BUSINESS PLAN

FOR
BROILER PRODUCTION

BY

ASMAMAW ZAFU

MISEAL BOGALE

September 14, 2017

Addis Ababa, Ethiopia
BUSINESS NAME: OLLA BROILER FARM

Address: Arba Minch, Ethiopia

Cell phone: +215915980830

Email: chameasme@gmail.com
Contents
LIST OF TABLES.................................................................................................................................... 3
EXECUTIVE SUMMARY....................................................................................................................... 5
1. BUSINESS DESCRIPTION................................................................................................................. 6
1.1. Back ground of the Business.....................................................................................................6
1.2. Vision........................................................................................................................................6
1.3. Mission......................................................................................................................................6
1.4. Objectives.................................................................................................................................6
1.5. Housing system.........................................................................................................................7
1.6. Business organization...............................................................................................................7
1.6.1. Business management and personnel.................................................................................7
1.6.2. Business control system.....................................................................................................7
1.7. Partner strategy.........................................................................................................................4
1.8. Product and service description................................................................................................4
1.9. Operational and production plan...............................................................................................4
2. MARKET ANALYSIS......................................................................................................................... 5
2.1. Demand and supply analysis.....................................................................................................5
2.2. Competitor analysis..................................................................................................................6
2.3. SWOT analysis Strengths.........................................................................................................6
Opportunities................................................................................................................................7
2.4. Marketing strategy....................................................................................................................7
2.4.1. Customer analysis..............................................................................................................7
2.4.2. Promotional strategies........................................................................................................8
2.4.3. Distribution Channels........................................................................................................8
3. FINANCIAL PLAN.............................................................................................................................. 8
3.1. Financial source........................................................................................................................8
3.2. Break-even analysis..................................................................................................................9
3.3. Costs-benefit analysis and sales forecast..................................................................................9
4. WORK PLAN..................................................................................................................................... 11
5. CONCLUSION................................................................................................................................... 11
6. APPENDICES..................................................................................................................................... 12
LIST OF TABLES

Table 1. Initial investment cost............................................................................................................8

Table 2. Cost benefit analysis for Year 1.............................................................................................9
Table 3.Time table.............................................................................................................................11
Table 4. Inputs (assumptions)............................................................................................................12
Table 5. Technical calculations..........................................................................................................14
Table 6. Variable costs of Year 1.......................................................................................................14
Table 7. Fixed costs for Year 1..........................................................................................................15
Table 8. Expenses, revenue and net income forecast.........................................................................17
EXECUTIVE SUMMARY

OLLA broiler farm will start its production on January 2017 using Cobb Sasso broiler breeds of
with the objectives to: get profit by producing good quality broiler chickens and create employment
opportunities for local people. The farm will produce about 2kg live weight broilers in four separate
poultry units and each unit will receive 300 broilers at every 3 weeks interval in order to have
continues supply of broiler chickens to customers. For the first three years the farm will be
managed by one of the shareholders and will employ two laborers for routine daily activities.
Broilers will be sold live to hotels, restaurants and individual customers. Creating a partnership
relation with two hatcheries, a feed processing and vaccine producing centers will facilitate
effective and efficient production of our farm. Rapidly growing human population, urbanization
and increasing trend in price of red meat contribute to a high demand of chicken meat in the area.
In order to exceed the current competitors (local farmers) the farm will produce high quality
chickens, ensure regular availability of chickens for customers, gives door to door service as per the
order of customers and sells broilers with relatively less price per kilogram of live weight of birds
as compared to price of local chickens. Moreover, the farm will promote its products using less
costly promotional strategies like brochures, posters, word of mouth and social media to attract
customers. To start the business, a total initial investment of $13,367 ($5,195 for house
construction, $714 for equipment, $6,243 working capital and $1,215 contingency budget) is
required. Out of the initial investment costs, housing costs and land will be covered by Mr.
Asmamaw Zafu and other costs will be financed by Mr. Miseal Bogale. The farm will get profit
starting from the first year. The estimated net income will be $11,261, $13,825 and $13,825 in the
first, second and third year of production respectively. Therefore, starting of the broiler farm in
Arba Minch town is profitable and feasible to the owners and beneficial for the community.
1. BUSINESS DESCRIPTION

1.1. Back ground of the Business

OLLA broiler farm is a privately owned business farm which is going to be started in the coming
January 2018 at Arba Minch town, Southern regional state of Ethiopia by Mr.Asmamaw Zafu
and Mr. Miseal Bogale. The farm will be started in a newly built house having four separate
units. About 300 Cobb Sasso breed broilers will be kept in each unit at a time and the total initial
capital required to start the business is estimated to be $13,367 (299,715 ETB). During this
business work, Mr. Asmamaw Zafu contribute his knowledge, skills and also cover cost of land
and building. All variable costs and costs of equipment will be covered by Mr. Miseal Bogale.

