ARBA MINCH UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

GROUP MEMBERS NAME ID NUMBER

1. ALAZER TESFAYE PWBE/025/15

2. ANDUALEM ALEMAYEH PWBE/027/15
3. MULALEM DEGIFE PWBE/___/__

Submission Date: - Jan. 2023

Submitted to: Getasew. Y (PHD Candidate)

Arbaminch

Ethiopia
 Business Plan on Dairy Farming

Contents
1. Executive Summary ............................................................................................................................... 1
1.1. Name of business....................................................................................................................... 1
1.2. Contact address ......................................................................................................................... 1
1.3. Legal Page ................................................................................................................................... 1
1.4. Description of the business idea ............................................................................................ 1
1.4.1. Project Goal and Purpose ..................................................................................................... 2
1.4.2. Estimated Cost of the Project: .............................................................................................. 2
1.4.3. Project Component ............................................................................................................... 2
1.5. Profiles of the Entrepreneurs ................................................................................................. 2
1.6. Contribution of the business to the Economy...................................................................... 3
1.6.1. Socio-Economic benefit ........................................................................................................ 3
1.6.2. Expected Beneficiaries: ......................................................................................................... 3
2. Sales and Marketing.............................................................................................................................. 4
2.1. Product Description ................................................................................................................. 4
2.2. Competitors’ ............................................................................................................................... 4
2.3. Location....................................................................................................................................... 4
2.4. Market Area................................................................................................................................ 4
2.5. Main Customers ......................................................................................................................... 5
2.6. Total Demand............................................................................................................................. 5
2.7. Market Share .............................................................................................................................. 6
2.8. Selling Price ................................................................................................................................ 6
2.9. Sales Forecast............................................................................................................................. 7
2.10. Promotion Measures ............................................................................................................ 8
2.11. Marketing Strategy (Marketing Plan Promotion)........................................................... 8
3. Production............................................................................................................................................. 8
3.1. Production Process ................................................................................................................... 8
3.2. Fixed Capital............................................................................................................................... 9
3.2.1. Building and Civil works ........................................................................................................ 9
3.2.2. Milk Processing Equipment ................................................................................................... 9
3.2.3. Vehicles ................................................................................................................................. 9

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 Business Plan on Dairy Farming

3.2.4. Office Furniture and Equipment ........................................................................................... 9

3.2.5. Milking Cows ......................................................................................................................... 9
3.3. Life of Fixed Capital................................................................................................................. 10
3.4. Sources of Equipment............................................................................................................. 10
3.5. Planned Capacity ..................................................................................................................... 10
3.6. Operation Materials Needed ................................................................................................. 10
3.6.1. Feed..................................................................................................................................... 10
3.6.2. Vaccination & Medicine ...................................................................................................... 10
3.6.3. Artificial Insemination (AI) .................................................................................................. 11
3.6.4. Laboratory & Cleaning supplies .......................................................................................... 11
3.6.5. Utilities ................................................................................................................................ 11
3.6.6. Plastic package .................................................................................................................... 11
3.7. Cost of Operation Materials .................................................................................................. 11
3.8. Labor .......................................................................................................................................... 11
3.9. Cost of Labor............................................................................................................................. 12
3.10. Production Cost ................................................................................................................... 13
4. Organization and Management .......................................................................................................... 13
4.1. Form of Business ..................................................................................................................... 13
4.2. Organizational Structure ....................................................................................................... 13
4.3. Business Experiences and Qualification of the Entrepreneur ....................................... 14
4.4. Pre – Operating Activities ...................................................................................................... 14
4.4.1. Building and Constructions ................................................................................................. 14
4.4.2. Milk Process Plant ............................................................................................................... 14
4.4.3. Purchase of Milking Cows ................................................................................................... 14
4.5. Office Equipment ..................................................................................................................... 15
5. Financial Plan ...................................................................................................................................... 15
5.1. Cost of Business ....................................................................................................................... 15
5.2. Financing Plan and Loan Requirement............................................................................... 15
5.3. Security for Loan ..................................................................................................................... 15
5.4. Profit or Loss Statement ........................................................................................................ 16
5.5. Cash Flow Statement .............................................................................................................. 17
5.6. Loan Repayment Schedules .................................................................................................. 18

