HOMEFARM

Business Plan

NOVEMBER 13, 2017

HOMEFARM
Negeri Sembilan, Malaysia
Legal Page

CONFIDENTIALITY AGREEMENT

The undersigned reader acknowledges that the information provided by Mohammed Ridzuwan &
group in this business plan is confidential; therefore, reader agrees not to disclose it without the
express written permission of HomeFarm Company.

It is acknowledged by reader that information to be furnished in this business plan is in all respects
confidential in nature, other than information which is in the public domain through other means
and that any disclosure or use of same by reader, may cause serious harm or damage to HomeFarm
Company.

Upon request, this document is to be immediately evaluated by the lecturer,

En. Zulkifly

Signature

___________________

Name (typed or printed)

___________________

Date

This is a business plan. It does not imply an offering of securities.

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 TABLE OF CONTENTS

Content Page

CONFIDENTIALITY AGREEMENT i

TABLE OF CONTENTS ii

SECTION 1 EXECUTIVE SUMMARY 1

1.1 Objectives and Mission

1.3 Keys to Success

SECTION 2 INDUSTRY ANALYSIS 2

2.1 Industry Size, Growth Rate, and Sales Projections

2.2 Industry Structure

2.3 Nature of Participants

2.4 Industry Trends

2.5 Long-term Prospects

SECTION 3 COMPANY DESCRIPTION 4

3.1 Company Description and History

3.3 Products and Services

3.4 Current Status

3.5 Legal Status and Ownership

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SECTION 4 MARKET ANALYSIS 5

4.1 Competitor Analysis

SECTION 5 THE ECONOMICS OF THE BUSINESS 7

5.1 Revenue Drivers and Profit Margins

5.2 Start-up Costs

5.3 Break-even Chart and Calculations

SECTION 6 MARKETING PLAN 8

6.1 Overall Marketing Strategy

6.2 Product, Price, Promotions, and Distributions

6.3 Sales Tactics

SECTION 7 DESIGN AND DEVELOPMENT PLAN 9

7.1 Development Status and Tasks

7.2 Challenges and Risks

7.3 Projected Development Costs

SECTION 8 OPERATIONS PLAN 10

8.1 General Approach to Operations

SECTION 9 MANAGEMENT TEAM AND COMPANY STRUCTURE 11

9.1 Company Structure

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SECTION 10 OVERALL SCHEDULE 12

10.1 Incorporating the Venture

SECTION 11 FINANCIAL PROJECTIONS 13

11.1 Pro Forma Income Statements

11.2 Pro Forma Balance Sheets

11.3 Pro Forma Cash Flows

11.4 Ratio Analysis

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 SECTION 1: EXECUTIVE SUMMARY

1.1 Objective

HomeFarm will be a project built around a highly successful businessman and the development
and training of skilled and semi-skilled staff in the organic hydroponics vegetables. The projects
main aim is to provide education to house wives to do hydroponics vegetables plantation in a small
housing area to give healthier and toxic free food for the younger generation. Besides that, to carry
out intensive and high turnover production, off a small area, while providing work and leadership
experience for local women.

The company is a combination of cutting edge, high quality, efficient food technology and
production. It is committed to the healthy and toxic free vegetables, improvement of taste in
vegetables and excellent quality and nutritional value. The company will provide education,
experience and research in the hydroponic field. It has the experience and extensive knowledge of
well-known government institution FAMA, MARDI and Malaysia Hydroponics.

1.2 Mission

HomeFarm with a two-fold mission:

To produce healthier, toxic free, high quality, nutritional, and flavorful vegetables for
consumption in both home and local market.
To create opportunities for leadership and highly productive teamwork for local area
women who work in the home farm.

The women working on their own home farm will be organized into intensive work groups, and
each group will be paid incentives on production and performances, in addition to the standard
wages.

1.3 Keys to Success

Efficient production utilizing greenhouses.
No existing projects of this magnitude in the local areas in Malaysia.
Experience in the vegetable industry goes back to 1996.

