Name of the Business- Rainbow Blooms LLC.

Executive Summary

Rainbow Blooms is a farm that will be dedicated to the production of botanical perennials.
Rainbow Blooms will be formed as an U.A.E based Limited Liability Corp. (L.L.C.) located in
Sharjah, U.A.E. Rainbow Blooms will be working hard to become a leading producer of
botanical plants for the natural supplement industry as well as plant nurseries. By leveraging a
well thought out business plan the Company is trying to get loan for its startup.

Products

Rainbow Blooms is a 10 acre farm that concentrates on the growing of botanical medicinal.
Botanical Bounty has chosen five plant species that have significant market demand. Botanical
Bounty will feature: Echinacea - an immune system booster; Ginseng - a source of energy; St
John's Wort - for mild depression; Skullcap- for inflammation; and Ginger - a stomach soother.

Market

Rainbow Blooms has three distinct customers: supplement companies, processors of botanicals
for supplement companies, and nurseries that resell the plants. The first two customers purchase
the plants for use in their products which they ultimately sell to the end consumer. The market
for natural supplements is quite exciting. An estimated 115.3 million consumers buy vitamins
and minerals for themselves, and 55.8 million purchase them for other members of their family,
including children

Objectives

The Rainbow Blooms has identified several objectives for the business:

 Become a leading supplier of botanical perennials for the health/vitamin

industry.

 Reach the point of sustainable profitability.

 Enjoy work while making a good living.

Mission

It is Rainbow Bloom's mission to become the leading provider of botanical perennials to the
health/vitamin industry. This will be accomplished by providing quality plants at fair prices
while exceeding customer's expectations.
Keys to Success

Rainbow Blooms will adhere to three keys that will be instrumental in its success:

 Strict financial controls.

 The never ending pursuit of the highest concentration of botanicals in every

plant.

 Ensuring that all customers’ needs are met and they are satisfied with the
purchased products.

Business description

Rainbow Blooms is a provider of botanical perennials including Echinacea, Ginseng, St. John's
Wort, Skullcap and Ginger. Rainbow Blooms will sell to supplement companies, processors of
botanicals for supplement companies, and nurseries that resell the plants. The first two customers
purchase the plants for use in their products which they ultimately sell to the end consumer.

The company will be organized as a Sole Proprietorship.

Products and Services

Rainbow Blooms will offer a range of botanical perennials (plants where the root structure
remains, allowing the plant to regrow every year). Botanical perennials were chosen for two
main reasons. The first is the medicinal value that they offer; therefore the plants have a positive
contribution to society by improving people's health. The second reason is that the market for
medicinal herbs is a very strong industry with excellent growth, ensuring demand for their plants.
Rainbow Blooms will offer the following excellent:

Echinacea

Echinacea has been used for years in alternative medicine to support the immune system, and to
purify the blood, especially during season changes and during the cold and flu season. Scientific
studies have confirmed the presence of natural chemicals, echinacosides, which increase white
blood cell activity.

Ginseng

Ginseng stimulates and increases endocrine activity in the body. Promotes a mild increase in
metabolic activity and relaxes heart and artery movements. Stimulates the medulla centers and
relaxes the central nervous system.
St. John's Wort

St. John's Wort has been used as a medicinal for thousands of years, but has only recently been
studied for its medicinal value. Now proven to have many highly active compounds including
rutin, pectin, choline, sitosterol, hypericin and pseudohypericin. The flowers and leaves are
medicinal as analgesic, antiseptic, antispasmodic, aromatic, astringent, cholagogue, digestive,
diuretic, expectorant, nervine, resolvent, stimulant, vermifuge and vulnerary. Some compounds
of the plant have been shown to have potent anti-retroviral activity without serious side effects
and they are being researched in the treatment of AIDS.

Skullcap

Skullcap is a powerful medicinal herb, it is used in alternative medicine as an anti-inflammatory,

abortifacient, antispasmodic, slightly astringent, emmenagogue, febrifuge, nervine, sedative and
strongly tonic. Some valuable constituents found in the plant are scutellarin, catalpol, other
volatile oils, bitter iridoids and tannins. Scientific studies are proving this to be a valuable plant
in many areas for mental disorders. Skullcap is used in the treatment of a wide range of nervous
conditions including epilepsy, insomnia, hysteria, anxiety, delirium tremens, withdrawal from
barbiturates and tranquilizers.

