London School of Commerce Malta

MODULE TITLE: Financial Analysis Management & Enterprise - FAME

PROGRAMME: MBA – Full Time

MODULE PERIOD: February – March 2023

Lecturer setting the Assessment: Robert Suban Prepared by: Moez Amri

Cow’s smart collar

 Table of Contents

I- QUESTION 1......................................................................................................................3
1- PRESENTATION OF VENTURE.........................................................................................3
2- SOLUTION GOALS..........................................................................................................3
3- - MARKET ANALYSIS....................................................................................................3
4- COMPETITOR ANALYSIS................................................................................................5
II- QUESTION 2......................................................................................................................6
2- PRODUCT DEVELOPMENT.............................................................................................6
3- MANAGEMENT TEAM....................................................................................................7
4- OPERATION PLAN..........................................................................................................8
5- SALES PLANS................................................................................................................8
6- FINANCIAL PROJECTION:..............................................................................................9
A- Assumption 2: Good scenario....................................................................................11
B- Assumption 2: Bad scenario.......................................................................................11
7- THE PROPOSED OFFER.................................................................................................12
III- QUESTION 3:............................................................................................................12
APPENDIX...............................................................................................................................13
REFERENCES.........................................................................................................................16

Table of figures and tables

TABLE OF CONTENTS.........................................................................................................................2
FIGURE 1: PROCESS OF COW’S SMART COLLAR..........................................................................3
FIGURE 2: ANNUAL GLOBAL VENTURE CAPITAL IN AGRITECH.............................................4
FIGURE 3: NUMBER OF CATTLE IN WORLDWIDE........................................................................4
TABLE 1: NUMBER OF CUTTLE TARGET........................................................................................5
TABLE 2: MARKET PENETRATION RATES BY COUNTRY..........................................................8
TABLE 3: OPENING ASSUMPTIONS..................................................................................................9
FIGURE 4: MONTHLY EVOLUTION OF REVENUE AND PROFIT..............................................10
FIGURE 5: MONTHLY CASH FLOW PROJECTIONS......................................................................10
FIGURE 6: MONTHLY CASH FLOW PROJECTIONS......................................................................11
FIGURE 7: MONTHLY EVOLUTION OF REVENUE AND PROFIT FOR ASSUMPTION 2........11
FIGURE 8: RISK HEAT TABLE..........................................................................................................12
FIGURE 9: FINANCIAL FORECAST..................................................................................................13
FIGURE 10: FINANCIAL FORECAST “ASSUMPTION 1”...............................................................14
FIGURE 11: FINANCIAL FORECAST “ASSUMPTION 2”...............................................................15
I- Question 1
1- Presentation of venture

Our company is startup Agri-tech specializes in developing technology solutions for

agriculture, with a focus on addressing reproductive and health issues in cows through a smart
connected collar offered by our platform. Our smart collar technology provides farmers to
track various data on cows through a cloud platform accessible via mobile or computer.
Proprietary algorithms based on veterinary science analyse the data and provide key
information to farmers, such as the optimal time for insemination and the cow’s health status.
The start-up offers anti-theft notifications, address milk quality problems, monitor nutritional
behaviour, assist with breed selection, and enable geo-tracking. Our product is designed to be
affordable and user-friendly, making it accessible to farmers of all sizes.

2- Solution goals

Our solution is aiming to bridge gaps between various stakeholders in the livestock industry,
including breeders, veterinarians, financial institutions, insures, animal pharmaceutical
companies, government organisations, and NGOs. These solutions also empower farmers to
make productive decisions for their cows and create sustainable livestock production.
It can help farmers reduce labor costs and save time, by providing automation of tasks such as
tracking, monitoring and data analyses.
Figure 1: Process of cow’s smart collar

3- - Market analysis

Agri-Tech is a sector that includes all companies and startups dedicated to finding solutions at
every stage of the agricultural value chain. Agri-tech aims to improve agriculture through the
monitoring of information and analysis of weather conditions, pests, soil and air temperature.
According to report of Pitchbook (Frederick, 2021), the agri-tech industry recorded in the
third-highest quarter ever in Q4 2021, with $ 2.5 billion invested in 164 venture capital deals.

