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Index

General Introduction ..................................................................................................................................... 1. PESCA NORTE S.L. ...................................................................................................................................... What is the principle activity of the business?............................................................................................ Who are the promoters of the project? ...................................................................................................... 2. General Description .................................................................................................................................. Introduction ................................................................................................................................................. Contents....................................................................................................................................................... Business description..................................................................................................................................... Market study ................................................................................................................................................ Summary ...................................................................................................................................................... Executive Summary...................................................................................................................................... 3. Organizational aspects............................................................................................................................. Commercial description...............................................................................................................................

3 4 4 4 6 6 6 6 6 7 7 9 9

Technical description................................................................................................................................... 10 Purchasing Plan ........................................................................................................................................... 11 Organisation and Human Resources ........................................................................................................... 11 Legal structure ............................................................................................................................................. 12 4. Viability....................................................................................................................................................... 13 Economic-financial study ............................................................................................................................. 13 Evaluation of the risk ................................................................................................................................... 14 Annexes............................................................................................................................................................ 15

General Introduction

The Business Plan: what it is and what it serves for A Business Plan is a document that identifies describes and analyses a business opportunity, examines its technical, economic and financial viability and develops all the procedures and strategies necessary to convert the business opportunity into a definite business project. As a second use, what in this document we are going to call corporate use, the Business Plan is a fundamental instrument in the corporate analysis of a new business opportunity, a diversification plan, an internationalisation project, the acquisition of a business or a unit of an external business or even in the launching of a new product or service. In short, both in the development and launching of a start-up and for the analysis of new corporate investments, the Business Plan has become an indispensable tool. The elaboration of a Business Plan covers two specific objectives: On the one hand, it allows the promoter of a business opportunity to carry out an exhaustive market study which gives him the information for carrying out the correct positioning of his project and for determining the viability of his project with reasonable certainty. Furthermore, the Business Plan, generally in a reduced version or executive summary, covers the objective of being the presentation card of the entrepreneurs and their project to third parties when asking for any type of collaboration, help or financial support.

Formal aspects when writing a Business Plan Making a Business Plan involves the following of a series of rules and standards: Beginning with the language used, a Business Plan is usually directed at more than one reader, for which reason it is important to use language that is intelligible to more than one group: investors, bankers, suppliers, technologists etc. Entering in the structure of the document, in annex 2 we suggest a plan for the content of a Business Plan, a scheme that we will develop later in a more detailed way.

1. PESCA NORTE S.L.

PESCA NORTE S.L. is a family business resulting from the more than 30 years experience in the salted cod sector of its founder and present General Manager Mr Ramon Snchez. Its headquarters is in the Industrial Polygon La Pesquera in Laredo (Cantabria) where the new plant was inaugurates in 1998 with some of he best installations in the sector.

What is the principle activity of the business? The principle activity of the business and that which forms its business objective is the import, elaboration and wholesale of salted cod. The average number of employees is 30, most of whom are operatives for the . manipulation of the product, from the reception of the raw material from the North Sea (Norway and Iceland preferably) until the shipment of the finished product for its later distribution. The commercialised products are centred on salted cod and its presentations: backs, pieces, barbels, fillets etc.

Who are the promoters of the project? The project has been made by the following team:

Mara Garca: Degree in Business Management from the Universidad Autnoma de Madrid and MBA from the Instituto de Empresas de Madrid, with experience as management assistant in PESCA NORTE and knowledgeable of the cod sector.

Samuel Larralde: Degree in Business Studies from the Universidad de Navarra and MBA from the Instituto de Empresa de Madrid.

The project will be directed by Maria Garca, who will act as Product Manager for the production area, an operative who knows the product and the desalting processes, will be appointed to take charge of the plant. He will come from the principal business unit of traditional salted cod. The director of the project and Product Manager will be directly responsible to the General Manager of PESCA NORTE.

2. General Description

Introduction In this section should appear the name and address of the projected or already established business, a summary of the businesss activity, the date of its constitution, activities or sectors in which it operates, the number of employees, products or services commercialised, etc. Similarly, there should appear in this section, the names and professional records of the business promoters and all those professionals who collaborate in the writing of the Business Plan and in the consequent start-off of the activity. See annex 1

Contents The structure of a Business Plan should be outlined in a table of contents which contains the different sections and the pages where they can be found. See annex 2

Business description Reference should be made to the product or service proposed in the Business Plan, the needs it covers, its difference from competitors products, descriptions of its present use, testimony of present clients of the product, means of protection of and rights over the product or service to be commercialised (patents, brands, anagrams, authorisation formulas, etc) and in the case of a new product, the steps taken to obtain patents or other protection formula whose groundwork has begun or been completed.

