FreshWater FlashFreezersBusiness Plan

Commerce 447Submitted to: Marv Painter

Submitted by: Michael Huck

03 December 2009Table of Contents

Page1.0 Executive Summary 22.0 About the Author 3

2.1 Mission Statement 32.2 Goals and Objectives 3

3.0 Introduction to Commercial Fishing 44.0 Operations Plan 4

4.1 Organizational Structure 44.2 Site Plan and Work Plan 54.3 Quality Control 64.4 Average Business Assessment 74.5 Supply Analysis 84.6 Service Providers 84.7 Capital Budget 94.8 Environmental Limitations 9

5.0 Human Resources Plan 105.1 Summary of Compensation 11

6.0 Marketing Plan 116.1 Market Overview 116.2 Marketing Mix 116.3 Competitive Analysis 136.4 Porter’s 5 Forces Analysis 146.5 Projections of Revenues and Marketing Expenses 16

7.0 Financial Plan 167.1 Debt and Equity Financing 167.2 Dividend Policy 167.3 Economic Forecast 167.4 Ratio Analysis 177.5 Financial Analysis 177.6 Break-Even Analysis 18

8.0 Summary of Business Plan 18

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1.0 Executive Summary

FreshWater FlashFreezers examined the current means of commercial fishing within the province of

Saskatchewan and saw a gap which with the right people and the right innovation could be filled. The

commercial fishing industry in the northern administration district region of Saskatchewan used to

attribute 6,000,000 kilograms of fish to the market each year. Over the past decades number has

declined to less than half that. Commercial fishermen are few and a trend towards urbanization and

employment in the forestry and mining industry coupled with stagnant fish prices and lack of fisher

mobility has created a dismal looking future.

FFWF will focus on operating under all guidelines set forth by the Fisheries Act of Canada, attaining

harvests in a responsible and sustainable manner. Operating solely in the spring to fall seasons has

created a competitive advantage through innovation as there are reduced competition for quotas and

improved access to remote lakes. Having commercial grade freezing technology allows FFWF the ability

to stay at shore-side locations for greater periods of time because the worry of fish decaying in the

warm weather is minimal. This allows for large shipments of fish which reduce the transportation costs,

improve operational efficiency, and ultimately a higher return in revenue.

The FFMC has a mandate to purchase all fish legally caught by commercial fishers in the interior of

Canada and in the year 2008 they had revenues of over $63,000,000 to markets around the world.

FFWF is in a position where its gains are only limited by the amount of fish it has the ability to harvest.

With unused quotas on 900 lakes within Saskatchewan, there is no shortage of fishing to be done.

The business requires $400,000 start up capital, in which $150,000 will be financed through equity with

the remainder coming in the form of long term debt. Analysis of the finances shows that the venture

carries a high level of risk which is reduced over time. With high salaries and regular dividends after the

third year of operations FFWF proves is economically feasible.

FFWF looks forward to the its future and is confident that with the proper planning and care there is the

ability to become a market leader in the commercial fishing industry of Saskatchewan.

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2.0 About the Author

This plan has been created by Michael A.C. Huck; a

fourth year management major enrolled in the

Edward’s School of Business of the University of

Saskatchewan. Michael plans on finishing his

bachelor level studies at age 21 by the end of 2010

and then work overseas on a global exchange for 18

months. Upon return to Canada, Michael hopes to

pursue a master level diploma in Environmental

Management. Michael possess experience in cold

storage, having worked full time for Western

Canada’s largest cold storage facility, and has been

fishing Saskatchewan waters since he was able to hold up

a rod.

2.1 Mission Statement

FreshWater FlashFreezers (FFWF) has a mission to bring nourishment to the lives of people around the

globe using Saskatchewan’s abundant renewable resources. FFWF is committed to the harvesting of

pristine fish in a responsible and sustainable manor, taking out of the waters only what can be afforded

to remove. Utilizing innovative shore-side measures, FFWF strives to become a market leader in

Saskatchewan.

