DEPARTMENT OF SCIENCE AND MATHEMATICS EDUCATION

COURSE TITLE : ENTREPRENEURSHIP AND BUSINESS DEVELOPMENT

COURSE CODE : MGMT 102

BUSINESS PLAN TITLE : ETHIO LOVE SMALL SCALE DAIRY ENTERPRISE

Submitted To: Dr.Zelalem

Submission Date : July,2022 G.C

ETHIO LOVE DAIRY Page I

TABLE CONTENTS page

INTRODUCTION................................................................................................................III

1. EXECUTIVE SUMMARY...........................................................................................1

2. BUSINESS DESCRIPTION........................................................................................1

2.1. Product description..............................................................................................2

2.2. Overview of the livestock sub-sector...................................................................2

2.3. Base and significance of the project....................................................................2

2.4 Project area.............................................................................................................3

3. MARKET ANALYSIS...................................................................................................3

3.1. Demand...................................................................................................................3

3.2. Opportunities...........................................................................................................3

3.3. Threats and their solutions.....................................................................................4

4. TECHNICAL FEASIBILITY...........................................................................................8

5. SUPPLY ANALYSIS......................................................................................................8

6, Production process......................................................................................................9

7, Marketing plan..............................................................................................................9

8, Pricing and distribution strategy.................................................................................9

9, COMPETITIVE ANALYSIS.............................................................................................10

10, FINANCIAL FEASIBILITY...........................................................................................11

11, ORGANIZATIONAL FEASIBILITY..............................................................................15

13. CONCLUSION........................................................................................................... 16

14. APPENDIX..................................................................................................................17

ETHIO LOVE DAIRY Page II

 1. INTRODUCTION PAGE

Name of the business; “ETHIO LOVE SMALL SCALED DIARY PRODUCT”.

Location; CNCS campus, Addis Ababa University, Addis Ababa, Ethiopia.

Legal form of the business; partnership.

E-mail address; Ethiolovediary@gmail.com

Type of project SMALL SCALE DAIRY PROJECT

Name of project ETHIO LOVE SMALL SCALE DAIRY ENTERPRISE

Project owner SECOND YEAR STUDENT'S AAU UNIVERSITY

location: AAU University

Project address Bishoftu City East of Oromia National Regional State.

ETHIO LOVE DAIRY Page III

1. EXECUTIVE SUMMARY

This project is proposed to establish small scale commercial dairy farm with annual production
capacity of 55,000 liters of milk. The current demand for milk and other dairy products is
estimated to be about 23.38 million tons at the national level and this demand is projected to
reach 33.89 million tons in the year 2024.

Initial stocks of 25 cross-breed dairy cows are assumed to be included in the start-up stage of the
project. From these animals, 15 will be lactating cows and the rest 10 will be pregnant heifers
purchased based on their milk production potential, disease resistance capability and agro-
ecological adaptation.

The project is supposed to be established in Bishoftu city of East Hararge zone in the Oromia
National Regional State on five hectares of land from which two hectares will be covered by
construction, other two hectares will be used for animal fodder production and the rest one
hectare will be occasional grazing area for the farm cows.

The total capital required for establishment of this project is birr 650,000. From this capital, the
20% (birr 130,000) will be contributed by the project members saving account while the 80%
(birr 520,000) is assumed to be gained from the bank in the form of long-term loan for five years
at 10% annual interest rate.

The project considers various opportunities and threats that determine the future success or
failure of the firm. Suitable climatic conditions, better infrastructure, availability of animal feed
at lower cost, plenty of all-weather and dry-weather roads and increased demand and market
value of milk and other dairy products are among the opportunities. The competition from other
nearby dairy farms, seasonal fall in the price of milk and lack of quick response from the
responsible government body are some of the proposed threats.

The annual income generated by this project in the first year is estimated to be about 1,345,680
birr and this is assumed to increase by 12.5% in the second year and to double it in the
subsequent years.

2. BUSINESS DESCRIPTION

Description of the business here deals about the products generated by the project and the
livestock sub-sector this project will be operating.

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2.1. Product description

The products assumed to be produced by the project include raw milk, cheese, butter and cream.
Milk is one of the most important agricultural commodities produced in the country. It is a
traditional component of the Ethiopian diet. From nutritional point of view milk provides the
nation with basic food containing all essential ingredients (carbohydrates, proteins, fats, minerals
and vitamins) to promote and maintain life.