Ginger

Ginger roots and dried herb are medicinal and edible, it has a spicy, hot, crispy, taste and can be
eaten fresh in small quantities in salads, used as a relish, a condiment, or made into a sauce for
meat, especially good on chicken, or used to make ginger candy. Widely used as an alternative
medicine ginger contains the valuable constituent aristolochic acid, scientific study shows it to
have anti-inflammatory, antiviral, antitumor activity, cures warts in some cases and is a broad-
spectrum antibacterial and antifungal.

Rainbow Blooms will sell these excellent perennials in plant form for the botanicals to be
extracted by their customers. Rainbow Blooms concentrates on producing the healthiest plants
which have the highest concentration of active botanicals.

Start-up expense and Capitalization

The start-up expense for Rainbow Blooms is focused primarily on production and extraction
equipment. The owner’s parent will invest 40% of the total fund required which is $40,000 and
the owner will invest $10,000. In addition, they will secure a $50,000 HSBC loan.
Start-up Requirements
Start-up Expenses
Legal $600
Stationery etc. $100
Insurance $300
Rent $600
Expensed Equipment $40,000
Total Start-up Expenses $41,600
Start-up Assets
Cash Required $33,400
Start-up Inventory $5,000
Other Current Assets $5,000
Long-term Assets $15,000
Total Assets $58,400
Total Requirements $100,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $50,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $50,000
Capital
Planned Investment
Owner’s parent $40,000
Owner $10,000
Additional Investment Requirement $0
Total Planned Investment $50,000
Loss at Start-up (Start-up Expenses) ($41,600)
Total Capital $8,400
Total Capital and Liabilities $58,400
Total Funding $100,000
Staff requirement-Personnel Plan

 Owner: Operations including vendor relations, accounting, and some growing

responsibility. Head grower and sales. As head grower the owner will be responsible for
supervising, scheduling plant production, the cutting schedules, crop selection, growing
schedules, fertilizer selection and application schedules, irrigation system development,
and pest control. Because the owner personally have the technical knowledge regarding
the plants and their industry leading botanical concentrations as the owner have
undertaken several courses regarding the same prior to the initial startup plan. The owner
will be in charge of sales which will include qualifying leads as well as participating in
the final negotiations and account management.
 Grower: The owner will have the assistance of a full-time grower in order to meet the
sales responsibilities.
 Laborers: The laborer positions will be seasonal as there is more work required in the
summer months, however, there will always be some laborers on staff throughout the
year. Some of the responsibilities of the laborers are soil tilling, compost distribution,
plant collections and trimming.

Role of financial advisor

When it comes to achieving the financial objectives, financial advisors are there to assist the
business. They can assist in saving much more money, invest properly, or pay off the debts more
quickly. As an agricultural consultant or adviser, one's responsibilities may vary based on the
organization they work for, but includes the following:
● Identifying and evaluating clients' commercial or technical needs through
communication.
● Measuring and analyzing performance data, such as agricultural yields.
 ● Participating in meetings, putting on seminars and teaching classes.
● Advice booklets, technical notes and press releases.
● The process of submitting plans for development.
● Managing modern farming's commercial, compliance, and paperwork concerns.
● Performing clerical tasks, such as keeping track of finances, maintaining records, and
putting together reports.
Consultants tend to specialize on a particular area of expertise. These include environmental
consulting, acquisitions and negotiations with EU and government agencies, insurance claims,
environmental protection, and pollution control in the form of environmental consulting and
pollution prevention.

Economic Environment

The term economic environment refers to all the external economic factors that influence buying
habits of consumers and businesses and therefore affect the performance of a company. These
factors are often beyond a company’s control, and may be either large-scale (macro) or small-
scale (micro).

PESTEL analysis is used here to explain the factors that will most probably be having an impact
on the external environment of Rainbow Blooms. PESTEL is a strategic tool to analyze the
macro environment of the organization. PESTEL stands for - Political, Economic, Social,
Technological, Environmental & Legal factors that impact the macro environment of Rainbow
Blooms

PESTEL analysis provides great detail about operating challenges Rainbow Blooms will face in
prevalent macro environment other than competitive forces. For example an Industry may be
highly profitable with a strong growth trajectory but it won't be any good for Rainbow Blooms if
it is situated in unstable political environment.

