Farm Way

Business Model and Plan

a business plan prepared by

Asem Alkahtani
Zachariah Chambers
Salaheddine Saboul
Salma Chakour
Mansour Almutairi
Kunal Bajpai

December 5, 2104
 Farm Way: Business Model
Background
Riyadh is the second largest province in Saudi Arabia. Centrally located, it has

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just over 404,000 km of predominantly agriculture-based industry. The City of Al-

Kharj, located along a major highway in the mid-eastern section of Riyadh, is a hub of

this industry, ranking number one in milk production and third in vegetable production

within the Kingdom.

There are 50 retail shops in Al-Kharj where merchants provide specific goods: one

shop for seeds, another for fertilizer, and yet another for tools. While a quaint turn of the

century business model, it presents a time cost to farmers and other customers. A one

stop shopping model, such as Lowes or Rural King, does not exist in Al-Kharj.

These merchants typically lease their shop space in pre-determined, non-

negotiable blocks. Some merchants may have too much space while others may have too

little. A flexible mechanism for providing space for merchants also does not exist in Al-

Kharj.

An underlying cultural value of trust is what powers the supply side of

agriculture in Al- Kharj as well as most of the Middle East. Farmers typically do not

have money at the onset of the growing season to purchase supplies. They approach

their various suppliers and are provided the supplies on the promise that they will be
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paid for upon the selling of the crops . These relationships develop over years and

reflect a very high switching cost for the farmers, thus presenting a significant

barrier to entry for new retailers.

Finally, Al-Kharj will be undertaking an exciting opportunity in 2016. Ground will

be broken for a large public University. This will result, however, in the leases not being

renewed for at least 28 highway shops as they will be demolished and the land sold

to the University.

1 This helps explain the specialization of the shopkeepers - they build a customer relationship around a
specific product.
With leasable space in this prime retail location already at capacity, at least 28 merchants will be

displaced with nowhere to sell their goods.

Farm Way sees an opportunity to address these issues by acting as a retail enabler which will

be described below.

Customers
There are two customer segments in need of service. The primary customers are t h e

displaced merchants (and others) in need of retail space to sell their goods. The secondary

customers are the farmers (and potentially home gardeners and others) in need of these goods

within the cultural context of trust-based transactions.

Product/Service
Farm Way will provide direct product and service to its primary customers and indirect

service to its secondary customers. The direct product will be flexible retail space to merchants

in Al-Kharj. Shared support services, such as cashiers, security, marketing, and delivery services

will be available. The indirect service will be a convenient one-stop-shopping experience for the

farmers who will want to visit these merchants due to the pre-established trust-based

relationships. A bonus service is the potential of merchants in Farm Way developing new

relationships due to the convenience of the one-stop-shopping.

Ability
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Farm Way is uniquely prepared to provide these services. Approximately 26,500 m of land,

with highway frontage, has been obtained approximately 2 km west of the site of the to-be-

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demolished buildings. This land will be converted into a 10,000 m commercial park. Shelf

space will be flexibly leased to meet the needs of the primary customers and support staff will be

hired to provide the additional services. The park will lend itself to the one-stop-shopping

convenience for the secondary customers and, by housing the displaced merchants, enable the
continuation of the trust relationships while potentially creating new relationships due to

proximity.

Conclusion
An opportunity exists in Al-Kharj. It is an agricultural hub with a number of specialized

shops that operate on a trust-based transaction culture. Merchants lease their shops at inflexible

space rates. At least 28 of these shops will be eliminated and there is currently no excess

capacity for them. Farm Way will provide flexible space and support services to these displaced

merchants and others. This will provide convenient one-stop-shopping for the farmers within a

trust-based transaction context. By defining itself as a retail enabler, Farm Way can sidestep the

tremendous barrier to retail entry, create a new market, and provide value to two groups of

customers.

The Business Plan follows.

