Second Year
Second Semester
First Individual Assignment
Entrepreneurship
MGS 2201
Lecture Name - Ms. R.M.C. Kumari
Student Name - G.M.G.S. Priyanga
Registration Number - MG/19/107
Date of Submission – 2022/12/05
SP
Mushroom
Products
Sanjaya Priyanga
237, Katugastota, Kandy
081-8526856
077-9525500
SPMushroomProducts@Gmail.com
www.spmushroomproducts.lk
Table of Content
Content Page No.
Executive Summary 01
Business Description 01
Marketing 02
Operations (Production) 05
Financial 09
Critical Risks 15
1. Executive Summary
This is a business plan for a Mushroom cultivation business called ‘SP Mushroom Products’
that is going to start in February 2023. The business is mainly focusing on cultivating Oyster
mushrooms. This is going to be a sole proprietorship business and the location will be in
Katugastota, Kandy. Also, I expect to recruit employees for the business. The major markets
of the business will be Central Province (Kandy, Nuwara Eliya, and Matale)
This business plan consists of the following fields,
1. Business Description
2. Marketing
3. Operations
4. Management
5. Financial
6. Critical risks
2. Business Description
Vision - Our vision is to provide fresh and clean foods for customers.
Mission - To give healthier lives to customers
This business is mainly focusing on the cultivation of Oyster mushrooms. Mushroom has a
huge global market. In 2021, the global mushroom market was 15.25 million tonnes and it
was valued at USD 50.3 billion.
Therefore, I am decided to start a mushroom cultivation business. The idea came from the
entrepreneurship development program conducted by Small Enterprises Development (SED).
Business Type - Sole proprietorship
Product - Mushroom (Oyster)
Location - 237, Katugastota, Kandy
No of Employees - 1
Opening date - February 2023
Industry
This business belongs to the agriculture category. Agriculture products are the main products
in Sri Lanka because, in the past, Sri Lanka was an agricultural country. It means a large part
of the Sri Lankan GDP is covered by agricultural products.
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Goals of the business
1. Reduce production cost
2. Increase revenue
3. Increase market share
4. Capture the export market
5. Give more employment opportunities
6. Provide high quality mushroom at affordable price.
7. Innovation
About products
Firstly, I expect to offer fresh mushrooms in the local market then need to consider the
international market. So, anyone can check the production process of mushrooms.
Personal details
Name - G.M.G.S. Priyanga
Address - 36/A, Gohagoda, Katugastota, Kandy.
Phone Number - 0767579838
Educational Qualifications - GCE O/L, GCE A/L, Undergraduate of the University of
Peradeniya.
National Identity Card Number - 200102301685
Divisional Secretariat - Harispattuwa
Proposed Business - Mushroom cultivation business
3. Marketing
The main market of this mushroom business is the central province. But we expect to grow it
for the whole island. After that, expect to focus international market. In the central province,
we are focusing on selling mushrooms in Kandy Municipal Central Market, Dambulla
Dedicated Economic Centre, Kurunegala Central Market, and Menikkumbura Economic
Centre. Among these markets, Dambulla Dedicated Economic Centre is important because
through this market we can spread the products to the whole of Sri Lanka.
According to the research that we conducted, there are no major one or two mushroom
manufacturers. But there are many small-scale mushroom manufacturers in this area.
Therefore, there is big competition among small-scale mushroom manufacturers.
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Also, through the conducted research, we have recognized that if there is good demand for
mushroom products, most small mushroom manufacturers fail due to a lack of quality.
Customers check quality the quality of mushrooms after purchasing. So, if they recognize
low-quality products, definitely they will not buy that one again. The conclusion is
mushroom is a profitable business but we need to do it correctly.
Marketing Mix / 4Ps of the Business
1. Product
The business cultivates Oyster mushrooms. Oyster mushrooms have good colour and mostly
their colour is light brown. The size of one flower is approximately 5-7 inches. After
harvesting mushrooms, put them into different size bags such as 100g, 150g, and 200g. Then
offer to the market under the brand name of ‘SP Mushroom Products’.
2. Price
One of the main goals of the business is to capture a lager market share. Therefore, to do that
we decided to set an affordable price for all customers. Prices are like below,
Wholesale prices
100g packet - Rs. 80
150g packet - Rs. 120
200g packet - Rs.150
Retail prices
100g packet - Rs.100
150g packet - Rs.140
200g packet - Rs.180
When it comes to the pricing strategy, we will use the cost-plus pricing method.
