Spraying

1. Spraying Michael Bender Nathan Allen Steven Myers December 4, 2007 Ag Ec 495

2. Overview • Introduction • Operations Analysis • Human Resources • Marketing Analysis • Financial Analysis

3. Introduction • What is Vegetation Control? • Custom spraying service provided to oil and gas industry • Goals and objectives are to focus on customer service, environmental stewardship, and quality workmanship • Headquarters in Alberta

4. Operations Plan • Organizational Structure • will be a private corporation • Five people on board of advisors • Manager (president) will be in charge of both duties • Service staff will consist of two spray truck drivers as well as a secretary • Company will employ four people to start with

5. Site plan located in Alberta

6. Breakdown of Spray Unit • Options and features • Capacities • Cost of Purchase • Importance of GPS and Mapping

7. Capital Budget

8. Cost of Goods Sold Description Cost ($) Beginning Inventory + - Costs of Goods Manufactured + $208,276 Costs of Goods Available $208,276 Ending Inventory - - Cost of Goods Sold $208,276

9. Overhead Costs

10. Direct Materials

11. Direct Labour

12. Cash Management • Little cash on hand due to accounts payable coming due before accounts receivable • Have to plan in the case of receivables not getting paid • Line of credit may be essential to cover cash shortfall during startup phase

13. Inventory on hand will be chemicals that are needed for the week along with extra safety supplies that will be needed How we determined a week’s inventory .5 acres per site .4 L Glyphosate + 1L of Dicamba 150 sites sprayed per week Resulting in an inventory of 30L glyphosate, and 75L of dicamba Inventory Management

14. Inventory Management • Easy access to herbicides that are being used will help to keep inventory to a minimal • Keep herbicide on truck that will be used for the week • Inventory turnover will be within a week as product will be used up at this rate

15. Accounts Payable • Managed to avoid paying interest • Credit Card used to purchase herbicides and safety supplies, meals and hotel accommodations • Fleet Card for purchase of fuel • These payables will be due within 30 days • Challenge to obtain enough credit during start up

16. Human Resources Job Descriptions • Manager (president) • Will oversee the business • Hire seasonal staff • Daily tasks include, organizing inventory, planning daily activities of the spray trucks, as well as keeping in contact with clients as well as suppliers • Salary will be $4500 per month

17. Human Resources Job Descriptions • Spray truck drivers • Duties include traveling to oil and gas sites that will be sprayed • Carrying out the task of spraying, as well as mixing chemicals • Record keeping that will be required • Wage will be $20 per hour and time and a half for overtime

18. Human Resources Job Descriptions • Secretary • Will work part time approx. 20 hours per week • Duties will be taking calls, organizing meetings, book keeping, invoicing and billing • Wages will be paid hourly at a rate of $12 per hour

19. Marketing Plan

20. The 4 P’s Products and Services • Custom Spraying Service • Vegetation control in industrial situations such as oil and gas wells • Site evaluation to access the product that needs to be applied • Safety orientated • specializes in spraying and focuses on quality

21. The 4 P’s Price • Competitive Pricing • Many established competitors in business • All vegetation control has relatively similar strategy (no differentiation) • Price that will be charged is $80 per site • Chemical price will be $68.88 per acre

22. The 4 P’s Promotion • Trade shows • Make initial contact with potential clients • Show case services • Emphasize high quality service, attention to detail and focus • Signage on trucks • Mode to “get name out” • Visual images often stick with people • Trucks cover large area during spraying season • Pamphlets with literature on services provided • Breakdown of services provided • Position o as a higher quality service provider in comparison to competitors

23. The 4 P’s Place • will target oil and gas sites in Alberta • Geographic factors will limit the area that can service • Strive to keep resources efficient and effective

24. SWOT Analysis Human Resources-Strengths • Strong Management Skills • Hired employee's don’t need extensive training • Work is relatively basic • Day to day actions repetitive • Management has key contacts in Agricultural and Oil and Gas Industry • Useful resources • Opens doors to new possibilities • Few employees

25. SWOT Analysis Human Resources-Weaknesses • Few employee’s • Short staffed • Services may be restricted • Management has little knowledge in accounting • Outsource accounting • Working long hours • Worker fatigue and stress • Possible liability • Possible lack of safety personnel

26. SWOT Analysis Physical Resources-Strengths • Majority of equipment brand new • Little down time for maintenance • Increase efficiency • Precise and user-friendly spraying equipment • Increase efficacy • GPS and mapping technology • Can be used in disputes

27. Physical Resources-Weaknesses Using previously owned trucks Higher repair costs May lead to increased downtime May need to upgrade in near future SWOT Analysis

28. External Threats and Opportunities Opportunities • Oil and Gas sector growing (market trends) • Alberta- growing and established • Saskatchewan- low establishment of oil sites • Huge potential for market boom • New products/Services • implement mowing service as well • Customers are looking for ways to reduce costs and hassle • ATV mounted sprayers • Customers • Commercial buildings and other industrial sites • Government policy change • Any changes made to oil industry will impact markets

29. External Threats and Opportunities External Threats • Customers • Larger base customers may desire services out of our region • Becoming selective of who is hired • Government policy change and competition • Alberta government raised royalties/this may slow down oil production • Saskatchewan- Sask. Party winning election • Party platfom/ different ideas • Competition • Many well established companies • Largest threat 12 large companies • Approx. 20 provincial competitors • Environmental Threats • Temperature, wind speed, precipitation affects agrochemicals

30. Major Competitors West Country Oilfield Services Ace Vegetation Precision Oilfield Services Spray-Rite Vegetation Control Inc. DDK Oilsite Services Weed Wackers All Pro Vegetation Management Precision Vegetation Control Altec Vegetation Management Corp. TMT Vegetation Management Ltd. Cunningham Vegetation Management Site Rite Vegetation Management Minor Competitors Clarke Vegetation Control Vanguard Vegetation Control Excel Vegetation Services Ace Vegetation Control Service Blueweed Services SPS Well Service Target Vegetation Control Ltd. Competition

31. Taber MajorCompetitors Minor Competitors

32. Marketing Plan Budget

33. Financial Plan

34. Critical Variables

35. Financial Feasibility

36. Breakeven Analysis

37. Scenario Analysis • Two critical variables used (10%) change • IRR and NPV are extremely sensitive to change

38. Conclusion • Over the next ten years NewCo is projected to have a Internal Rate of Return (IRR) of 19.6% • NewCo will prove to be a feasible business if sales objectives can be met • Focusing on new customer relationships will be important to the success of the company

39. Questions