 Farm Way: Business Plan

Contents
Executive Summary..................................................................................................................................... 3
General Overview........................................................................................................................................ 3
Customers............................................................................................................................................... 3
Product/Service....................................................................................................................................... 3
Marketing................................................................................................................................................ 4
What Drives Us........................................................................................................................................ 4
Company Description.................................................................................................................................. 5
Mission Statement................................................................................................................................... 5
General Description................................................................................................................................. 5
Value Proposition.................................................................................................................................... 5
Goals and Objectives............................................................................................................................... 5
Principal Owners...................................................................................................................................... 6
Legal Structure......................................................................................................................................... 6
Market Research......................................................................................................................................... 7
Customers............................................................................................................................................... 7
Industry................................................................................................................................................... 7
Business Culture...................................................................................................................................... 7
Competition............................................................................................................................................. 8
Competitive Advantage........................................................................................................................... 8
Regulation............................................................................................................................................... 8
Product/Service Line................................................................................................................................... 9
Product/Service....................................................................................................................................... 9
Product/Service Life Cycle....................................................................................................................... 9
Pricing Structure...................................................................................................................................... 9
Marketing & Sales..................................................................................................................................... 10
Communication..................................................................................................................................... 10
Growth Strategy.................................................................................................................................... 10
Prospects............................................................................................................................................... 10
Financial Projections.................................................................................................................................11
Trading Profit and Loss Account...........................................................................................................11
Income Statement..............................................................................................................................11
Balance Sheet....................................................................................................................................12
Financial Assumptions..........................................................................................................................14
Assumptions for Profit and Loss Projections.....................................................................................14
Assumptions for Cash Flow Analysis................................................................................................14
Assumptions for Balance Sheet.........................................................................................................14
Conclusion.................................................................................................................................................15
Workshop Notes…………………………………………………………………… …………………...18
The Business Building ..............................................................................................................................15
Building Design Features…….…………………………………………………………. ..............15

Executive Summary
 Al-Kharj is an agricultural hub of the predominantly agricultural province of Riyadh in

Saudi Arabia. As described in the Business Model, Farm Way intends to seize an opportunity to

serve as a retail enabler for displaced merchants (and others) while providing additional shared

resources such as cashiers, security, marketing and delivery. Farmers (and others) will benefit

from the consolidation of multiple, highly specialized shops to a convenient one-stop-shopping

experience at Farm Way. Importantly, the culture of trust-based retail transactions will be

maintained as the merchants will be bringing their customers with them.

General Overview

Customers
Farm Way has identified two distinct customer segments. The primary customer segment

consists of the displaced 28 plus merchants and potentially other established or new merchants.

The secondary customer segment consists of the farmers and other individuals who will solicit

these merchants.

Product/Service
Farm Way will provide products and services geared towards each of its customer

segments. The primary customers will be able to lease flexible space to display their goods and

have access to shared support services such as cashiers, security, marketing, and delivery. The

secondary customers will enjoy the convenience of a one-stop-shopping experience in

conjunction with the familiarity of conducting trust-base transactions with merchants they

already know.

Marketing
Farm Way will deploy two distinct marketing strategies. The first strategy will be direct

contact with the to-be-displaced merchants to make them aware of Farm Way and hopefully
secure a lease. The second strategy will be directed towards the secondary customers. Farm

Way will make use of social media, print and broadcast media. The agricultural input and

equipment market in Saudi Arabia is divided into two main segments: dairy farming and crop

farming. Notably, dairy farmers have a demand for inputs and equipment different from that of

crop farmers. The market for the dairy and crop inputs and equipment in Saudi Arabia is

moderately competitive, less saturated, and has a great potential for growth. This is especially

true in Al-Kharj City and the surrounding region, which produces a significant quantity of dairy

and crop products for the Saudi Arabia market. The marketing team will use targeted

communication to reach the particular market segments.

What Drives Us
Al-Kharj is about to undergo an exciting change and add a large public university to the

city. Unfortunately, this will leave at least 28 merchants displaced and with nowhere to go. By

creating Farm Way, not only will value be created for the investors and the customers, a great

service will be done to support the community, both local and extended. It is the opportunity to

create value that is both tangible and intangible that drives us.

Company Description

Mission Statement
Farm Way will enable merchants to more effectively manage their resources and provide

their customers with a convenient and familiar purchasing experience.

General Description
Farm Way is a retail enabler which provides flexible leased space and shared support

services to merchants and the convenience of one-stop-shopping to farmers within the context of

trust-based transactions.

Value Proposition
 Farm Way creates value for itself by leasing space to merchants and generating a profit.