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 SECTION 2: INDUSTRY ANALYSIS

2.1 Industry Size, Growth Rate, and Sales Projection

The hydroponic industry is still fairly new in the Malaysia local market, in terms of research and
the number of completely developed farms. The biggest negative is the start-up costs to erect a
fully state-of-the-art project. Therefore, this business plan will start up from the local area houses
in small scale (around 100 houses first) with the team work of house wives by hiring them as staffs.
If a project is going to be developed, two major factors need to be taken into account. Project size
is the project must be able to supply produce all year round, if not, retail outlets will not be
interested. As the sales projections the selected markets will due to high quality, vegetables must
be sold retail outlets, more to retrieve highest price. The Industry is still small, and therefore a
project of this magnitude will create interest among all the major vegetable outlet markets.

2.2 Industry Structure

HomeFarm will be a partnership of successful businessmen developing a small farm at home into
a highly productive hydroponics. Hydroponics is the growing of high-quality vegetables in high-
tech, multi-span greenhouses. The produce is grown in 15L bags with a medium used to support
the root system. The plants are automatically fed nutrients through irrigation systems. The plants
are grown in the best suitable growing conditions, which allows each plant to produce the
maximum fruit possible.

2.3 Nature of participants

HomeFarm will produce fresh and organic vegetables with affordable price in spite of other
vegetables in market that sold in high price with high toxic level in vegetables in a name of
pesticides.

2.4 Industry Trends

In an era of big-box food stores, when 4 major grocery chains control the purchase of vegetables,
the proliferation of open air markets has come out of nowhere, giving more consumers an option
to purchase fresh organic vegetables. Such markets include retailers such as Mydin and Tesco.
HomeFarm will not only supply the major supermarkets, but also the local stalls to reach the people

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easily. With these trends in mind, HomeFarm will also concentrate on door delivery live vegetables
by online-vege sales that sell fresh organic hydroponic vegetables instantly without pesticides.

2.5 Long-term Prospects

The company is seeking both short-term and long-term funding to finance the purchase of a new
farm and development costs of the project. This will cover startup expenses and first year loses. It
is estimated that the company will begin to make a profit in year 2 of operations. The project is
expected to begin production within 8 months from start of the first tunnel being erected. The
largest portion of the start-up requirements is for purchase of the greenhouse and construction of
the necessary infrastructure, including well-digging. These are listed below as long-term assets.
The start-up period is five months long, and includes construction and one and a half months for
growing the first crops, to be sold beginning in January.

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 SECTION 3: COMPANY DESCRIPTION

3.1 Company Description

We are planning to locate only 90 minutes away from Kuala Lumpur city, Malaysia, in the small
town of Port Dickson, in the Eastern sea side. The planned location is suitable environment for
hydroponic planting and peaceful area for business venture. Welcome to our partnership website
(http://malaysiahydroponics.com) which has been designed to give you a feel of what Hydroponics
Farm is all about; what the products, services and projects offered and how we can share our slice
of paradise with you.

3.2 Company History

HomeFarm was first started in the founder’s house garden area as a small scale organic vegetables
production for household uses only since 2010. This idea brings to propose a business plan to open
a hydroponics vegetables greenhouse garden in local housing area at resident’s houses.

3.3 Product and Service

The company will concentrate on the production of 6 main crop vegetables such as tomatoes,
peppers, eggplant, carrot, daikon and cucumbers in the tunnels, and in time will pursue more
selective vegetables and the fresh cut flower market.

Hydroponics is the production of vegetables in state-of-the-art, temperature-controlled, multi-span

tunnels. The structures being used are richelle multi-spans, which come complete with computer
temperature sensors, automatic opening and closing vents, automatic misting units and temperature
controlled fans.

3.4 Current Status

The business is still on negotiation with committee for optimization, partners and funders and also
the residents in selected housing areas.

3.5 Legal Status and Ownership

HomeFarm is owned jointly by its two founders, one of whom will serve as the project manager
for the long term plan and the residents as the short term plan.
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 SECTION 4: MARKET ANALYSIS

4.1 Competitor Analysis

In an era of big-box food stores, when major grocery chains control the purchase of vegetables,
the proliferation of open air markets has come out of nowhere, giving more consumers an option
to purchase fresh vegetables. Zenxin Organic Food Malaysia and CityFarm are two healthy
competitors of HomeFarm.