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 Business Plan on Dairy Farming

6. Exit Strategy ........................................................................................................................................ 18

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 Business Plan on Dairy Farming

1. Executive Summary
1.1. Name of business
Tesfaye and his children Dairy farming and Milk processing plc

1.2. Contact address

Offices at Bulki, Gofa zone, Ethiopia

Project site Bulki Minder nearest to kalehiwot integrating agro and dairy farming site

Tel. +251916424889

E-mail altghebe@gmail.com

Fax. +251----------

1.3. Legal Page

Confidentiality Agreement
The undersigned reader acknowledges that the information provided by Tesfaye and his
children Dairy farming and Milk processing plc in this business plan is confidential;
therefore, reader agrees not to disclose it without the express written permission of
Tesfaye and his children dairy farming and Milk processing plc.

It is acknowledged by reader that information to be furnished in this business plan is in all

respects confidential in nature, other than information which is in the public domain
through other means and that any disclosure or use of same by reader, may cause serious
harm or damage to Tesfaye and his children dairy farming and Milk processing plc.

Upon request, this document is to be immediately returned to Tesfaye and his children
dairy farming and Milk processing plc.

1.4. Description of the business idea

Animal husbandry and agriculture are synergistic-ally involved and are the important
source of income and employment in rural areas. Among them, dairying provides security
to farmers, especially when agriculture fails. Dairy farming is essential to millions of poor
households across the country not only as a source of income but also as a major source of
protein, supplementary nutrition, fertilizer, fuel and a store of wealth.
Enhancement in milk processing has necessitated the increased demand for milk and this
triggered the setting up of many commercial dairy units in medium and small scale in
different parts of the country. Introduction of improved technologies, availability of
compounded feed are the other factors responsible for this shift from traditional mixed
farming production to specialized dairy production system. Dairying with high yielding

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 Business Plan on Dairy Farming

breeds has generated ample scope for developing the dairy farming on commercial lines as
a business enterprise. On the other hand, the potential of dairy development in Bulki Town
is very huge. The existence of suitable agro-ecologic for dairy production, increasing
domestic demand for milk and milk products and better markets opportunity indicate the
potential and opportunities for dairy development in the Town.

The Project proposal of Family Dairy Farming Considering the important of dairy farming
to sustainable food value chain, and employment opportunities to the society, can
contribute immensely to poverty alleviation and improved nutrition in the Gofa Zone Bulki
town. We will propose to build medium scale dairy farm Around Gofa Zone Bulki Town,
Ethiopia.

1.4.1. Project Goal and Purpose

The overall goal of the project is to contribute towards the economic development of
Ethiopia through using the existing investment opportunities in the Country and taking
advantage of the expressed policy incentives that emphasize on greater commercialization
of agriculture and enhancing private sector development. The main objective of the said
project is to produce milk and milk processing products for local markets and to maximize
profit so as to sustain the project. In line with this the following are specific objects of the
project.

 To introduce modern dairying and milk processing technologies to the

surrounding locality.
 To create job opportunity for skilled and unskilled local citizens.
 To create market linkages with small holder farmers in the town and its
surroundings and etc.

1.4.2. Estimated Cost of the Project:

At the beginning of the production year the project will have the following costs

 Capital 3,628,400
 Working Capital 1,557,622.80
 Total cost : 5,186,022.80

1.4.3. Project Component

 Total production area: 20,000 Square meters
 Types of investment: Diary Farming and milk processing

1.5. Profiles of the Entrepreneurs

The anticipated Dairy Farming and Milk Processing Project” is initiated and owned by A
Group of Student who studies MBA Weekend Program in Arbamich University Sawla
Campus.