Value is created for the primary customers (merchants) by providing them flexible amounts of

space to meet their needs and additional support services. Value is created for the secondary

customers (farmers and others) by providing a convenient one-stop-shopping experience within

the context of trust-based transactions. Value is created for the community, both local and

extended, by preserving and strengthening the agriculture retail heart of Al-Kharj in both

business and culture.

Goals and Objectives

1. Capture the retail enabling market as the first entrant

2. Provide primary customers with a unique product that satisfies their needs, both known

and unknown

3. Provide secondary customers with a convenient product within cultural context

4. Generate a profit in year one

Principal Owners
The business will be owned by three directors each contributing a third of the business’s

equity. Each investor will hold a third of the assets of the business.

Legal Structure
The business will operate as a private company limited by guarantee

Market Research

Customers
There are two main types of the customers in the Al-Kharj locality. They include

individual farmers and agricultural companies working in the area. The area has a huge

agricultural population that is entirely dependent on agriculture. The smallholder farmers

do not have all the needed equipment for agriculture and therefore will benefit from

renting at Farm Way. Most of the large companies do not have enough storage space for

their farm equipment and will therefore benefit from renting the storage space from Farm

Way.

Farm Way has identified two distinct customer segments. The primary customer segment

consists of the displaced 28 plus merchants and potentially other established or new merchants.

The secondary customer segment consists of the farmers and other individuals who will solicit

these merchants.

Industry
Saudi Arabia enjoys a considerably large farm inputs and equipment market. In 2009, the

cultivable area in the Kingdom was about 48.9 million hectare accounting for 21.7% of the total

area of Saudi Arabia. The total holding area (farms) in 2009 was about 4.3 million hectare of

with less than one million hectare was under cultivation representing only 0.44% of the total

area and 2.0% of the cultivable area. Agriculture is already a strong industry and has tremendous

growth potential. With Al-Kharj City being an agricultural hub of the country and associated

with about 75% of Saudi Arabia’s farm products, the growth in demand for inputs and equipment

will increase in the future.

No current retail enabling businesses exist. Farm Way will be the first entrant into this

new market.

Business Culture
Conducting business in Saudi Arabia requires an understanding of the business culture.

Terms must be very clear because what is said is taken as truth. Making decisions takes a long

time and intermediate steps are easily overturned as negotiations continue. Negotiations are very

thorough. Saudis do not like to do business under pressure and are adverse to presenting bad
news. They will commonly say “perhaps” instead of “no.” Finally, Saudis prefer to create a

trust relationship before conducting any business. Should the trust relationship become
sufficiently strong, businesses have no problem providing customers goods with the expectation

that they will pay later in the future.

Competition
Farm Way faces no competition as a retail enabler – this market is a blue ocean. One

category of competitors the company will face, however, is large franchise business enterprises,

which supply farm inputs and equipment in the region. Such enterprises usually handle specific

brand products and lack variety in the products they offer. However, they have capital and are

able to offer their products at discounted prices. The other category of competitors entails the

small retailers operating within the region. Although such retailers have tried to diversify their

brand products at offer, they cannot fully stock all brands in the market. Note that these two

competitors directly threaten the resident merchants which, in turn, threatens Farm Way.

Competitive Advantage
Farm Way possesses a distinct competitive advantage – the market for retail enablers

does not currently exist and represents a blue ocean for Farm Way to enter. This open market

combined with highway frontage property in the traditional agriculture retail district and an

impending desperate need for merchant space poises Farm Way to take over this market.

Regulation
The local government regulates the industry and ensures that businesses obtain the

requisite licenses and pay taxes. The procedure for forming the company starts with reserving the

company’s name and submitting the requisite documents to the Unified Center. The owners of

the business are required to register with the Chamber of Commerce, the General Organization

of Social Insurance and the Department of Zakat.

Product/Service Line
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Product/Service
Farm Way provides both a product and a service to its primary customers. The product is

the physical building and shelf space. The service is the shared support including cashiers,

security, marketing, and delivery. The secondary customers receive the service of a one-stop-

shopping experience where they can conduct business in a familiar trust-based manner.

Product/Service Life Cycle

The life cycle will begin with recruiting a merchant to become a resident of Farm Way.

The merchant will lease space and utilize services until they desire or are required to leave. The

process will then repeat.

