1. Scenario Planning Framework
Scenario planning involves modeling different potential futures based on key variables such as market prices, resin yield, operational costs, and product mix.
A. Key Variables
| Variable | Description | Impact on ROI |
|---|---|---|
| Resin Yield per Tree | Low, Medium, High (kg/tree/year) | Directly affects chip/oil revenue |
| Oil Extraction Efficiency | % of oil obtained from chips | Higher efficiency → higher luxury revenue |
| Market Prices | Domestic vs export pricing, luxury vs standard grade | Determines revenue potential |
| Plantation Size | Area in hectares or number of trees | Affects economies of scale |
| Operational Costs | Labor, inputs, packaging, logistics | Affects net cash flow and profitability |
| Product Mix | Chips, oil, incense, candles, beads, perfumes | Determines revenue diversification and margins |
| Time to First Harvest | Years until resin formation | Affects breakeven timing |
B. Example Scenarios
- Optimistic Scenario
- High resin yield, premium oil extraction, strong export demand
- Product mix favors high-margin luxury oils and artisanal products
- Early breakeven (~4–5 years), high ROI (>25% annually)
- Moderate / Base Scenario
- Average resin yield, mix of chips and some oil extraction
- Balanced domestic + export sales
- Breakeven around Year 6, ROI ~15–20%
- Pessimistic Scenario
- Low resin yield, market price drops, high operational costs
- Reliance on lower-grade chips or incense
- Breakeven delayed to Year 7+, ROI <10%, cash flow strain
2. ROI Modeling for Plantation & Products
ROI modeling quantifies financial returns on investment across different scenarios.
A. ROI Formula
[
ROI (%) = \frac{\text{Net Profit over Investment Period}}{\text{Total Capital Invested}} \times 100
]
B. Sample ROI Calculation (5-Year Horizon)
| Scenario | Capital Invested | Total Revenue | Total Costs | Net Profit | ROI (%) |
|---|---|---|---|---|---|
| Optimistic | $100,000 | $500,000 | $200,000 | $300,000 | 300% |
| Base | $100,000 | $300,000 | $200,000 | $100,000 | 100% |
| Pessimistic | $100,000 | $200,000 | $180,000 | $20,000 | 20% |
Notes:
- ROI depends heavily on resin yield, oil extraction efficiency, and product pricing.
- High-margin products like premium oil and luxury perfumery significantly improve ROI.
C. Cash Flow Modeling
- Include annual inflows/outflows per product to estimate breakeven and liquidity.
- Apply discounted cash flow (DCF) for present value analysis if investor funding is used.
- Factor pre-sales or contracts to reduce uncertainty.
3. Sensitivity Analysis
Identify variables with the greatest impact on ROI:
- Resin yield per tree: ±20% change → large revenue swing.
- Oil extraction rate: ±10% → luxury revenue impact.
- Market price volatility: ±30% → affects total revenue projections.
- Operational costs: ±15% → affects net profit but less sensitive than yield/price.
This helps prioritize management focus and risk mitigation.
4. Strategic Insights
- Diversify products: chips + oil + luxury items + artisanal → reduces dependency on one revenue stream.
- Phase plantation expansion to match cash flow and reduce upfront capital risk.
- Invest in value-added processing (oil, perfumery, artisanal products) for higher ROI.
- Use scenario and sensitivity analysis for investor presentations to show risk-adjusted returns.