1.2. Vision

In the coming 10 years, OLLA broiler farm has a vision to become one of the best live broiler
chicken producer and dressed broiler meat exporters in the country.

1.3. Mission

OLLA broiler farm will make its best effort to satisfy the demand of its customers by supplying
quality and healthy broilers with affordable price.

1.4. Objectives

The business will be established:

1. To produce good quality broiler chickens that are safe for human health and provide to
customers at affordable price in Arba Minch town and surrounding areas and to earn
profit from the produces.
2. To take advantage of government’s declared policy of developing small scale local
poultry enterprises as part of its 5-year Growth and Transformation Plan (GTP II).
3. To support creation of employment for local people.

1
1.5. Housing system

Good housing plays a major role in success of any poultry farm. So a new poultry house (25m x
8m = 200 m2) having four separate units for rearing broilers, feed and equipment store rooms
will be built in one building (Figure 1). During construction in addition to the use of good design
and quality building materials we will also consider directions of the building with respect to
sunlight and wind direction. Chickens will be kept in a full litter system house and wood shaving
will be used as a litter material.

1.6. Business organization

1.6.1. Business management and personnel

Since Mr. Asmamaw Zafu has the background knowledge of poultry production and health in his
undergraduate study and he has specialization in animal feed, there is no need of employing
other professional to manage and organize the business especially in the first 3 years. Mr.
Asmamaw Zafu will visit the farm every day for at least 2 hours and follow the progress of the
farm closely. Each and every equipment that will be used in the farm are not automatic.
Therefore, labor is essential for daily activities. For this reason two full time workers will be
employed for routine daily activities and they will reside permanently in the farm to monitor and
see to the wellbeing of birds day and night.

1.6.2. Business control system

For proper control of the progress and performance of the farm, there will be a well-organized
recording format for feed consumption and weight gain, health, and costs and revenue. Results of
records will be analyzed weekly and compared with the standards of the breed. In case of
extreme deviations, possible reasons will be investigated and corrective measures will be taken.
4
1.7. Partner strategy

Hawassa farms PLC. In Hawass city and Alema farms located in Debre-zeit town will be the key
partners of the farm in providing day old broiler chickens. Alema Feed Processing plant will be a
partner in supplying feed required for production. National Veterinary Institute (NVI) will be the sole
supplier of required vaccines. In order to get chance of expansion through government support
especially to get land in the future, the farm will work in strong collaboration with Arba Minch town
administration and municipality offices.

1.8. Product and service description

OLLA farm will produce broiler chicken of Cobb Sasso breeds. Even if these birds have a potential
to grow more than 3.5 kg at the age of 91 days, selling in this farm will be started at approximately 2
Kg of weight after staying for 6-9 weeks. Since the chickens will be managed indoor and fed well,
the meat from our broilers will be higher in quality and quantity than the ones produced by local
farmers and will be the choice of customers. We will distribute live broiler chickens to hotels and
restaurants by providing home delivery services and interested individual customers can also get
chickens directly from our farm (entry is not allowed). Moreover, manure will also be another source
of income for our farm.

1.9. Operational and production plan

OLLA farm will start broiler production on the 1st of January 2017. The farm will have 4 separate
units and all the units will not have chickens of the same age. In order to ensure continuous supply of
broiler chickens for customers, the farm will receive about 300 day old chickens in each unit at every
three weeks interval. Even if the chickens will stay for 9 weeks, selling will be started from 6 weeks
of age by selecting birds that have good weight gain. In between two consecutive batches there will
be a three weeks gap which will be used for cleaning, disinfecting and preparing the house to receive
new batch. So one complete cycle will take about 12 weeks and on average each unit can have about
4.3 batches per year. The production plan for the first two years is given in Figure 2.