2.2 Goals and Objectives

The goals and objectives of this business plan are to highlight the opportunity which is still available in

an industry which has been declining over the past decades. Through innovative means, spring and fall

fishing in Saskatchewan can once again be seen as a way to make an earnest living. This plan will outline

challenges and opportunities in operations, marketing, and financing for the company. A five year

financial projection model has been prepared which showcases all applicable costs, revenues, taxes,

future cash flows, critical variables, break-even points as well as the internal rate of return on equity

investment.

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3.0 Introduction to Commercial Fishing

At the turn of the 20th century inhabitants of the region now know as Saskatchewan began to

commercially fish waters generally around Ile-A-La-Crosse and Buffalo narrows regions. Fast forward 70

years and the industry is flourishing. Over 500 lakes and rivers were being fished. At this time, 1969, the

federal government established the Freshwater Fish Marketing Corporation (FFMC), this caused a

centralization of fish processing in Winnipeg, for the largest percentage of freshwater commercial

fishing is done in Manitoba. Soon after, the government implemented a policy which stated that all fish

sold must be processed through the FFMC or be issued a permit by them to sell to distributors. This

caused 12 northern Saskatchewan plants to close. It was no longer feasible to catch fish in many remote

lakes due to the long shipping distance. Since the 1970s, there has been a steady decline. In 1998-99,

90% of the fish caught came from only about 50 lakes. Fast forward to present time and the industry is

still not as strong as it could be, commercial fishermen are few and a trend towards urbanization and

employment in the forestry and mining industry has created a dismal looking future. However as the

province has developed over the years, so has access to many of these remote lacks, creating an

opportunity to once again restore the economic viability of commercial fishing in Saskatchewan’s north.

4.0 Operations Plan

4.1 Organizational Structure

FFWF will be set up as a Canadian-controlled private corporation. Presented below are several of the

reasons behind this decision:

It permits the achievement of significantly lower tax rates as a result of the small-business

deduction on the first $500,000 of active business profits. This operates as a tax deferral, rather

than a tax saving, because the lower tax rate will ultimately be followed by a second level of tax

to the shareholder when after-tax corporate profits are distributed or when the shares are sold.

The increased cash flow produced by the reduced tax rate can be reinvested in business

expansion or in passive investments that result in greater ultimate returns on investment.

Increased cash flow at the early stages of a business reduces the risk of failure. Increased cash

flow also makes for greater borrowing capacity in that it increases FFWF’s ability to repay debt

obligations.

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Further, the corporation has the option to provide the owner/manager with various types of

employment benefits which are fully deductible from the corporation’s income but are not

taxable to the employee.

The corporate structure, which imposes a two tier system of taxation, gives the shareholder the

right to choose when the second level of tax on dividend distributions will occur. In a year in

which the owners other sources of income are very low, a dividend can be made that results in a

lower rate of tax than would normally apply.

Also, FFWF will be eligible capital gain deduction by the net capital gains realized on properties

over their lifetime to a maximum of $750,000. Qualified fishing property includes real property,

eligible capital property (quotas), and shares of a fishing corporation as well as a an interest in a

fishing partnership.

Besides the financial benefits of incorporating, through this action the owner is at reduced liability which

can be beneficial if FFWF fails to persist in the long-term.

4.2 Site Plan and Work Plan

FreshWater operates as a small commercial fishing team. There will be no permanent site as operations

will commence at different bodies of water around the province. Included below is a projected shore

camp layout for operations.

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The site will generally be set up similar to that as laid out above. It is important to have the preparation

tent, freezer, and cold storage all located close to a docking point on the water front. This is to diminish

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Spiral Freezer

Cold Storage Truck

Boats

Prep Tent

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the length of time it takes to get the fish from water to cold storage which increases overall efficiency of

operation.

Once the site is set up, the harvesting of fish can commence. The following is an outline of the steps of

work that would be done from harvest to shipping.

a. Team scouts waters for targeted fish areas using lake maps and sonar detection.

b. Specialized gill nets are deployed in the waters

c. 8-10 hours later gill nets are hauled in on boat and fish are untangled from net and placed in

storage tanks after going initial screening for targeted type.

d. Team docks and the fish are brought to the preparation tent.

e. Fish are sorted by type, weighted and recorded, and separated into batches for freezing.

f. Fish are then run through the spiral freezer.

g. Once frozen, fish are loaded into 620 kg capacity insulated totes located in cold storage on site

until a full load is confirmed.

h. Once a full load comprised of approximately 7,440 kgs the fish are transported to one either

Prince Albert or Saskatoon to be inspected by an FFMC purchasing agent.

i. Fish are then sent to processors; generally Freshwater Fish Marketing Corporations Winnipeg

location at FFMC’s cost.