Market study The carrying out of a complete market study is a fundamental part of a good Business Plan. The information obtained through this study allows us to make a judgement on the technical, economic and financial viability of our business project. The first phase of the market study should be the fixing of objectives and how to reach them. Carrying out a complete study allows us to know the following points: Forecasts and growth potential of the sector in which our product or service is involved.

 Present size, growth or decline percentage of the market and the purchasing behaviour of potential clients. Potential clients should be identified and classified in relatively homogeneous groups with common and identifiable characteristics. Analysis of the competition and its products: the location of our competitors, the characteristics of their products or services, their prices, their quality, the efficiency of their distribution, the service offered, the timing of the product, their market quota or estimated sales volume, their commercial policy, their profitability, and in general all that information that helps our product or service to position itself as well as possible in the market or reference segment. The market study should likewise, analyse the present and future barriers to entry in the market. In the market study all the possible formulas through which the administration can influence our product, should be shown. To cover the points mentioned above, we need to collect an enormous amount of information which is not always readily available. For this reason it is fundamental to plan intelligently the field-work that must be done to collect the necessary information. The information that we are going to collect by carrying out the market study will have a great influence on the drawing up of the different parts of the Business Plan and in many cases, as it is the determining element when analysing the viability of a business project, it may lead to a change of strategy or even to the abandoning of the business idea.

Summary This is the last section of our Business Plan. In this, we should state in summary form, the main strengths of the project, its weaknesses its advantages and opportunities and its threats and risks. It is the opportunity to reinforce our arguments for the still not convinced investor of the worth of the project for which reason we must spare no effort when reflecting the true profitability of this project. Finally, in the summary and conclusions, as a final conclusion, the denial of the viability of the project might happen, an undoubted benefit when concentrating our investments on potentially more viable projects.

Executive Summary The executive summary, although it is in second position in the Business Plan scheme described in this technical note, is in reality the last document that has to be made and is a summary of all the activity proposed in the

Business Plan. This brief document, which generally is no more than three pages, is a commercial requirement, especially when negotiating with potential investors in our business project or equally it can be a communication tool for people responsible in the corporation, financial entities etc. A good executive summary should include at least: A description of the business model that supports the opportunity. It is useful for this purpose, to describe our value chain and to leave clear our income model. An outline of the promoting team and the manager in charge of the project, with special attention to his knowledge of the sector, his management capacity, his record of business and corporate achievements, and his degree of commitment to the project. A summary of the most significant data of the market referred to, size, potential, barriers, clients, competitors etc. An analysis of the different management areas of the project with special attention to those that are critical to the later success of the project: production, marketing Human Resources etc. A chart summary of the financial aspects and an evaluation of the investment needs and their corresponding calendar. A final summary outlining the main risks and the corresponding counter-measures. See annex 3

3. Organizational aspects

Commercial description The Marketing Plan has as objective the fixing of the strategies that allow us to reach the turnover figure in the economic-financial analysis. The Marketing Plan therefore must detail our global marketing strategy that serves to exploit our business opportunity and the advantages inherent in it. In the first place, we have to fix our global commercial strategy and define the specific philosophy so that the commercial section stimulates our business project. In this sense, here we should include a study of the primary motivation of the client for the acquisition of our product or service, how we identify and contact our potential clients, what characteristics of our product or service (price, quality, distribution, delivery service, guarantee, etc.) we will emphasise to generate sales etc. Likewise, we must design our sales strategy, indicating its objectives and quantifying them in units and in euros. We will indicate if the product or service will be introduced at regional, national or international level in the first phase, the reasons for this and future expansion plans. Then, we will attend to our price strategy, determining the commercialisation prices of our product or service, comparing them with those of the competition. We will go on to quantify the gross margin and calculate if such a margin can support the activity of the business, investments and derived costs. It is interesting, if we have the data, to compare our commercial margins with those of the competition. In the case where there are great differences between our price policy and that of our competitors, we must be capable of explaining these differences and in the case where they are favourable to our competitors explain our higher price in terms of novelty, quality, guarantees, features, service, saving in derived costs etc. In the opposite case, that is, where our prices are lower than those of the competition, we must be capable of explaining how we can position ourselves in the market with lower prices and maintain the profitability of our product or service, through greater production efficiency, lower labour costs, lower material costs etc. Finally we must make a sensitivity analysis to study different price policies, for example, to study if a higher price, in spite of reducing volume, increases profitability. Next the Marketing Plan must refer to sales policy. In this sense, it is necessary to describe the composition, the way of contracting and the qualifications of the sales team (the companies own force or representatives) both in the immediate future and in the medium and long term. Later the Marketing Plan should describe the commercial margins policy and promotion measures offered to distributors, representatives and retailers and the comparison with what our competitors do. Moreover, the estimated sales of each representative or member of the sales team should be presented as well as the incentives designed for different volumes and the total cost of