Zenxin Agri-Organic Food (Zenxin) is Malaysia’s leading producer, distributor and retailer of
organic produce. Zenxin are the member of International Federation of Organic Farm Movements
(IFOAM) and we have a complete production chain (compost factory, organic farms and organic
wholesalers) which is certified by National Association for Sustainable Agriculture Australia
(NASAA). Also, they are certified organic under the standards of Scheme Organic Malaysia, SOM
(accredited by Department of Agriculture, Malaysia). Since 2001, Zenxin has been a trusted source
for organically-grown vegetables and fruits. They offer the widest and most complete organic
produce with over 60 varieties to over 70 supermarkets and 100 dealers in both Malaysia and
Singapore. Their tropical crops are grown in Malaysia and Thailand while seasonal temperate
crops are sourced alternatively from the northern & southern hemispheres.

Beside of the fresh produce, they have launched their house brand, Simply Natural in 2009. Simply
Natural food offers a healthier option without artificial additives and preservatives. They have a
wide range of organic products with affordable prices. All their products are packed in our own
NASAA certified organic facilities, a dedicated cold room to ensure the freshness and hygiene.
Till now, they have 5 organic farms, 20 contract farms, 3 distribution centers, 1 organic fertilizers
factory, 10 organic food stores, 1 recreation park and more than 200 workforces in their team.

CityFarm Malaysia is a newly-founded organization whose objective is to inspire more city

farmers with the ability to grow locally from anywhere for a more sustainable future of food
production. It launched in early July this year with an indoor controlled environment vertical show
farm (450sqf) that is capable of producing 2000 heads of lettuce every month. The primary driver
of CityFarm Malaysia to venture into indoor farming is its ability to satisfy the rapid growth in
consumer demand for affordable, high-quality, locally produce crop in any climate. Farming

5
within the city also able to reduce carbon food print where transportation can be optimized and
making “farm-to-table” possible.

Cityfarm Malaysia is currently supplying lettuce to neighbor cafés around Serdang area.
Progression of Hydroponics technology makes soilless farming possible within the urban
household and this is the key to address food supply issue where everyone is a city farmer and able
to be part of the food supply process. However, the awareness of urban farming is relatively low
compared to countries like Taiwan, Japan, Europe and the US. Hence, CityFarm Malaysia wishes
to play a part in the movement by creating simple & affordable farming system in cities, e.g.
Balcony set (20 plants capacity) for a small family and consultation to build indoor/outdoor farm.
CityFarm Malaysia’s next focus is mainly on education where they want to train the next
generation on the importance of farming and how they can play a part to make the world a better
place by growing food that is healthy, clean and fresh.

These two companies are our healthy competitors. They have collaborated with neighboring
countries to produce healthy vegetables. Though they are well to do companies, our concept is
completely different from theirs, we would want to educate and provide a career to women out
there. We would also not be using pesticides and insecticides which can harm the consumers in
the long run. Moreover, our project is to practice their future plans in real, thus we are forward in
action compared to them.

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 SECTION 5: THE ECONOMICS OF THE BUSINESS

5.1 Revenue Drivers and Profit Margins

Profit margin
Year 1
Sales RM120, 000
Direct Cost of Sales RM 50, 000
Other Costs of Sales RM 0
Total Cost of Sales RM 50, 000

Gross Margin RM 70, 000

Gross Margin % 58.30%

5.2 Break-even Analysis

Based upon our monthly fixed costs we need to sell the number units, shown below, each month
to break-even. Given the high demand for these products and our expertise in this industry, we
should exceed this amount even in the first month of the plan, after our initial start-up period for
construction and first crop growth.
Break-even Analysis

Monthly Units Break-even 5, 000

Monthly Revenue Break-even RM 20, 000

Assumptions:
Average Per-Unit Revenue RM 4.58
Average Per-Unit Variable Cost RM 2.28
Estimated Monthly Fixed Cost RM 10, 000

5.3 Start-up Costs

HomeFarm needs to fund its start-up requirements. The owner will seek for fund from FAMA or
MARDI or loan from AGRO bank, and is seeking long-term borrowing, using as collateral two
other successful agricultural ventures.
Start-up Funding
Start-up Expenses to Fund RM 20, 000
Start-up Assets to Fund RM 32,000
Total Funding Required RM 52, 000
Assets
Non-cash Assets from Start-up RM 30, 000
Cash Requirements from Start-up RM 2, 000
Cash Balance on Starting Date RM 2, 000
Total Assets RM 32, 000

Total Funding RM 52, 000

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 SECTION 6: MARKETING PLANS

6.1 Research and development

The company will seek contact with local and international companies in order to learn about and
acquire new hybrids of vegetables that are hardier and grow faster in our local climate. These and
other available species and systems will be constantly tracked. In addition to the above, the
company will seek contacts at universities and researchers that are involved in greens, and will
continue the quest for the best flavored, large, and firm vegetable throughout the year.

