Fully describe the business's activities?
The business manufactures wood shavings used in horse stables.The wood shavings mill can also manufacture shavings used by chicken farmers. The only difference is the size of the shavings. Chicken shavings must be manufactured from dry wood, whilst horse shavings can be manufactured from wet wood. The same mill with different blades is used to produce chicken shavings.
How long has the business been established?
How long has the owner had the business?
The current owner bought the business in December 2021.
What steps are in place to solve 'load shedding' problems?
None, they plan their working hours around load shedding. Staff remain productive with during load shedding by moving and cutting logs in preparation for the wood shaving mill. Logs are cut using a chain saw during load shedding instead of a electrical saw.
What is the average KW usage?
The average monthly KW usage of the mill for the duration that the current owner had the mill is 2 215 kWh, with the lowest month (April 2022) being 1 761 kWh and the highest month (January 2022) being 2 574 kWh. Current rate per kWh charged by Eskom at the time of writing this report is R1.4219/kWh.
How does the business operate on a daily basis?
The business uses a wood shaving mill to produce wood shavings from reject pine logs. The logs are delivered in 32 ton loads. Average production per months is in the region of 99 tons. The wood shaving mill has a capacity of 1 000 - 1 200 bags per day. Each bag weighs approximately 11kg (if dry) and up to 13kg if when wet. The wood shavings mill dumps the shavings onto a conveyor belt which drops the shavings into bags. Labourers assist with filling and binding of bags. Bags are delivered to customers using a 5 ton truck. Devilries are only done for full truck loads i.e. 400 bags. The production yield is approximately 78 - 90 bags of shavings per ton, depending on the moisture content of the logs. The business currently sells an average of 9 000 bags monthly at an average selling price of R20/bag excluding delivery cost.
How are the clients attracted to the business?
Word of mouth and repeat customers.
What Advertising/Marketing is carried out?
None what so ever.
Does the business have any contract work?
No, the nature of this business is repeat customers. Shavings are are sold out 3 - 4 days ahead of production.
What competition exists?
Completion is either on a very small scale (horse shavings) or a very large scale (chicken shavings) with enormous overheads.
What are the seasonal trends?
There are no seasonal trends, shavings is a necessity for horses.
Is the business VAT Registered?
Are there up-to-date Management Accounts available?
The Seller has prepared a monthly statement of income and expenses. Monthly sales for the 6 months period before the the current owner bought the business is as follows: - Aug 2021 R176 750 - Sep 2021 R164 508 - Oct 2021 R205 138 - Nov 2021 R201 538 - Dec 2021 R90 200 (only traded for 18 days before business was sold and transferred to the current owner).
What Balance Sheet and Income Statements are available?
None, the current owner only had the business from Jan 2022.
What percentage of the business is cash/credit?
Most customers pay EFT on delivery. The two bigger customers pay EFT on a weekly basis.
What is the age analysis of the debtors book?
Approximately 1 week.
How could the profitability of the business be improved?
The profitability could be improved by doing more marketing and advertising and by planning log purchases well in advance to ensure constant supply of raw materials.
What is the total staff complement?
Give a breakdown of staff/ functions/ length of service?
1 x Driver (since Feb 2022). 1 x Maintenance and machine operator (1 year). 3 x Labourerers (since Jan 2022). 1 x Electric saw operator (since Jan 2022).
Do any receive special perks or incentives?
All staff stay on the premises and work on Saturdays if required in lieu of rent, water and electricity.
Are they on contract?
No, all employees work on a casual basis.
Do any have management potential?
How involved is the Owner in running the business?
The owner spends approximately 2 - 3 hours a day on the business doing the following: 1 - Invoices to customers, delivery schedules and payment follow-ups. 2 - Ordering of wood and plastic bags. 3 - General admin.
When does the current lease end?
The business runs from the owner's farm in the Midvaal municipal district. There is no rental agreement in place.The business can easily be relocated, alternatively the Seller is very willing to enter into a monthly lease agreement with the Buyer. The wood shaving mill requires approximately 120 sqm to operate. Yard space is required for log storage and cutting 2.4m logs into 1.2m logs. The yard space must have sufficient entry, turning circle and exit for an interlink truck, approximately 300 sqm. The seller is prepared to rent the existing premises to the buyer at R10 000 per month.
Is there an option of renewal & what period?
This is negotiable with the Seller.
What is the annual escalation %?
This is negotiable with the Seller.
What are the trading hours?
Monday to Friday 7;30 am to 4:30 pm. Saturdays if required.
What is the square meters of the business?
Approximately 120 sqm under roof plus yard space of approximately another 300 sqm.
Do you require a licence?
No license is required.
What lease deposit and/or other surety is required?
This is negotiable with the Seller.
What are the main assets of the business?
The main assets are as follows: 1- Wood shaving mill with customer designed conveyor belt and cabling; 2 - 2019 5 ton FAW truck (approximately 53 000 km); 3 - Electric saw; 4 - Chain saw; and 5 - Spares and shaving knifes. The current owner uses a 12t/m Leyland crane truck of off-load the logs. This crane truck belongs to a friend of his, who is prepared to sell the truck at R55 000.00
Are any items not included in the sale?
All items are included in the sale.
What is their overall condition?
All equipment and the truck is in daily use and in good condition.
Do any require repairing?
Which assets are on lease/HP and with whom?
N/A - all assets are fully paid.
Are they presently insured?
The current owner does not have any business insurance other than third party insurance on the delivery truck. The truck also has a tracking device.
Easy to run business with low overheads. Low staff compliment. Repeat customers. Shavings is a necessity in the horse and chicken industry/farming. Very low working capital requirements. This is the most efficient shaving mill with the lowest labour input available in the market.
No marketing or advertising. The location of the business in proximity to its customer base.
The current wood shavings mill has the capacity to more than double existing production. Direct marketing and advertising. Social media. Proper planning of raw materials purchases and transport. Shavings is as essential to horses and chickens as toilet paper to humans. The processes can be streamlined, planning can be improved and headcount can be reduced with the right guidance and input from the new buyer.
Poor planning around lead times and available transport of raw materials (logs) from the low-veld to Gauteng.
What is the reason for the sale?
The Seller no longer has time to devote this business due the expansion in his other business interests.
Why is this a good business?
This is a good business because: 1 - It is easy to run; 2 - It has low overheads and a small staff compliment; 3 - Repeat customers; 4 - The product is a necessity; 5 - High demand for shavings; and 6 - Very little working capital required.
Annual Turnover Amount between R 500 thousand and R 6 million