Political Factors that Impact Rainbow Blooms

Political factors play a significant role in determining the factors that can impact Rainbow
Bloom’s long term profitability in a certain market. To achieve success in such a dynamic Herbal
Products industry across various regions is to diversify the systematic risks of political
environment. Rainbow blooms can closely analyze the following factors before entering or
investing in a certain market-

 Political stability and importance of Personal Products sector in the country's economy.
  Bureaucracy and interference in herbal Products industry by government.

 Legal framework for contract enforcement

 Intellectual property protection

 Trade regulations & tariffs related to Consumer Goods

 Favored trading partners

 Anti-trust laws related to herbal Products

 Pricing regulations – Are there any pricing regulatory mechanism for Consumer Goods

 Taxation - tax rates and incentives

 Wage legislation - minimum wage and overtime

 Work week regulations in herbal Products

 Mandatory employee benefits

 Industrial safety regulations in the Consumer Goods sector.

 Product labeling and other requirements in herbal Products

Economic Factors that Impact Rainbow Blooms

The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign
exchange rate and economic cycle determine the aggregate demand and aggregate investment in
an economy. While micro environment factors such as competition norms impact the
competitive advantage of the firm. Rainbow Blooms can use country’s economic factor such as
growth rate, inflation & industry’s economic indicators such as herbal Products industry growth
rate, consumer spending etc. to forecast the growth trajectory of not only agricultural sector but
also that of the organization. Economic factors that Rainbow Blooms should consider while
conducting PESTEL analysis are -

 Type of economic system in country of operation – what type of economic system there
is and how stable it is.
 Government intervention in the free market and related Consumer Goods
 Exchange rates & stability of currency.
 Efficiency of financial markets – Does Rainbow Blooms needs to raise capital in local
market?
 Infrastructure quality in herbal Products industry
 Comparative advantages of the country and Consumer Goods sector in the particular
country.
  Skill level of workforce in herbal Products industry.
 Education level in the economy
 Labor costs and productivity in the economy
 Business cycle stage (e.g. prosperity, recession, recovery)
 Economic growth rate
 Discretionary income
 Unemployment rate
 Inflation rate
 Interest rates

Social Factors that Impact Rainbow Blooms

Society’s culture and way of doing things impact the culture of an organization in an
environment. Shared beliefs and attitudes of the population play a great role in how marketers at
Rainbow Blooms will understand the customers of a given market and how they design the
marketing message for herbal Products industry consumers. Social factors that leadership of
Rainbow Blooms should analyze for PESTEL analysis are -

 Demographics and skill level of the population

 Class structure, hierarchy and power structure in the society.
 Culture (gender roles, social conventions etc.)
 Entrepreneurial spirit and broader nature of the society. Some societies encourage
entrepreneurship while some don’t.
 Attitudes (health, environmental consciousness, etc.)
 Leisure interests

Technological Factors that Impact Rainbow Blooms

Technology is fast disrupting various industries across the board. A firm should not only do
technological analysis of the industry but also the speed at which technology disrupts that
industry. Slow speed will give more time while fast speed of technological disruption may give a
firm little time to cope and be profitable. Technology analysis involves understanding the
following impacts -

 Recent technological developments by rainbow Blooms competitors

 Technology's impact on product offering
 Impact on cost structure in herbal Products industry
  Impact on value chain structure in Consumer Goods sector
 Rate of technological diffusion

Environmental Factors that Impact Rainbow Blooms

Different markets have different norms or environmental standards which can impact the
profitability of an organization in those markets. Even within a country often states can have
different environmental laws and liability laws. Before entering new markets or starting a new
business in existing market the firm should carefully evaluate the environmental standards that
are required to operate in those markets.

Some of the environmental factors that a firm should consider beforehand are -

 Weather
 Climate change
 Laws regulating environment pollution
 Air and water pollution regulations in herbal Products industry
 Recycling
 Waste management in Consumer Goods sector
 Attitudes toward “green” or ecological products
 Endangered species
 Attitudes toward and support for renewable energy

Legal Factors that Impact Rainbow blooms

In number of countries, the legal framework and institutions are not robust enough to protect the
intellectual property rights of an organization. A firm should carefully evaluate before entering
such markets as it can lead to theft of organization’s secret sauce thus the overall competitive
edge. Some of the legal factors that Rainbow Blooms leadership should consider while entering a
new market are -

 Anti-trust law in herbal Products industry and overall in the country.