6.2 Marketing Strategy

HomeFarm will market and supply its products to the selected outlets aggressively, focusing at
first on local markets, and then on export options. We will emphasize the reliable year-round
output of our climate-controlled hydroponics facilities, as well as the ability to produce in-demand,
non-native vegetables. Marketing for turf will take place with direct contact between HomeFarm
and regional greenhouses and landscapers. The company will also eventually develop a website
and advertise on the Internet, although these future marketing avenues are not included in this plan.

6.3 Competition and Buying Patterns

HomeFarm aims to be the biggest growers of hydroponics in the West Malaysia region. At present
there are very few big growers, minimizing the competition. The advantage of hydroponics on a
large scale is the availability to produce vegetables all year round in large quantities. This
immediately becomes a positive factor with major retail outlets and exporters.

6.4 Sales Strategy

At HomeFarm, the sales process is primarily the same for vegetables as it is for instant turf, in that
both products will be mainly sold through wholesale marketing. Online sales will be implemented
to place orders for the vegetables of choice. Shipments of vegetables will be transported in
refrigerated trucks as per orders, and instant turf will be palletized on open back trucks as per
orders.

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 SECTION 7: DESIGN AND DEVELOPMENTAL PLAN

7.1 Development Status and Task

The HomeFarm group strategy is to profitably and efficiently utilize present and future agricultural
technology in the production of vegetables. The company, by developing a profitable vegetable
farm with all the necessary custom-innovated equipment, will gain a significant industry
advantage. The company's goals in the first year are to:
Develop the complete project in most of local resident’s houses.
To have all the planted material and ready for production.
To have grading and pack shed constructed.
The company's long term plan is to also produce more selective vegetables as well as looking to
get into the online-vege delivery.

7.2 Challenges and Risks

Experiences and technical knowledge: running a system of many types of equipment,

which requires necessary specific knowledge for the devices used, what plants you can
grow and how they can survive and thrive in a soilless environment. Mistakes in setting up
the systems and plants' growth ability in this soilless environment and you end up ruining
your whole progress.
Initial expenses: spending under one hundred to a few hundreds of dollars (depending on
your garden scale) to purchase equipment for your the first installation. Whatever systems
you build, you will need containers, lights, a pump and/or a timer, growing media,
nutrients). Once the system has been in place, the cost will be reduced to only nutrients and
electricity (to keep the water system running, and lightning).
Long return per investment: Commercial growers still face some big challenges when
starting with Hydroponics on a large-scale. This is largely because of the high initial
expenses and the long uncertain ROI (return on investment). It's not easy to detail a clear
profitable plan to urge for investment while there are also many other interesting high-tech
fields out there that seem fairly promising for funding.
Diseases & pests may spread quickly: Growing plants in a closed system using water, in
the case of plant infections or pests, they can escalate fast to plants on the same nutrient
reservoir. So better to have a good disease management plan beforehand. For example, use
only clean disease free water source and growing material, checking the systems often.

7.3 Projected Developmental Cost

Financial Plan: with initial loans, we can construct the hydroponics facilities and begin
crop development. Based on the high demand for these products, we expect solid sales in
the first year, with improving margins.
Start-up Funding: HomeFarm needs to fund its start-up requirements. The owner will
provide personal investment, and meanwhile MARDI and FAMA are also providing fund.

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SECTION 8: OPERATIONS PLAN

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 SECTION 9: MANAGEMENT TEAM AND COMPANY STRUCTURE

Founder
Mohammed
Ridzuwan

Co- founder Advisor

Nalahyini Kumar Kumaran Kanasan

Sales Director Procurement Director R & D Director

Shashikala Seran Vhinohthini Erranna Prashila Nadarajah

Sales Team Procurement R & D Team

Leader Team Leader Leader
-Business Strategy -Operating -Application
procedures analysis and design
- Sponsorship
-Backup and -Custom
- Marketing
recovery development
procedures
-Equipment
-Consultation
-Greenhouse
design, construction
and management

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 SECTION 10: OVERALL SCHEDULE

10.1 Milestones

Table 10.1: The following table shows the main milestones for the first year.

