IE 3142

Quality Management Systems

Business Plan of J & J Bone Meal Organic Fertilizer Company

Presented by:

Morales, Erold Ceasar G.

Ramirez, Julian Ambrose L.

Presented to:

Eugene Angelo I. Subang

Instructor

September 18, 2021

 Executive Summary

Currently, a lot of people engaged to planting activities which makes them their
hobby and make their own business. People who engaged in planting activities need to
take good care of the health and growth of their plants. A lot of organic fertilizers in
different kinds are mostly expensive in which people cannot afford to buy. J&J bone
meal organic fertilizer wants to introduce its new brand and single-line of product in the
existing market in which the company could address to the demands of the customers
of the ideal organic fertilizer they want to purchase. The company aims to provide a
good quality of organic fertilizer in terms of lower cost and higher nutrients.

Our product is mainly made from beef bones that are cleaned, boiled and
pulverized into fine powder. Our bone meal organic fertilizer composes of high nutrients
such as nitrogen, phosphorus, potassium, and calcium that is essential for the health
and growth of plants. Our product is packed with a special and customized plastic bag
so that customers could handle an easy pour bag for easier application of using the
product. Our product is chemical-free, affordable, and 100% organic.

The company’s target market are the plantito’s and plantitas in Davao city which
are classified as people with ages 15 to 80 years old, online purchasers, people who
use organic fertilizer, and people which turned into customers after seeing our
advertisements. J&J bone meal organic fertilizer company aims to achieve 0.5% market
share in the fertilizer industry during the start-up. With an increase rate of 0.25% for the
following year, the company’s goal is to reach 1.25% for the year 2024. The company
will supply estimated units of 5,724 in which is 50% of this units are per 250 grams, 30%
are per 500 grams and 20% are per 1 Kilogram. This is calculated from the frequency of
buying of the customers for the first year which is multiplied by the market share. For
the year 2023, units supplied will increase by 65% and 59% for the year 2024.

The company will apply the First-In-First-Out (FIFO) Method in handling and
managing its inventories. Units manufactured are needed to stay in our inventories for a
maximum of 30 days before these units will be sold in the existing market. The company
will only accept up to 5% of defects from the suppliers to ensure good quality of our
products. Proper solid waste management and sanitation of the workplace will be
implemented in order to have a safe and clean environment.

For the first year, the company’s expected profitability is 31% annual gross profit
margin or a revenue of P171,184.35 followed by P451,385.64 or 29% annual gross
profit margin for the year 2023 and 34% annual gross profit margin or a revenue of
1,222,424.91 for the year 2024. The company expect to recover their initial investment
of P670,000 in 12.09 months with a return on investment of 133.04%. The funding
sources will be divided among the bank loans (70%) and owners (30%).
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 Table of Contents

Executive Summary............................................................................................................i
Company Background......................................................................................................1
1.1. Vision, mission, goals, and objectives....................................................................1
1.1.1. Vision................................................................................................................1
1.1.2. Mission.............................................................................................................1
1.1.3. Goals and Objectives.......................................................................................1
1.2. Business philosophy...............................................................................................1
1.3. Legal form of ownership..........................................................................................2
1.4. Company logo and trademark.................................................................................3
Product profile...................................................................................................................4
2.1. Product description.................................................................................................4
2.2. Product value..........................................................................................................4
Market Analysis and Marketing Strategy..........................................................................5
3.1. Market definition......................................................................................................5
3.2. Industry and competitor analysis............................................................................6
3.3. Marketing strategy...................................................................................................7
3.3.1. Product logo and branding...............................................................................7
3.3.2. Place, promotion, packaging, pricing...............................................................8
Operational Plan.............................................................................................................11
4.1. Manufacturing process..........................................................................................11
4.2. Inventory management.........................................................................................12
4.3. Supplier management...........................................................................................12
4.4. Quality management system................................................................................12
4.4.1. GMP...............................................................................................................12
4.4.2. Solid and Water Waste Disposal Management.............................................13
4.4.3. Continuous Process Improvement.................................................................13
4.5. Legal requirements...............................................................................................13
4.5.1. SEC registration.............................................................................................13
4.5.2. Business Permit.............................................................................................13

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 4.5.3. FPA registration..............................................................................................13
4.5.4. BIR..................................................................................................................14
Financial Projection........................................................................................................14
5.1. Capitalization.........................................................................................................14
5.2. Project cost...........................................................................................................15
5.3. Income statement..................................................................................................16
5.4. Statement of cash flow..........................................................................................17
5.5. Balance sheet.......................................................................................................18
References......................................................................................................................20

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 1.Company Background

1.1. Vision, mission, goals, and objectives

1.1.1. Vision

We aim to become the nation’s leading consumer business for our plant fertilizer
product. We aim to make our product very well known to the nation of its great quality
and service.

