Appalachian Herbal Essentials

Ethically grown medicinal and culinary herbal products from Meigs County, Ohio

42255 Old Farmhouse Road

Athenia, Ohio 45700

BUSINESS PLAN

prepared by

Benjamin Casey Ph.D., Business Consultant

and

Louise Smith M.A., Business Consultant

Private and Confidential: The contents of this document must not be disclosed

[Legal Notice: Financial Statements and analyses contained in this plan are fictitious
and were developed for educational use in the SET© curriculum only. The information
contained in this plan was not meant to reflect and does not reflect the actual
operation or financial history of the Appalachian Herbal Essentials.]

Appalachian Herbal Essentials Business Plan 281

 Table of Contents

Executive Summary
Statement of Purpose

Part 1: The Business

Mission Statement
Description and Location of Business
Product or Service
Features and Benefits
Legal Structure

Part 2: Market Analysis

Target Market
Market Research
Marketing Strategy
Pricing Strategy
Business Website
Advertising Materials
Logo
Business Card
Flyer

Part 3: Financials
Income Statement
Breakeven Analysis

282 Appalachian Herbal Essentials Business Plan

 Appalachian Herbal Essentials

Executive Summary
Statement of Purpose
Appalachian Herbal Essentials is a sole proprietorship to be established in 2001. The company will
be located in Meigs County, Ohio. The aim of the company is to provide its customers with high
quality organic herbs, plants, seeds, nutriceuticals and other herbal products at reasonable costs.
No funding is required for the company at this time as the owner intends to slowly grow the
company using his own personal resources. The purpose of this plan is to provide the owner with a
“roadmap” to enable him to envision the growth and direction of the company and in the
development of product lines.

Mission Statement

Central to Appalachian Herbal Essentials’ philosophy is that we are not in possession of the land
from which our products spring but rather are its stewards. In all our activities we will show
reverence to Mother Nature and the natural order at all times. Appalachian Herbal Essentials is
dedicated to growing and distributing high-quality herbal and botanical products in an ethical,
organic and Earth-friendly way. Specifically, Appalachian Herbal will:

Provide our customers with the highest-quality medicinal and culinary herbs and herbal
products that are ethically and organically grown.

Provide our customers with the highest-quality ethically and organically grown live plants,
rootstock and seeds of native Appalachian medicinal herbs, culinary herbs and other useful
exotic species.

Provide our customers with other botanical products, such as aroma-therapeutic mixtures,
herbal formulas and herbal pharmaceuticals that contain the highest-quality ethically and
organically grown products from around the world.

Detailed Plan
Description and Location of Business

Appalachian Herbal Essentials is a start-up company located in rural northern Meigs County, Ohio.
Appalachian Herbal’s herb farm consists of some 15 acres, about 4.5 acres is relatively flat, tillable
fertile land with the remaining 10 acres being rolling maple/beech/oak forestland.

Product or Service
The product line will be a mixed combination of herbal products including live plants, roots and
seeds, dried and fresh specialty Appalachian medicinal herbs, herbal infusions and teas,
nutriceuticals, aroma-therapeutic oil blends and natural botanical soaps. The raw materials for the
product line will be derived both from material grown on the Appalachian Herbal farm, from other

Appalachian Herbal Essentials Business Plan 283

local growers and from bulk wholesalers. Where possible, we will use North American domestically
produced certified organic raw materials.

284 Appalachian Herbal Essentials Business Plan

Features and Benefits

The product line will be a mixed combination of herbal products including live plants, roots and
seeds, dried and fresh specialty Appalachian medicinal herbs, herbal infusions and teas,
nutriceuticals, aroma-therapeutic oil blends and natural botanical soaps. There are few, if any
medicinal herb companies that specialize in Appalachian herbs and specialty products.
Appalachian Herbal will be the first company to offer live plants, roots and seeds, dried and fresh
specialty Appalachian medicinal herbs, herbal infusions and teas, nutriceuticals, aroma-therapeutic
oil blends and natural botanical soaps over the Internet. The Website is also educational and
informative which will appeal to teachers and students of herbology as well.

The raw materials for the product line will be derived both from material grown on the farm and
from bulk wholesalers. Where possible, we will use North American domestically produced organic
certified raw materials.

Features Benefits
Organically grown herbs and herbal products Appeals to health-conscious consumer
Locally produced Wide variety of products available from one site
Local Appalachian species Sane pricing policy
Online ordering available
Low prices
Educational website
Close to university population
Weekly electronic newsletter

Legal Structure

The Company will be a Sole Proprietorship registered in the State of Ohio.