4
 Figure 2. Production plan

2. MARKET ANALYSIS

2.1. Demand and supply analysis

Currently, most of the poultry products consumed by people come from local chickens produced
from free range scavenging systems. Exotic broiler meat only constitutes a limited portion of the
market share of chicken meat in the country. The low input low output poultry production systems
are low in production and do not produce poultry and poultry products continuously. In Ethiopia,
human population is increasing rapidly and continuously. The country is now going through a
constant multifaceted economic growth. It realizes a strong and stable economic growth with rising
incomes. Moreover, the price of red meat from cattle, sheep and goat is increasing continuously due
to traditional way of production, absence of specialized meat breed animals and government
emphasis for export market to get foreign currency. These facts indicate that there will be widening
of the gap between demand and supply of meat at present and in the future, that makes the market
perspectives for poultry meat most promising.

In addition, Arba Minch town is among the big towns of the country and known for its center of trade
for the surrounding areas. Population number and density is increasing rapidly in Arba Minch town

5
due to good weather condition of the area, establishment of colleges and a university and being a
preferred center area for trade. To satisfy the needs of these people that live and visit the town, there
are a number of standardized hotels and restaurants in the town. This will contribute to a high
demand for poultry meat. Though the consumption of poultry and other animal product is affected by
the fasting periods of Orthodox Christians, majority of the people living in Arba Minch and its
surrounding towns are non-fasting (Muslims, Protestant and Catholics). So market will not be a
problem even during fasting periods.

2.2. Competitor analysis

Currently there is no any commercial broiler farm in Arba Minch town. Peoples in the town buy local
chickens that are not grown for meat purpose from farmers. So for the time being these local farmers
will be our competitors. Even though the local chickens are produced under scavenging system, have
low body weight and are too aged; the society still believes as they are preferred birds for local
dishes prepared from chicken meat and egg (called “doro wot”). However, those chickens are poor
in quality, production is not regular, chickens are sold only on market days (twice a week) and
customers are expected to buy directly from market. Thus, unlike our competitors we will provide
our customers regularly with good quality chickens and door to door services, and sell birds with
relatively lower price as compared to local chickens. For instance, currently, farmers are selling their
local chickens by about $6.69 for approximately 1.5 kg live weight ($4.46 per Kg) to consumers and
even the price is more than this during holidays. To compete with them, our products will be sold at a
price of $3.7 per Kg, which is lower than our competitors by $0.76.

In the future, other competitors may start broiler production. Then during that time we hope that our
business will be transformed from small to medium (especially after 3 years), and we will exceed our
competitors by our previous experience and we will start to provide not only live chickens but also
dressed chicken meat through our distribution shops.

2.3. SWOT analysis Strengths

 The farm will be managed by skilled man power

 The farm will produce chickens of high quality and provide continuous supply of broilers to
customers through door to door service

6
  Construction of an ideal house which can fulfil at least the basic requirements
Weakness
 We are not being able to provide dressed chickens for our customers in the first 2-3 years
Opportunities
 Less competitors for the business, because commercial broiler production has not started still
now in the area and its surroundings
 Urbanization, rapidly increasing human population and increasing demand of meat
 Good location of the farm;
 Availability of required infrastructures like road access, electricity and network
 Presence of a number of small towns in the surroundings of Arba Minch town.
 Convenient government policy that encourages development of poultry production.
 Presence of readily available very cheap labor
Threats
 Disease out break

 Shortage of vaccines and medication

 Difficulty to get access of land for future expansion
 High feed cost
 Long distance transportation of day old chickens from hatchery
 Preference of peoples to the local chicken meat which may be a threat until their opinion is
changed

2.4. Marketing strategy

2.4.1. Customer analysis

Produced broilers will be sold mainly for hotels and restaurants. Since there are many hotels and
restaurants, creating a link with them will help us to have continuous market. Interested individual
customers can also buy our broilers directly from the farm.

7
2.4.2. Promotional strategies

Low cost promotion strategies like brochures, posters, word of mouth and social media will be used to
promote the products of OLLA broiler farm.

2.4.3. Distribution Channels

We are not going to use any advanced distribution channel in the first three years. To take an advantage
over its competitors, OLLA is planned to establish good relationship and communication with its
customers through phone calls and direct personal contact to take their orders. As per their order we
will directly supply chickens to the customers by our own transportation.

3. FINANCIAL PLAN

3.1. Financial source

Since the initial capital required to start the business is not beyond our capacity, all the costs required
for the business will be covered by our own budget. A total of $13,367 (299,715 ETB) budget is
required to start the business; out of this, $5,195 (116,480 ETB) required for house construction will
be financed by Mr. Asmamaw and the cost of equipment and all variable costs , which is about
$6,957 (183,235 ETB) will be paid by Mr. Miseal.