1.1.2. Mission

Our mission is to provide the best quality organic fertilizer to help support and
supply the customers’ plants in terms of their nutrients and growth. To provide an
interesting, enabling, and supporting environment in which people can achieve, be
innovative, and entrepreneurial while working in an ethical and safe setting based on
meritocracy and equal opportunity. Lastly, to be a responsible corporate citizen who
cares about the environment and the communities with which we interact. To provide a
service that is quick, effective, and efficient.

1.1.3. Goals and Objectives

By creating a good quality organic fertilizer, we could help save, protect, and
preserve our environment. We aim to create an effective and affordable organic fertilizer
that plantitos and plantitas would be able to buy our product. Our goal is to increase the
country's fertilizer production capability. Another would be to make fertilizers available at
uniform pricing across the country. By doing these, we could contribute to the country's
economic and social development by generating jobs for the people.

Our objective is also to have the capabilities to address the specific needs of our
customers and apply product development as problems are determined and to what is
demanded. We aim to be able to achieve our goals and objectives in 1 to 2 years’ time
frame.

1.2. Business philosophy

To achieve the kind of environment that everyone wants, we have created a

business philosophy which is the acronym “PLANT” P – People, L – Lives, A – Aim, N-
Nurture, T – Trust.

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People and Lives

For “P”, we prioritize our people by providing them good quality products and
service.

For “L”, We could help save and protect the lives of our people by achieving a
well preserved, clean, and refreshing environment.

Aside from having a mindset of being profit- oriented, a reason why we want to
have this business and type of product is that we want to contribute in helping our
customers increase agricultural growth of their plants which could help protect and
preserve nature. We make our customers our number one priority by providing them
great service and good quality products. We don’t bury the lead; we give people what
they want.

Aim and Nurture

For “N”, we aim to protect, preserve, and support the lives and growth of plants in
nature.

For “A”, we aim to be the best and the most well-known bone meal organic
fertilizer company.

Our business philosophy would be that we will go back to the basic principles of
agriculture and apply them. The Principles of Health, Ecology, and care are the roots
from which organic agriculture grows and develops. They express the contribution that
organic agriculture can make to the world, and a vision to improve all agriculture in a
global context. Legal form of ownership.

Trust

For “T”, We want to gain the trust of our customers in terms of our products and
services and have good relationships and connections with each other.

We would always keep in mind on the principle of Fairness to our management

because we treat all members and staff of our business equally and right because each
of us have our own important roles in the business. No biases.

1.3. Legal form of ownership

J&J Bone Meal Organic Fertilizer will be wholly owned and operated by Erold
Ceasar G. Morales and Julian Ambrose L. Ramirez. We will apply to a business permit
in order for our start up business to be registered in the government. We choose to

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apply partnership firm because compared to sole proprietorship, a partnership offers the
advantage of allowing the us as owners to draw on the resources, expertise, and
knowledge of each other with our fellow workers and co-partners. We could gain more
capital by attracting possible investors and raising further funds to expand. A good
business partner can also help you borrow money to fund your company's expansion.
It's a good idea to keep these financial concerns in mind while assessing a potential
mate. Since we share our capital, we would also share our liabilities which is a burden
to our personal finances and assets. Partnership could also lead to conflicts such as
having emotional issues towards the partner if both of us would have disagreements or
different preferences. Despite having disadvantages of applying partnership, strategic
partnership benefits both parties and can result in long-term profitability. When two
experts join together to extend their brand's reach, they form strategic alliances.
Opportunities for co-branding provide value to your firm, raise brand awareness, and
build brand trust. We believe that partnership is the best way in handling our business
because we believe it is the best way to save the money of our company.

1.4. Company logo and trademark

Figure 1.1 Company Logo

Figure 1.1 presents the company logo in which we created this logo through the
owners’ nicknames which are respectively “Jong and Jam” that is why we placed the
name as “J&J” and of course we specifically named our logo based on the product we
will sell which is a bone meal organic fertilizer. Lastly, the representation of bones is
shown because they are our main ingredients for our product. We wanted to provide a
simple and light-colored design of our logo so that customers will look at a presentable
product that is pleasing to their eyes.

