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Volunteer Africa 2017 ISE Animal Healthcare Financing Pitch 17 May 2017 Entrepreneur: Team: Charles Mariana Barrientos Juan Esteban Jijon Francesco Petracca Table of Contents 1. Business Overview 1 2. Growth Opportunities 4 3. Required Resources and Execution Plan 10 Appendix A. Business Model Canvas (BMC) Analysis 16 B. Other Opportunities Explored 17 C. Additional Information 19 Q&A 1. Business Overview Charles Isabirye – ISE Animal Healthcare Background: Charles has a three-year Associate’s Degree on Animal Production & Management mainly focused on the production of dairy and meat – Charles also has a Certificate in Artificial Insemination, Customer Service and Business Management He is a seasoned veterinary technician with c. 10 years of experience – In 2015 he started a successful veterinary drug service shop, ISE, to help Nakaloke farmers boost productivity by enhancing animal health – Previous experience include working for National Agricultural Advisory Services, an NGO doing consulting work in Uganda for 5 years In 2016 Charles successfully completed Balloon’s ICS program, which enabled him to improve his current operations and secure a UGX 1.2m loan – Charles is on track to fully repay the loan, establishing a strong credit record, and is ready to access more capital to further grow his business – In November 2016 Charles was involved in a motorcycle accident involving a large settlement that affected his working capital, yet Charles managed to overcome adversity and sustain ISE’s operations Charles is the father of two children, and has been married to his wife Sarah for the past 5 years 1 Business Overview Business Snapshot Key Financials ISE Animal Healthcare (“ISE” or the “Company”) was founded by Charles in 2015 Average Monthly UGX 000 Figures 2017YTD ISE is a vet-drug store based in Nakaloke, Revenue (Net of Commissions to Sales Agent) 2,800 Business Sironko District Purchase of Products (1,891) Description The Company employs two people, a full Gross Profit 909 time employee who mans the shop and sells Margin % 32.5% products when Charles is in field visits and a License (19) sales person paid on a commission basis Rent (100) Salaries (1 employee) (50) Utilities (Electricity) (40) Sale of veterinary drugs Net Profit 700 Margin % 25.0% Key Products Farm planning and management advisory and Services Sale of animal feed mix and supplements Breakdown by Channel Delivery of treatments in-field Revenue: UGX 2,800k Gross Profit: UGX 909k Key Small and medium local farmers Sales Customers Sales Local practitioners Agent Agent 11% 7% In Store Sale of veterinary drugs and supplements in 35% store On-site delivery of treatment and drugs Field Channels 32% In Store administration 57% Sales through sales agent paid on On Field commission basis 58% Note: for more detailed information see Business Model Canvas in Appendix A. 2 Business Overview Vet Drugs Industry Overview and Competitive Landscape Market Research Key Findings Key Competitors Agrimed Super Quick Van Jonnet Agri- Services Veterinary Veterinary Agri Ins ISE Surveys to 5 vet drug stores in Mbale Vet Supply revealed the following: International Drugstore Drug Shop Years of 10 years 3 months 5 years 20+ years 8 months 2 years 1 100% of players interviewed believe Operation Mbale Mbale Mbale Mbale Bus Mbale Bus that technical advice and Location Nakaloke consulting services represent a Downtown Downtown Downtown Park Park Number of 1 + 1 Sales competitive advantage 1 2 0 0 1 Employees Agent 2 100% of players provide animal • Full • Vet Drugs • Vet Drugs • Vet Drugs Spectrum of • Vet Drugs treatment services Services • Consultation • Consultation • Consultation Vet Drugs Vet Drugs • Consultation Offered • Treatments • Treatments • Treatments • Consultation • Treatments 3 40% players provide delivery • Treatments services Delivery? × √ √ × × √ 4 100% of players believe to have a On-Site loyal and recurrent customer base Treatments? √ √ √ × × √ Average Single 5 100% of players mention that Purchase 30k 20-30k 20-30k 20k 20-30k 20-30k inventory constraints are an issue (UGX) # of Recurrent 20 30 30 50 10 50 6 No players buy products on credit Customers Stock 7 No players use salesmen for selling Constraints? √ √ √ × √ √ products Credit from suppliers? × × × × × √ 8 100% of players sell broken down √ Credit sales? × × × × × products (i.e. 1 pill from a package (3-7 days) instead of the whole package) Artificial Insemination? × × × × × WIP 3 Business Overview 2. Growth Opportunities ISE’s Growth Opportunities Overview Opportunity Upside Challenges Priority Loan Request 1 ▲ Strong earnings upside: Incremental profit of UGX2.3m with only 69 ▼ Upfront capex investment: Requires purchase of treatments/year equipment worth UGX2.3m ▲ Latent demand: Proven willingness to pay the product, with 2 sales and ▼ New product: AI with hormones is a relatively new 5 scheduled treatments for AI with hormones after surveying 10 farmers Artificial treatment that will require educating farmers about ▲ High barriers to entry: Equipment and higher education are required to Insemination benefits of investing in it UGX 2.3m provide treatment (“AI”) ▼ High treatment price: Proposed price for hormone ▲ Ease of execution: Charles has successfully performed AI with treatment is relatively high at UGX120k. Marketing borrowed equipment 7 times in the past needs to drive the point that this is an investment ▲ Nakaloke community benefits: AI will boost dairy farmers’ productivity, rather than an expense providing visibility over reproductive cycles and stable revenue 2 ▲ Profitability boost: Restocking would generate incremental cash flow ▼ Upfront capital investment: Requires purchase of of UGX3.7m/year (breakeven case) enabling Charles to re-invest in the inventory worth UGX3.7m business Store UGX 3.7m ▲ Proven demand: Historically, ISE has been able to rotate UGX6m of Restocking inventory in 2 months ▲ Ease of execution: ISE has a qualified employee able to sell products when Charles is on the field and the shop has shelf space for inventory 3 Working ▲ Cash flow boost: Maximizes DOP and boosting in-store rotation ▼ Complexity: Could lead to unfulfilled payables if not Capital ▲ Successful testing: In 10 days of testing Charles has demonstrated executed correctly -- Optimization cash management discipline and adequate book keeping 4 ▲ Boosts sales from most profitable channel: On-site delivery of ▼ Time consuming as Charles will need to invest time services is ISE’s most profitable channel with 58% of profits. Charles in thinking more strategically about his clients Relationship can increase revenue by establishing a proactive relationship Management -- management strategy Strategy ▲ Ease of implementation: Launch only requires development of client profiles and disciplined follow-up 5 ▲ Ease of execution: Readily available ingredients that Charles can ▼ Volatile margin: Testing revealed that ingredient cost Product purchase to obtain the feed mix (See Appendix for detailed analysis on is volatile reflecting crop costs whereas prices are Extension: testing and results) sticky, resulting in pressured margins -- Feed Mix ▼ Low product differentiation as farmers perceive they can mix ingredients themselves 6 ▲ Boost sales: Interviews revealed that convenience is a key driver for in- ▼ Complex execution: Opening a new store while Channel store sales. Nkoma is a busy, growing town with a large Sunday market launching AI services and boosting store sales would Expansion: that would drive store traffic be a stretch implementation wise as all initiatives will -- New Store ▲ Wholesale volume: By purchasing products for two stores, Charles’ require strong marketing efforts would be able to capture higher, wholesale-like margins ▼ High upfront investment: In the UGX8-9m range High Priority Opportunities Growth Support Strategy Medium Term Opportunities 4 Growth Opportunities 1 Artificial Insemination Loan Request: UGX 2.3m Opportunity Expand offering by providing high-margin (40%) AI services AI services in the Nakaloke area are provided by only two practitioners who have the necessary equipment, driving supply shortages Rationale Based on preliminary assumptions on demand and pricing, by offering this service ISE’s profitability could increase by 67%, generating incremental cash flow of UGX 2.3m/ year1 Assumptions Test and Results 1 There is demand to provide 1 Conducted interviews to a sample of 10 farmers Nakaloke to test demand at least 69 treatments per and willingness to pay for AI treatments year at a price ranging ▲ Obtained 2 sales and 5 pre-orders for AI using hormones at a price of between UGX 50K to UGX UGX 120K with launch scheduled for 12/5/2017 using a colleague’s 120K equipment 2 Initial investment of UGX 2 Obtain quote from the Kenya Agricultural Research Center 2.3m and availability of ▲ Quote obtained on 4/5/2017 confirming upfront investment and equipment for purchase verifying in-stock availability 3 Charles is qualified to provide 3 Verify Charles’ qualifications and ask farmers about the strength of their the service and his clients relationship with Charles trust him to be able to deliver ▲ Charles has a certificate in AI and is qualified to provide these on quality and effectiveness services promises ▲ Client interviews revealed strong, long standing relationships and preference for his services 1. Breakeven case assumptions which are more conservative than Charle’ estimates, see following page for details 5 Growth Opportunities 1 Artificial Insemination – Competitive