixed cost overall are $15,090 (or $65 per season for each of the 58
plots). The variable costs per plot depend on the package type and are the following; $76 per season
for each Bronze Package, $101 per season for each Silver Package, and $103 per season for each
Gold Package. These increases in variable costs come from the extra labor used and the
differentiation in materials as you move up from each package. We expect 34 Bronze Packages, 8
Silver Packages, and 16 Gold Packages to be purchased for each of the four growing seasons.
Bronze Package - $350

Silver Package - $425

Gold Package - $475

Watering
accommoda8ons
Tool availability
8x3 plot
Unlimited consulta8ons
1 soil op8on

Watering
accommoda8ons
Tool availability
8x3 plot
Unlimited consulta8ons
2 soil op8ons
1 week of plant siFng

Watering
accommoda8ons
Tool availability
8x3 plot
Unlimited consulta8ons
3 soil op8ons
2 weeks of plant siFng

Package Specifications:

Figure 9-1

1) Watering accommodations - Garden technicians will provide watering accommodations

based upon plot necessity.
2) Tool availability - We will provide all plot renters with the availability to the necessary
tools needed to maintain and develop plots.
3) Plot - Each package includes an 8x3 plot in which the customer has the capability to
grow desired products.
4) Soil - Dependent upon the package purchased, customers will have a variety of soil
options including: Bronze Package - Ultimate Organic Mix, Silver Package - Ultimate
Organic Mix and Premium Grade Vermiculite, Gold Package - Ultimate Organic Mix,
Premium Grade Vermiculite, and Black Mulch.
5) Unlimited Consultations - Customers are provided a 30 minute one-on-one expert
analysis of their plot and are provided further guidance on the development of their plot.
6) Plant Sitting - In the case that the customer is unavailable to tend to their plot, our garden
technicians will care for the pruning and cultivating of the plot in the renters absence.
The following package additions provide the customer with the opportunity to enhance their
pre-established package (for other variations in package deals, customers should speak to a

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manager): Plant Sitting: $10/day, promising general plot maintenance and Time Extension:
$30 per week, if customers would like to extend their package.
Mushroom Cultivation and Pricing
Unlike our business-to-consumer pricing, we will not be offering packages but instead a flat rate of
$6 (Profitableplants.com) per pound for our organically cultivated oyster mushrooms. We will grow
our mushrooms using the following process: fill large plastic bags with damp straw, poke holes in
the plastic bag every 3 inches, spread the mushroom culture throughout the bags, cover the bags
with the tarp to keep direct sunlight from reaching the mushrooms, and finally check on the
mushrooms daily, keeping the straw in the bags damp (Alexander, 2013). The mushrooms sprout
every two weeks; therefore, they will be produced in various cycles to ensure constant availability of
our product to the restaurants and other customers in need. Restaurants will have the opportunity to
contact a garden technician to place an order with the quantity of mushrooms (in pounds) and
schedule a complimentary delivery at a time convenient to them. According to scheduled delivery, a
staff member will be responsible for transporting mushrooms to the restaurant via company vehicle.
In addition, assuming substantial availability, we will be offering the sale of our organic oyster
mushrooms at our facilities for individual customers. All excess mushrooms will be stored for later
sale. Individual customers may contact a garden technician about preparing an order of the
mushrooms to be picked up.
Overall Pricing Strategy
Our pricing objectives consist of being able to increase our sales, obtain customer loyalty, and
enhance the image of our brand. These objectives are appropriate for our business because we are
determined to tap into a niche market where customers feel welcomed to grow their own produce. It
is important to build a reputable brand that embraces the same values as our customers so they
continue renting our plots. The strategy for Organic by Natures customer plots is to price above the
market. Since there is high demand for organic products, there is a willingness to spend more on
these items in comparison to non-organic items. This allows us to charge a price above the market
standard for what we provide. These high prices signal to customers the quality of our business, and
will reflect the unique ability to grow their own food year round within their designated greenhouse
space. To reflect cost of living increases as well as continuous price inflation, we will increase prices
for our plots by 2.7% and prices for mushrooms by 1.7% each year. For the mushroom sales of our
company we hope to maximize profits while providing a quality product to our customers. A

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reasonable price of $6 per pound for the oyster mushrooms is a reflection of penetration pricing
strategy. Demand for mushrooms has risen significantly in recent years and compared to a typical
market price of seven dollars, it should be easy to compete (Wallin).