2.2. Overview of the livestock sub-sector

Ethiopia takes the lead in its livestock population from the rest of African countries with an
estimated livestock population of 53.9 million cattle, 25.4 million sheep, 24.06 million goats and
0.9 million camels on which dairy production is based (CSA 2012/13) excluding the livestock
population of the three zones of Afar and six zones of Somali regions. Although our livestock
population is numerically huge, the production of milk and milk products is very low as
compared to the number of animals and productivity level seen in our nearby countries like
Kenya and Somalia. This low production is due to various diseases challenges, inadequate
nutrition, lack of support services like extension, lack of information on how to improve animal
production systems and keeping animals for status. Currently, a number of dairy farms are
established in different parts of the country but most of these farms are concentrated in and
around the regional towns and the capital cities.

The need for milk and milk products in zonal and woreda level is still higher. Therefore,
expansion of dairy farms to the lower level is mandatory and milk and milk products as well as
productivity of farms have to be increased through the introduction of cross- breed dairy cows to
balance the demand and the supply. As a result, the establishment of this dairy project is based
on the following objectives.

 To introduce high milk producing cross-breed dairy cows to the society.

 To improve the health status of the community through presenting quality milk and milk
products.
 To be a model dairy farm for training the local people on animal husbandry practices.
 To enhance the project capital as well as the national economy.
 To create job opportunities for the project area people.

2.3. Base and significance of the project

Currently, modern dairy production systems are gaining higher emphasis both from the society
and from the government. This contributes for the increase in the number of dairy farms from
year to year indicating that the current market needs improved animals both in type and quality
in addition to their quantity. Hence, viewing these aspects, this small scale dairy project is

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prepared to establish modern dairy farm in Bishoftu town and it will have the following
advantages.

 It supports the government’s poverty reduction programs through creating new areas of
employment and reducing joblessness.
 Payments from income tax and selling tax help the development of the woreda where the
project is established.
 It will become an educational ground for improved dairy cattle management practices
(feeding, health care and environmental hygiene) in the project area.

2.4 Project area

This small scale dairy project will be established in Bishoftu city of East shewa Zone in Oromia
National Regional State. It is found about 61.9km from capital city Addis Ababa in the south east
direction.

The city has ample dry- weather and all-weather roads connecting it with the Regional and the
National markets. Surface water is in excess and the potential to get under ground water is high.
Telephone access necessary for market information and electricity important for increasing the
shelf- life of milk and milk products are also other facilities available in the city.

3. MARKET ANALYSIS

Market analysis deals about the market demand for milk, the competitive situation in the dairy
industry and the demand gap remained to be fulfilled.

3.1. Demand

According to the Food and Agricultural Organization, the total milk production of Ethiopia in the
year 2013 was about 1.5 million tones. The total national demand of milk by the same year was
about 4.86 million tones. This indicates that about 3.36 million tones of milk demand gap occurs
in the national population. The demand is assumed to grow parallel with the growth of the
population. Currently 2.9% growth rate is used to project the future demand. Therefore, the
entrance of this project in to the dairy industry will have great role to narrow the demand gap.

3.2. Opportunities

This project has many opportunities. The climatic condition of the city is suitable for adaptation
and productivity of dairy cows. In addition, the presence of animal feed at a lower cost, the
presence of well established infrastructure, availability of industrial by products at nearby places
and the increased demand and market value of milk and other dairy products (butter, cheese and
cream) are some of the opportunities for the project. Now, not as before city has also relative
peace and stability important to run day to day activities without interruption and the investment
policy of the city is conductive.

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3.3. Threats and their solutions

The required land area and government support are mandatory for the establishment and growth
of this project. These conditions have to be considered by the responsible government body so
that the project will be established based on the proposed time schedule.

The competition from nearby farms may be another challenge for this project but this can be
solved by slight reduction the price per liter of milk and by producing value added products.

4. TECHNICAL FEASIBILITY

Technical feasibility describes the degree of newness of the project idea or the availability of
technological facilities and man power capable of operating in the project. Rearing of dairy
cows, milk production and milking have been practiced traditionally for many years ago in
Ethiopia. Hence, the practice is not new and it does not require highly skilled man power and
sophisticated materials as compared to other business areas.