Pricing Structure
The business will price its services and products based on the cost of operations. Price

will be set at 50% above the cost of operations. Prices will be two-tiered based on shelf height

with eye-level shelves commanding a premium.

Marketing & Sales

Communication
Farm Way will maintain active communication lines with the customers to understand the

changing trends in the market and to ensure that the company will stay in close contact with the

trends.

Growth Strategy
The firm will adopt an aggressive growth strategy in the first years backed by low

introductory prices. This is meant to acquire a wide section of the market before competitors

enter. This will also help the company acquire economies of scale in its operations. The business

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will also use technology to market and serve customers meaning lower costs for the business.

The target growth rate is 20% annual growth on sales both from existing and new customers.

Prospects
Assuming no new entrants, Farm Way will capture the entire market the first year. As the

first entrant, it can establish a position of strength by actively recruiting all Al-Kharj merchants

to join Farm Way. If this can be accomplished, there will be no customers for late market

entrants. Growth can be maintained by expanding into other agricultural hub cities.

Financial Projections

Trading Profit and Loss Account

Income Statement

Income Statement in $1000

2015 2016 2017 2018 2019

Sales $650 $975 $1,462.5 $1,950 $1,950

Salaries &
$162 $162 $162 $162 $162
Wages

Maintenance
$69.6 $70.3 $70.3 $70.3 $70.3
& Utilities

Marketing $13 $19.5 $29 $39 $39

Depreciation $164 $164 $164 $164 $164

Net Income $241.4 $559.2 $1,037.2 $1,514.7 $1,514.7

Balance Sheet

Balance Sheet - Assets in $1000

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 2015 2016 2017 2018 2019

Current
$0 $0 $0 $0 $0
Assets

Cash $1,050 $1,539 $2,190.5 $2,842 $3,006

Accounts
$0 $0 $0 $0 $0
Receivable

Inventory $0 $0 $0 $0 $0

Total Current
$1,050 $1,539 $2,190.5 $2,842 $3,006
Assets

PPE $0 $0 $0 $0 $0

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

Building $1,560 $1,560 $1,560 $1,560 $1,560

Less Accum.
$156 $312 $468 $624 $780
Depreciation

Equipment $40 $40 $40 $40 $40

Less Accum.
$8 $16 $24 $32 $40
Depreciation

Total Assets $4,486 $4,811 $5,298.5 $5,786 $5,786

Balance Sheet – Liabilities and Stakeholder Equity in $1000

2015 2016 2017 2018 2019

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 Current
$0 $0 $0 $0 $0
Liabilities

Accounts
$244,6 $251.8 $261.5 $271.3 $271.3
Payable

Total Current
$244,6 $251.8 $261.5 $271.3 $271.3
Liabilities

Long Term
$0 $0 $0 $0 $0
Liabilities

Notes Payable $2,000 $2,000 $2,000 $2,000 $2,000

Total
$2,244.5 $2,251.8 $2,261.5 $2,271.3 $2,271.3
Liabilitie
s
Stockholders’
$0 $0 $0 $0 $0
Equity

Capital Stock $2,000 $2,000 $2,000 $2,000 $2,000

Retained
$241.4 $559.2 $1,036.7 $1,514.7 $1,514.7
Earnings

Total
Stockholders $2,241.4 $2,559.2 $3,036.7 $3,514.7 $3,514.7
’ Equity

Financial Assumptions

Assumptions for Profit and Loss Projections

 The company’s sales will grow by 20% per year

 The cost of revenue is 50% of sales

 Annual maintenance is 15% on capital equipment

 Equipment depreciate to nil in 5 years

 Annual tax rate is 30%

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Assumptions for Cash Flow Analysis
 There is no capital expenditure for the next three years

Assumptions for Balance Sheet

 It is assumed that the business will have the following capital assets at the beginning of

the year capital

 Machinery and equipment worth $100000

Conclusion
Farm Way has an opportunity to create a retail enabling blue ocean market. Having

identified that over half of the agriculture based merchants in Al-Kharj will be displaced in 2016

and no space capacity exists for them, Farm Way has obtained frontage property near the heart of

the agriculture retail district. Farm way has leveraged the culture of trust –based transactions to

be a market entry enabler as opposed to a barrier to traditional retail sales. As no other retail

enablers exist in Saudi Arabia, Farm Way has a tremendous competitive advantage. Financial

projections show a profit in year one and the construction costs potentially being paid off by