Figure 2: Annual global venture capital in Agritech

Source : (Pitchbook, 2021)

The market of Agri-tech is continuing to accelerate, Wren-Hilton says in the media that global
agri-tech investment is growing rapidly, with investment in 2018 estimated at more than
$US2.5 billion (Parker, 2019). The market shown an increasement of demand for innovative
solutions to improve efficiency and profitability in the agriculture industry.

Cattle farming presents a key sector of this industry, with over 1.53 billion cows worldwide,
and a significant need for advanced technology to improve management. In a line chart
below, it shows the evolution of a number of cattle in the world.

Figure 3: Number of cattle in worldwide

Source: (Ourworldindata, 2022)

 The assumption for analyzing the market size is based on the number of cattle, since each
dairy cow in production must wear a smart collar.

In 2020, Malta had a total of 241 cattle farms with a cattle population of 14,447 heads of
which, 5,996 were dairy cows.

Table 1: number of cattle target

Countries Number of cuttle
Malta 14,000
Italy 6.4 million
Greece 539,000
Sources: (Ourworldindata, 2022)

It is widely acknowledged that the advancement of smart farming or precision farming, has
beneficial impact on the ecosystem and that one of the most significant challenges in the
upcoming years is the sustainable for the agricultural industry (Lovarelli, 2020).

When it comes to precision livestock farming (PLF), closely observing the behavior, welfare
and productivity is fundamental to enhancing sustainable production systems (Sébastien
Fournel, 2017). By using sensors and technology, it is possible to collect a considerable
quantity of information that needs to be analysed using advanced statistical methods in order
to understand and anticipate the animals’ behaviour, health and welfare conditions.

Furthermore, a study conducted by (K.N. Dominiak, 2017), focused on the sensors that are
available for managing environment, health and welfare concerns and how they may be used
to raise performance levels.

The consumers’ interest in animal welfare and the quality of food products has grown over the
past few years. PLF has the great potential to help farmers raise animals in decent
circumstances, produce food safely and do it with less of an impact on the environment
(Sébastien Fournel, 2017).

The benefit of PLF to the environment, among others, the efficient use of feed and nutrients,
early disease detection, welfare assurances, and decreased emission of pollutants to the air,
soil and water (Lovarelli, 2020).

4- Competitor analysis

Our main competitors in the smart collar for cow market are AGCO corporation, Ag Leader
Technology, and Aglunction Inc, according to market reports (Reaserch, 2021), they are
currently leading the market in terms of market share and revenue. AGCO Corporation is
 known for their advanced sensors and monitoring capabilities, which have been demonstrated
to enhance cow health and productivity.

The AGCO corporation has a significant market share in the precision agriculture sector and
provides smart collars for cows in addition to a variety of other precision farming technology.
However, their smart collars are reported to be relatively expensive compared to other options
in the market. (Reaserch, 2021)

Despite having a significant presence in precision agriculture, Ag Leader Technology may not
have the same level of competence in smart collars for cows as more devoted rivals like
AGCO Corporation and Aglunction Inc. Finally, despite Aglunction Inc's reputation for
producing high-quality goods, their distribution options may be constrained in comparison to
those of bigger rivals like AGCO Corporation and Company Ag Leader Technology.
(Reaserch, 2021)

II- Question 2
1- Marketing strategy

We will focus on building strong relationships with key stakeholders in the agricultural
industry, including farmers, veterinarians and industry associations.
To reach a larger audience, we will use social media and online advertising. We will also
attend trade shows and industry events to show off our technology and build our brand.
We will also establish agreements with distributors and resellers to guarantee our product is
widely available. We will provide low pricing and various payment choices to ensure
affordability for our consumers.