What is required from this project is conversion of the usual traditional production system in to
improved, designed and modern production methods. The main areas of technical practice in
dairy sector include feeding, milking, storing, processing, packing and transporting areas. The
technical gaps that will occur in such areas will be solved by short-term and long- term trainings
provided by the agricultural officers before the start-up of the project works. The milk processing
machine and packing materials can be produced domestically. Therefore, milk production is
possible using domestic technology and labor and does not require the hiring of foreign experts
or the introduction of equipments from foreign countries, hence it is technically feasible.

5. SUPPLY ANALYSIS

The supplies of this proposal refer the inputs required for successful establishment and continuity
of the project. The main inputs for milk production include different types of feeds, replacement
dairy cows, man power (labor), water and electricity. Some types of animal feeds like alfalfa and
elephant grass will be grown in the project site while others like grains and concentrates will be
purchased from nearby markets, agricultural areas and factories. Those feeds will be collected
during periods of excess feed supply to prevent seasonal shortage.

Dairy cows will be purchased at the initial stage of this project establishment but in subsequent
years, female calves delivered in the project site will replace the death or the senility of
previously purchased cows. Hence, no difficulty will occur in the supply of dairy cows.

The water and electricity supplies will be kept constant through discussion with the respective
officers but the project will extract underground water and will also generate bio-gas from cow

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dung to solve problems of water shortage and power interruption. Therefore, this project will not
face much difficulty in supply situation.

6, Production process

After the construction and establishment of the farm including buildings, farm structures and
fodder production, lactating cows and pregnant heifers will be purchased from the reliable
suppliers based on their production level, diseases resistance ability and environmental
adaptation. Initial stock of cross- breeds of ten lactating cows and ten pregnant heifers are
considered. These twenty dairy cows are assumed to produce about 200 liters of milk per day.

The milk will be taken directly from the milking parlor with pipeline to a cooling tank for
temporary storage and processed immediately. One percent of the fat content is separated and
chilled in a cold store. Then cream is either churned to butter or sold as it is depending on the
availability local market. After cream separation process, milk is filtered and sealed with plastic
bags or bottled and distributed to the market.

Ethio love small scale diary’s products will be:

 Milk: liquid milk sales will account for 70% sale of our products. because, it is
most widely usually in the area and easy for sale.
 Cheese : from our major products it only will account for 10% of our product.
 Butter: this product will account for 10%
 Cream: this product will account for 10%

7, Marketing plan

Local market sale:

The sale of Ethio love small scale dairy products into the local retail market produces the highest
net worth of sales in business. Marketing will therefore concentrate on gaining a higher
percentage of the available local dairy market.

Our customers can easily purchase our product via:

 Our selling shops

 Door to door
 Agents &many more

8, Pricing and distribution strategy

Milk is highly perishable in nature that is difficult to transport it and there by exploit the market
at a wide geographical coverage. Thus, considering the nature of the product, it was found more
appropriate to relay on the regional markets rather than the national market.
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Therefore the milk produced by this project will be sold directly to the consumers in the nearby
towns or it will be processed in to butter, cheese and cream by the milk processing machine
depending on the season. Up on the selling of milk and milk products of this project, the price
will depend on the local market.

The marketing of Ethio love small scale dairy farm fall into three main categories;

 online advertising,
-Using websites i.e. specialized web site, organizational websites, personal
websites, E-mail marketing.
 Offline
- Print media,(news ,papers, magazine),…etc
 word of mouth marketing
- Friends and family discount, referrals, discount offers special order or purchase…
etc.

9, COMPETITIVE ANALYSIS

Modern Dairy Farm business is well known and has good profit in other place. specially,
Regional Towns and Capital city. But, in our area it is not recognized this much. Even if there is
no known Dairy Farm processing in this area, there are some competitors’ who competes with us.

√ Our direct competitor's area are :-

1. Bisidimo Hospital

2. waldaa Aannanii Afran Qaalloo

√ Our indirect competitors are :-

individual Farmers nearby town

The strength of our competitors is that they have high initial capital and also have enough man
power. In addition, they have enough space for producing large number of dairy products.