The process which has been identified above is unique to this region of the world. Currently,

commercial fishers in northern Saskatchewan have not had access to an onsite freezer and cold storage.

This limits the amount of fishing which can be achieved because operations are interrupted by the

necessity of transporting the fish before they spoil. As of now, the fish are placed into coolers filled with

ice and water, while this preserves the fish for a short period, there is not the ability to achieve the high

level yields which FFWF can.

4.3 Quality Control

As FFWF will be dealing with a product which will be provided to consumers as a food item it is

important to create a safe environment for the product. It is essential to comply with or exceed industry

standards. This entails chilling fish as soon as possible after a catch and keeping harvest away form

outside contaminants. There will be no formal training or structure in the first years on operations

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although FFWF had identified the possibility to register for HACCP (Hazardous Analysis and Critical

Control Points) certification in the future if expansion into processing becomes possible and warranted.

4.4 Average Business Assessment

FFWF is set up as a small organization and operates as a commercial fishing outfit during the spring and

fall fishing seasons, with limited operations during the summer season. While 71% of Saskatchewan’s

commercial fishing occurs during the winter months when the lakes are frozen, FFWF will not operate in

these months for the first years of operation. This is for a few reasons, one, commercial license quotas

for individual lakes are at reduced competition during high temperate months, two, the competitive

advantage of freezing the fish on site is diminished as the cold temperatures allow for longer

preservation periods and three, further capital requirements are needed for winter fishing and four, this

provides FFWF employees to pursue other ventures in the winter months.

During the operational months of May through October, the following will be required of the manager

of FFWF prior to site set up.

Scout out advantageous waters where commercial fishing licenses are available, focusing on

northern pike and whitefish quotas.

Apply for licenses to Fisheries Department for waters which are targeted

Apply for fuel tax exemption permit from Saskatchewan government

Apply for subsidies and bursaries allocated to commercial fishers available for current year.

Once site is set up the following tasks would need to be completed by either the manager or the helper.

Tour water with fish finding equipment and map out primary and secondary net locations

Positioning nets at night in intended marks

Hauling in the nets and harvesting fish from the nets during the morning, and completing

primary screening of fish

Weighing and sorting fish, preparing a record of these in log book

Loading fish into spiral freezer and placing in cold storage

Monitor temperature of insulated totes within the storage truck, making sure temperatures do

not rise above 32°F.

File commercial fishing report to Fisheries Canada office

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Following site close, operations will be moved to another location where the site tasks would be

repeated. In order to continuously achieve strong yields, it is expected that the operations will be

moved approximated 5 times throughout the season. This not only creates a sustainable means of

operation, never fishing over quota on bodies, but it was provides access to more fish thus creating a

higher revenue stream.

4.5 Supply Analysis

In order for FFWF to operate it will need inputs which can be purchased from businesses in

Saskatchewan. In order to operate the freezer, liquid carbon dioxide must be purchased and picked up

from Air Liquide Canada, located in Saskatoon, SK. The costs have remained tied steady with no severe

spikes and the supply is expected to remain at high levels over the long term. The fuels required for

operating the reefer storage, boats and trucks can be purchased from several providers located in

Saskatchewan. These fuels, unleaded gasoline and diesel are subject to frequent price changes but the

supply of these is not in risk in the long term. These are the primary inputs which FFWF relies upon for

operations.

4.6 Service Providers

FFWF is a small business and does not possess a lot of service providers. Those whom will be relied upon

for business are outline below:

Liquid carbon dioxide provider - Air Liquide Canada (Saskatoon)

Freezer service - Advanced Equipment Inc. Contractor

(Saskatoon)

Vehicle Service - Hino Motors Ltd. (Saskatoon)

Accounting and general maintenance – FFWF

4.7 Capital Budget

Early boat full with fish Pile of Whitefish Early cold storage shed

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The following is a list of capital items which will be required in the first year of operations for FFWF.