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 2.Product profile

2.1. Product description

Figure 2.1 presents the bone meal organic

fertilizer which comes from animal bones that are
cooked, sterilized, and crushed into a fine powder for
use in the garden. This 100% organic fertilizer typically
consists of cow bones procured from slaughterhouses
and these cow bones have different kinds specialty
cuts and can be bought from meat industries. We
specifically chose specialty bone cuts such as bone
tails, bone shanks, and bone feet because they contain
the least meat and the large amount of bones to be
used for making our bone meal organic fertilizer. Our
bone meal organic fertilizer is inexpensive and at the
same time an effective fertilizer compared to other
kinds of organic fertilizer. It meets the Nitrogen,
Phosphorus, and Potassium ratio of nutrients that is
needed for the growth and life of plants. We will buy
Figure 2.1 Bone Meal Organic
Fertilizer raw bones and meat cuts that is mostly contained with
bones and less amounts of meat or flesh in meat
industries. According to an article from Garden Alive Inc. (2021), studies have found
that the ideal ratio of those nutrients for flowering plants is 3-1-2. (That's 3% Nitrogen,
1% phosphorus & 2% potassium.) According to Evergreen Garden Care (2021),
Another common type of bone meal fertilizer is fish, blood, and bone meal fertilizer,
which is made from fishbones and blood rather than beef bones. With this source, we
could use fishbones and blood from both beef bones and fishbones as an alternative
and addition of raw ingredients in case of shortage of beef bone supply. According to
Nigel Davenport (2019), the Nitrogen, Phosphorus, Potassium ratio of fish blood bone
meal is (5:5:6.5) which meets the right amount of NPK ratio.

2.2. Product value

This bone meal fertilizer makes a wonderful organic fertilizer to supply your
plants with important nutrients like calcium and phosphorus, promoting strong, healthy
plants and produce. Bone meal is phosphorus-rich and is best used to fertilize flowering
plants such as roses, tulips, dahlias, and lilies. Plants like root crops such as radishes,
onions, and carrots, and other bulbs also benefit from bone meal. Use bone meal to mix
with gardening soil of the right pH balance. Organic bone meal is often used for
establishing lawns since it helps young plants mature quickly. We could also recycle

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and use leftover beef bones as an alternative instead of always purchasing beef bones
from the meat industry.

3.Market Analysis and Marketing Strategy

3.1. Market definition

Our potential market includes all plantitos and plantitas in the Philippines. After
securing and serving our target market which is Davao city, we intended to expand our
business throughout the whole Philippines by improving our capabilities in our business
in terms of financial means and management. Specifically, our target customers are
classified in the following;

As of 2020, the City has a population of 1,825,450. Residents of Davao City are
colloquially known as Davaoeños. We estimated that 70% of the households have a
potential and the capability to buy organic fertilizers. Among the 70% of the households
25% of them contains families which also have millennials under 15 – 25 years old. 30%
of them are adults and 15% of them are senior citizens.

Based table 3.1, even though the population is increasing, we assume that the
population of people buying organic fertilizer in Davao City is also increasing in the
following years.

Table 3.1: Market Size

2022 2023 2024

Potential market (in the 112,508,991 113,964,102 115,406,849

Philippine population)

Serviceable addressable 1,907,721 1,949,400 1,991,457

market (Davao
Population)

Age 15-80yrs old (70%) 1,335,405 1,364,580 1,394,020

Online Purchasers (60%) 1,144,633 1,169,640 1,194,874

Use organic fertilizers 1,144,633 1,169,640 1,194,874

(60%)

Turn into customers after 95,386 97,470 99,573

seeing the ads (5%)

Frequency of buying (12 1,144,633 1,169,640 1,194,874

per year)

Market Share (0.5%) 5,723 8,772 14,936

(0.75%) (1.25%)

SOM 95,386 97,470 99,573

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3.2. Industry and competitor analysis

3.2.1 Competitor Profile

Currently, our type of competitors are other organic fertilizer providers and other
Bone-meal fertilizer providers. Our existing competitors are bone meal organic fertilizers
industries carrying by their logo and brand names which are Down to Earth, Miracle
grow, Jobes. In our business, based on figure 4.2.1 we will prioritize organic because it
contains the largest absolute weighted average value that indicates the most important
factor that the customer wants in which our business can provide low cost, high
nutrients, easy application and no chemicals kind of fertilizer. Based on the figure
below, Down to Earth is ranked third followed by Miracle-Gro Nature`s Care as second
and Jobes as first. Jobes will be our tough competitor in the competitive market
because they can also provide low cost and high nutrients organic fertilizer.

Greater amount of phosphorus and calcium

Miracle-Gro Nature's Care

Recycled bones
Easy pour bag

Down to Earth
Process

Organic

Jobes

Low cost 5.0 0 0 9 9 5 3.0 2.0

High nutrients 5.0 0 9 3 9 5 3.0 2.0
Easy Application 3.0 9 0 0 0 4 2.0 3.0
No chemicals 2.0 0 3 3 9 4 3.0 2.0
Absolute weight 27 51 66 108

Figure 4.2 1 House of Quality

3.2.2 Competitive Advantage

One main feature of our product is that we provide a high-quality packaging

which is an easy pour bag so that the customers will have an easy application of using
our product. Second main feature would be the greater amount of calcium and
phosphorus which an essential nutrient for plants which help them produced stronger
roots and have a long-life span. Third main feature would be the recycled bones which
are used as the alternative raw materials for our ingredients. Lastly, we prioritize our
fertilizer to be organic because we want our product to have high amount of nutrients

