Ginseng Business Plan
Ginseng Growers Company
Business Overview
Ginseng Growers Company was incorporated May 21, 2012. The company is wholly owned and operated by John Doe. The company owns twenty acres of farmland used to grow North American ginseng, also known as Panax quinquefolium. The ginseng is to be planted in September 2012, as ginseng must grow a minimum of four years prior to being harvested, product sales will not begin until the year 2016.
Vision and Mission Statement
Ginseng Growers Company seeks to establish and maintain a position among North American ginseng growers as a provider of raw ginseng products of high quality and further intends to become a member of the North American B.C. Ginseng Farmer’s Cooperative and sell its products on the Asian market.
Objectives
The primary objectives of the company over the first three years of business operations include:
(1) Obtain memberships in the North American Ginseng Grower’s Farmer’s Cooperative in order to establish distribution and export channels in addition to making the provision of updated information on new technologies and other factors impacting ginseng producers.
(2) Buy seeds and plant crop.
(3) The existing ginseng crop will be maintained until the year 2012. Secured operating loan of $32,000 will be used to cover operating expenses in years 2013, 2014 and 2015.
(4) Sell the harvested crop to a ginseng broker.
Location and Facilities
The company plans to purchase 20 acres of land in the Appalachia foothills area of Tennessee. Four acres will be used for planting and the remaining acre houses the planting equipment and facilities for maintaining and drying the crop.
Description of Products and Services
Ginseng is “a fleshy rooted, herbaceous perennial plant with five whorled leaves, or leaves arranged in a circle around the stem, on mature plants. The root texture is similar to that of parsnip. When mature, ginseng roots are approximately 30 centimeters long. After the ginseng is harvested, the root can be dried and is then used whole, in powder form or in the form of an extract. The leaves can be used for tea. Ginseng root is also used in products that include soup, candies, tea, and in capsule and tablet form.
Key Features of the Products and Services
American ginseng is slightly different from Asian ginseng and grows in a shady environment requiring at least 70% shade cover for effective growth. Ginseng requires four years to reach maturity although ginseng can be harvested after the second and fourth years of growth. Ginseng was first introduced into the eastern United States in 1982.
Production of Products
Ginseng grows best on a slight slope or in raised beds that have proper drainage of the soil and grows best in at least 30 centimeters of nutrient rich top soil. The best root is produced in sandy soils or silt. The company has had a local agricultural consulting firm test the soil and conduct plant analysis on the property, which indicated that the site is excellent for ginseng farming. The farm will mimic the plant’s natural habitat or that of a thick forest canopy through use of a screen that provides 70% of more shade along with straw mulch to replace the natural littering of leaves in the plant’s natural forest habitat. The average yield per acre is approximately 3,000 pounds or 1,364 kilograms of dried ginseng root. With a 20 acre ginseng crop the yield should total 60,000 pounds of dried ginseng for a total of $180,000.00. The following chart lists a comparison of three methods of ginseng growing and the net profit per 1/2 acre in each growing method.
Figure 1 — Three Methods of Growing Ginseng and Estimation of Profits Per 1/2 Acre
Method
Artificial Shade
Woods Cultivated
Wild Simulated
Time till first harvest
3 to 4 years
6 to 8 years
6 to 12 years
Seeds planted per ? acre
50 lbs
24 lbs
10 lbs
Total Labor per 1/2 acre
1,500 Hours
1,950 Hours
825 Hours
Total Costs per 1/2 Acre
($33,500)
($24,135)
($9,690)
Root yield per 1/2 acre
1,125 lbs
300 lbs
80 lbs
Root price per pound
$12/lb
$100/lb
$300/lb
Gross Income per 1/2 acre
$13,500
$30,000
$24,000
Net Profit per 1/2 acre
($20,000)
$5,865
$14,310
Source: Ohio State University Fact Sheet (2004)
Comparative Advantages in Production
Land located in the Appalachia foothills of Tennessee is conducive to growing ginseng. The land on which the company intends to grow ginseng has been determined as optimal ginseng growing land.
Business Start-up Expenses
Purchase of 20 acres of land at $1,500.00 per acre $30,000.00
Ginseng Seed (110 pounds per acre X 20 acres @ $40.00 per pound) $88,000.00
Equipment and facilities $30,000.00
Total $148,000.00
The land has been carefully chosen as land that is too dry will kill the roots and land that is too wet will result in rotting of the ginseng roots.
Industry Overview
Ginseng has been used as an herbal remedy for more than 5,000 years in Asia and more than 400 years in North America. Western culture is beginning to acknowledge the medicinal properties of ginseng and this has resulted in an increase in research of the health benefits of ginseng. Domestic output in Asian countries has been unable to meet the current demand for ginseng products making imports of North American ginseng more profitable and they have increased steadily since 1986 and report state that these imports of North American ginseng into Asia will continue to increase. The average price of ginseng is $30.00 per pound wholesale, which has fallen from the 1992 price of $50.00 per pound.
Marketing Strategy
The primary target markets are those of Hong Kong and Asia since these countries are the largest consistent consumers of ginseng. Secondary markets include other South Asian countries such as Malaysia, Singapore and Taiwan. A secondary market will be that of Japan.
Projected Annual Cash Flow Statement
For the Years Ending Dec
2016 2017 2018
Cash Inflows
Cash Receipts 180,000 180,000 180,000
Operating Loan 0-0 0
Funding 0-0 0
Owner Investment 0-0 0
Operating Loan 0-0 0
Advances 0-0 0
Term Loan Advances 180,000 180,000 180,000
Cash Outflows:
Payment of:
Cost of Sales Items 800.00-800.00-800.00
Sales & Marketing Items 1200.00 1200.00 1200.00
Property and Utilities Items 1100.00 1100.00 1100.00
Operations Items 0-0 0
Banking and Other Items 30,000 30,000 30,000
Other Wages 0-0 0
Sale of Fixed Assets 0-0 0
Other Assets 0-0 0
Total Cash Inflows 145,900 145,900 145,900
References
Growing American Ginseng in Ohio (2004) Ohio State University Fact Sheet. School of Natural Resources. F-56-04. Retrieved from: http://ohioline.osu.edu/for-fact/0056.html
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