BUSINESS PLAN ON DAIRY
FARM
Owner: Tahir Kasim
Address: Woreda: Agaro
Zone: Jimma
Region: Oromia
Country: Ethiopia
Qualification: BSc in Agribusiness and Value Management
Email: Tahirkasim10@Gmail.Com
Phone: +251977684566
Phone: +251923345749
Table contents
Contents
page
Table contents ............................................................................................................................. i
1. Company Overview ........................................................................................................... 1
2. Product or Service.............................................................................................................. 1
3. Market Potential................................................................................................................. 2
4. Customer Analysis ............................................................................................................. 3
5. Competitive Advantage...................................................................................................... 4
6. Management ...................................................................................................................... 4
7. Financial Highlight ............................................................................................................ 5
7.1
Recommended Major Labor & physical inputs ......................................................... 6
7.2
Operating cost............................................................................................................ 6
7.2.1 Depreciation schedule ........................................................................................... 7
7.3
Overhead Costs and Revenue .................................................................................... 7
7.3.1 Salaries & wages ................................................................................................... 7
7.3.2 Revenue projection ................................................................................................ 7
7.4
Fixed assets................................................................................................................ 8
7.5
Operating costs .......................................................................................................... 8
7.5.1 Working capital determination .............................................................................. 9
7.6
Projected Profit & Loss Statement ............................................................................ 9
7.7
Estimated Requirement Source of funds ................................................................... 9
7.7.1 Financial Requirements ......................................................................................... 9
7.7.2 Source of funds .................................................................................................... 10
7.8
Cash Flow Statement and Balance Sheet Statement ................................................ 10
7.8.1 Projected Cash Flow Statement ........................................................................... 10
7.8.2 Projected Balance Sheet Statement ......................................................................11
7.9
Financial Internal Rates of Return and Breakeven Analysis ................................... 12
7.9.1 Financial Internal Rates of Return ....................................................................... 12
7.9.2 Breakeven Analysis ............................................................................................. 12
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1. Company Overview
Occurrence malnutrition in Ethiopia particularly around my residence might
be common. Because of this many children were died in the past year. I think
that we can solve this problem with Agricultural mechanization like planting
dairy farm. I will proposed to build medium scale dairy farm Around Agaro,
Ethiopia.
Tahir dairy farm project selected as the sole proprietorship as it formal legal
entity. It private run business that ownership by Tahir Kasim. He will be
successfully conducted a milk and by product delivery business in Agaro town.
Dairy operation Our dairy operation is a conventional 8 cross breed cow dairy
farm producing approximately 403,200/birr of milk for an average per unit
animal production of 26,880liters milk per year.
Currently in Ethiopia fresh milk is not imported and exported. Hence,
domestic demand is supplied through local production. Because of this our
target customers will be local cafe and domestic consumers.
2. Product or Service
Tahir dairy farm will offer a wide service of quality milk, as well as it is by
product. Plain items on hand, and will be able to provide our customers with
various packing, just by before packing them on, prior to consumption or
re-heating. Milk is served at the counter, for Dairy Farm, or delivered to the
location indicated in our customer orders. We take orders online, by phone, or
at our location. The product are sealed and the packaging will allow our
customers to remove individual product from their freezers as they need them.
Thus, the customer will be able to pop them into a preheated oven (re-heat
instructions are included in the package), or deep-six them for later use. The
milk can be delivered not only refrigerated, but also hot, depending on
customer preference.
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3. Market Potential
Agaro area is a growing low to middle class area, counting more than fifty
thousand residents. There are about five hundred businesses close to our
location. Most of these residents are families of three or more. The average
income for the area is 100birr. Coffee production in the area is primarily in
response to new business and employment opportunities in the city Local
residents. Similar Dairy service businesses that traditionally do well with this
population have proved the potential for Tahir Dairy Farm With continued
growth in the area, opportunities to serve the Local residents will increase.
The company will sell to individuals, but it will also accept some occasional
catering jobs to individuals and companies in the area. We estimate that over
90 percent of our sales will go to individuals (retail customers) and the
remaining balance to existing and future businesses (corporate customers).
However, it is important to note that, typically, corporate customers make
larger orders for their employees' needs or special business events.
a) Individuals (retail customers) accounting for more than 90 percent of our
sales, and
b) Local businesses (corporate customers) which, in terms of purchase orders,
typically make larger orders for their employees and business needs.
c) Next illustration shows the market segmentation, taking into account, for
conservative purposes, only the potential number of individuals that would
order milk (about 100 thousand residents, or 10 percent of the population in
the city's area, plus 500 businesses), and less than 5 percent average growth
rate.