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and at the same time to be chemical-free for the healthier growth of plants. Our
business purposes in the industry of organic fertilizer focuses only in residentials or so-
called households Based on the profile of our competitors they implemented also online
selling which also like our business. The difference with our business is that customers
can easily access our products in terms of location and traceability because our target
are mainly Filipinos. For their own benefits, we can offer a cheaper and faster delivery
service compared to other competitors because our business is mainly in the
Philippines unlike other competitors that are outside countries. By being able to provide
a cheaper and faster delivery service to our Filipino customer we can gain their trust
more.

3.3. Marketing strategy

J&J's marketing strategy is straightforward for a start-up company. It is to be able

to compete in the fertilizer market by promoting high-quality and effective bone meal
organic fertilizer through delivery service, online selling/purchasing, word of mouth,
advertising mediums such as vlog, blogs and etc.

3.3.1. Product logo and branding

Figure 3.3.1. Product Logo and Branding

Figure 3.3.1 presents the product logo and branding in which the business
owners decided to have a one product line which indicates that our business has
decided to have the same company logo and product logo. We created this product logo
and branding through the owners’ nicknames which are respectively “Jong and Jam”
that is why we placed the name as “J&J” and of course we specifically named our logo
based on the product we will sell which is a bone meal organic fertilizer. Lastly, the

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representation of bones is shown because they are our main ingredients for our
product. We wanted to provide a simple and light-colored design of our logo so that
customers will look at a presentable product that is pleasing to their eyes.

3.3.2. Place, promotion, packaging, pricing

Place

Main Office. In our start-up business, we will have our main office located in
GSIS Matina, Davao City in which the greatest number of Bone Meal Organic Fertilizer
materials, equipment and stocks are stored here.

Online. The Company will sell through online and use social media platforms
such as Lazada/Shopee. In this time of pandemic, we decided to create this online
selling platform so that customers can access at all times and buy the products. In this
online selling platform, we aim to gain profit and serve our customers with high-quality
bone meal organic fertilizers and good services.

Flower shops. The company will offer the products to different flower shops in
order to advertise it to the market and sell it to the customers.

Promotion

Lazada/Shopee. The company will have a collaboration with Lazada and Shopee
to sell our products online with a transaction fee.

Social Media Platforms. To promote our business, we will make our own
business page in Facebook in order to inform and introduce our products to the people
especially to the ones who are interested in planting activities.

Exhibit/Bazaar. We plan to go to different flower/plant shops in Davao City to

advertise our products for them to be aware with our products.

Packaging

The business owners of J&J Bone Meal Organic Fertilizer applied for Securities
and Exchange Commission (SEC) registration, Business Permit (LGU registration),
Bureau of Internal Revenue (BIR) and Fertilizer and Pesticide Authority (FPA)
registration.

Bone Meal Organic Fertilizer comes from animal bones that are cooked,
sterilized, and crushed into a fine powder for use in the garden. This 100% organic
fertilizer typically consists of cow bones procured from slaughterhouses and these cow

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bones have different kinds specialty cuts and can be bought from meat industries. The
manufacturer for this product will be J&J Bone Meal Organic Fertilizer.

It meets and contains the Nitrogen, Phosphorus, Potassium, and Calcium ratio of
nutrients that is needed for the growth and life of plants.

Our products are packed in three different sizes which are in per 250 grams, per
500 grams, and 1kg of bone meal organic fertilizer.

Instructions

For Bulbs:

New Bulbs: When planting, mix 1 teaspoon of fertilizer into the surrounding soil.
Existing Bulbs: Use 1 teaspoon of fertilizer per plant, working it well into the soil

For Roses:

Apply 1 cup per mature bush, working into the soul carefully to avoid root.

For Gardens:

Apply at the rate of 2.25 cups of fertilizer per 25 square feet, carefully raking it to
the soil to avoid root damage

For Trees & Shrubs:

Depending on size, evenly spread 2 to 4 cups under the foliage of a tree, shrub
or rose bush, carefully rake into the soil to avoid root damage.

Repeated Application:

Apply twice per month or as needed

Note: Be sure to wash off any plant food that gets on the plant

The Bone Meal Organic Fertilizer will be released phosphorus in to the soil up to
4 months. It will work 2-6 weeks.

This product is manufactured in Davao City, Philippines.