Note: Costs rounded to the nearest hundred.

Item Cost $ Provider Location2001 Peterbilt 378 32 000.00 Autotrader.ca Saskatoon, SK2008 Hino Reefer Truck 30 000.00 Hino Motors Ltd. Saskatoon. SKPortable Work Tent 5 000.00 Wholesale Sports Outfitters Saskatoon, SKIQF Spiral Freezer 173 000.00 Advanced Equipment Inc. Vancouver, BC2 -2006 14’ Aluminum Misty River Boats with Trailers

12 500.00 12 500.00

FFWF & Northstar Sports

Turtle Lake, SKNorth Battleford, SK

Insulated Fish Totes 1 100.00 Commercial-fishing.net CanadaFish Finder 1 700.00 Wholesale Sports Outfitters Saskatoon, SK100’ Nylon Gill Nets-3”, 4”, 5” Mesh

1 500.00 Commercial-fishing.net Canada

Life Jackets, Flags, Radios, Oars, Scales, Misc. Tools, etc.

10 000.00 Various Saskatchewan

Total Capital Costs 279 300.00

There is currently limited future capital costs projected in the near future for FFWF. All the major

components for operations are provided in the first year.

The following table outlines projected 5 year operating costs based on a harvest of 73,200 kilograms.

For sensitivity analysis please see attached working financial excel file.

Year 2010 2011 2012 2013 2014Cold Storage 2,928 2,987 3,046 3,107 3,169 Labour 39,400 46,800 53,240 58,240 62,240 Gasoline & Diesel 9,516 9,706 9,900 10,098 10,300 Licenses 217 221 226 230 235 Insurance 4,500 4,590 4,682 4,775 4,871 Liquid Carbon Dioxide 7,111 7,253 7,398 7,546 7,697 Maintenance and Repair 14,000 14,280 14,566 14,857 15,154 Total Operating Expenses 77,672 85,837 93,058 98,854 103,666

4.8 Environmental Limitations

In order to operate as a commercial fisher in Saskatchewan a license must be acquired for each body of

water operated on. The average price of such a license is $31.00 a piece. It should be noted that each

licensed water body possess a limitation quota on maximum harvest of each species. Once a certain

species is at its limit the water is shut down for the season. This is why it is important to strategically

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locate waters with limited if no commercial outfits are operating on. Further, fishing using nets cannot

be done during extreme weather for safety reasons, and therefore FFWF can only operate during

reasonable weather.

5.0 Human Resources Plan

As shown prior in the operations plan, FFWF operates with an integrated small outfit. The set up of such

an organization allows decisions to be made in real time as the manager is on location at all times.

Communication challenges between management and labour will therefore be reduced as decisions can

be conferred with ease. While the manager carries out the jobs which need to be completed prior to

and post camp set-up, the labour and manager share job duties during camp. Detailed descriptions of

jobs are provided below.

Manager

The manager possesses the greatest amount of responsibility for he must operate as both an

administrator as well as a labourer. However he is in a position to see the greatest rewards. The

manager will be responsible for assembling financial statements on a yearly basis. Further, He will be

responsible for filing taxes and applying for bursaries, grants and subsidies as well. Communication

between FFWF and FFMC and their agents will also be a responsibility of this position. Further he will be

responsible for all the scouting of waters and applications for licenses, arranging pick-up of supplies and

be responsible for on going daily decisions. While many jobs are also shared along with labour, the tasks

involved in labour are explained below.

Labourer

Labour will be required for more of the hands on duties involved in FFWF’s operations. This position

does not require any educational requirements. However, a person in this position has to be patient and

carry a high level of core competencies to fulfill this job successfully. Also required would be a 1A

driver’s license. Daily and weekly responsibilities include laying nets, hauling and sorting fish, operation

of freezer, monitoring equipment and daily cleanup and maintenance.

Historically in the commercial fishing industry labour help has been trained on-site as there are no

courses offered at any educational institute. Paid position training will be on site training coinciding with

regular operations.

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5.1 Summary of Compensation

Provided in the operating expenses was a combined sum of manager and labourer wages. Depicted

below is the individual compensation attributed to each position.