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 Business Plan on Dairy Farming

S/N Name Age Sex Edu. Kebele Phone number Experi Position
Level ence

1 Alazer Tesfaye Ersasu 28 M MA Kera 0916424889 Yes Chairperson

2 Andualem Alemayehu 34 M MA Kusti 0916400405 Yes Secretary

3 Mulalem Degife 30 M MA Zala 0939830571 Yes Finance

4 Behailu Tesfaye 36 M MA Sawla 0912069551 Yes Member

5 Tesfaye Ersasu 51 M MA Bulki 0913528281 Yes Member

6 Wondemagegn Tesfaye 38 M MA Arebaminch 0935504918 Yes Member

7 Simegn Tesfaye 32 F MA Arebaminch 0993412515 Yes Member

1.6. Contribution of the business to the Economy

Livestock production is an integral part of Ethiopian's agriculture sector and plays a vital
role in national economy. At present, livestock is contributing about 49.1% to the
agricultural sector and 11.4 per cent to the GDP. Role of livestock in rural economy may be
assessed by the fact that 30 to 35 million of the total rural population is engaged in
livestock farming, having 2 to 3 cattle and 5 to 6 sheep/goats per family deriving 30 to 40
per cent of income from it. Most farmers (about 75%) have small land holdings on which
most of the livestock population is concentrated. Dairy farm also creates different
opportunity which includes; livestock genetic resources and production system, access
services and land inputs, agricultural extension services and technologies, income
generation and employment opportunities.

1.6.1. Socio-Economic benefit

 The project will create additional means of employment for skilled, semi-skilled and
casual laborers in the area.
 Aside from the increase in income of the partners, the project would activate the
economy especially in the continuous production of milk and milk products. It will
also encourage entrepreneurs in the country to engage in milk processing and milk
production.
 The expected increase income of the permanent and temporary employees’
beneficiaries would eventually contribute to good health and nutrition in the family
and allow them to access better education for their children, improve sanitation and
provide for the necessities in the household.

1.6.2. Expected Beneficiaries:

- Permanent employee: 9
- Temporary employee: 20

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 Business Plan on Dairy Farming

2. Sales and Marketing

2.1. Product Description

Taking the existing opportunity in to account, the project intends to offer major dairy
products including: Raw & pasteurized milk, Butter and Cheese (Ayib). Thus, the main
course of activity is focuses on milk production and processing involving a range of value
addition on the main product.

Milk is a traditional constituent of the Ethiopian diet, especially areas where the livelihood
is based on cattle production. Liquid milk handled traditionally has a very limited shelf-life.
In modern dairy production exotic cross breeds or pure breed castles are used and the milk
is processed to have longer shelf-life. The project will start a breeding arrangement with 21
heads of exotic cross breeds pregnant heifers. These heifers would give birth in two to
three months’ time and production of milk will be started nearly of the first year. The dairy
farm will have milk processing and packing facilities. The project will also collect milk from
small holder farmers around the town to supply the processing plant. Finally, the product
will be distributed by establishing own distributing stores in major towns or by using
commissioned agents.

2.2. Competitors’
There are different private small scale farm and household farm competitor in Bulki Town
and whole Gofa Zone. At city level one small scale dairy farm owned by Kalehiwot
Church and 9 small scale farm at woreda level. But this farm unit not actively produced
milk at sufficient quantity and quality. We distinguish ourselves from them by providing
better quality milk at reasonable prices, and delivering both fresh and special package
refrigerated. They can't be closed the gap because of, they haven't relevant knowledge of
dairy farm and concept of value chain.

2.3. Location
The geographical location of the project is SNNPR, GOFA ZONE, BULKI Town
administration, which is located west of Sawla town and 16 kilo meter distance far ways.
The project site is at “Mindre” site and we selected it because of the criteria its altitude
from see level is recommendable for the dairy farming – which is highland, the land of 2
hectare are owned by the partner (by the family) and there are Kalehiwot church dairy
farming near to our site by which we can share the experience of their farm work.