Figure 11-1

Figure 11-1 represents the monthly sales forecast for our rental plots and mushroom sales.
Cash Handling Policy
We will accept payment by all major credit cards, cash/check, debit, or direct debit via our bank (U.S
Bank in Seattle). A customer will fill out a direct debit form, which gives the bank permission to
transfer money from the customers account to our account. This will happen the first Friday of
every month to ensure that all customers are accounted for. Any cash or checks that are collected
will also be deposited each Friday. When a customer signs up for a growing season, they will become
members of Organic by Nature. Therefore, they will be charged on a monthly basis until they cancel
their membership with our company.
Quality Assurance
Based upon the products and services we provide, our customers expect the following from us:
1)
2)
3)
4)
5)

Successful produce and plant yield

An attentive and friendly staff
Necessary resources to develop plot
Close proximity to customers home
Quick responsiveness to customer needs

Organic by Nature will be utilizing Total Quality Management to ensure that we are consistently
improving not only our services provided, but also the overall customer experience; always ensuring
that our company growth does not exceed the excellence we provide our customers (Nolting). We
will guarantee excellence and expertise from our employees. Our hiring standards will ensure such
excellence, by requiring the following:
a. Our top-level manager position will require an extensive background or degree in
agriculture as well as business.
b. The secretary position will require a degree in business administration.

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c. All other garden technicians must have a desire to not only work closely with the
gardening aspects, but have the ability to accommodate all customer needs effectively in a
professional manner.
d. All employees will be subject to a drug test and a level 2 background check prior to hiring.
e. All employees will have to participate in a 3-day training course to learn the day-to-day
operations and tasks of the company.
In order to optimize the experience for the customer, we have also implemented a few
accommodations in our facilities:
a. We will ensure that our facilities are always clean and well-maintained for the customer to
have easy access to their plot and an optimal growing environment.
b. We have shaped our hours of operation to the times that we believe will be most
convenient for our customers. We will be open from 8am until 8pm giving a 12 hour period
for customers to visit our facilities.
c. The manager will be required to post hours that he/she will be available to provide these
consultations so that the customers can sign up according to their availability. In the event
that our manager cannot attend the consultation, the customer must be notified 24 hours
prior to the scheduled consultation (Q1).
d. We will also be building a locker room area within our administrative building, for
customers to keep their items while they are working on their plots. Additionally, the locker
room area will have the necessary amenities (such as sinks and restrooms) for customers to
clean up after working on their plots.
e. We will have our customers sign a contract as a part of their rental agreement establishing
the guidelines of our greenhouse (regarding respecting the property and tools, other
customers and their plots, as well maintaining the chemical free, organic environment).
f. We will guarantee consistent production of high quality organic oyster mushrooms to
provide for the businesses we are supplying. Prior to delivering our produce, we will wash
and inspect each order to ensure that it will provide a quality customer experience (Q2).
g. We will ensure an optimal organic environment for our customers by acquiring an organic
certification from the Washington State Department of Agriculture. For our crops to
receive the organic label; we must successfully pass through an inspection, pay an application
fee of $470 and additional costs of $1,812 to create a total cost of $2,282 (Coyne, 2014).
Our overall Total Quality Assurance is strong but will be enhanced by our follow-up plan. After
every growing season, each customer will be emailed a survey asking about their experience with our
facilities and any further improvements that can be made to enhance the customers experience. We
will also have the following redundancy plans in case something was to go wrong:
a. If our customers voice concerns to the manager about their plot not growing to their
expectations, we will offer a 30% discount on their next monthly payment.
b. Through a system of internal controls, we will be able to effectively monitor inventory of
critical equipment to safeguard our companys assets.
c. In the event that our company vehicle is inoperable, we will rent a truck from a third party
until the issue is resolved.
d. If we lose electricity, we will immediately activate our back-up generators which will

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power the greenhouse until the electricity is restored.

e. In the event of a fungus or insect infestation, we will hire an outside mold remediation
service and shut down operations until the issue is resolved. In the case that a customers
plot is compromised due to these infestations, we will remedy the situation dependent upon
the severity of the damage.
Process Map