Milestones

Milestone Start Date End Date Budget Manager Department

Raise funding 11/1/2018 1/15/2018 RM 52,000 Shashikala Sales Director
Begin Construction 2/1/2018 2/5/2018 RM 30,000 Nalahyini Co- Founder
Begin First Crop 5/10/2018 5/15/2018 RM 60,000 Prashila R &D Director
Planting
Begin Sales 7/1/2018 7/10/2018 R0 Nalahyini Co-Founder
Begin Turf Sales 10/1/2018 10/10/2018 R0 Shashikala Sales Director
Total Sales over R12 7/1/2018 6/30/2018 R0 Prashila R&D Director
Million
Totals RM 142,000

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 SECTION 11: FINANCIAL PROJECTIONS

Table 11.1: Pro forma Income Statement

Market Analysis
Year 1 Year 2 Year 3
Potential Customers Growth CAGR
MARDI 25% 100 125 156 24.98%
Agrobank 10% 20 22 24 9.73%
FAMA 25% 50 63 79 25.49%
Total 23.62% 170 210 259 23.62%

Table 11.2: Pro forma Balance Sheet for 3 Years

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets

Current Assets
Cash RM1,668,970 RM2,640,193 RM5,118,779
Accounts Receivable RM1,068,167 RM969,534 RM1,260,264
Other Current Assets RM0 RM0 RM0
Total Current Assets RM2,737,137 RM3,609,727 RM6,379,044

Long-term Assets
Long-term Assets RM20,000,000 RM20,000,000 RM20,000,000
Accumulated Depreciation RM666,660 RM1,333,360 RM2,000,060
Total Long-term Assets RM19,333,340 RM18,666,640 RM17,999,940
Total Assets RM22,070,477 RM22,276,367 RM24,378,984

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities
Accounts Payable RM909,964 RM426,964 RM865,430
Current Borrowing RM0 RM0 RM0
Other Current Liabilities RM0 RM0 RM0
Subtotal Current Liabilities RM909,964 RM426,964 RM865,430

Long-term Liabilities RM17,130,000 RM16,130,000 RM14,880,000

Total Liabilities RM18,039,964 RM16,556,964 RM15,745,430

Paid-in Capital RM2,798,753 RM2,798,753 RM2,798,753

Retained Earnings (RM793,753) RM1,231,760 RM2,920,650
Earnings RM2,025,513 RM1,688,890 RM2,914,150
Total Capital RM4,030,513 RM5,719,403 RM8,633,553
Total Liabilities and Capital RM22,070,477 RM22,276,367 RM24,378,984
Net Worth RM4,030,513 RM5,719,403 RM8,633,553

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Table 11.3: Pro forma Cash Flow for 3 years.
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received

Cash from Operations

Cash Sales RM1,860,000 RM1,688,250 RM2,194,500
Cash from Receivables RM9,471,833 RM9,665,383 RM12,144,769
Subtotal Cash from Operations RM11,331,833 RM11,353,633 RM14,339,269

Additional Cash Received

Sales Tax, VAT, HST/GST Received RM0 RM0 RM0
New Current Borrowing RM0 RM0 RM0
New Other Liabilities (interest-free) RM0 RM0 RM0
New Long-term Liabilities RM0 RM0 RM0
Sales of Other Current Assets RM0 RM0 RM0
Sales of Long-term Assets RM0 RM0 RM0
New Investment Received RM0 RM0 RM0
Subtotal Cash Received RM11,331,833 RM11,353,633 RM14,339,269

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending RM480,000 RM483,000 RM519,750
Bill Payments RM8,317,863 RM8,899,410 RM10,090,933
Subtotal Spent on Operations RM8,797,863 RM9,382,410 RM10,610,683

Additional Cash Spent

GST Paid Out RM0 RM0 RM0
Principal Repayment of Current Borrowing RM0 RM0 RM0
Other Liabilities Principal Repayment RM0 RM0 RM0
Long-term Liabilities Principal Repayment RM870,000 RM1,000,000 RM1,250,000
Purchase Other Current Assets RM0 RM0 RM0
Purchase Long-term Assets RM0 RM0 RM0
Dividends RM0 RM0 RM0
Subtotal Cash Spent RM9,667,863 RM10,382,410 RM11,860,683

Net Cash Flow RM1,663,970 RM971,223 RM2,478,586

Cash Balance RM1,668,970 RM2,640,193 RM5,118,779

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