2- Product Development

The smart collar solution is based on advanced sensors that measure the movement of the
cow’s neck and the send the measurements at the platform via routers.

The platform analyzes the data and compare the entered data to the existing database. The
client whether a farmer or a veterinarian, receives information about the health, nutrition,
ovulation, theft, and the birth of their cows.

To develop and design our product we need to:

 - Research and concept development: we will start by conducting in-depth research on the
requirements of dairy sector farmers and ranchers. We will compile data on current herd
management methods and pinpoint applications for our technology. We will create a
concept for our smart collar that caters to the demands of our target market using the
information from this study.
- Design and prototyping: The design process will start as soon as we have an idea for our
smart collar. We will collaborate with engineers and industrial designers to build a
prototype that satisfies our requirements. To make sure the prototype is reliable and
durable, we will test it in actual usage scenarios.
- Software development: A software component of the smart collar will collect and send
data to the farmer. For the collar, we will develop special software that will deliver real-
time information on cow health and behavior. The program will be simple to use and
navigate.
- Testing and validation: To make sure that our smart collar is accurate, reliable, and
efficient, we will put it through rigorous testing. We will test our technique in the field
with farmers and ranchers to confirm its efficacy.
- Manufacturing and distribution: We will start producing and distributing our smart collar
as soon as its validity has been established. To manufacture the collars in bulk, we will
collaborate with a contract manufacturer. We will set up distribution channels that
effectively connect us with our target market.
- Continuous improvement: With the help of farmers and ranchers, we will regularly assess
how well our smart collar is working. We will utilize their feedback to upgrade our
technology and make it more efficient.

3- Management team

Our executive team is made up of seasoned experts with experiences in animal health, data
analytics, and agri-tech. We have a track record of successfully introducing cutting-edge
items to the market and have developed connections with significant companies in the sector.

Considering that the startup currently has one CEO, two product team members, one
marketing and sales team, one operations and administration team member and one in the
marketing and sales. We plan to new team member in the marketing in the second year.
4- Operation plan

1-Production: Our smart collars will be made in collaboration with a contract manufacturer.
To make certain that every unit meets our high standards, we will establish quality control
methods.

2- Inventory management: To guarantee that we can satisfy client demand, we will maintain
an inventory of finished products. We will set minimum inventory levels and reorder points to
make sure that we always have enough stock on hand.

3- Supply chain management: To ensure that we have a consistent supply of materials and
parts, we will cooperate with suppliers. We will develop relationships with multiple suppliers
to reduce the risk of supply chain interruptions.

4- Logistics: We will cooperate with outside logistics service providers, to make sure that our
products are delivered to consumers on time and in good condition. We will also create
standard operating procedures for shipping and logistics to guarantee that each cargo is
handled effectively.

5- Customer service: to make sure that our clients are happy with our product and support, we
will offer top-notch customer service. We will build up a customer support network that is
knowledgeable about our goods and responsive to queries from clients.

6- Regulatory compliance: make sure that our product complies with all relevant legal
standards. We will cooperate with regulatory agencies to guarantee that our product is safe
and effective for use in the dairy sector.

5- Sales Plans

Our target market includes dairy and beef farmers with herds of more than 50 cows. However,
simulating the market size based on the number of cows seems to be overestimated, which is
our start-up will adapt a specific penetration rate for the target market as follows:
Table 2: Market penetration rates by country
Countries % Targeted of market size
Malta 20%
Italy 1%
Greece 1%
Source: Personal work
We will use a combination of direct sales and partnerships with local distributors to reach our
target market will be managed by dedicated sales team, while partnership with local
 distributors will help us reach smaller farms in rural areas. Also, the products and services
will be available exclusively on our website.