Part 2: Market Analysis

Target Market

The target market of Appalachian Herbal Essentials can be grouped into four categories or groups.

The first target group is the young, health-conscious, college-age/grad students, who shop at the
local food co-op and are primarily vegetarian. These young people grew up with computers and are
likely to utilize our online ordering system. They are likely to use herbal teas, soaps and oils.

The second target group is the aging “baby boomer” population. These are adults who may have
several medical conditions that require treatment. Many among this group have considerable
reservations with traditional medicine with its high costs, invasive techniques and expensive drugs.
In addition, more and more seniors are using computers for email and shopping. Our weekly
newsletter will keep them informed and up-to-date on the latest herbal news and information.

Both of these target groups are subsets of a much larger, more amorphous group of consumers
who cannot be defined in terms of age, socio-economic class or education level. This group can be
defined as “natural and alternative”. They are individuals who have reservations about many
aspects of modern society including, but not limited to, modern medicine, fast foods, use of
chemical fertilizers and pesticides, genetic engineering, and pharmaceutical additives to enhance
livestock growth. This group seeks out fresh organic foods, herbal remedies and alternative
medical practices

Appalachian Herbal Essentials Business Plan 285

The third target group is a component of the herb industry. Just as Appalachian Herbal will buy
components that cannot be grown in this region from other growers, we will also act as a supplier
of dried and fresh native Appalachian medicinal herbs to the herb industry. We will appeal to small
to medium sized operations that require small amounts of organically grown Appalachian herbs of
the highest quality.

Gardeners are our fourth target group. We aim to supply gardeners with seeds, plants and
rootstock of a range of rare and interesting medicinal herbs, shrubs and trees.

Market Research

Medicinal herbs have been used throughout the world for thousands of years and three quarters of
the world’s population still uses herbal medicine. For a number of reasons, Americans stopped
using herbal remedies in the 1920s and 30s. Recently however herbal medicines are starting to
regain popularity as a treatment of choice in America. Estimates are that 1/3 of Americans now use
herbal remedies and 88% will be using herbal remedies by the end of this century (Sturdivant,
1999). The burgeoning world of herbal remedies has created many business opportunities for
growers.

National Data

County Data

286 Appalachian Herbal Essentials Business Plan

Survey Results

Appalachian Herbal Essentials Online Survey Results:

Number of people in Survey = 65

YES NO
Have you ever bought medicinal herbs online? 88% 12%

Where did you buy them?

Prospect 25%
Herbs "R 'Us 17%
Natures Harvest 24%
NCG 19%
Sun Up 12%
Other 3%

YES NO
Were you satisfied with the product you bought 54% 46%

YES NO NOT SURE

Would you buy from the same vendor again? 33% 49% 18%

If no, why?
too expensive 46%
bad service 29%
poor selection 25%

What is most important to you when considering

purchasing medicinal herbs online?
price 52%
wide selection 5%
speedy service 5%
guaranteed potency 23%
free shipping 5%
ease of ordering 10%

Appalachian Herbal Essentials Business Plan 287

Marketing Strategy

Appalachian Herbal will operate in two main market locations. Sales will be generated through an
on-line Internet site and from a shop and greenhouse location at Appalachian Herbal Farm. In
addition we will be vendors at local fairs, festivals and other gatherings where our target customers
may be in attendance.

Internet

We will host our domain, [Link] on the servers of our local

Internet Service Provider. Registering our company with all known search engines will generate
market visibility. Considerable thought and research has gone on into a suitable, exhaustive list of
Meta Tag keywords that will ensure the maximum number of hits when our target customers
conduct on-line searches for products (list code appended). Our Website will be efficient, fast
loading and user friendly, and will adhere to good Web design principles at all times. Our
customers will have several shopping options. They will have the ability to shop via an online
shopping cart, there will be a printable mail order form, an electronic email order form and a 1 800
number for those wishing to phone in their order.

On the Farm

To accommodate local customers, we will operate a small shop and greenhouse at the
Appalachian Herbal Farm. Our marketing approach for this part of the business will follow more
traditional marketing methods. We will advertise in local newspapers an in the magazines of local
utilities. Business cards (sample appended) and flyers will be posted on public bulletin boards of
stores and post offices etc. We will visit local fairs and gatherings with our merchandise to further
increase our local visibility. To gain even greater recognition, we propose to hold an Annual
Medicinal Herb Fest that will feature our products and the products of other Meigs County artisans
and growers (flyer appended).