Position Compensation Hours/Week 2010 2011 2012 2013 2014

Manager Salary 60 $25 000 $30 000 $35 000 $40 000 $44 000

Labourer Wage 40 $14 400 $16 800 $18 240 $18240 $18,240

Wages for Labourer start at $15.00 / hour with an increase to $17.50 in year 2 and $19.00 in year 3

onward.

Employee benefits are further being considered. However, time will have to dictate this decision. As

FFWF operates seasonally, alternate employment with a benefit package will likely be realized.

6.0 Marketing Plan

6.1 Market Overview

As aforementioned, the commercial fishing industry in Saskatchewan was once a strong industry but in

the past decades has declined. Currently there are an estimated 613 commercial fishermen operating in

the province annually. According to the Fresh Water Fish Marketing Corporation they combined for a

total of 2,450,234 kilograms of fish for export and 145,094 kilograms were sold in province on peddler’s

license in 2008. Saskatchewan once provided over six million kilograms of fish to the market but this has

declined for many reasons. There has been a decline in the amount of fishermen, many are seeking

other means of work, rising costs associated with catching and transportation combined with stagnant

fish prices has created in many eyes an uneconomical venture.

6.2 The Marketing Mix

Product

The good which is provided is renewable freshwater fish located within the waters of Saskatchewan. The idea is to

provide fish which have a high demand, for those are the fish which carry the highest price, which provides higher

returns on inputs. The accompanied chart identifies the types of fish which are most sought after in Saskatchewan

waters by current commercial fishers based on a study by Environment Saskatchewan.

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Pricing

The intention of FFWF is to sell all their catch to the Freshwater Fish Marketing Corporation. The FFMC’s

mandate is to purchase all fish lawfully fished and offered for sale; to create an orderly market; to

promote international markets; to increase fish trade; and to increase returns to fishers.

Average price of fish/ kilogram 2010 2011 2012 2013 2014

Pickerel 3.50 3.57 3.64 3.71 3.79

Trout 0.62 0.63 0.65 0.66 0.67

Northern Pike 0.78 0.80 0.81 0.83 0.84

Whitefish 1.09 1.11 1.13 1.16 1.18

Other 0.50 0.51 0.52 0.53 0.54

Average price of fish 1.30 1.32 1.35 1.38 1.40

Projected Inflation of Prices 2.0% 2.0% 2.0% 2.0% 2.0%

The above table takes uses a six year historical average to conclude 2010 initial prices. Years following

are adjusted at 2.0%; the rate of inflation of the financial model. Generally, initial prices are set for each

species by estimating its market value, subtracting its projected processing and operating costs.

Promotion

As Freshwater Flash Freezers operations are not directed to primary consumers but towards the FFMC

whom has a mandate to buy one hundred percent of the harvest, little promotion is needed. However

FFWF wants to be seen in the public eye as a responsible business that prides itself on sustainable

practices. By operating in northern Saskatchewan where there are increased levels of unemployment

and poverty FFWF is sure to be welcomed for the economic expenditures which it will incur.

Place

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Operations of FFWF will take place in waters primarily in northern Saskatchewan.

Display to the left is what is referred to as the Northern

Administrative District (NAD). 37,000 inhabitants live in

this region. Of this 86.3% are aboriginals. This compares

to a provincial average of 13.3%. Primarily, FFWF will

target accessible waters with open quotas in this area.

It will be important to portray FFWF as a group that is

designated to helping the areas in which it operates.

FFWF will attempt to support locally whenever possible in

its operations.

6.3 Competitive Analysis

FFWF is in the business of commercial fishing in a province which has a strong history of these

operations. The majority of operations of commercial fishing are taken place in the NAD region as

depicted above. According the Government of Saskatchewan there are approximately 613 commercial

fishers operating in borders. Depicted below is a chart analyzing this population of commercial fishers.

2008 Results 2005 ResultsMedian Age 49 45Sex 89% Male 90% MaleAboriginal/ Métis Heritage 72% 75%Education < than High School 70% 74%Fishing Primary Income 57% 52%Median Fishing Income $10 000 $10 000Average Weeks of Fishing 12.4 13.2Deliver All Fish to FFMC 61% 59%Collecting EI Benefits 48% 49%Collecting Social Assistance 19% 20%

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Due to price restrictions and familiarity many of these fishers do not travel far from their homes to

conduct operations. A majority of these fishers join a co-op which provides them with support but

reduces their potential profits through adding additional costs on the market chain. In order to

demonstrate where a majority of the competition will be operating the following list of fisheries along

with their produced weight is shown.