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Triple Bottom Line

People - To ensure employee satisfaction and maintain our employee's desire to perform at their
highest ability, we have incorporated benefits for all staff members. Organic by Nature will allow
customers the freedom to carry themselves however they would in daily life rather than conforming
to a company standard. Employees may express themselves and approach situations in their own
creative manner. So long as they continue to provide superior customer service and appropriately
accomplish the tasks they are assigned.
Profit -By delivering a service and product that people desire and allocating our resources effectively,
we will be able to adequately provide each of our employees with essential benefits for the
betterment of their lives and of our company.
Planet - Our companys main initiative is to provide our community and customers with the outlet
for an environmentally friendly and healthy lifestyle. In addition, we will be making a difference by
helping our community to go green and become better consumers.
Resources
Organic by Nature features two large-scale greenhouses that provide an optimal environment for
cultivating organic produce and plants. We will purchase two IGC Texan Teaching Packages that
we will assemble using the IGC greenhouse construction team. The greenhouses will be 416 wide,
72 long, and have a sidewall height of 8of Lexan twin-wall polycarbonate covering that is UV
resistant and can withstand 85 mph winds. According to the Greenhouse Megastore website, the
package contains all necessary wall structures, heating and cooling fans, air flow fans, shutters, and
doors. We will need a 2014 Bobcat S70 to aid in moving around supplies throughout our facility.
Over the course of 5 years, our company will require 3 separate greenhouses to be developed by the
end of year 3. We will begin with the two greenhouses (one focused on the business-to-business
sector and the other focused on the business-to-consumer sector) at the initial startup. In year 3, we
are planning on featuring another business-to-consumer greenhouse to allow for more rentable
plots. The customer greenhouse will have a capacity of 58 plots and will double to 116 total
available plots after our expansion in year 3. The greenhouses will be equipped with Agrosum
fluorescent fixtures, a pre-wired humidistat, and a misting system in order to create an optimal
growing environment. We will also provide basic level organic soil, vermiculite, organic pesticides,
black mulch, and seeds from an organic seed supply company in Seattle. Finally, we will be
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providing our customers with the necessary tools that will also be used in our mushroom cultivation,
such as hand shovels, rakes, regular shovels, hoes, gloves, and pruners. For our mushroom growing
operations, we will need large plastic bags, straw, and a tarp. In order to deliver our mushrooms to
the local restaurants, we have purchased a 2005 Ford Ranger that will serve as our company vehicle.
Organic by Nature will also need an administrative building for office space, a bathroom, and
lockers that our customers can store their valuables in. Our employees for the first two years will
consist of 2 managers, 2 secretaries, and 6 gardening technicians. When we expand in our 3rd year
we will need to acquire 2 additional gardening technicians to accommodate our company growth.
The extra employees will accommodate the third greenhouse after expansion in year 3. The
expansion will increase sales by $86,464. Our company will take out a loan of $78,171 from U.S.
Bank and ask for another $38,950 from investors to finance our start-up costs. The bank loan will be
backed by 50% of our fixed assets to be used as collateral.
Financial Analysis
We are a unique operation in Seattle; therefore, we have the advantage of charging prices that
increase our margins, and as a result, our profits. Our location also makes delivery services a unique
and cheap feature of our operations. Our contingency plan minimizes potential loss and maximizes
Organic by Natures profit capabilities. By negotiating on the price of equipment, we can ensure that
we have minimized our costs, and maximized our profit margins. Organic by Nature has strong
returns on investment. The investment of $82,500 has a payback period of 4.63 years, a NPV of
$31,203, an IRR of 29.43%, and a MIRR of 25.79%. A change in revenue of 20% changes NPV by
8%. The agriculture industry is expected to grow at a rate of 5% each year. Organic by Nature needs
$165,000 to start operations. We will have 50% of our financial needs funded by debt in the amount
of $82,500. As the owners, we intend to contribute $41,250 and expect equal outside investment.
Organization Chart
and

Employee Salaries

Table

Figure 15-1
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Our facilities will require 5 employees at the beginning of the first year consisting of 1 manager, 1
Secretary and 3 garden technicians and on the second year we will add 3 more garden technicians.

Breakeven Analysis

Conclusion
Our business model has all of the necessary means to make Organic by Nature a very successful
company. Our facilities will be located in Seattle, Washington, a prime location for a business that
provides the opportunity to grow organic food. Our services are positioned at a higher price
compared to similar businesses, but we offer a high quality service that warrants such a price. Our
marketing strategy is directed at high-income individuals that have the means to rent out our
facilities. We are able to efficiently and effectively provide our customers with the ability to grow
their own produce and the psychological satisfaction of being able to provide food for themselves.
Our company is profitable while simultaneously catering to the environment. Allowing our
customers space to grow organically enables them to be environmentally friendly and live a healthier
lifestyle. All of the features of this business provide an excellent investment opportunity for any
potential investor looking for a unique idea that caters to a healthier population and planet.

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Assumptions:
1. The company will be established as a Limited Liability Company and taxed as a corporation.
2. Supplies are paid for two months after being purchased. The supplies for our first two greenhouses will cost $93,310 in the first year and reflect an average inflation rate for
Seattle of 1.7% in Year 2. In Year 3, the cost will increase to $96,506 as a result of the opening of a third greenhouse. In Years 4 and 5, the cost of supplies will represent a
1.7% average increase from inflation. An inventory supply worth $20,000 will be kept at all times in the event that shipping makes a critical error or there is an emergency
need for it.
3. In the first year, there will be 10 staff (6 gardening technicians, 2 managers, and 2 secretaries). Technicians will earn $9.32/hour and work 28 hours per week. Due to
Seattles new minimum wage law, companies with fewer than 500 employees must increase their minimum wage from the current $9.32 to $15 within 7 years. Therefore,
wages for our gardening technicians will increase by $0.81 each year. The managers will earn $40,000 per year with a scheduled raise of at most 4% each year. The secretaries
will earn $30,940 per year with a scheduled raise of at most 4% each year. Employees are paid every two weeks.
Garden Technicians:

$9.32/hour

Managers:

$40,000/year

105,388

Secretaries:

$30,940/year

85,164

Total:

$81,420

$271,972

4. Equipment will be purchased and total $129,884 in Year 1. An additional greenhouse will be built and opened in Year 3 for a total expense of $179,849.
a.

b.

c.