Pricing

Analysis of the herbal product market shows that, regardless of their size, most companies
involved in the consumer end of the industry indulge in a rather heavy markup of prices. For
example, a box of Celestial Seasonings® Peppermint tea bags retails for around $2.85 and
contains 1.1 oz of peppermint. With dried peppermint wholesaling from $7-$11 per pound, the
markup from wholesaler to consumer is from 415% to 651%. At the other end of the spectrum, a
small single proprietorship herbal tea company sells bulk peppermint tea at 181% to 285% over
wholesale price. Appalachian Herbal Essentials will strive to keep markup over wholesale to less
than 100%.

Business Website: [Link]

Management Capacity

Dr. Herbert Greenwood has years of experience in cultivating medicinal plants. Growing up in
Athenia, Ohio, Greenwood spent 3 years working for the Tranquility Greenhouse where he learned
to identify, and cultivate hundreds of medicinal herb varieties. Greenwood later enrolled in the
Greenmore School of Herbalism where he learned to utilize native Appalachian plants in creating
medicinal teas, salves, tinctures, and oil blends. His experience working closely with owners of the
small, family-owned Tranquility Greenhouse gave Greenwood experience in book keeping,
customer service, and an understanding of the day to day requirements of running a business.

288 Appalachian Herbal Essentials Business Plan

Part 3: Financials

Income Statement
Income Units Sold Jun-01
Herbs
Live Plants
Wild Yam 10 $59.50
Echinacea 20 119.00
Black Cohosh 15 89.25
Blue Cohosh 10 59.50
Astragalus 30 118.50
Bloodroot 30 118.50
Goldenseal 50 497.50
Seeds
Echinacea Purpurea 60 75.00
Bulk Dried herbs
Echinacea 16 160.00
Chamomile 9 108.00
Red Clover 5 125.00
Rootstock
Astragalus 25 375.00
Black Cohosh 15 225.00
Bloodroot 15 225.00
Blue Cohosh 10 180.00
Echinacea 40 800.00
American Ginseng 35
Goldenseal 45 2,250.00
Wild Yam 20 300.00
Aromatic Oil Mixtures
Sweet Dreams Pillow Oil 144.00
Sweet Dreams Cold and Flu Pillow Oil 38.25
Relaxation 166.40
Cure-Oil Anti-fungus Blend 348.95
Cure-Oil Arthritis Rub 548.70
Soap
Lavender 18 63.00
Echinacea & Calendula 24 84.00
Oatmeal 17 59.50
Sage and Mint 20 70.00
Sandalwood 15 60.00
Peppermint & Marshmallow 27 94.50
Teas (4 ounces)
Sweet Dreams Tea 15 59.25
Uplift Tea 24 94.80
Relaxation Blend 19 75.05
Coughs-N-Sniffles 4 15.80
Stress Reducer Blend 22 86.90

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 Sales SUBTOTAL $7,875.50

290 Appalachian Herbal Essentials Business Plan

  Owner’s Draw (if funds are available)   $500.00  
Insurance 25.00
  Water Bill 150.00
  Electric Bill 75.00
  Internet 19.95
  Phone bill 49.95
  Cell Phone 29.95
  Yellow Pages Ad 25.00
  Radio Spot 50.00
  PO Box 2.00
  SUBTOTAL Fixed Expenses $926.85
 
  Variable Expenses
  Packaging Units Purchased
  Labels 600 $28.32
  Bottles 138.00
  Caps
  plastic cap 200 24.00

  Plastic Bags
  Teas 100 2.00
  Paper Bags 300 30.00
  Tubs 27.00
  Pots
  Ingredients
  olive oil 1 88.21
  safflower oil 1 65.00
coconut oil 1 158.32
  sweet almond oil 1 99.90
  wheat germ oil 1 53.04
  cocoa butter 0.2 30.33
  Lye 2 216.80
  beeswax 2 130.00
  Aromatic oils
  chamomile 1 261.45
  clary sage 1 41.96
  clove 1 24.95
  eucalyptus 4 45.04
  frankincense 2 326.32
  lavender 2 103.90
  peppermint 3 75.81
  sandalwood 1 260.18
  St. John's Wort 0.25 291.93
  tea tree 4 98.00
  Mailing/shipping expenses 35.00
  SUBTOTAL Variable Expenses 2,655.46
  TOTAL EXPENSES $3,582.31
GROSS PROFIT (sales minus variable expenses) $5,220.04
NET PROFIT (gross profit minus fixed expenses) $4,293.19

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292 Appalachian Herbal Essentials Business Plan
Break-even Analysis

Break-even

Fixed Costs $926.85

Variable Costs + 2,655.46

Break-even in sales = Fixed costs + Variable costs = $3,582.31

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