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Pricing

7.50% 31.75% 20.75%

Direct Materials 100.00 200.00 400.00
Direct Labor 56.37 56.37 56.37
Overhead 40.17 40.17 40.17
OPEX 82.42 82.42 82.42
Cost per Unit 278.96 378.96 578.96
Mark-up % 20.92 120.32 120.13
Package Discount - 50.00 100.00
Price Per unit 299.88 449.28 599.09
Retail Price (Rounded) 300.00 450.00 600.00

Based on our pricing above, the company decided to have a mark-up of 7.5% for
products that are packed in 250 grams, in 500 grams the mark-up of 31.75% while in
per 1 Kilogram the mark up of 20.75%. In 500 grams of product, there will be a package
discount of 50 pesos. Lastly, in 1 kilogram of product, there will be a package discount
of 100 pesos. Compared to other competitors in the bone meal organic fertilizer market
we contain the lowest cost.

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 4.Operational Plan

4.1. Manufacturing process

For manufacturing bone meal organic fertilizers for plants, we would need the
following raw materials such as heaps of bones specifically beef bones that are packed
in specialty cuts such as bone tails, bone shanks, and bone feet which are purchased
from Meat Traders Corp. We would also need to prepare tools and equipment needed
for the manufacturing process of bone meal organic fertilizer such as precision tool for
fat removal, pressure cooker, bone pulverizing machine or grinder, soil testing
equipment, and a large container.

Inspection
Inspection Before we start the manufacturing process, we inspect
first to ensure good quality of main ingredients.
Clean the bones
Your first step is to remove any remnants of fat and
Start meat from the bones. Consider scraping the surface
thoroughly till they are spanking clean; if that isn’t
effective, pressure cook the bones for 5 minutes.
Scraps and wastes such as excess fat and meat will
Clean the bones be disposed or recycled.

Bake or Cooking Process

After cleaning the bones, bake them at 400-450°F or
Bake or Cooking Process until they get all dry and fragile. Ideally, small and
medium bones will take an hour to reach that stage.
Keep them aside and let them cool down.

Grind or Pulverize using Bone Pulverizing Machine

Grind or Pulverize using Bone
Pulverizing Machine
Transfer and Packaging
After the baking or cooking process, we place the
baked or cooked bones into the bone pulverizing
machine to grind and break them into smaller and finer
granular pieces.
Transfer the bones to a tough bag or sack and use a
bat or a rolling pin to smash them into tiny fragments
about an inch long.

Transfer and Packaging

Inspection Transfer the finished processed bone meal powder to
large containers and prepare packaging materials such
as tough plastic bags or sacks.

End Inspection
Before selling our products in the market, we will
inspect to determine if there are any defects present.

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4.2. Inventory management

The company will implement the First-In-First-Out (FIFO) method in handling our
inventories. In the package of 250 grams, the business will manufacture two hundred
fifty units in the first month then another two hundred fifty in the second month, then the
batch produced in the first month will be sold first. In the package of 500 grams, the
business will manufacture one hundred fifty units in the first month then another one
hundred fifty in the second month, then the batch produced in the first month will be sold
first. In the package of 1 kilogram, the business will manufacture one hundred units in
the first month then another one hundred in the second month, then the batch produced
in the first month will be sold first. The manufactured products are needed to stay in the
inventory for a maximum of 30 days before it will sell through the market.

4.3. Supplier management

Meat Traders Corporation is our main supplier for our main ingredients which are
beef bones. We simply purchase beef bone products from them such as bone tails,
bone shanks, and bone feet. After purchasing meat products from them, we would use
the products for manufacturing our product which is bone meal organic fertilizer and sell
them through online and walk ins. We ensure to have a strong and healthy relationship
with our supplier to allow our business to achieve a much stronger and improved
service as well to procure effectively. We will consistently buy beef bones from them in
a monthly basis. To ensure quality in manufacturing our products, we will be accepting
up to 5% defects of beef bones from the supplier. By doing all this, we may be able to
maintain a balanced rapport in the long run. In addition, Prime Beef company will be our
alternative supplier for our main ingredients which are the beef bones.

4.4. Quality management system

4.4.1. GMP

The Company wants to implement Good Manufacturing Practices (GMP) in-order

to ensure that our fertilizers are consistently manufactured, meets the professional
quality standard and the workplace clean and sanitized. Before starting the
manufacturing process, the company will inspect all the raw materials if they meet the
company’s quality standards for manufacturing. When the goods are manufactured, the
manufacturers will test the finished product in order to have a quality assurance of bone
meal organic fertilizer.

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4.4.2. Solid and Water Waste Disposal Management

The company will apply the solid waste disposal management to establish proper
solid waste segregation, collection, transportation, storage, treatment, and disposal by
developing and implementing best environmental practices in ecological waste
management. Proper segregation of waste will be prioritized by placing trash bins with
proper labels. By following this, the company members especially the workers can
operate in a cleaner and safer environment. The company will also apply the water
waste disposal in order to separate the clean water for personal uses with the disposal
of used water in the production.