3. Place
As I previously said we mainly target four markets to sell products those are Kandy
Municipal Central Market, Dambulla Dedicated Economic Centre, Kurunegala Central
Market, and Menikkumbura Economic Centre. Except for those markets, we expect to
distribute our products to supermarkets such as Cargills Foodcity, Arpico Supercentre,
Keells, and Laugfs Supermarket. Transportation will be done by two hired lorries.
4. Promotion
Promotion is not that much important in the mushroom business. Once we introduce our
products to the market, customers will buy them. Then, if they like our mushroom, definitely
they will buy it again.
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Target Market Segmentation
There are 4 bases of market segmentation. Those are Geographic, Demographic,
Psychographic, and Behavioural. Aa a mushroom cultivation business, we decided to select
family size under Demographic segmentation. Because we have different sizes of mushroom
packets.
Product Target Market (family size)
100g packets Small
150g packets Medium
200g packets Large
Demand and Supply Analysis
Demand Analysis
Area Quantity of Demand monthly Quantity of Demand annually
(100g, 150g and 200g Packets) (100g, 150g and 200g Packets)
Kandy 10,500 126,000
Nuwara Eliya 7,500 90,000
Mathale 11,700 140,400
Total 29,700 356,400
Supply Analysis
Item Supplier Quantity Quantity
(Monthly) (Annually)
Spawns P.G. Ajith 1kg 12kg
Sawdust Nuwan Wooden products 100kg 1200kg
Rice bran P.D.K. Gamunu 10kg 120kg
Soya flour P.G. Ajith 1kg 12kg
Cao Star Super Kandy 2kg 24kg
MgSO4 Star Super Kandy 200g 2.4kg
Polythene bags, rubber Nimal Hardware 250 units 3000 units
bands
Expected Market Share
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We mainly focus on Central province to sell our products. Therefore, our expected market
share as follows,
Area Market Share
Kandy 10%
Nuwara Eliya 8.5%
Mathale 13.3%
Competitor Analysis
Strategy Nimali Fresh Shan Mushroom Our Business
Mushroom
- Oyster mushroom - Oyster
- Unique packing mushroom
Product - Oyster mushroom
design - Attractive
packing design
Price Rs100 – Rs.200 Rs120 – Rs.200 Rs80 – Rs.180
Kandy, Nuwara
Place Kandy Kandy
Eliya, Mathale
Banners
Banners
Promotion No Handbills
Handbills
Social Media
4. Operations (Production)
We are going to cultivate mushrooms in the Katugastota area. In that area, there is enough
space to build a mushroom cultivation house. Also, transportation can be done easily without
distance.
Below things are the basic requirements for mushroom cultivation
1. Mushroom compost (substrate)
2 Mushroom spawns (seeds)
3. Mushroom growing house
4. Sawdust, Rice bran, Soya flour
5. Polythene Bags, Rubber bands
6. Cao
7. MgSO4
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8. Metal racks
9. Water spray bottles
10. Thermometer
11. Compost Mixer
12. Temperature Controller
13. Air Exchange Fan
14. Barrel
Oyster mushroom cultivation process
1. Prepare growing house - As the initial stage, we need to prepare a mushroom growing
house that needs to have low temperature, a wet floor, and good ventilation.
2. Prepare substrate - To prepare the substrate, we need to mix the below things,
Sawdust - 100kg
Rice bran - 10kg
Soya flour - 1kg
Cao - 2kg
MgSO4 - 200g
3. Fill the polythene bags - After preparing the substrate, need to put them into polythene
bags and close the top of the polythene bag tightly.
4. Sterilization - Here, need to take 200l empty steel barrel. Then need to make a hole on top
of the barrel. Then, need to pack all the prepared polythene bags into a barrel and put some
water into the barrel. Need to remember, water cannot touch polythene bags. Finally, boil the
whole barrel for about 2 hours.
5. Add spawns - After sterilization, keep the polythene bags for one day. Then need to add
spawns into bags. To do that we can open the top of the polythene bag and put one teaspoon
of mushroom spawns into each bag. After that need to close the top of each bag.