Fish Plant Weight in kilograms Location & Weight in kilogramsChurchill Fisheries 644.378 Beaver Lake -88,882

La Ronge – 373,752 Pelican Narrows – 188,744

Deschambault Lake Fisheries 125,644 DeschambaultFFMC- The Pas, Manitoba 3,815 The Pas, MBKinoosao Co-op 303,089 Co-op PointHunter Fish Agencies 747,239 Big River – 15,833

Canoe Lake – 25,730Dore Lake – 5, 250Isle a la Crosse-293, 376Patuanak - 12,937Pinehouse – 170,103Wollaston – 224,010

J. Waite Fisheries Inc. 592,252 Buffalo NarrowsNorthwest Co-operative Fisheries 10,825 Leaf Rapids, SKWest Boundary Fish Co-op 22,975 PiercelandTotals 2,450,236

6.4 Porters 5 Forces Analysis

Bargaining power of buyers

The bargaining power of the buyers is high because they are the ones whom set the price for the fish

which are being harvest buy the commercial fishers. Fishers have no means to differentiate their catch

from those of competitors and are therefore in a low bargaining positing with the buyers in terms of

price. However the mandate of the FFMC is to purchase all fish lawfully fished and offered for sale; to

create an orderly market; to promote international markets; to increase fish trade; and to increase

returns to fishers. This also reduces the bargaining power of the FFMC for they are legally required to

purchase all fish which are presented to them.

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Bargaining power of suppliers

The inputs required to successfully run FFWF are limited. The power of the liquid carbon dioxide supplier

is relatively low. Industry market rates dominate this product and price jumps are not overly volatile in

products history. Commercial fishing licenses are monitored through the government of Saskatchewan

and currently there is low demand for them. Therefore it seems that the bargaining power of suppliers is

relatively low.

Threat of substitutes

There are many substitutes for the fish product. Pork, beef, chicken, and wild game are all readily

available substitutes. However, fish has proved a staple in many people’s lives and consumption is

usually balanced across these categories. Also fish has proven to aid in a healthy diet, high in proteins

and omega vitamins. There has been a shift in many households to make an effort to eat more fish.

Barriers to entry

There are limited barriers to entry in this industry. A person need only apply for a commercial license

and invest in operational equipment. In fact, there are several incentives supplied by the government in

order to attract new and maintain commercial fishers in the province. Tax incentives and exemptions

and operational subsidies provided by the government helps foster profitability in the commercial

fishing sector of Saskatchewan.

Competition intensity

There is a relatively low level of competitive intensity. As FFMC is required to purchase all the fish that

can be caught in a legal manor it appears that competition does not take up any of FFWF`s market share.

Surprisingly, the more fish harvested out of Saskatchewan the better, this allows the FFMC to more

aggressively market the product which in turn creates more worldwide demand, raising final payments.

Also with FFWF operating in the summer months, there is little competition for commercial licenses

across Saskatchewan.

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6.5 Projections of Revenues and Marketing Expenses

The following is based on 2008 Saskatchewan Delivers to the FFMC and a projected harvest of

73,200kgs.

Expected Total Annual Revenues

Fish Species 2010 2011 2012 2013 2014

Pickerel 46,372 52,030

58,377

62,522

66,961

Trout 5,491 6,161 6,913 7,404 7,930

Northern Pike 7,879 8,841 9,919

10,623

11,378

Whitefish 29,202 32,765

36,762

39,373

42,168

Other 6,917 7,761 8,708 9,326 9,989

Total revenue 99,090 110,785

123,907

132,476

141,652

Freshwater Flash Freezers has minimal advertising needs. FFWF only promotional costs are graphics on

the side of vehicles which is included in vehicle cost in the capital budget and business cards which can

be produced at home for a minimal amount.