2.4. Market Area

In Gofa zone, milk and milk products are marketed through both informal marketing
systems. In this marketing system, producers sell to consumers directly or to unlicensed
traders or retailers. Price is usually set through negotiation between the producer (seller)
and the buyer; this system is predominant in the rural dairy production system. Our

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 Business Plan on Dairy Farming

organization will use the both formal marketing system, which there are cooperatives and
private milk collecting and processing plants that receive milk from us and channel to
consumers, café and restaurants and the informal marketing system.
Initially, our enterprise focuses on the local market, which is Bulki Town, Sawla Town
and Geze Gofa woreda. Then at growth stage of the enterprise we can operate at least 80%
of the production capacity and we will see the regional market around Gofa Zone.

2.5. Main Customers

The main target customers for our dairy products include but not limited to:

 Small kiosks: - these kiosks are already experienced at selling raw milk and milk
projects like yogurt, ice cream, butter, and cheese to the general public. These kiosks
do not require sophisticated packaging and have good product handling skills.
 Individual consumers, Hotels, Guest houses, and Restaurants: these are to be used to
provide a meaningful linkage.
 Direct General Markets: milk products will be brought to the general markets where
to be sold to the general public.
 Dealers: independent operators who buy and sell packed milk and milk products.
The dealing is usually done at the shop level.
 Order buyers: Acts as agents for distribution of dairy products and other processed
milk.

2.6. Total Demand

In Ethiopia, per capita annual consumption of dairy is just 11% of World Health
Organization recommended levels (gain briefing paper dairy in Ethiopia 2021). The FAO
recommends the consumption of 200 liters of milk per person per year. The annual socio-
economic statistical abstract of Gofa zone Plan and Development department report shows
that the average consumption of Bulki Town and Gofa zone was only 16 liters per year and
increase 4.2 % annually. The total Population of Gofa zone is estimated around 1.2 million
(Gofa Zone Plan & development dep’t).

Demand for standard dairy products from the modern sector is met by domestic
production and through imports. 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. In general, increasing population growth (as in the following
Table) and rising real income are expected to expand the demand for milk and milk
products. Therefore, increase in population growth and consumer income in the future is
expected to increase the consumption of milk products.
Table: 1 Projected Demand

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 Business Plan on Dairy Farming

Population Milk Milk available Demand for Gap between

in 000 Based production, In For milk, in million projected milk
on current million liters consumption liters based on available for
Year growth rate based on (68 % of the ½ of FAO consumption and
(2.9% ) current produce) in demand base on FAO,s
recommendation
growth rate Million liters recommendation in
(100 k/g )
(4.2% ) million liters
2023 260,000 4,160 2,282.8 26,000 21,840
2024 265,954 4,334.7 2,947.61 26,595.4 22,260.7
2025 272,045 4,516.8 3,071.41 27,204.5 22,687.7
2026 278,274 4,706.5 3,200.41 27,827.4 23,120.9
2027 284,647 4,904.2 3,334.83 28,464.7 23,560.5

2.7. Market Share

There are many determinants that determine the share of milk production. Marketed milk
volume (Supply), Milk yield per day, Number of milking Cows, Distance to nearest market
and Access to market information are some of the determinants. The market share of
Family dairy farm Enterprise will increase through the operation years (Table 2) shows the
determinants of market share of the enterprises.

