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 We have, they don't They have, we don't

Private small scale farm Skilled dairy staff, lower Luxury environment, high
price end customers
Household farm better quality, specialized lower prices, table service,
products, better equipment 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
Production area (m2) 696
Types of production
Cow(no) 8
Crop(m2) 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
Cow Crop Total
Direct operating cost
Oxen, pump 3780 3780
Labour 8,200 8200 16400
Input 162,000 14,534 176,534
Sub total 170,200 26,514 196,714

7.2 Operating cost

Description Unit Quantity Freq Unit Total
cost cost
(Birr) (Birr)
1. Oxen Operation
Ploughing – OXD 5 1 150 750
Ridging/furrowing OXD 3 1 150 450
Pump PD 1 12 200 2400
Sub total 3600
2. Labor operation
Seed preparation MD 2 45 50 4500
Fertilizing MD 2 1 50 100
Irrigation (watering) MD 2 12 50 1200
Harvesting, bagging & MD 30 1 50 1500
handling
Sub total 8200
3. Material inputs
Crop Seed Kg 15 10 150
Cow No 8 20000 160,000
Fertilizer – NPS Qt 5 - 1500 7,500
Veterinary drug Pc 20 - 100 2,000
Fuel Lit 30 12 19 6,840
Subtotal 176,490
Total 188,290
Contingency (5%) 9,415
Grand total 197,705

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 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 30000

Guard (2) @ Birr 1000/month 24000
54000
Utility: Birr 100/month 1200
PTT: Birr 500/month 6000
Repair & maintenance: 2% of the building 600
Protective device (5) @ Birr 250/Pc 1250
Stationery: Birr 100/month 1200
Land rent: Birr 8/m2 8000

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 Total
price
1 Building
1.1 Office & store M2 96 1000 96000
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
Direct operating cost
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

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 7.5.1 Working capital determination

Description Requirement Project years

Months 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
Interest 7750 7750 7750 7750 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 Description
1 Fixed Assets
Building 96,000
Tools 4050
Subtotal 100,050
2 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 - - - - -
Net Profit 410,312 728,473 1,214,384 1,963,636 3,071,389
Total Cash Inflows 238,232 648,544 1,298,196 2,432,446 4,314,494 7,302,670
Cash Outflows
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

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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
ASSETS
CURRENT ASSETS
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
FIXED ASSETS
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
Less: Depreciation 5003 10,006 15,009 20,012 25,015
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
LIABILITIES & Capital
LIABILITIES - - - - - -
CAPITAL
Owner's Equity 38,232 238,232 569,723 1,218,062 2,350,854 4,231,281
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

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 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 Revenue Fixed Workin Total Fixed Operating Total Net Incom Net
ct Asset g Benefits assets Costs Costs Benefit e Tax Benefit
Years Recover Capital Excludin Before After Tax
y Recove g Income Tax
ry Tax
0 0 100,050 100,050 (100,050) (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 75,035 193,930 3,786,390 375,666 375,666 3,410724 62,620 3,348,104

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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