7.0 Finance Plan

7.1 Debt and Equity Financing

Total capital required to commence operations is $400,000, with $150,000 being financed through

equity and the remainder being financed with debt. The equity financing will be raised through the

owner. Once the $150,000 in equity financing is raised, FFWF will look towards to banks in order to

secure long term debt of $250,000.

7.2 Dividend Policy

Dividends will be paid out at owner’s discretion. FFWF operating as a privately controlled Canadian

corporation is in a position to invest in similar eligible corporations and receive tax benefits on the

capital gains. However, there is a considerable amount of retained earnings after 3 years. Dividends of

$20,000 are likely to be paid out each year, starting in 2012.

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7.3 Economic Forecasts

The financial model was created using several estimates and theorizations. The most critical variable in

the model is the price of fish. Using the Fresh Water Fish Marketing Corporations financial statements,

the price of fish was established. This rate was taken as a 6 year moving average. The price was then

adjusted in the following 4 years using a hypothesized compounding rate of inflation of 2.0%.

7.4 Ratio Analysis

Leverage and profitability ratios depicted below were solved for this business plan. The debt

ratio starts off quite high during the first year of operations, but continues to decline as years of

operations pass. This shows that FreshWater FlashFreezing is forecasted to make enough money each

year to pay down long term debt and still build up a retained earning. The extremely high debt to equity

Ratio reflects that a large portion of the company’s assets were financed through debt. This creates an

added level of risk to the organization which is somewhat offset by anticipated low interest rates in the

future. The interest debt interest rate used in the model was 4.0% which is quite close to the 2009 prime

plus one rate.

Below is a three year period of leverage and profitability ratios calculated:

Leverage Ratios 2010 2011 2012Debt Ratio 58.8% 53.7% 51.0%Debt to Equity 142.3% 116.0% 104.1%Profitability RatiosNet Profit Margin 18.3% 19.0% 21.0%Return on Assets 4.30% 5.2% 6.7%Return on Equity 10.8% 11.1% 13.1%

The profitability ratios start off at a respectable amount and continue to climb in the future. Considering

the high salary being achieved and the dividend pay-outs this is very acceptable.

7.5 Financial Analysis

While it is apparent that this business plan creates a valid opportunity, it does not declare whether this

venture is economically feasible. Carrying a required return on investment (ROI) of 20%, this venture

provides an internal rate of return (IRR) of 69.3%. Further the terminal value at the end of 5 years is just

shy of $200,000. This combined with positive cash flows and net income every yeardeems the venture

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financially feasible. The seasonality of the work, the relatively high salary and dividend pay-outs, coupled

with the freedom of doing what one enjoys makes this venture more than just financially feasible.

7.6 Break-Even Analysis

One of the most critical variables is the amount of fish caught, for that is ultimately the deciding factor

on how much revenue can be achieved. While operations will be targeted towards higher revenue

earning fish, the financial model has been based on Saskatchewan’s historic resuluts. The net income

break even point for first year is 288 kilograms. This amount decreases each year to a break even of 203

kilograms in 2014.

8.0 Summary of Business Plan

This business plan has shown that FFWF has the an opportunity to operate successfully, although at a

higher degree of risk, in an industry which is dismally portrayed by many. The opportunity to harvest

Saskatchewan’s fish, in a responsible and sustainable manner also has the ability to meet the desired IRR

of 20%. Having virtually no marketing costs, and operating with only one buyer whom possesses a

mandate to purchase all fish harvest provides further incentive to look beyond the plan and into start-

up. The person who would be held in highest account would be the owner, whom also has the most to

gain through company success. I will be able to succeed in this industry because of an innovative

approach to operations which creates a sustainable advantage. The success of the business hinges upon

the amount of and species of fish caught. While this is not entirely controllable, with proper planning

ambiguity can be mitigated and success achieved.

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ReferencesFishing on Deep River<http://www.jkcc.com/fishing.html>

Industry Profile- Commercial Fishing< http://www.sasknetwork.ca/html/Home/lmi/sectorstudies/sscommercialfish.htm>

Fresh Water Fish Marketing Corporation< http://www.freshwaterfish.com/english.htm>

Fishery Canada Regulations and Fines< http://www.qp.gov.sk.ca/documents/gazette/part2/1996/g2199617.pdf>

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