4.4.3. Continuous Process Improvement

The company will apply the Plan-Do-Check-Act (PDCA) cycle for continuous
process improvement of our business. This quality management system will help the
business apply an effective approach in solving possible problems and to adapt to
changes in the future. In terms of quality it could help our manufacturing processes
prevent from recurring mistakes.

4.5. Legal requirements

4.5.1. SEC registration

The company will apply a certificate of registration from the Securities and
Exchange Commission (SEC) for our company to legally engaged in business and be
entitled to certain rights under the country's corporate and laws.

4.5.2. Business Permit

The company will apply a business permit in order to operate in the market and
ensuring that the company is paying taxes and following municipal safety, security,
health, and sanitation requirements.

4.5.3. FPA registration

The company needs to apply a certification of registration from the Fertilizer and
Pesticide Authority (FPA) for our brand and products to be available in the market and
to ensure that our product is safe to use.

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4.5.4. BIR

The company will apply a certificate of registration from the Bureau of Internal
Revenue (BIR) so that our company will be allowed to start business operations as a
start-up business that should pay the fees and taxes needed.

5.Financial Projection

5.1. Capitalization

J & J Bone Meal Organic Fertilizer

Project cost

Capital expenditures 264,100.00

Leasehold improvements 50,000.00
Factory equipment 200,500.00
Precision Tool 6,000.00 Under the capital
Pressure cooker 3,000.00 expenditures are the
Bone Pulverizing Machine 160,000.00
Soil testing equipment 5,000.00 company’s long-term
Large Containers 1,500.00 expenses which are the
Trolleys 25,000.00
Office equipment 13,600.00
leasehold improvements
Tables 1,600.00 that is used for renovation
Chairs 1,000.00
Electric fans 4,000.00
of area, the factory
Storage Racks 7,000.00 equipment that is used for
Pre-operating expenses 57,500.00
the manufacturing
Permits and licenses 25,000.00 process, and office
SEC Registration 8,000.00
Business Permit (LGU Registration) 4,000.00
equipment for the
FPA Registration 8,000.00 documents and
BIR 5,000.00
Trial run 5,000.00
transactions of the
Hiring and training 2,500.00 business. Under the pre-
Marketing budget 25,000.00
operating expenses are
Working capital (2 months) 286,370.00 the needed licenses and
Cost of goods sold 228,270.00
permits for the
Advertising expense 10,000.00
Delivery expense 6,000.00 registration of the
Salaries and wages expense 36,000.00
company to be able to
Rent expense 4,800.00
Utilities expense 1,300.00 operate in the market.
Under the working capital,
Contingency (10%) 10% 60,797.00
which is for two months
TOTAL 670,000.00 are all the operating
expenses needed in the
business. Lastly, under the contingency of 10% is the extra budget of the company if
there are any problems or emergencies that the company may experience. The total
project cost is amounted to P670,000.00 This is the amount needed to start-up our
business.

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5.2. Project cost

The initial capital amounting to P670,000.00 will be financed by the BDO Network
bank – BDO Unibank and capitalists/owners. (70%) or P469,000.00 getting from the
BDO Network bank – BDO Unibank with an interest of 3.5% per month, approval
duration up to 120 hours and a loan term of 3-240 months. and the other (30%) or
P201,000.00 will be getting from the capitalists/owners. The partners of the business
will be the families of Morales and Ramirez.

5.3. Income statement

J & J Bone Meal Organic Fertilizer

Income statement

Note Pre-operating 2022 2023 2024

Sales 1 - 2,329,200.00 3,706,560.00 6,549,304.32
less: Cost of goods sold 5 - 1,600,870.00 2,616,748.80 4,331,761.82
Gross profit - 728,330.00 1,089,811.20 2,217,542.50

Operating expenses
Bed debts expense 2 - 11,646.00 18,532.80 32,746.52
Depreciation expense 7 - 33,012.50 33,012.50 33,012.50
Advertising expense - 60,000.00 62,400.00 64,896.00
Delivery expense - 36,000.00 37,440.00 38,937.60
Salaries and wages expense - 234,000.00 243,360.00 253,094.40
Rent expense - 28,800.00 29,952.00 31,150.08
Utilities expense - 7,800.00 8,112.00 8,436.48
Permits and licenses expense - 25,000.00 250.00 250.00
Pre-operating expense - 32,500.00 - -
less: Operating expenses - 468,758.50 433,059.30 462,523.58

Income before interest - 259,571.50 656,751.90 1,755,018.91

less: Interest expense 9 - 15,022.43 11,915.28 8,697.61
Earnings before income tax - 244,549.07 644,836.62 1,746,321.30
less: Income tax (30%) - 73,364.72 193,450.99 523,896.39
Net income - 171,184.35 451,385.64 1,222,424.91