Table 2 determinants market Share

Year Distance from Number of Milk Yields Milk Yields Marketed Market
nearest market Milking per day (30 Annually milk Share
(Sawla) k.m Cows lit./cow) (lit.) volume
(Supply)
(80%)
2023 16 21 630 229,950 183,960 0.009%
2024 16 28 840 306,600 245,280 0.0115%
2025 16 35 1050 383,250 306,600 0.0141%
2026 16 42 1260 459,900 367,920 0.0165%
2027 16 50 1500 547,500 438,000 0.0192%

2.8. Selling Price

The main objective of the project is producing milk and milk processing products to
maximize profit and make the project sustainable. To achieve this objective, consideration
of production and other costs that determine profitability is necessary. In addition, the
profit from such kind of dairy business is attained by minimizing production costs which
account nearly half of the total cost of products. Any attempt to improve production and
increase its efficiency, therefore, needs to focus on better utilization of available resources.

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 Business Plan on Dairy Farming

The planned project will rely on using locally available materials and agro-processing
byproducts to feed cows including molasses, concentrate made from maize, bean, wheat,
barley. Feedlots will also have to be devised as mechanisms to source feeds by-passing
middlemen and other profiteers who charge high prices for these feeds relative to the
lower products prices. Through using these resources the cost of production will be lower
than other commercial dairy and milk processing farms in the country. In addition, the
project will adjust the price of products supplied to the consumers based on market
situations.

The price of raw cow milk in Gofa Zone is approximately varies between birr 40 birr to 60
birr per liter. Thus, to be competitive the project gate price is proposed to be Birr 45 per
liter. As to the distribution, the envisaged plant can use wholesale and retail channels,
which include café, restaurant and small shops.

2.9. Sales Forecast

In this business plan, it assumed that the price of each bull calves & heifers is Birr 10,000 &
32,000 respectively. Revenue could be generated by selling 80% of the milk as fluid milk,
20% of the milk processed into cheese and the left over cream is processed into butter. The
diversification of products would help buffer the enterprise from volatility in the product
markets. Prices can vary depending on the market outlet that a producer is selling through.
When selling through a retail outlet, a producer will receive a wholesale price .When selling
directly to consumers; the producer receives a retail price. Family Dairy Farm Enterprise
assumed a wholesale price, that the price of raw milk, cheese, butter & cream per k/g is
Birr 45, 100, 500 & 400 respectively.
The financial projection assumes that for the first three years total raw milk available
for value addition will be sold and for the last two years of production the total raw milk
will be divided into milk and cheese production. Therefore, the total raw milk available for
value addition, 80 percent will be pasteurized milk and 20 percent will be cheese. During
milk processing, cream is left over. In order to use the cream, butter will be produced.

Table 3 Sales Forecast

Items Year one Year Two Year Three Year Four Year Five

Raw milk/ 6,898,500 9,198,000 11,497,500 13,797,000 16,425,000

Pasteurized milk

Cheese - - - 9,198,000 10,950,000

Butter - - - 2,759,400 1,971,000

Cream - - - 735,840 876,000

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 Business Plan on Dairy Farming

Sales of bull Calves - 50,000 50,000 50,000 50,000

Sales of Heifers - 288,000 288,000 288,000 288,000

Total 6,898,500 9,536,000 11,835,500 26,828,240 30,560,000

2.10. Promotion Measures

Promotion measures means activities relating in particular to advertising and public
relations measures aimed at encouraging the consumption of quality beef and veal,
including the organization of and participation in trade fairs and exhibitions accompanied,
where appropriate, by the provision of marketing advice to the various operators.

2.11. Marketing Strategy (Marketing Plan Promotion)

Effective strategies in marketing are crucial for any organization. While these strategies
are seen as important, developing plans and strategies for marketing today is a challenging
endeavor. With increasing competition companies operating in various sectors tend to fight
for market share therefore calling for effective strategies though the fundamentals of
marketing planning remain the same. In order for a marketing strategy to be deemed
effective, it must efficiently communicate all the features and characteristics the product's
consumers’ demand. Family Dairy Farm Enterprise will use a good market growth matrix
that as stated by Grant (2012) is a blend of unique marketing activities such as aggressive
advertising, competitive pricing strategies, sales promotional activities and additional
resources directed to personal selling.