Table 1. Initial investment cost

Costs ETB Dollar ($) Finance source

Variable costs

Purchase price of Broilers 26,400 1,177

Total Feed cost 78,408 3,497
Costs of heating and Electricity 1,600 71
Cost of Water (incl. cleaning) 200 9 e
g al
Cost of Vaccinations and Medication 900 40 Bo
al
Labour costs 28,800 1,284 ise
r .M
Cost of disinfectants 1,800 80 M
Cost of Litter 720 32
Transportation cost for selling broilers 1,140 51

8
 Sub-total 139,968 6,243

Fixed costs

Costs of house 116,480 5,195 Mr. Asmamaw Zafu

Total cost of Equipment’s 16,020 714 Mr. Miseal Bogale
Sub-costs 132,500 5,910

Total costs 272,468 12,152

Contingency Budget 27,247 1,215

Total Initial Investment 299,715 13,367

3.2. Break-even analysis

The break-even point of the business, which indicates the level at which costs and revenue are in
equilibrium, is estimated to be $2.45 (55 ETB) per kg live weight of broiler. Thus, the sale price of
broiler is planned to be the break-even point plus 50%, which is about $3.7 (83 ETB) per Kg live
weight. This selling price of broiler chickens is affordable and lower than selling price of chickens
produced by farmers, which is $4.5 (100 ETB) per kg of live weight of local chicken.

3.3. Costs-benefit analysis and sales forecast

A total of $21,435 (480,600 ETB) will be invested in the first year and about $32,696 (733,087 ETB)
revenue will be obtained. Thus, the Net income (NI) of the farm during its first year of production is
estimated to be about $11, 261 (252,487 ETB) (Table 2). The expenses, revenues and NI forecast for
the first 3 years is also given Table 8.

Table 2. Cost benefit analysis for Year 1

Year 1

Costs ETB Dollar ($)

Variable costs

Purchase price of Broilers 101,200 4,514

Total Feed cost 300,564 13,405
Costs of heating and Electricity 6,133 274

9
Cost of Water (incl. cleaning) 767 34
Cost of Vaccinations and Medication 3,450 154
Labour costs 28,800 1,284
Cost of disinfectants 6,900 308
Cost of Litter 2,760 123
Transportation cost for selling broilers 4,370 195
Annual income tax 14,662 654
Sub-total 469,606 20,944
Fixed costs

Total annual cost of House 6,989 312

Total annual cost of Equipment 4,005 179
Sub-total 10,994 490
Total costs 480,600 21,435
Selling of Broilers 725,420 32,354
Selling of Manure 7,667 342
Total revenue from selling 733,087 32,696
Net Income (NI) per year 252,487 11,261

Break-even Analysis 55 2.45

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4. WORK PLAN

Table 3.Time table

Year
Activities 2017 2018
Jun Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May
Contact and
communication
with partners
Preparation of
materials and
construction of
house

Purchasing and
installation of
poultry equipment
Cleaning and
disinfection of
house and
equipment

Purchasing of Feed

Purchasing of
DOC and
Production

5. CONCLUSION

Generally, the market, customers, competitors, opportunities and threats, expenses and benefits of the
business are thoroughly analyzed. Accordingly, it is concluded that, starting of broiler production in
the area is profitable and feasible to the owners and beneficial for the community as well.

11
6. APPENDICES

Table 4. Inputs (assumptions)

Broiler Breed : Cobb Sasso

Currency exchange rate 1 ETB = $ 0.04

Number of broilers 300

Density Broilers 10 per m2

Area required for rearing 30 m2

Purchasing Price per chick ETB $

22 0.98
Mortality 5%

Number of broilers delivered 285

Average body weight at delivery 2 Kg

Selling price per kg live weight ETB $

83 3.70
Manure produced per batch 500 kg

Price of manure per Kg ETB $

1.0 0.04
Broiler starter feed 408 Kg/1- @ ETB $ per kg
4week 11 0.49
Broiler finisher feed 1374 Kg/5- @ ETB $ per kg
8week 11 0.49
Number of weeks in production 9 week

Number of weeks for cleaning and disinfection 3 week

Costs of heating and Electricity ETB $ per batch

400 17.84
Cost of Water (incl. cleaning) ETB $ per Batch
50 2.23
Cost of Vaccinations and Medication ETB $ per
0.8 0.03 Chicken
Labour costs 2 Person @ ETB $ per
1,200 53.5 month
Cost of disinfectants ETB $ per batch