2018. Farm Way is ready to get started.

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 Workshop Notes

Availability
Good
De s ig ne d fo r: De s ig ne d b y :
customers On: 11/11/2014
The Bus ine s s Mo de l Canvas Bank
Service!
MBA Students
Ite ratio n # 2
Delivery
Lower
Ke y Partne rs Value Pro po s itio ns Cost
Cus to me r Re latio ns hips Cus to me r S e g me nts
Ke y Ac tivitie s W Rent!,
● SABIC: Supplier ● Operations and ● Centralized location Ads
● ALA (water Logistics for retailers and it Logistic!
purification) ● Marketing costs lower than
Companies
● GAT their previous
● Relationship built on
● Farmers Uniform ● Support services
trust
specific to ● Limited amount of ●
agriculture More Sales, local advertising ● Primary customers:
● Bank Secondary customers: Convenient, ○ Segmented
Increase
● Agricultural traffic ● Centralized location All product in (Slightly
for quality product one place, different
Center (extension Advertizing
service) ● Delivery service Save customer
● Farmers ● Order via Internet shopping groups)
Insurance ● Lots of retail space time ● Secondary customers:
(unique area) Channe ls ○ Diversified
Ke y Re s o urc e s
-Secondary customers: (Multiple
● more efficient in unrelated
their shopping customer
(availability of all segments)
products +
ed to
Buildings & transportation) ● Radio
py of
location. ● Large retail building ● TV spots
late
Farming with rentable space ● SMS to farmers
experience and ● General ● BillBoards (on Farmers
relationship. Administrative highways)
services (Fin, ● Ads on the farmers’ way
accounting, IT, HR) ● Ads on Vehicles
● Marketing and
cky communication (
old service awareness
ou
Co s t S truc ture Upfront Fixed cost for Building to the farmers
Re ve nue S tre ams
eate Utilities before selling the
e. Staff wages products)
administration ● Delivery service Rent
Marketing expenses Revenue
Insurance cost

www.bus ine s s mo de lg e ne ration.c o m

The closest bank where the business is located is 10 km away. In addition, the courier companies such

as FedEx or DHL is also 10 Km away. The nearest café is also the same distance from the

premises of our business. It is for this reason that the far way will offer these institutions with

rental space to launch operations that will indirectly benefit the Farm Way

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 The business will occupy two main buildings as shown in the map below. The first one

down on the right is the one we talking about it in this paper where the initial operations will be

launched. The second building is illustrated on the on the left in the map and will be used to

extend the business in future as we grow.

The main office will be on the first floor. The other two remaining floors will be rent out

to other agricultural companies. The building up on the left will house a bank and a

logistics/courier firm like FedEx or DHL. These facilities will assist the companies in the vicinity

to handle their logistics with ease. The building up in the mid right will have three stores for rent

and the one on the mid left will have three stores for rent.

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 PRODUCED BY AN AUTODES K EDUCATIONAL PRODUCT

Bank
Area 1000 m2 stores Offices
Area 4500 m2

PRODUCED BY AN AUTODESK EDUCATIONAL PRODUCT

PRODUCED BY AN AUTODES K EDUCATIONAL PRODUCT

PRODUCED BY AN AUTODES K EDUCATIONAL PRODUCT

The Business Building

The building will be constructed using energy efficient materials. Alkharj has a very hot

climate and has so much sand. The building will be equipped with energy and water conservation

materials including gray water collection facilities. In future, the building will have solar power

as the business grow to make it energy efficient. However, the building will have double doors in

order to conserve the internal climate and lower the cooling costs. The gray water will be used to

plant trees around the business area.

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 The parking area will be designed based on the American parking system. The sewerage

will be constructed by the government later but for now, the building will be built in the orchard.

Building Design Features

The buildings will be slowly converted into a green energy building as the business grows

in future. This will entail installation of solar power and water storage facilities. All entrances to

the building will have double doors. There is water well on the property to provide water and also

there is water coming from the government. A water tank and pumps will get the water to the

building. A machine will be used to filter the water and clean the water.    The apartment building

will have one, two and three bedroom apartments.  There will be a security system using cards for

each resident.  Security cameras will be throughout the property. The entrance to the parking lot of

the apartment building will have a security gate.

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