3. Production
3.1. Production Process
Milk is a traditional constituent of the Ethiopian diet, especially areas where the
livelihood is based on cattle production. Liquid milk handled traditionally has a very
limited shelf-life. In modern dairy production exotic cross breeds or pure breed castles are
used and the milk is processed to have longer shelf-life.
The project will start a breeding arrangement with 21 heads of exotic cross breeds
pregnant heifers. These heifers would give birth in two to three months’ time and
production of milk will be started nearly of the first year. The dairy farm will have milk
processing and packing facilities. The project will also collect milk from small holder
farmers around the town to supply the processing plant. Finally, the product will be
distributed by establishing own distributing stores in major towns or by using
commissioned agents.

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 Business Plan on Dairy Farming

After the fresh milk is received it is filtered and pumped into the dump tank; it is then
chilled with help of a chiller so that the growth of bacteria is minimized .One percent of the
fat content is separated and chilled in a cold store. Then, the cream in either churned to
butter or sold as it is depending on the availability of local market. After the end of cream
separation process, the milk will then undergo different value added products like milk,
Butter and cheese. Milk products undergo pasteurization process; the pasteurized milk is
filled in the cooling tanks for delivery to urban milk distribution centers. Pasteurized milk
would be packed into 500 mille liter plastic containers, so two plastic containers would be
used to package one liter of pasteurized milk and distributed to the market. Cheese and
butter would be packed into 250 and 500 gram paper packages. After separation, cream is
held in stainless steel tanks and refrigerated at (4°C).

3.2. Fixed Capital

The major investment required to establish the project include civil works, purchase of
cows, feeds ,different machinery and equipment ,vehicles and purchase of milk from
surrounding farmers.

3.2.1. Building and Civil works

The civil works that this dairy farm and milk processing plant include are primarily the
relays of structure for milk production and processing activity indicated above. The
engineers estimate for these items and for other construction facilities needed at the site
are valued at Birr 2,650,000.

3.2.2. Milk Processing Equipment

According to the Performa invoices submitted from local suppliers, the aggregate cost of
the machinery and equipment is summed up to Birr 700,000.

3.2.3. Vehicles
The farm would utilize Second hand Isuzu (milk tankers installed) as a farm vehicle.
According to the Performa invoices submitted from local suppliers, the aggregate cost of
the vehicles is summed up to Birr 800,000.

3.2.4. Office Furniture and Equipment

According to the Performa invoices submitted from local suppliers, the aggregate cost of
the office furniture & equipment is summed up to Birr 88,400.

3.2.5. Milking Cows

Initial herd sizes of 21 cows, which are cross breeds, with better milk production are
considered. A total cost of the cows is Birr 840,000. The farm will not need to purchase any
cows. The flock would be “bred up” by increasing the percentage of dairy blood in the cow
flock over time.

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3.3. Life of Fixed Capital

Table 4 Life of Fixed Capital

Name of Fixed Milk House Milk Processing Vehicles Office

Capital Equipment Equipment
Useful life 20 10 10 5

3.4. Sources of Equipment

The source of working equipment for Family Dairy Farm Enterprise was purchased by the
operators of the enterprise.

3.5. Planned Capacity

Table 5 Production Plan of Pasteurized milk, Cheese, Cream & Butter

Raw Milk Available Out Put

Year For Production in Raw Pasteurized Cheese Butter Cream
Liters Milk milk in liter in Kg in Kg in Kg
229,950
1st - - -
229,950
306,600
2nd - - -
306,600
383,250
3rd - - -
383,250
459,900
4th -
367,920 91,980 5,519 1,840
547,500
5th -
438,000 109,500 6,570 2,190

3.6. Operation Materials Needed

3.6.1. Feed
Dairy animals will be fed 5 kilogram of concentrate along with 10 kilogram of roughage per
head per day. These feed ingredients when mixed according to feed formula will provide
adequate energy according to energy and protein requirements of animal in production.
The total cost of feed for the first production year estimated to be Br. 421,575

3.6.2. Vaccination & Medicine

Vaccination & medicine is required to prevent any disease outbreak in the animal herd.
Each new animal will be vaccinated before entering the farm .The vaccines and medicine
are obtained from the Government institutes on payment. It will cost Br. 300.00 per cow
for a total cost of Br. 6,300.00 for the first production year.