6. Keep for 25 to 30 days - After adding spawns, need to keep these bags in the mushroom
growing house for 25 - 30 days. After this period, you can see fungal has grown in bags.
7. Keep the growing house wet - After the above step, need open the top of each bag. As well
as a need to keep the growing room wet for around 8 -10 days.
8. Harvesting - As the final stage, you can harvest the mushroom once 8 days.
Production Capacity (250 bags - 7” width and14” height)
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Sawdust - 100kg
Rice bran - 10kg
Soya flour - 1kg
Cao - 2kg
MgSO4 - 200g
Raw materials requirements
Mushroom spawns
Sawdust
Rice bran
Cao
Soya flour
MgSO4
Polythene bags
Rubber bands
Labour cost (For one employee)
Net salary per labour Rs.20,000 per month
Process Chart
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Prepare Substrate
Fill the Polythene Bags
Sterilization
Add Spawns
Keep It for25-30 Days
Keep the Growing Gouse Wet
Harvesting
Packing and Labelling
To Market
Factory Layout
5. ManagementSterilization
Area Cropping Cropping
Room 1 Room 2
This is a sole proprietorship business under the name of SP Mushroom Products. Therefore,
the business needs to register in the divisional Corridor
secretariat office. It will help when taking
Spawning
finance from banks. We take necessary consultation from Small Business Development
Areaof Agriculture, Gannoruwa.
Centers and the Department
Storage Area
Owner - G.M.G.S. Priyanga (Myself)
Substrate
One employee - P.S.D. Withanage
Cropping Cropping
Preparing
Room 3 Room 4
Yard
6. Financial
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The financial plan will provide a total project cost statement, profit or loss estimate statement,
and project evaluation.
[1] Total Project Cost
Owner’s
Bank Loan Total Project Cost
Assets Contribution
(Rs) (Rs)
(Rs)
Land and land preparation (Annex 01) 900,000 150,000 1,050,000
Mushroom growing house (Annex 02) 110,000 480,000 590,000
Equipment (Annex 03) 51,900 51,900
Furniture (Annex 04) 18,750 18,750
Vehicle 1,500,000 1,500,000
Other fixed assets 1,500 1,500
Electricity supply 40,000 40,000
Water supply 20,000 20,000
Pre operational expenses 4,000 4,000
Contingency expenses 5% 163,808 163,808
Working capital (Annex 05) 113,535 69,000 182,535
Total 2,923,493 699,000 3,622,493
Annex 01 – Land and land preparation
Owner’s
Bank loan Total
No Description Quantity contribution
(Rs) (Rs)
(Rs)
1 Land 5 Purch 900,000 900,000
2 Land preparation 150,000 150,000
Total 900,000 150,000 1,050,000
Annex 02 - Mushroom growing house
No Description Quantity Owner’s Bank loan Total
contribution (Rs) (Rs)
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(Rs)
1 House 1 100,000 100,000
2 Metal racks 8 100,000 380,000 480,000
3 Lights 4 10,000 10,000
Total 110,000 480,000 590,000
Annex 03 - Equipment
Owner’s
Bank loan Total
No Description Quantity contribution
(Rs) (Rs)
(Rs)
1 Water spray bottles 3 900 900
2 Thermometer 1 6,000 6,000
3 Compost mixer 1 3,000 3,000
4 Temperature controller 1 7,000 7,000
5 Air exchange fan 2 25,000 25,000
6 Others 10,000 10,000
Total 51,900 51,900
Annex 04 - Equipment
Owner’s
Bank loan Total
No Description Quantity contribution
(Rs) (Rs)
(Rs)
1 Table 2 10,000 10,000
2 Chairs 5 8,750 8,750
Total 18,750 18,750
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Annex 05 - Working capital estimate
For 3 months
No Description Total
Own Loan Rs.
1 Materials (454,140/12*3) 113,535 113,535
2 Laboure (276,000/12*3) 69,000
Total 113,535 69,000 182,535
[2] Profit or Loss Statement 2023/24
Description Rs. Rs.