Manufacturing Equipment
Delivery Vehicle
Greenhouse Tools
Bobcat
Total
Office Equipment
Computers
Printer
Desks
Chairs
Lockers
Total
Buildings
Greenhouse (2 in Year 1)
Greenhouse (1 in Year 3)
Office Space
Total

Total Expense

$6,500
2,868
13,925
$23,293
$3,500
800
1,720
400
2,500
$8.920
$77,424
41,412
28,800
$147,636
$179,849

5. SG&A will include marketing, insurance, and permits and licenses that will be required. Our marketing budget will be approximately 10% of our total projected revenue
(John Hill, October 8, 2014).
d.

Year 1

e.
f.
g.
h.

Year 2
Year 3
Year 4
Year 5

Marketing
Insurance
Permits
Utilities
Total

$42,370
25,000
1,212
13,500
$82,082
$94,345
$103,991
$105,386
$106,888

6. Organic By Nature will sell its mushrooms for $6/lb in Year 1 and will only sell 75% of its maximum capacity due to start up delay. In years 2-5, the mushrooms will be
grown at a maximum capacity of 65,800 pounds. Each year after that will reflect a continuous inflation rate of 1.7% for food. Plots will vary in price based on which package a
person chooses to buy. Prices in Year 1 will be as follows: $350 for Bronze Package, $425 for Silver Package, and $475 for Gold Package. The packages will cover one
growing season (3 months) and there will be four season in a year. Prices will increase each year by 2.7% to reflect inflation in household food prices in Seattle (U.S. Bureau of
Labor Statistics). In year 3, the new greenhouse will open for plot purchase and availability will double. As a result, revenue for each type of plot will double.

20

Section 1
Team 5
Fall 2014

i.

j.
k.
l.
m.

Year 1

Year 2
Year 3
Year 4
Year 5

Bronze Package (34 plots)

Silver Package (8 plots)
Gold Package (16 plots)
Mushrooms (49,350 pounds)
Total Revenue

$47,600
13,600
30,400
332,100
$423,700
$544,336
$651,151
$664,217
$677,415

7. Credit card transactions will be accepted. We will use a rate of 0.0245 to calculate the amount to be paid.
Year 1

$3,322

Year 2

$4,268

Year 3

$5,105

Year 4

$5,207

Year 5

$5,311

8. Depreciation on assets will be straight-line. For buildings, it will be over 13 years, while other items will only be 5 years.
n.

o.

Years 1 and 2
Depreciation on Buildings
Depreciation on Office Equipment
Depreciation on Manufacturing Equipment
Total
Years 3, 4, and 5
Depreciation on Buildings
Depreciation on Office Equipment
Depreciation on Manufacturing Equipment
Total

$8,171
1,784
4,950
$14,905
$12,257
1,784
7,435
$21,476

9. Interest will be 6% on loans that are taken out. Loans for Year 1 will be $82,500 and another loan of $34,887 at the end of Year 1 in order to maintain our minimum target
cash balance.
p.
q.

Year 1
Years 2-5

$5,100
$7,679

10. Dividends will represent 30% of income after taxes and an initial investment of $82,500 will be accepted as equity.
11. Taxes will reflect rates from Seattle, King County, the State of Washington, Federal, FICA, SUTA, FUTA, and Worker Comp.
r.

s.
t.
u.
v.

Year 1

Year 2
Year 3
Year 4
Year 5

Seattle (.415%)
King County (4.1%)
Washington (.138%)
Federal (15%)
FICA (6.2% of first $117,000 and 1.45% of all wages)
SUTA (2.7% of first $9,000)
FUTA (0.6% of first $7,000)
Worker Comp ($247 for two staff and $149 for 6 others)
Total

$6.98
68.96
2.32
252.30
1,870.28
45.41
10.09
1,388
$3,644
$35,786
$41,556
$43,143
$40,187

12. Adjustment of $1 in year 3 to represent rounding error.

21

Section 1
Team 5
Fall 2014

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24

Section 1
Team 5
Fall 2014

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25

Section 1
Team 5
Fall 2014

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26

Section 1
Team 5
Fall 2014

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27