15
 Under sales, we calculated the sales per month for the three products with the
selling price of P300 per 250 grams, P450 per 500grams and P600 per 1 kilogram
which results to P194,100 per month having the total sales of P2,329,200 less the cost
of goods sold which is P1,600,870 to have a gross profit of 728,330 for the year less the
operating expenses with the assumption of bad debts expense, depreciation expense,
advertising expense, delivery expense, rent expense and utility expense which has an
inflation rate of 4% as well as the interest expense of 3.5% and income tax of 30%
which results to P171,184.35 total net income in the first year. For the year 2023, we
calculated that our business can gain a net income of P451,385.64 followed by the year
2023, and for the year 2024, P1,222,424.91.

5.4. Statement of cash flow

J & J Bone Meal Organic Fertilizer

Statement of cash flow

Note Pre-operating 2022 2023 2024

Cash flow from operating activities
Cash receipts from customers 2 - 2,232,150.00 3,649,170.00 6,430,856.64
Cash paid for purchases 4 (91,010.00) (597,105.40) (975,337.79) (1,541,469.06)
Cash paid for advertising - (60,000.00) (62,400.00) (64,896.00)
Cash paid for delivery - (36,000.00) (37,440.00) (38,937.60)
Cash paid for salaries and wages - (558,000.00) (917,280.00) (1,304,409.60)
Cash paid for rent - (96,000.00) (99,840.00) (103,833.60)
Cash paid for repairs and maintenance - (120,000.00) (124,800.00) (129,792.00)
Cash paid for supplies - (36,000.00) (37,440.00) (38,937.60)
Cash paid for utilities - (15,600.00) (16,224.00) (16,872.96)
Cash paid for interest 9 - (13,887.74) (12,178.37) (8,970.07)
Cash paid for taxes - (73,364.72) (193,450.99) (523,896.39)
Cash paid for permits and licenses - (25,000.00) (250.00) (250.00)
Cash paid for pre-operating expenses - (32,500.00) - -
Net cash provided by operating activities (91,010.00) 568,692.14 1,172,528.85 2,658,591.76

Cash flow from investing activities

Cash paid for capital expenditures 7 (264,100.00) - - -
Net cash provided by investing activities (264,100.00) - - -

Cash flow from financing activities

Cash invested by owners/partners/investors 201,000.00 - - -
Cash loaned from bank 9 469,000.00 - - -
Cash paid to/withdrawn by owners/partners/investors - - - -
Cash paid for loan 9 - (87,360.71) (90,467.86) (93,685.53)
Net cash provided by financing activities 670,000.00 (87,360.71) (90,467.86) (93,685.53)

add: Cash, beginning - 314,890.00 796,221.43 1,878,282.41

Cash, Ending 314,890.00 796,221.43 1,878,282.41 4,443,188.64

This how our cash flow is segmented. The net cash provided by operating
activities for the year 2022 is amounted to P568,692.14. The net cash provided by
financing activities is amounted negative P87,360,71 that will be paid for the bank loan
for the year 2022. The cash ending for the year 2022 resulted to P796,221.43. For the
year 2023 it totals to P1,878,282.41 for the cash, ending of the business. For the year
2024 it totals to P4,443,188.64 for the cash, ending of the company.
16
5.5. Balance sheet
Note Pre-operating 2022 2023 2024

ASSETS
Current assets
Cash 314,890.00 792,721.43 1,874,782.41 4,439,688.64
Accounts receivable 2 - 97,050.00 142,794.00 242,708.88
less: Allowance for doubtful accounts 2 - 11,646.00 18,532.80 32,746.52
Raw materials inventory 4 91,010.00 144,840.80 256,057.98 266,300.30
Finished goods inventory 5 91,010.00 185,520.00 322,389.60 364,488.38
Total current assets 496,910.00 1,208,486.23 2,577,491.20 5,280,439.69

Non-current assets
Leasehold improvements 7 50,000.00 50,000.00 50,000.00 50,000.00
Factory equipment 7 200,500.00 200,500.00 200,500.00 200,500.00
Office equipment 7 13,600.00 13,600.00 13,600.00 13,600.00
less: Accumulated depreciation 7 - 33,012.50 66,025.00 99,037.50
Total non-current assets 264,100.00 231,087.50 198,075.00 165,062.50
TOTAL ASSETS 761,010.00 1,439,573.73 2,775,566.20 5,445,502.19

LIABILITIES
Current liabilities
Accounts payable 8 91,010.00 688,115.40 1,663,453.19 3,204,922.26
Interest payable 9 - 1,134.69 871.59 599.14
Short-term portion of loans payable 9 79,963.47 82,807.53 85,752.74 88,802.70
Total current liabilities 170,973.47 772,057.62 1,750,077.52 3,294,324.10