the sales activity and its percentage of the estimated global turnover. Finally reference should be made to clients payment periods and other considerations such as the discount policy, advances, abseilings etc. Going on to the promotion and publicity formulas, the Marketing Plan first of all has to describe what it is going to use to attract the attention of potential clients to our product or service. It is important to draw up a Means Plan, which collects the publicity and promotional means which we are thinking of using, with an economic evaluation of the means and the impact cost of our activity. Similar procedures can be followed in the case of using other promotional means such as mailings, appearance at fairs, telemarketing websites etc. Another important aspect of the Marketing Plan is that referring to after-sales service and the guarantee system, in the case that our product or service is capable of offering either or both. Finally, we will have to refer to our distribution policy, making reference to the distribution channels that we have to use, the discount and margin policy for our channels and the importance of distribution costs with regard to commercialisation price and the possibilities of exporting our products using the system of international distribution, transport, insurance, payment by international clients, etc

Technical description The technical description section should include, in the case that our activity is based on the development, production and commercialisation of a product, the first two phases already mentioned: development and production. If we are dealing with a service, as there is no production process as such, we will talk about technical description and limit ourselves to giving a detailed description of the procedures and technical needs which we will meet when giving the service. In the case of a product we must begin by considering the duration of the research and development work which leads us to form the product in its totality and the needs for investment in the human team and the laboratory, samples, prototypes, etc. that lead us to develop our final product as well as examining whether we are capacitated in technological and know-how terms for such a development or whether we should opt for subcontracting. Then, we have to describe the production process, for which we should give attention to the following aspects: The operating cycle, including the number of units to be produced, the number of shifts in hours and days necessary to cover the production forecasts and the need for personnel, their qualification and cost. The geographic location of the installations, the advantages and disadvantages of the selected option in terms of the existence of qualified manpower, the cost of the manpower, labour conflictivity in the zone, incentives for the placing of manufacturing installations, the environmental normatives, proximity to the sources of raw material, accessibility of the installations, etc.

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 Buildings and land necessary in square metres, financial formulas for acquiring them, possibilities of expansion, acquisition regime, maintenance expenses, structure and design and the construction of the plant and estimated cost of the installations. Equipment necessary for the manufacture of the product (or sale of service), characteristics, models, acquisition formulas, production capacity, estimated cost and timing of the acquisitions and finally the duration of the production equipment and annual depreciation. Production process strategy, decisions on and motives for subcontracting components, definition of subcontractors, who they are, qualification and cost, description of the Production Plan in terms of volume, cost, manpower, raw material, subcontracted components, stock management, etc. Description of the quality control processes, control of inventories and inspection procedures, which guarantee minimum costs and avoid problems of dissatisfaction among our clients. Finally, we will be able to evaluate, from a strategic point of view, the option of subcontracting the production if our added value is not found here.

Purchasing Plan The Purchasing Plan should cover the relationship of the raw materials and materials necessary for producing and commercialising our product or service. It is necessary to carry out an estimation of cost, of the needs of existing stocks in storage and their rotation, and a list of suppliers and other sources of provisioning and their location. To conclude this section we must refer to our need for space to store raw materials and finished products and to the cost of this storage and assuming it is relevant, to mention the seasonal nature of the storage of raw materials as a consequence of production.

Organisation and Human Resources This section of the Business Plan includes a description of management functions and line positions, a detailed description of key management posts, with the profiles required or a description of the persons if they have already been determined, with a list of their responsibilities. For each person who occupies a position of responsibility, it is necessary to describe in detail his professional experience, his specialisation in a determined functional area or in a determined sector and a list of his achievements during his professional career. This type of list increases the confidence of possible investors in the management team and at the same time indicates possible weaknesses or strengths of the directing team. Later, it is important to describe in detail the responsibilities and specific tasks that each member of the organisation will perform in the Business Plan project and the remuneration which corresponds to the position, detailing the specific remunerative concepts, fidelity policy, stock options if applicable, etc.

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Regarding line personnel, it is necessary to accept the labour categories that exist in the business, the tasks that are carried out in each of these categories, the labour agreement which the workers accepted with their specialities if there were any, the contract formula and the number of workers per category and position, establishing work shifts that guarantee the correct functioning of the business and finally the remuneration corresponding to each group of workers and the total cost of the payroll. The need for qualified personnel in a certain area and at an appropriate cost can mean in some sectors and at precise moments a true entry barrier that makes the viability of the project extremely difficult. To finalise, the section referring to organisation and human resources must make reference to the global policy of the business in the area of human resources, especially if the size of the business advises the creation of a specific personnel division and likewise it is necessary to formulate an organisation chart of the business by areas and with the specific persons, if they exist, in the positions of managerial responsibility.