The current average retail price of milk powder is Birr 225 per pack of 900
gram. Producing the envisaged product in Ethiopia means the firm will be a
new entrant and needs to penetrate the market.
The price of raw cow milk in Agaro is approximately varies between birr
12.50 to 15.00 per liter. Thus, to be competitive the project gate price is
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proposed to be Birr 13 per liter. As to the distribution, the envisaged plant can
use wholesale and retail channels, which include café, restaurant and small
shops.
4. Customer Analysis
The Farm will focus on its target market, low to middle class residents in the
area, along with local businesses that are located inside or outside the Local.
As explained above, individuals (retail customers) accounting for more than
90 percent of our sales, and local businesses(corporate customers) which, in
terms of purchase orders, typically make larger orders for their employees and
business needs.
The demand for milk depends on many factors including consumer preference,
consumer’s income, population size, price of the product, price of substitutes
and other factors.
Our retail and corporate customers are especially sensitive to service value.
The Dairy Farm. must ensure that price and service are perceived to be a good
value to our customers. High quality product will be offered at a reasonable
price, but the price will certainly not be the lowest in the area. In the limited
service dairy industry, one message rings true: other competitor can always
beat you on price.
Therefore, our pricing strategy will be competitive within the various product
range, but will not rely on the selling price to overshadow other advantages of
doing business with our company, such as a diverse line of high quality milk
products, that are readily available, reasonably priced, and backed by service
excellence and on time delivery.
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5. Competitive Advantage
There are different private small scale farm and household farm competitor in
Agaro and whole woredas. At city level one small scale dairy farm and 39
small scale farm at woreda level. But this farm unit not actively produced milk
at sufficient quantity and quality. Due to this not strong completion between
them.
We distinguish ourselves from them by providing better quality milk at
reasonable prices, and delivering both fresh and special package refrigerated
milk to the customer door. Other differences are included in the next table.
Competitor
Private small scale farm
Household farm
We have, they don't
Skilled dairy staff, lower
price
better quality, specialized
products, better equipment
They have, we don't
Luxury environment, high
end customers
lower prices, table service,
various other food items
They can't be closed the gap because of, they haven't relevant knowledge of
dairy farm and concept of value chain.
6. Management
Our management is expected to use resource wisely, operate profitably and
abide by law and regulations. Tahir Kasim will be manager of farm. And he
graduated from Jimma University with associate degree in Agribusiness and
value chain management.
Tahir oversees the total dairy business operation, with daily responsibilities for
managing milking, milk house work, book keeping, and fieldwork. Other
assists with all farm responsibilities, with daily responsibilities for maintaining
herd health records, heifer raising, and fieldwork. No other employees work
on the farm at this time.
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The personal plan reflect the need to booster our capability to match our
position project farm, will have the following staff
Dairy farm manager → BSc
Barn worker skilled
Veterinarian→diploma
Pasture and worker→ skilled
The ultimate goal of all our employees is to meet or exceed our customers'
expectations. They are all empowered to take any reasonable action to avoid a
customer leaving our premises dissatisfied.
Our continuous improvement policy encourages all employees to continually
look for ways to keep updated with the latest technology, to improve processes,
reduce costs and save time. This approach serves the goal of reducing costs
and delivery times, and increasing the service quality and customer
satisfaction.
7. Financial Highlight
Assumptions used in the Financial Study
Total area
1000
2
Production area (m )
696
Types of production
Cow(no)
8
2
Crop(m )
600
Yield
Milk(liter/cow)
16
Forage(kg/m2)
10
Net production
Milk(liter/cow)
128
Forage(kg/m2)
6000
Price (Birr)
Milk( Liter/birr)
15.00
Forage
2.50
Revenue per production period
Milk
403,200
Forage
60,000
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7.1 Recommended Major Labor & physical inputs
Description
Production
Crop
Cow
Direct operating cost
Oxen, pump
Labour
Input
Sub total
Total
3780
8200
14,534
26,514
8,200
162,000
170,200
3780
16400
176,534
196,714
7.2 Operating cost
Description
1.
Oxen Operation
Ploughing –
Ridging/furrowing
Pump
Sub total
2.
Labor operation
Seed preparation
Fertilizing
Irrigation (watering)
Harvesting, bagging &
handling
Sub total
3.