 Discrimination law
 Copyright, patents / Intellectual property law
 Consumer protection and e-commerce
 Employment law
 Health and safety law
  Data Protection

Operational and marketing plans

The marketing strategy will be based on generating awareness and visibility of Botanical Bounty
and their ability to produce the highest percentages of botanicals. The strategy will rely on
several different forms of communication. The main form is participation in the numerous trade
shows for the industry. The trade shows are where everyone from the industry gathers to meet
and transact business. It is a wonderful place to network as well as learn about new
developments in the industry. The second form of communication will be the use of
advertisements. The main venues for advertisements will be industry trade magazines. The trade
magazines are a well-read source of information that buyers and sellers refer to for many
different transactions. The Operation strategy, in addition to reinforcing the competitive edge,
will seek to qualify leads by concentrating on Rainbow Bloom's ability to perform reliably on
long-term contracts, becoming a stable supplier to the larger companies that need a steady supply
stream.

Business project Evaluation

1. Net present value (NPV) is the difference between the present value of cash inflows and the
present value of cash outflows over a period of time. NPV is used in capital budgeting and
investment planning to analyze the profitability of a projected investment or project.

NPV analysis for Rainbow Blooms

Year Initial Cash flow DF @ 10% Present value

Investment
0 -$100,000 1.000 -$100,000
1 -$11,964 0.909 $ 10,875
2 $ 6,556 0.826 $ 5,415
3 $25,530 0.751 $ 19,173
4 $50,600 0.683 $ 34,560
5 $75,490 0.620 $ 46,804
$116,827
NPV = $ 16,827

The PV of cash inflows exceeds the PV of cash outflows by $16,827 which means that the
project will earn a DCF return in excess of 9% that is it will earn a surplus of $29,760 after
paying the cost of financing. It should therefore be undertaken.

2. The internal rate of return (IRR) is a metric used in financial analysis to estimate the
profitability of potential investments. The IRR rule states that if the IRR on a project or
investment is greater than the minimum RRR—typically the cost of capital, then the project or
investment can be pursued.

Where:

L = Lower rate of interest

H = Higher rate of interest

NL = NPV at lower rate of interest

NH = NPV at higher rate of interest.

Year Initial Investment Cash flow DF @ 8% PV@10%

0 -$100,000 -$100,000 -$100,000
1 -$11,964 $ 11,067 $ 10,875
2 $ 6,556 $ 5,618 $ 5,415
3 $25,530 $ 20,245 $ 19,173
4 $50,600 $ 37,191 $ 34,560
5 $75,490 $ 51,333 $ 46,804
$125,454 $116,827
NPV@8%=$25,454 NPV@10%=$16,827

IRR = 8% + ($25,454 / 25,454-16,827) × (10%-8%)

IRR = 13.9%

3. ARR
Financial statements and valuation of the business

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1 Year 2 Year 3
Sales $282,000 $340,000 $420,000
Direct Cost of Sales $141,000 $170,000 $200,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $141,000 $170,000 $200,000

Gross Margin $141,000 $170,000 $220,000

Gross Margin % 50.00% 50.00% 52.38%

Expenses
Payroll $70,800 $76,000 $105,000
Sales and Marketing and Other Expenses $4,260 $7,200 $8,500
Depreciation $4,800 $4,800 $4,800
Leased Equipment $0 $0 $0
Utilities $4,800 $5,300 $6,000
Insurance $650 $780 $900
Rent $7,200 $7,800 $8,500
Payroll Taxes $10,620 $11,400 $15,750
Other $0 $0 $0

Total Operating Expenses $103,130 $113,280 $149,450

Profit Before Interest and Taxes $37,870 $56,720 $70,550

EBITDA $42,670 $61,520 $75,350
Interest Expense $5,158 $4,340 $3,050
Taxes Incurred $9,814 $15,714 $20,250

Net Profit $22,899 $36,666 $47,250

Net Profit/Sales 8.12% 10.78% 11.25%
Table: Cash Flow

Pro Forma Cash Flow

Year 1 Year 2 Year 3
Cash Received

Cash from Operations

Cash Sales $70,500 $85,000 $105,000
Cash from Receivables $161,300 $244,675 $300,759
Subtotal Cash from Operations $231,800 $329,675 $405,759

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $12,000 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $243,800 $329,675 $405,759

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $70,800 $76,000 $105,000
Bill Payments $173,564 $228,609 $262,229
Subtotal Spent on Operations $244,364 $304,609 $367,229

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $3,000 $6,000 $3,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $8,400 $8,400 $8,400
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $255,764 $319,009 $378,629