Their weakness

 They provide poor quality

 Their service of time is limited
 They do not respect their customers

9.1 Competitive Advantage

The competitive advantages of our business are listed in the following manner;

 We provide quality milk and it's product for our customers better than our competitors

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  Our business entertain customers who are in different age level
 It address customers need with lower price
 Proximity to suppliers
 Initiated workers

10, FINANCIAL FEASIBILITY

It refers to how much initial capital is required for the establishment of this dairy project, the
source of the capital and repayment schedule.

10.1. Project capital requirement

The total initial capital required for this project is birr 650,000. From this the twenty percent (birr
120,000) is contributed from the project members i.e, saving account and the rest eighty percent
(birr 530,000) will be gained from government loan at ten percent interest rate for five years.
This analysis is done by summing up the costs required for project inputs including building cost,
manpower cost, feed cost, field and office equipments’ cost, costs of animal purchase (dairy
cows), repair and maintenance cost, depreciation cost and insurance cost.

10.1.1. Building cost

The project will construct separate buildings for milking cows, pregnant heifers, calves, feed
store and mixing, milk store and processing and offices and rest rooms.

Table 1. Building cost

Ns Building type Need Unit cost (birr) Total cost

1 Cow house (milking cows) 1 12,000 12,000

2 Heifers house 1 10,000 10,000

3 Calves house 3 10,000 30,000

4 Feed store and mixing 1 8,000 8,000

5 Milk store and processing 1 8,000 8,000

6 Office and rest rooms 4 6000 24,000

7 Sub total 11 _ 92,000

10.1.2. Man power costs

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This refers to the costs for personnel employed by the project. Managers, animal health
professionals, production experts, milkers, pasture area workers, sanitarians, guards, milk
processing plant workers and sales man are the required personnel of this project. They will be
hired based on their academic rank and experience following the rules and regulations of the
government.

Table 2. Man power cost

No Man power Need Academic rank Monthly Annual salary

salary (birr)

1 Veterinarian 1 10+3 1,500 18,000

2 Production expert 1 10+3 1,200 14,400

3 Manager 1 10+3 1700 20,400

4 Sales man 1 10+3 1200 14,400

5 Milk processing plant 2 10+3 1,500 36,000

workers

6 Milker 4 Completed Grade 10 600 28800

7 Sanitarian 1 Completed Grade 10 600 7,200

8 Pasture area workers 2 Completed grade 6 500 12,000

9 Guard 1 Completed grade 6 500

Sub total 14 _ 9300 157,200

10.1.3. Feed cost

A cow is assumed to consume 1.5 kgs of mixed feed per day and the monthly and annual feed
requirements are calculated by multiplying the daily requirement for twenty cows by thirty and
then by twelve respectively.

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Table 3. Feed cost

No Number of cows Daily feed requirement per Monthly feed Annual feed
cow requirement requirement

1 20 1.5kg 900kg's 10,800kg's

2 Feed cost (birr) 5 birr per kg 4,500birr 54,000birr

10.1.4. Field and Office Equipments and machines

This includes costs for furniture, sanitizers (soaps), field bags and clothes.

Table 4. Costs for equipements and machines

No Equipment Requirements Unit cost(birr) Total cost(birr)

1 Tables 4 140 560

2 Chairs 6 100 600

3 Shelves 3 400 1200

4 Sanitizers, field bags and rain _ _ 4000

clothes

5 Machines(cooling and milk 2 10,000 20,000

processing machine)

Sub total 13 _ 26,360

10.1.5. Costs for Animal purchase

This includes the costs budgeted for purchase of ten lactating cows and ten pregnant heifers at
the start-up stage of the project.

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Table 5. Animal purchase cost

No Animal type Number of Unit cost(birr) Total cost(birr)

Animal

1 Lactating caw 10 12,000 120,000

2 Pregnant heifers 10 10,000 100,000

Sub total 20 _ 220,000

10.1.6. Repair and maintenance cost

The costs required for repair and maintenance of buildings, equipments and milk processing
machine.

Table 6. Costs for repair and maintenance

No Item Total cost Rate(%) Repair and maintenance cost(birr)

1 Building 92000 7% 6440

2 Equipments and 26,360 5% 1318

Machines

Sub total 118360 7758

10.1.7. Depreciation cost

The financial losses that occur due to wear and tear or obslation of assets are described under this
title.