Material inputs
Crop Seed
Cow
Fertilizer – NPS
Veterinary drug
Fuel
Subtotal
Total
Contingency (5%)
Grand total
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Unit
Quantity
Freq
Unit
cost
(Birr)
Total
cost
(Birr)
OXD
OXD
PD
5
3
1
1
1
12
150
150
200
750
450
2400
3600
MD
MD
MD
MD
2
2
2
30
45
1
12
1
50
50
50
50
4500
100
1200
1500
8200
Kg
No
Qt
Pc
Lit
15
8
5 20 30
6
10
150
20000 160,000
1500
7,500
100
2,000
12
19
6,840
176,490
188,290
9,415
197,705
7.2.1
Depreciation schedule
Description
1
2
3
4
5
Building
4800
4800
4800
4800
4800
Tools
203
203
203
203
203
Total
5003
5003
5003
5003
5003
5003
10,006
15,009
20,012
25,015
7.3 Overhead Costs and Revenue
7.3.1
Salaries & wages
Manager (1) @ Birr 2,500/month
Guard (2) @ Birr 1000/month
30000
24000
54000
1200
6000
600
1250
1200
8000
Utility: Birr 100/month
PTT: Birr 500/month
Repair & maintenance: 2% of the building
Protective device (5) @ Birr 250/Pc
Stationery: Birr 100/month
Land rent: Birr 8/m2
7.3.2
Revenue projection
Crop
Project years
1
2
3
4
5
Milk
604800
907200
1360800
2041200
3061800
Forage
90000
135000
202500
303750
455625
Total
694,800
1,042,200
1,563,300
2,344,950
3,517,425
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7.4 Fixed assets
Sr. No.
Item
Unit
Quantity
Unit
price
Total
M2
96
1000
96000
1
Building
1.1
Office & store
2
Tools
2.1
Spade
Pc
5
70
350
2.2
Doma
Pc
5
50
250
2.4
Watering can
Pc
5
50
250
2.5
Sprayer
Pc
2
400
800
2.6
Milk can
pc
8
100
800
2.7
Milk holding
pc
8
200
1600
Total
99,800
7.5 Operating costs
Sr. No.
Description
Project years
1
2
3
4
5
Oxen and pump operation
3780
4200
4666
5184
5760
Labour
16,400
18,222
20,247
22,497
24997
Inputs
176,534
196,149
217,943
242,159
269066
Land rent
8,000
8889
9877
10974
12193
Subtotal
204,714
227,460
252,733
269,840
312,016
Salary & wages
54000
54000
54000
54000
54000
Utility
1200
1200
1200
1200
1200
PTT
6000
6000
6000
6000
6000
Protective device
1250
1250
1250
1250
1250
Stationery
1200
1200
1200
1200
1200
Subtotal
63650
63650
63650
63650
63650
Total
268,364
291,110
316,383
333,490
375,666
Direct operating cost
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7.5.1
Working capital determination
Description
Requirement
Months
Project years
1
2
3
4
5
Oxen and pump operation
50%
1890
2100
2333
2592
2880
Labour
50%
8200
9111
10124
11249
12499
Inputs
100%
88267
98075
108972
121080
134533
Land rent
100%
8000
8889
9877
10974
12193
Salary & wages
50%
27000
27000
27000
27000
27000
Utility
50%
600
600
600
600
600
PTT
50%
3000
3000
3000
3000
3000
Protective device
50%
625
625
625
625
625
Stationery
50%
600
600
600
600
600
Total
138,182
150,000
163,131
177,720
193,930
Incremental working capital
138,182
11818
13131
14589
16210
7.6 Projected Profit & Loss Statement
Projected Profit & Loss Statement (Birr)
For the Years Ending Jun 30, ---Description
Project Years
1
2
3
4
5
Gross revenue
694,800
1,042,200
1,563,300
2,344,950
3,517,425
Less operating cost
268,364
291,110
316,383
333,490
375,666
Income before interest
426,436
751,090
1,246,917
2,011,460
3,141,759
7750
7750
7750
7750
Interest
7750
Profit before tax
418,686
743,340
1,239,167
2,003,710
3,134,009
Tax (2%)
8374
14,867
24,783
40,074
62,620
Net income
410,312
728,473
1,214,384
1,963,636
3,071,389
7.7 Estimated Requirement Source of funds
7.7.1
Financial Requirements
S.No
1
2
Description
Fixed Assets
Building
96,000
Tools
4050
Subtotal
100,050
Working Capital
138,182
Total
238,232