Net Cash Flow ($11,964) $10,667 $27,130

Cash Balance $21,436 $32,103 $59,233
Table: Balance Sheet

Pro Forma Balance Sheet

Year 1 Year 2 Year 3
Assets

Current Assets
Cash $21,436 $32,103 $59,233
Accounts Receivable $50,200 $60,525 $74,766
Inventory $19,800 $19,394 $22,264
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $96,436 $117,022 $161,263

Long-term Assets
Long-term Assets $15,000 $15,000 $15,000
Accumulated Depreciation $4,800 $9,600 $14,400
Total Long-term Assets $10,200 $5,400 $600
Total Assets $106,636 $122,422 $161,863

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities
Accounts Payable $24,738 $18,257 $21,848
Current Borrowing $9,000 $3,000 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $33,738 $21,257 $21,848

Long-term Liabilities $41,600 $33,200 $24,800

Total Liabilities $75,338 $54,457 $46,648

Paid-in Capital $50,000 $50,000 $50,000

Retained Earnings ($41,600) ($18,701) $17,965
Earnings $22,899 $36,666 $47,250
Total Capital $31,299 $67,965 $115,215
Total Liabilities and Capital $106,636 $122,422 $161,863

Net Worth $31,299 $67,965 $115,215

Table: Cash Flow

Pro Forma Cash Flow

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month Month Month
10 11 12
Cash Received

Cash from Operations

Cash Sales $0 $2,500 $3,000 $3,500 $4,500 $5,500 $6,500 $9,000 $10,000 $9,000 $8,000 $9,000
Cash from $0 $0 $250 $7,550 $9,050 $10,600 $13,600 $16,600 $19,750 $27,100 $29,900 $26,900
Receivables
Subtotal Cash from $0 $2,500 $3,250 $11,050 $13,550 $16,100 $20,100 $25,600 $29,750 $36,100 $37,900 $35,900
Operations

Additional Cash
Received
Sales Tax, VAT, 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
HST/GST Received
New Current $0 $0 $0 $0 $0 $12,000 $0 $0 $0 $0 $0 $0
Borrowing
New Other Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
(interest-free)
New Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities
Sales of Other Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Assets
Sales of Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Assets
New Investment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Received
Subtotal Cash $0 $2,500 $3,250 $11,050 $13,550 $28,100 $20,100 $25,600 $29,750 $36,100 $37,900 $35,900
Received

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month Month Month
10 11 12

Expenditures from
Operations
Cash Spending $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900
Bill Payments $15 $656 $7,042 $8,918 $10,294 $13,956 $16,619 $19,449 $28,790 $27,877 $21,118 $18,831
Subtotal Spent on $5,915 $6,556 $12,942 $14,818 $16,194 $19,856 $22,519 $25,349 $34,690 $33,777 $27,018 $24,731
Operations

Additional Cash Spent

Sales Tax, VAT, $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
HST/GST Paid Out
Principal Repayment $0 $0 $0 $0 $0 $0 $500 $500 $500 $500 $500 $500
of Current Borrowing
Other Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment
Long-term Liabilities $700 $700 $700 $700 $700 $700 $700 $700 $700 $700 $700 $700
Principal Repayment
Purchase Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current Assets
Purchase Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Assets
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $6,615 $7,256 $13,642 $15,518 $16,894 $20,556 $23,719 $26,549 $35,890 $34,977 $28,218 $25,931

Net Cash Flow ($6,615) ($4,756) ($10,392) ($4,468) ($3,344) $7,544 ($3,619) ($949) ($6,140) $1,123 $9,682 $9,969
Cash Balance $26,785 $22,029 $11,637 $7,169 $3,825 $11,369 $7,750 $6,802 $662 $1,785 $11,467 $21,436

All the above statements are the forecast for the upcoming three years and it is clearly observed
that the business will do well and generate profit in the future gradually.
Conclusion

For people who are just starting out and forming their own company, whether it's a small
freelance business at home or a new venture with an office and a starting pool of employees,
there's a lot of importance to a business plan. It is a road map, an outline, a document that
explains what the business is, what the goals of the enterprise are, and how exactly it will set
about achieving those goals. Rainbow Blooms is a start-up business for which a clear cut
business plan has been made, including an overview of several important aspects of the business
which helps the entrepreneur get a clear direction towards the future and also have an realistic
predictions which could be shown to secure a loan to start the business.

References