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3.6.3. Artificial Insemination (AI)

The Farm will also obtain Artificial Insemination (AI) s on payment according to prescribed
schedule from the government institutes, the charges will be Br 50.00 per cow for a total
cost of Br. 1,050 for the first production year.

3.6.4. Laboratory & Cleaning supplies

Since the dairy farm is processing daily, the facility will need to be cleaned after each
processing and the milk should be tested. The purchase will be on yearly base, the cost of
laboratory and cleaning supplies per year is estimated to be 5,500 and 3,500 birr
respectively.

3.6.5. Utilities
Annual requirements of water and electricity of the dairy farm is estimated to be 101,250
and 22,000 birr respectively. Total cost of utilities for the first year of production is
estimated Birr 103,250.00

3.6.6. Plastic package

Packaging material is estimated at Br 5 per k/g of milk product produced A total of birr
432,812 will required for a three months of production year .The cost of purchasing
packaging material is taken for initial investment and it will revolve.

3.7. Cost of Operation Materials

Table 6 Cost of Operation Materials

No Operation Material List Estimated Cost of

operation Materials for
the First Production
Year
1 Feed 421,575
2 Vaccination and Medicine 6,300
3 Artificial Insemination (AI) 1,050
4 Laboratory 5,500
5 Clean Supplies 3,500
6 Utilities 123,250
7 Plastic Package 432,812
Total 993,987

3.8. Labor
Our management is expected to use resource wisely, operate profitably and abide by law
and regulations. We will have manager of farm whom graduated from University with
associate degree in Agribusiness and value chain management. The manager oversees the
total dairy farming operation, with daily responsibilities for managing milking, milk house

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work, and fieldwork. Other assists with all farm responsibilities, with daily responsibilities
for maintaining herd health records, heifer rising, and fieldwork. To manage the finance we
appointed one partner from the enterprise who has graduated from university with
Accounting and finance BA Degree controls the overall financial activities of the
organization. There will be contract/temporary employee’s work on the farm on daily
work for hygiene of the cows, harvest feed and manage available feeds, transport milk to
formal linked market and process milk further accordingly. The personal plan reflect the
need to booster our capability to match our position project farm, will have the following
staff
I. Dairy farm manager → BSc
II. Barn worker skilled - Contract
III. Veterinarian → diploma
IV. Pasture and worker→ skilled – Contract
We have to employee 20 contract workers. The wages of labor for contract employees is
1,600 Birr per month and they were work at the farm at least for Four Months out of the
operation year.
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.

3.9. Cost of Labor

Table 7 Manpower Requirement and Labor Costs

No Job Description Vacant position Monthly salary Annually salary

required
1 General Manager 1 8,017 96,204
2 Farm Manager 1 6,000 72,000
4 Veterinarian 1 5,200 62,400
6 Milk processing plant worker 1 4,667 56,004
7 Barn Worker 2 3,882 93,168
8 Marketing and sales man 1 4,667 56,004
9 Store keeper 1 3,000 36,000
10 Guard 1 3,000 36,000
Sub – total 9 49,633 507,780
11 Pension contribution (11%) 55,855.80
12 Grand total 563,635.80

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3.10. Production Cost

The production cost includes; purchase of Dairy Heifers, feeds, veterinary, salary &wage,
water electric power, purchase of raw milk, dairy supplies etc

Table 8 Production Cost

No Description Grand Total

1 Cost of Operating per year 993,987
2 Dairy Heifers 840,000
3 Salary Expense 563,635.80
Total 2,397,622.8

4. Organization and Management

4.1. Form of Business
The anticipated Dairy Farming and Milk Processing Farm” is initiated and owned by A
Group of students who Study MBA Weekend Program in Arbaminch University Sawla
Campus. The form business of Family Dairy Farming is Partnership (plc) and was formed in
accordance with the commercial code of Ethiopia. The members are seven in number and
each partner have equal membership rights.