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7.7.2
Source of funds
Description
Amount (birr)
Owners’ Equity
38,232
Bank Loan
200,000
Grant
-
Total Allocation
238,232
7.8 Cash Flow Statement and Balance Sheet Statement
7.8.1
Projected Cash Flow Statement
Projected Cash Flow Statement (Birr)
For the year ending June 30, 20___
Description
Project Years
0
1
2
3
4
5
Cash Inflows
Owner's Equity
38,232
238,232
569,723
1,218,062
2,350,854
4,231,281
Loan
200,000
-
-
-
-
-
410,312
728,473
1,214,384
1,963,636
3,071,389
238,232
648,544
1,298,196
2,432,446
4,314,494
7,302,670
Investment on Fixed Assets
100,050
-
-
-
-
-
Pre-production cost
-
-
-
-
-
-
Increase in Working Capital
138,182
11818
13131
14589
16210
-
Loan Repayment
-
62000
62000
62000
62000
-
Depreciation
-
5003
5003
5003
5003
5003
Total Cash Outflows
238,232
78,821
80,134
81,592
83,213
5003
Net Cash Flow
238,232
569,723
1,218,062
2,350,854
4,231,281
7,297,667
Cumulative Cash Balance
0
569,723
1,787,785
4,138,639
8,369,920
15,667,587
Net Profit
Total Cash Inflows
Cash Outflows
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7.8.2
Projected Balance Sheet Statement
Projected Balance Sheet Statement (Birr)
As at June 30, ---DESCRIPTION
Y E A R
S
0
1
2
3
4
5
Cash
0
569,723
1,787,785
4,138,639
8,369,920
15,667,587
Inventory
138,182
150,000
163,131
177,720
193,930
193,930
Total Current Assets
138,182
719,723
1,950,916
4,316,359
8,563,850
15,861,517
Building
96,000
96000
96000
96000
96000
96000
Farm tools
4050
4050
4050
4050
4050
4050
Total Fixed Assets
100,050
100050
100050
100050
100050
100050
5003
10,006
15,009
20,012
25,015
ASSETS
CURRENT ASSETS
FIXED ASSETS
Less: Depreciation
Net Fixed Assets
100,050
95,047
90,044
85,041
80,038
75,035
Total Assets
238,232
814,770
2,0409,60
4,401,400
8,643,888
15,936,606
-
-
-
-
-
-
Owner's Equity
38,232
238,232
569,723
1,218,062
2,350,854
Bank loan
200,000
200,000
200,000
200,000
200,000
200,000
Retained Earnings
-
410,312
1,138,785
2,353,169
4,316,805
7,388,194
Sub total
238,232
848,544
1,908,508
3,771,231
6,867,659
11,819,475
Total Liabilities and Capital
238,232
848,544
1,908,508
3,771,231
6,867,659
11,819,475
LIABILITIES & Capital
LIABILITIES
CAPITAL
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4,231,281
7.9 Financial Internal Rates of Return and Breakeven Analysis
7.9.1
Financial Internal Rates of Return
Computation of Financial Internal Rates of Return (Birr)
For the Years Ending June 30, ----Proje
ct
Years
Revenue
Fixed
Asset
Recover
y
Workin
g
Capital
Recove
ry
0
Total
Benefits
Fixed
assets
0
100,050
Operating
Costs
Total
Costs
Excludin
g Income
Tax
Net
Benefit
Before
Tax
100,050
(100,050)
Incom
e Tax
Net
Benefit
After Tax
(100,050)
1
694,800
694,800
268,364
268,364
426,436
8374
418,062
2
1,042,200
1,042,200
291,110
291,110
751,090
14,867
736,223
3
1,563,300
1,563,300
316,383
316,383
1,246,917
24,783
1,222,134
4
2,344,950
2,344,950
333,490
333,490
2,011,460
40,074
1,971,386
5
3,517,425
3,786,390
375,666
375,666
3,410724
62,620
3,348,104
75,035
193,930
FIRR before tax
498%
FIRR after tax
490%
NPV at 10%
3,683,885
7.9.2
Breakeven Analysis
Fixed cost
Depreciation
5,003
Fixed operating costs
63,650
Total fixed costs
68,653
Variable costs
312,016
Variable cost/unit (Birr)
31201.6
Annual total revenue
3,517,425
Average unit price (Birr)
351742.5
Breakeven point (BEP) = Fixed costs÷ (Unit price-variable cost per unit)
= 0.21
Units
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