Our initial sales target is to sell 50 000 smart collars within the second year with a revenue
target of 5 000 000 €.
Our pricing will be based on a subscription model, with farmers paying a monthly fee for
access to the smart collar and cloud platform. The second year will mark the beginning of the
subscription.
We will develop a range of sales materials, including product brochures, case studies, and
demonstration videos to inform the customers about the benefits of our product.
Additionally, we will attend relevant trade shows and conferences to showcase our product
and meet potential customers and partners.
Our commitment to excellent customer service will ensure that customers are satisfied with
the product and willing to renew their subscription.
6- Financial Projection:

Below we will find the following opening hypothesis:

Table 3: Opening assumptions
Year 1 Year 2
Sales revenue per unit 100€
Variable costs per unit 70€
Contribution margin per unit 30
Break-even point per unit 470 units 567 units
Margin of safety in year 380 units 7311 units
Margin of safety in % 44,7% 92,8%
Source: Personal work
The maximum funding needed is 174, 395 € at end of month 19.
 Figure 4: Monthly evolution of revenue and profit

900,000

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
-100,000

Revenue Budgeted profit

Source: Personal work

During the last 24 months, revenue has been consistently rising, reflecting the startup's
success in the market despite occasional stalls. While the budgeted profit for the first 12
months is negative, it improves after the 13th month, suggesting the startup is now making
money and improving its profitability over time.

Figure 5: Monthly Cash Flow projections

100,000 €

50,000 €

0€
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

-50,000 €

-100,000 €

-150,000 €

-200,000 €

Net Cash Flow Closing Balance

Source: Personal work

The line graph shows that the cash flow net fluctuates, becoming fully positive from the 19th
month. However, the closing balance significantly decreased but turned positive in the 23rd
month after a turnaround from the previous negative trend.

A- Assumption 2: Good scenario

Figure 6: Monthly Cash Flow projections
1,400,000 €

1,200,000 €

1,000,000 €

800,000 €

600,000 €

400,000 €

200,000 €

0€
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
-200,000 €

Net Cash Flow Closing Balance

Source: Personal work

The net cash flow values start out negative in the first month and continue to fluctuate
between positive and negative values for several months. However, the net cash flow becomes
consistently positive in the 5th month and continues to be positive for the remainder of the
period. Max funding needed is 65, 000 € at end of month 5.
B- Assumption 2: Bad scenario
Figure 7: Monthly evolution of revenue and profit for assumption 2
100,000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
-100,000

-200,000

-300,000

-400,000

-500,000

-600,000

Net Cash Flow Closing Balance

Source: Personal work

 The cash flow for the second assumption is mostly negative, except in the 11th month. The
closing balance remains negative for the entire 24 months, with a maximum funding needed is
506, 250 € at end of month 24.

7- The proposed offer

To bring this technology to market, we are seeking an investment of 400 000 €. This funding
will be used for product development, marketing, premises and hiring team members. In
exchange for the investment, we are offering 15% equity which we believe has a high
potential for growth and significant market demand.

III- Question 3:
IV-
V- Our start-up is not immune to risks, just like any other new company. The competitiveness
in the market is one important risk.
VI- Due to the rising need for smart technology in the agricultural sector, it's likely that other
businesses may provide solutions that are comparable to our solution, which might reduce
our market share. Compliance with regulations is another risk. There may be certain rules
and legislation that we must follow depending on the country or region in which we
conduct business, such as those related to animal welfare or data privacy. There is also a
chance of technological malfunction or cybersecurity breaches, which might compromise
the information collected by the smart collars or cause financial loss. Third, there is a
financial risk because developing and marketing of our start-up will demand a significant
investment.

The table below shows a risk heat table that provides a better understanding of different levels
of risks.