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 Table 7. Depriciation cost

SN Item Total cost Rate Depreciation cost(br)

1 Buildings 92000 5% 4600

2 Equipments & machines 26360 10% 2636

sub total 118360 - 7236

10.1.8. Insurance cost

This describes the amount of money required for guarantee of losses of fixed assets. It is
calculated by multiplying the rate of insurance payment by the total cost for fixed assets.

No Asset type Total cost Rate(%) Insurance cost(birr)

1 Building 92,000 1% 920

2 Dairy caws 220,000 1% 2,200

3 Milk processing and cooling 26,360 1% 263.6

machine

Sub total 338,360 _ 3383.6

Table 8. Insurance cost

10.1.9. Other costs

The costs for medication of dairy cows, animal feed and milk transport costs, costs for water and
electricity and costs for license permission are included under this title.

Table 9. Other costs

No Cost class Monthly expense(birr) Annual expense

(birr)

1 Medication cost 200 2400

2 Transport cost 500 6000

3 Lisence permission 600 600

4 Water and Electricity 300 3600

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5 Advertisement 400 4,800

sub total _ 17,400

Summary of Total Project Capital Required

Table 10. Total project capital

No Cost class Cost in birr

1 Building 92000

2 Man power 157,200

3 Feed cost 54,000

4 Field and office Equipments and machines 26,360

5 Animals purchase 220,000

6 Repair and Maintenance 7,758

7 Depreciation 7236

8 Insurance 3383.6

9 Other costs 17,400

10 Reserve capital 20,000

Sum total 563,000

10.2. Cash flow statement

10.2.1. Cash inflow

Cash inflow refers to the amount of money generated by this project in annual bases. The income
of this project is assumed to increase by 10% in the first two years but for the next three years, it
is assumed to double itself. The milk produced by the project cows is the main source for this
income but male calves, organic manure (cow dung), cheese, butter,and cream can also be
sources of income. The income from milk is calculated based on lactation period of the cows.
The average lactation period for a cross breed cow is estimated to be 270 days per year pre
calving.

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Table 11. Cash inflow

No Income source Number of Daily out put Unit Daily Annual

animals Selling income income (270
price days)

1 Milk 20 12 lit per cow per 12 per lit 2880birr 777600birr

day (20*12 lit
=240 lit per day)

2 Selling of 10 _ 8,000 _ 80,000birr

growing male
calves

3 Organic manure 20 3kgs per cow per 3 birr per 180birr 65,700birr
(cow dung) day (20*3kgs kg
=60kgs per day)

4 Cheese 8kg 14birr/kg 112birr 30,240birr

5 Butter 7kg 20birr/kg 140birr 37,800birr

6 Cream 8kg 25birr/kh 200birr 54,000birr

7 Total annual 1114340bir

income (year 1)
(2020/21)

Year 2(2021/22) 1301530

Year 3(2022/23) 2183060

Year 4(2023/24) 4366120

Year 5(2024/25) 8732240

10.2.2. Cash out flow

Cash out flow describes the annual or monthly expenditures of the project for different farm
components.

Table 12. Cash outflow

No Expense class Year 1 Year 2 Year 3 Year 4 Year 5

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 (2020/21) (2021/22) (2022/23) (2023/24) (2024/25)

1 Selling tax (2%) 14466 1592.6 31825.2 31825.2 31825.2

2 Income tax (20) 168460 185306 370612 370612 370612

3 Interest (10%) 39060 31248 101556 93744 85932

4 Production cost 498210 548031 602834.1 663117.5 729429.25

5 Maintenance cost 7758 7758 7758 7758 7758

6 Depreciation cost 7236 7236 7236 7236 7236

7 Insurance cost 3383 3383 3383 3383 3383

Total 738573 784554.6 1125204.3 1177675.7 1236175.45

10.3. Income statement

Income statement compares the revenue generated by the project and the money expended from
the project to calculate the annual benefit gained. It is calculated by subtracting the annual cash
out flow from the annual cash inflow as follows.