Legal structure We should explain here the legal form that the business has and the reason for its choice instead of other legal formulas given in our legislation, the fiscal regime of the business, choice of partners, and the filiation of the founding partners of the business. If the business were already constituted, to the previously mentioned, would be added all those circumstances that have modified the legal nature of the business. Copies of the constitution deeds and business statutes should be attached. The legal structure should also contain the names and legal status of other partners or investors, with their corresponding share percentage and their different categories, with their obligations and restrictions. Moreover, this section should contain everything related to exterior advising services with specification of the legal status of the advisors, their speciality and the estimated cost of their services. All the administrative and legal proceedings for constituting a business, for example, the constitution of the company, registry, fiscal licence, licences for activity or works etc. should be detailed step by step, with an indication of the time required for carrying them out and their cost.

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4. Viability

Economic-financial study The Financial Plan is another of the basic elements included in the Business Plan. Its purpose is to evaluate the economic potential of a business project and to present viable alternatives for financing it. Obviously, before arriving at this point and after making the market study in our Business Plan, some sums will have had to be done previously, which indicate the possible economic and financial viability of the business. When preparing our Business Plan, it is necessary to think about our business project creatively and to consider alternative ways to finance or launch the project. When beginning to make out Financial Plan, we have to refer to the hypotheses which are going to support our plan, hypotheses that which are contained generally in the different sections of what we have been covering when making our Business Plan. Now, we have to describe the capital structure and the contributions of the promoters to it. As a central part of our Financial Plan we have to provide a series of financial state forecasts that are listed below: Treasury quota for the first year broken up into months to reflect the effects of possible seasonal variation. Analysis of the manoeuvring fund. Calculation of the break-even point and an explanation of its possible reduction if the projected sales volume is not reached. Financing needs and plans, including information regarding the options considered and the one chosen as more profitable for the project. Forecast balances for five years. For a business already working, this should include the current year and the two years previous. Forecasted results accounts for 5 years. Origin and application of the funds. Once the financial states described have been made, it is interesting to make a comment on the principal conclusions that they reflect, data such as the maximum amount of capital required and when it will be required, the amount of debt required, when it must be repaid etc.

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Regarding profitability, the internal rate of the profitability of the expected investment must be determined and explained fully, the periods for the recuperation of the investment, as well as the more appropriate financial ratios of the specific Financial Plan. Before completing the section on the Financial Plan, it is worth referring again to the double function that this plan covers, as global development of the business projects strategy and as a marketing tool when obtaining financing for the project. If we give priority to this second function, we run the risk of inflating the hypotheses in our financial states and so we would be committing a double error. Apart from falling in love with we would be leading potential financiers into error and they have enough knowledge to detect these anomalies and bury our credibility.

Evaluation of the risk The starting of a business project or the launching of a new product is an activity that undoubtedly carries multiple risks, and the Business Plan should contain implicit references to them. The Business Plan must include a description of the risks and of the possible consequences of adverse circumstances which affect the industry, our company, our human team, the acceptance of our product or service by the market, or delays in launching the product or service or obtaining the necessary financial resources. In the same way, the risk evaluation must make references to external factors such as recession, new technologies, competitor reaction, changes in demand, premature obsolescence, etc., and their influence on the development of our project and on the possible correcting measures on the risk factors that we may apply. The identification and discussion of the risk factor in our business project and the contingency plans proposed show the writers management capacity and increase the credibility of the project in the eyes of the investors.

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Annexes

Annex 1

PESCA NORTE S.L. is a family business resulting from the more than 30 years experience in the salted cod sector of its founder and current Managing Director Mr Ramon Snchez. The headquarters are situated in the Polgono Industrial La Pesquera in Laredo (Cantabria), where in 1998 a new production plant with some of the best installations in the sector was inaugurated.

The principal activity of the business and its main objective is the import, preparation and wholesale of salted cod. The average number of employees is 30, most of whom are operatives working in the preparation of the product from the reception of the raw material from the North Sea (preferably Norway and Iceland) to the shipment of the finished product prior to distribution. The commercialised products are salted cod and its different presentations: backs, pieces, barbels, fillets etc.