Figure 8: Risk heat table

VII- Risks VIII- Low IX- Medium X- High
Likelihood

XI- High XII- Cybersecurit

XIII- Regulatory XIV- Failure to
y breach changes secure funding

XV- Medium XVI- Product XVII- CompetitionXVIII- Failure to meet

defects production
targets

XIX- Low XX- EmployeeXXI- Minor cash XXII- Minor supply

turnover flow issues chain
 disruptions

Source: Personal work

XXIII- Appendix
Opening assumptions

Results:

-Sales revenue per unit: 100 €

-Variable costs per unit: 70 €
-Contribution margin per unit: 100 x 30% = 30
-Break-even point per unit in year 1: 14,100 €/30 = 470 units

Margin of safety in year 1: 850 – 470 units = 380 units

Margin of safety in % in year 1: 380/850 = 44,7%

-Break-even point per unit in year 2: 17,000 €/30 = 567 units

Margin of safety in year 1 7878– 567 = 7311 units

Margin of safety in year 1 7311 /7878 = 92,8 %

Max funding needed is 54,840 € at end of month 13.

Figure 9: Financial forecast

Assumption 1:

-Sales revenue per unit: 100 €

-Variable costs per unit: 70 €
-Contribution margin per unit: 100 x 30% = 30
-Break-even point per unit in year 1: 14,100 €/30 = 470 units

Margin of safety in year 1: 850 – 470 units = 380 units

Margin of safety in % in year 1: 380/850 = 44,7%

-Break-even point per unit in year 2: 17,000 €/30 = 567 units

Margin of safety in year 1 7878– 567 = 7311 units

Margin of safety in year 1 7311 /7878 = 92,8 %

Max funding needed is 65, 000 € at end of month 5.

Figure 10: Financial forecast “Assumption 1”

Assumption 2:

-Sales revenue per unit: 100 €

-Variable costs per unit: 70 €
-Contribution margin per unit: 100 x 30% = 30
-Break-even point per unit in year 1: 14,100 €/30 = 470 units

Margin of safety in year 1: 850 – 470 units = 380 units

Margin of safety in % in year 1: 380/850 = 44,7%

-Break-even point per unit in year 2: 17,000 €/30 = 567 units

Margin of safety in year 1 7878– 567 = 7311 units

Margin of safety in year 1 7311 /7878 = 92,8 %

Max funding needed is 506, 250 € at end of month 24.

Figure 11: Financial forecast “Assumption 2”

XXIV- References

Frederick, A. (2021). Annual agtech Report 2021. Institutional Research Group.

Retrieved 3 21, 2023, from
https://files.pitchbook.com/website/files/pdf/2021_Annual_Agtech_Report_Preview.p
df

K.N. Dominiak, A. K. (2017, February ). Prioritizing alarms from sensor-based

detection models in livestock production - A review on model performance and alarm
reducing methods. Computers and Electronics in Agriculture,Vol 33, pp46-67.
Retrieved 3 24, 2023, from https://doi.org/10.1016/j.compag.2016.12.008

Lovarelli, D. (2020). A review on dairy cattle farming: Is precision livestock farming

the compromise for an environmental, economic and social sustainable production?
Journal of Cleaner Production, Vol. 262, p4.

Ourworldindata. (2022, 5 17). Number of cuttle. (F. a. Nations, Ed.) Retrieved 3 26,
2023, from https://ourworldindata.org/grapher/cattle-livestock-count-heads?
tab=chart&time=1980..2020&country=~OWID_WRL

Parker, C. (2019, May). Substantial growth expected in the agritech sector.

Management, NZ Business, 33 (4), p3.

Pitchbook. (2021, 3 21). 2021 Annual Agtech Report. Retrieved 3 26, 2023, from
https://files.pitchbook.com/website/files/pdf/2021_Annual_Agtech_Report_Preview.p
df

Reaserch, G. V. (2021). Smart Agriculture Market Size, Share & Trends Analysis
Report By Type (Precision Farming, Livestock Monitoring, Smart Greenhouse,
Others), By Application, By Region, And Segment Forecasts, 2023 - 2030.

Sébastien Fournel, A. N. (2017). Rethinking environment control strategy of confined

animal housing systems through precision livestock farming. Elsevier.