Projected annual profit = projected annual cash inflow – projected cash out flow

Table 13. Income Statement

No cash statement Year 1 Year 2 Year 3 Year 4 Year 5

(2022/23) (2023/24) (2024/25) (2025/26) (2026/27)

1 Annual cash 1,345,680 1,603,530 2,183,060 4,366,120 8,732,140

inflow (birr)

2 Annual cash 738,573 784,554.6 1125,204.3 1,177,675.7 1,236,175.45

outflow (birr)

3 Annual profit 375,767 516,975.4 1,057,855.7 3,188,444.3 7,495,964.55

(birr)

10.4. Balance sheet

Balance sheet compares the amount of project capital covered by equity and the amount of
capital gained from bank in the form of long term loan (debt). The financial position of this

14
project is estimated to increase from year to year and the amount of money gained from loan is
assumed to decrease significantly as shown in the following table.

Table 14. Balance sheet

No Share Year 1 Year 2 Year 3 Year 4 Year 5

(2022/23) (2023/24) (2024/25) (2025/26) (26/27)

1 Equity 112600 253727 306975 1057855 3188444

2 Debt 450,400 312480 234360 156240 78120

3 Equity to Debt ratio 0.25 0.812 1.30 6.77 40.812

As shown in the above table, the project will cover half of the annual expenses in the 3rd year.
After the 3rd year, the amount money from loan decreases gradually and the project approaches
to freedom from loan.

10.5. Funding return schedule

From the total capital required ( 563,000 birr), 80% (birr 450,400) will be gained from the bank
loan for 5 years at 10% interest rate and it will be repaid in the 5 years by the following schedule.

Table 15. Repayment Schedule

Year Principal repayment Interest repayment Total repayment Un repaid capital

(10%)

0 450,400

1 90,080 45040 135,120 315,280

2 90,080 31528 121,608 193,682

3 90,080 19368.2 109,448.2 84233.8

4 90,080 8423.38 98,503.38 78120

5 90,080 7812 97092 0

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 11, ORGANIZATIONAL FEASIBILITY

Organizational feasibility describes about the structure of the project, the management team and
their background.

11.1. Organizational structure

This project will mainly be led by the founders (Biniyam Muluken, Kelemu Demeke and
Tegared Belete) but employers of financial administration will be included in the management
team. The management team is responsible to minimize personal as well as business risks as
much as possible. Conductive interpersonal relationship has to be created between the
managerial team and the employees and between the employees to maintain initiative staff
interaction. Appropriate incentive mechanisms should also be there to improve the desire for
working.

Organization Staff responsibility and qualification

General Manager Biniyam Muluken

Personnel Manager Addisu Akalu
production manager Ashagire Elias
Finance Manager Edengenet Yohannes
Marketing Manager Tegared Belete

Figure 1. Organizational Structure

General Manager

personal manager marketing manager milker sales person

finance manager veterinarian

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12.2. Management team and its back ground

Members of the management team of this project are currently (2014 E.C) students of higher
educational levels and they will be graduated in 2018 E.C from the different institution by Art of
management, Human Resource management and Agricultural Economics. Therefore, we hope
that the management team is fit for the project and they it will add values to the society and even
beyond the our countries.

13. CONCLUSION

As indicated by the above analytical steps of income statement and the balance sheet, this project
named “ETHIO LOVE SMALL SCALE DAIRY ENTERPRISE” is supposed to be profitable
and the daily, monthly and annual revenue generated from presenting milk and other dairy
product (butter, cheese and cream) is assumed to increase from year to year. The market,
financial, technical as well as organizational aspects are also shown to be feasible.

Therefore, both the responsible government body and the project owners have to do pre-
operational works including the arrangement and hiring of required man power, getting license
and provision of capital loan and required land area as soon as possible so that establishment of
the project will be realized according to the budgeted capital and the proposed time schedule.

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14. APPENDIXES

Project Managers – Biniyam Muluken, Tegared Belete and other four students

Position ---Students at Addis Ababa University

Current address ---ADDIS ABABA UNIVERSITY, CNCS

Form of organization--- Partnership

Registration--- on progress from the Oromia National Regional State Small Enterprises office

Status of the project--- New

Project duration--- 5 years

Start-up date--- August 01/2022 G.C

Annual milk demand (CSA 2015) --------4.86 Million tons

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