Sales Forecast (Annex 06) 3,015,000
(-) Direct variable costs
Material Expenses (Annex 07) 454,140
Fuel, water and electricity 20,000
Direct wages (Annex 08) 276,000
Total variable cost 750,140
Expected gross profit 2,264,860
(-) Operation costs
32,900
Administration expenses (Annex 09)
67,000
Marketing expenses (Annex 10)
452,640
Finance expenses (Annex 11)
Total operational expenses 552,540
Net Profit 1,712,320
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Annex 06 - Sales Forecast
Product For 40 days Annually
No of Unit Total No of Unit Total
units price units price
Oyster Mushroom
-100g 1600 80 128,000 14400 80 1,152,000
-150g 850 120 102,000 7650 120 918,000
-200g 700 150 105,000 6300 150 945,000
Total 3,015,000
Annex 07 - Material Expenses for 12 months
No Required material 40 days Unit price 40 days Annual
requirement Rs. expenses Rs.
Rs.
1 Spawns (Seeds) 1000g 20.00 20,000 180,000
2 Sawdust 100kg 70.00 7,000 63,000
3 Rice brain 10kg 160.00 1,600 14,400
4 Soya flour 1kg 1,140.00 1,140 10,260
5 CaO 2kg 4000.00 8000 72,000
6 MgSO4 200g 1.10 220 1,980
7 Polythene bags and others 250 units 50 12,500 112,500
Total 454,140
Annex 08 - Direct wages
Employee Monthly EPF 12% Monthly For 12 Months
salary ETF 3% expenses
P.S.D. Withanage 20,000 3,000 23,000 276,000
Total 276,000
Annex 09 - Administration expenses estimate
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No Expenses Monthly expenses For 12 months
1 Stationary 300 3,600
2 Telecommunication 150 1,800
3 Trade certificates 3,500
4 Entertainment 1,500 18,000
5 Others 500 6,000
Total 32,900
Annex 10 - Marketing expenses estimate
No Expenses Monthly expenses For 12 months
1 Transport 3,000 36,000
2 Customer survey 1,000
3 Printing 2,000 24,000
4 Others 500 6,000
Total 67,000
Annex 11 – Finance & other expenses estimate
No Expenses Monthly expenses For 12 months
1 Loan interest (699,000*15%) 104,850
2 Depreciation (Annex 11.1) 338,790
3 Others 750 9,000
Total 452,640
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Annex 11.1 - Depreciation estimate
No Item Value % Depreciation
1 Mushroom growing house 590,000 18% 106,200
2 Equipment 51,900 10% 5,190
3 Furniture 18,750 12% 2,250
4 Vehicle 1,500,000 15% 225,000
5 Other fixed assets 1,500 10% 150
Total 338,790
[3] Project Evaluation
01. Net profit ratio
Net profit ratio = Annual Net Profit / Annual Sales * 100
= 1,712,320 / 3,015,000 * 100
= 56.79%
02. Profit Volume Ratio
Profit Volume Ratio = Annual Gross Profit / Annual Sales* 100
= 2,264,860 / 3,015,000 * 100
= 75.12%
03. Return on Investment
Return on Investment = Annual Net Profit / Total Project Cost * 100
= 1,712,320 / 3,622,493 * 100
= 47.27%
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04. Payback Period
Payback Period = Total Project Cost / Annual Net Profit
= 3,622,493 / 1,712,320
= 2.12
= 2 Years and 2 months
05. Break Even Sales
Break Even Sales = Fixed Cost / PV Ratio
= 552,540 / 0.7512
= 735,543
7. Critical Risks
As a small-scale enterprise, the business will have to face the below risks.
1. Huge competition - As I previously mentioned, therefore many small-scale mushroom
manufacturers in the central province. We are going to the market as a new business. So It
will be difficult to capture current the market from current mushroom manufacturers.
2. Not enough demand - Although mushroom is a good sellable product, they will not have
enough demand due to some factors such as economic crisis, decreasing customer spending
power, etc.
3. Finance issues - When the business is progressing, we may need some finance from the
creditors. So, the thing is interest for loans is at a very high level. Therefore, it will lead to an
increase in the products' prices.
4. Unavailability of good spawn - Spawn is the major material for cultivation. The quantity of
the mushroom is depending on the quality of the spawn. So, it is quite difficult to find good
spawn.
5. Perishability - Mushrooms cannot keep for a long time after harvesting them. So we need
to quickly sell them within 2-3 days.
6. Liability - To implement the business, need some finance from banks. So there is a liability
to repay the loan and interest. As I early mentioned, if the demand will go down, it will be
difficult to pay bank loans and interest.
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-THE END-
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