Non-current liabilities
Loans payable 9 389,036.53 298,831.76 205,418.69 108,683.20
Total non-current liabilities 389,036.53 298,831.76 205,418.69 108,683.20
TOTAL LIABILITIES 560,010.00 1,070,889.38 1,955,496.21 3,403,007.29

PARTNERS' EQUITY
Capital, beginning 201,000.00 201,000.00 368,684.35 820,069.98
add: Profit sharing - 167,684.35 451,385.64 1,222,424.91
Capital, ending 201,000.00 368,684.35 820,069.98 2,042,494.90
TOTAL PARTNERS' EQUITY 201,000.00 368,684.35 820,069.98 2,042,494.90

TOTAL LIABILITIES AND PARTNERS' EQUITY 761,010.00 1,439,573.73 2,775,566.20 5,445,502.19

Under the current assets are the cash amounted to P792,721.43 followed by
accounts receivable amounted to P97,050 less the bad debts expense amounted to
11,646 followed by raw materials, inventory amounted to P144,840.80 and the finished
goods inventory amounted to 185,520.00. The total current assets amounted to
P1,208,486.23 for the year 2022. Under the non-current assets are in the project cost
which are the leasehold improvements amounted to P50,0000 used for renovation,
factory equipment amounted to P200,500.00 followed by office equipment P13,600.00
less the accumulated depreciation of P33,012.50 that would be increase in the following
year. The total non-current assets amounted to P231,087.50. The total assets for year
2022 amounted to P1,439,573.73. Under the liabilities, the current and non-current
liabilities which are the accounts payable, interest payable, loans payable amounted to
a total of P1,070,889.38 for the year 2022. The partner’s equity which is the capital,
beginning amounted to P201,000 plus the profit sharing amounted to 167,684.35
followed by the capital ending of 368,684.35 which is the total partner’s equity. The total
liabilities and partner’s equity amounted to P1,439,573.73 is equal to the total assets for
the year 2022. In the year 2023, the total assets are also equal with the total liabilities
and partner’s equity which makes balance and for the following year.

17
J & J Bone Meal Organic Fertilizer
Financial ratios Q AD AQ

2022 2023 2024 Trend

Liquidity ratios
Current ratio 1.57 1.47 1.60
Quick ratio 1.14 1.14 1.41
Cash ratio 1.03 1.07 1.35

Activity ratios
Accounts receivable turnover 13.09 12.38 12.45
Accounts receivable days 27.50 29.07 28.91
Accounts payable turnover 11.64 12.73 12.04
Accounts receivable days 30.93 28.29 29.90
Inventory turnover 11.33 11.40 11.88
Inventory days 31.77 31.57 30.29

Profitability ratios
Gross profit margin 0.31 0.29 0.34
Operating profit margin / Return on sales 0.11 0.18 0.27
Net profit margin 0.07 0.12 0.19
Return on assets 0.12 0.16 0.22
Return on equity 0.46 0.55 0.60

Financial leverage
Interest coverage ratio 16.28 54.12 200.78
Debt-equity ratio 2.88 2.37 1.66
Debt ratio 0.74 0.70 0.62

DuPont analysis
Profit margin (Operating efficiency) 0.07 0.12 0.19
Total asset turnover (Asset use efficiency) 1.61 1.33 1.20
Equity multiplier (Financial leverage) 3.88 3.37 2.66
Return on equity 0.46 0.55 0.60

J & J Bone Meal Organic Fertilizer

Financial ratios

Hurdle rate Allocation Rate Percentage

Liabilities 70% 4% 2.45%
Equity 30% 15% 4.50%
Cost of capital 6.95%

Net present value (NPV) and Internal rate of return (IRR)

Net cash provided
Year by operating Present value
activities
(670,000.00)
2022 568,692.14 531,736.45
2023 1,172,528.85 1,025,089.91
2024 2,658,591.76 2,173,247.99
Total 3,730,074.36
less: Initial investment 670,000.00
Net present value (NPV) 3,060,074.36
Internal rate of return (IRR) 133.04%

Payback period 1.09

Initial investment 670,000.00
Net cash provided by operating activities
Initial investment - 670,000.00 1.00
2022 568,692.14 101,307.86 0.09
2023 1,172,528.85 (1,071,220.98)
2024 2,658,591.76 (3,729,812.74)

18
 6.References

Davenport, N. (2019, January 10). The Nutrient Company. Retrieved from

https://thenutrientcompany.com/blogs/horticulture/npk-value-of-everything-
organic-database

Gardens Alive. (2021). Retrieved from https://www.gardensalive.com/

Love the Garden. (2021). Retrieved from Evergreen Garden Care:

https://www.lovethegarden.com/uk-en

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