12
 450 20.1
Cost of Litter 60 Kg @ ETB $ per batch
3 0.13
Transportation cost for selling broilers ETB $ per bird
1 0.04
Round drinkers 12 drinker @ ETB $ per
200 8.92 drinker
Round feeder 16 feeder @ ETB $ per
200 8.92 Feeder
Electrical infra-red bulbs for heating 12 bulb @ ETB $ per bulb
400 17.84
Cost of boot and overall 10 pair @ ETB $ per pair
160 7.14
Weighing Balance (25 kg capacity) 1 Number @ ETB 13.38
300
Transportation Crate 10 Crate @ ETB $ per coop
300 13.38
Wheel Cart 2 Bin @ ETB $ per Cart
400 17.84
Feed Bin 4 Bin @ ETB $ per Bin
300 13.38
Total area required for housing and storage 208 m2

Costs of house ETB $ per m2

560 25
Depreciation of house 20 Years

Maintenance 1%

Depreciation of equipment’s 5 years

Maintenance of equipment’s 5%

Annual income tax 2%

Contingency Budget 10%

13
Table 5. Technical calculations

Average daily gain 36 g

Total weight grown per year 8740 kg
Total feed consumed per batch 1782 kg
Total manure produced per year 7667 kg

Number of batches per year in 1 unit 4.3 Batch

Number of batches in Year 1 in 4 units 15.3 Batch
Number of batches in Year 2 in 4 units 17.3 Batch

Total manure produced in Year 1 7667 kg

14
Table 6. Variable costs of Year 1

ETB Dollar ($)

Purchase price of Broilers 101,200 4,514

Broiler starter feed ETB 68,816 $ 3,069

Broiler finisher feed ETB 231,748 $ 10,336

Total Feed cost 300,564 13,405

Costs of heating and Electricity 6,133 274

Cost of Water (incl. cleaning) 767 34

Cost of Vaccinations and Medication 3,450 154

Labour costs 28,800 1,284

Cost of disinfectants 6,900 308

Cost of Litter 2,760 123

Transportation cost for selling broilers 4,370 195

Annual Income Tax (2%) 14,662 654

Sub-Total 469,606 20,944

15
Table 7. Fixed costs for Year 1

ETB Dollar ($)

Costs of house ETB $ 5,195

116,480
Depreciation of house 5,824 260

Maintenance 1,165 52

Total annual cost of House 6,989 312

Round drinkers 2,400 107

Round feeder 3,200 143

Electrical infra-red bulbs for heating 4,800 214

Cost of boot and overall 320 14

Weighing Balance (25 kg capacity) 300 13

Transportation Crate 3,000 134

Wheel Cart 800 36

Feed Bin 1,200 54

Total cost of Equipment’s 16,020 714

Depreciation 3,204 143

Maintenance 801 36

Total annual cost of Equipment 4,005 179

16
Table 8. Expenses, revenue and net income forecast

Year 1 Year 2 Year 3

Costs ETB Dollar ETB Dollar ($) ETB Dollar ($)

($)
Variable costs

Purchase price of Broilers 101,200 4,514 114,400 5,102 114,400 5,102

Total Feed cost 300,564 13,405 339,768 15,154 339,768 15,154
Costs of heating and Electricity 6,133 274 6,933 309 6,933 309
Cost of Water (incl. cleaning) 767 34 867 39 867 39
Cost of Vaccinations and Medication 3,450 154 3,900 174 3,900 174
Labour costs 28,800 1,284 28,800 1,284 28,800 1,284
Cost of disinfectants 6,900 308 7,800 348 7,800 348
Cost of Litter 2,760 123 3,120 139 3,120 139
Transportation cost for selling 4,370 195 4,940 220 4,940 220
broilers
Annual income tax 14,662 654 16,969 757 16,969 757
Sub-total 469,606 20,944 527,497 23,526 527,497 23,526
Fixed costs

Total annual cost of House 6,989 312 6,989 312 6,989 312
Total annual cost of Equipment 4,005 179 4,005 179 4,005 179
Total costs 10,994 490 10,994 490 10,994 490
Selling of Broilers 725,420 32,354 839,800 37,455 839,800 37,455
Selling of Manure 7,667 342 8,667 387 8,667 387
Total revenue from selling 733,087 32,696 848,467 37,842 848,467 37,842
Net Income (NI) per year 252,487 11,261 309,976 13,825 309,976 13,825

17