Given the level of maturity reached in the salted cod market and our experience in it, we have opted for a strategy of related diversification. Our project is based on the creation of a new line of frozen salted cod, a product recently introduced on the market, with great potential due to the fact that it has not been introduced massively. The product has a great advantage over traditional salted cod because it avoids the tedious work of desalting for the user.

There is a growing tendency among consumers for rapidly prepared food and with our new product we are trying to adapt traditional cod to the new needs of the consumer.

In the present study PESCA NORTE proposes the creation of a new production line to produce desalted, deepfrozen cod ready for cooking and situated in its central processing plant in Laredo (Cantabria). The objective is to enter in new market segments so that PESCA NORTE will be adapting to new tendencies and will depend less on its traditional business, salted cod. The turnover expected of this new UEN would be 2,650,453 in the first year, which would mean 15% of the total combined sales of PESCA NORTE in this period.

The distinguishing advantage of our product lies in the quality of the raw material, which is much superior to the products found on the market at present.

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Promoters This project has been developed by the following team:

Mara Garca: Degree in Business Management from the Universidad Autnoma de Madrid and MBA from the Instituto de Empresa de Madrid with experience as management assistant in PESCA NORTE and expert in the cod sector.

Samuel Larralde: Degree in Business Studies from the Universidad de Navarra and MBA from the Instituto de Empresa de Madrid. The project will be directed by Mara Garca, who will act as Product Manager. In the production area an operative who knows the product and the desalting processes will be incorporated from the main business unit of traditional salted cod. The project director and the Product Manager will be directly answerable to the managing director of PESCA NORTE.

Annex 2 GENERAL TABLE OF CONTENTS OF A BUSINESS PLAN 1 2 3 4 5 6 7 8 9 10 11 INTRODUCTION ........................................................................ 1

EXECUTIVE SUMMARY ............................................................... 2 BUSINESS ANALYSIS................................................................... 4

ANALYSIS OF THE INDUSTRY ..................................................... 10 ANALYSIS OF THE CLIENTS ........................................................ 15 DESCRIPTION OF THE MARKET AND THE COMPETITORS .......... 22 MARKETING PLAN ....................................................................... 25 DESCRIPTION OF THE WORK TEAM ........................................... 30 ECONOMIC AND FINANCIAL STUDY......................................... 33 GROWTH EXPECTATIONS .......................................................... 35 ANNEXES ................................................................................... 38

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Annex 3

EXECUTIVE SUMMARY Description of the business PESCA NORTE is a business dedicated to the preservation and wholesale of salted imported cod. The aim of the project is to launch a line of frozen desalted cod to enter in a new segment through new distribution channels (especially super-stores). The principal advantage of the product is that presents traditional cod of the highest quality, ready for cooking.

Technical description The production process will be carried out in a special section within the installations of PESCA NORTE, who is our supplier of raw material (salted cod, already cut up). From this point, we will carry out all the phases of production, only subcontracting transport.

Potential clients Within the portfolio of potential clients, there are two very different groups. On the one hand, there are the superstores and on the other the wholesale distributors, who in turn are divided into two groups: distributors of frozen food and present distributors of PESCA NORTE

Competition Frozen salted cod is a product that is still not well established in the market and at present there is no business that produces frozen salted cod of quality and with the capacity to supply it regularly on a large scale.

Investment needed The process will take place in PESCA NORTEs own installations in Laredo, for which reason no investment is needed for premises, as there is more than enough space since the industrial premises are of recent construction. Even so, the halls we will use have to be prepared so that they are in the state necessary for carrying out the desalting and freezing processes. These investments, which include both machinery and preparation of the halls (moving earth, refrigerating, electric, and sanitary installations, etc.) come to 21,633,88318 euros. To the investment only has to be added something for furniture, a computer, suitable working clothes, for a little more than 6,000 euros and the investment in the manoeuvring fund which is 500,000 euros for the first year.

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Sales forecasts The sales forecasts considered start from contacts made both with present clients of PESCA NORTE and with possible new clients. The start off figure is 300,000 kilos, of which 40% will be for Portugal and 60% for Spain. Regarding the distribution channels in the first year we think 20% of sales will be in super-stores rising to 40% in the fifth year.

Economic analysis The real net value discounting cashflow in the first five years and the residual value (considering infinite cashflows with growth of 2%) is a little more than 6,600,000 euros, which is very profitable. Even discounting only the cashflows in the 5 years analysed, the VAN is also positive. (1,057,781 euros). In the different sensitivity analyses done (price, discount rate, first year sales, sales growth, and growth of infinite cashflow) we have determined that the project would not be profitable only if sales were 50,000 kilos or less. Taking into account that in the market study the forecast was 300,000 kilos, it does not seem very probable such a thing would happen.

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