4.2. Organizational Structure

The highest executive body of the project management organ will be elected by the
partners with merit since Dairy Farming and Milk Processing owned by seven partners.
The CEO controls and supervises the overall activity of the business at times while the
operation and management of the farm will be entrusted to qualified and well experienced
manger. All staff members of the project are accountable to the General manger who is
assigned by the Partnership to manage the overall activities of the farm. He also serves as a
cosignatory with the owner of the project.

Under the General Manager three section will be organized, Farm manager, Marketing
Manager and Finance and Administration Manager. The responsibility bounded to the farm
site would be delegated to the farm manager who will direct different animal husbandry
practices at the farm e.g. feeding, watering, and milking and care of animals etc. Under the
farm manager, farm supervisor, barn workers, milk processor, Laboratory analyst & Barn
workers will be organized.

Under Finance and Administration manager Accountants, store keepers, drivers and office
workers will be organized. Under marketing expert, sales man, shop keeper will be
organized, Marketing Finance and Human resource sections. Each worker is responsible to
their respective job descriptions provided by the respective section head. The store keeper

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 Business Plan on Dairy Farming

will be responsible to systematically record and keep the input and outputs of the project
respective working areas.

Figure 1 Organizational Structure of Family Dairy Farm

Family Dairy Farm and Milk Process Enterprise

CEO

Farm Marketing Finance and

Manager Manager Administration

4.3. Business Experiences and Qualification of the Entrepreneur

The composition of sex is six members were male and one is female. Though the
partnership is newly formed, the experience of members is outstanding all of them are
MBA in Business Administration from Arbaminch University.

4.4. Pre – Operating Activities

4.4.1. Building and Constructions

The major civil works to be built as part and parcel of the dairy farm include; Dairy barn or
shed, calves room, water and feeding troughs ,Isolation pen , water system and latrine
.Other building and construction facilities needed at the site are- fence including gates,
Guard room and Office.

4.4.2. Milk Process Plant

The processing plant have receiving facilities, storage for raw milk, pasteurizing, cleaning
equipment and coolers for finished products, as well as office space. Many products may
also have additional equipment in common. To the extent that common equipment can be
shared and not duplicated in separate plants, the overhead cost can be reduced. This
efficiency is in addition to the fact that multi-line plants gain efficiencies from more even
seasonal use of milk and facilities. Investment could be on pasteurizing plants with a
capacity of processing 4,000 liters per day.

4.4.3. Purchase of Milking Cows

Initial herd sizes of 21 cows, which are cross breeds, with better milk production are
considered. A total cost of the cows is Birr 840,000. The farm will not need to purchase any

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 Business Plan on Dairy Farming

cows. The flock would be “bred up” by increasing the percentage of dairy blood in the cow
flock over time.

4.5. Office Equipment

According to the Performa invoices submitted from local suppliers, the aggregate cost of
the office furniture & equipment is summed up to Birr 88,400.

Table 10 Office Equipment

Description Units Quantity Unit Price Total Price

Table PCs 5 4500 22,000
Chair PCs 10 2200 22,000
Shelf PCs 3 1800 5,400
Cash box PCs 1 4000 4,000
Computer with PCs 1 35,000 35,000
Printer
Total 88,400

5. Financial Plan
5.1. Cost of Business
No Description Grand Total
1 Refrigerated Vehicle 800,000
2 Office Furniture and Equipment 88,400
3 Pre-Production Expense 2,740,000
Total 3,628,400
8 Working Capital 1,557,622.8
9 Total Cost the Business 5,186,022.8

5.2. Financing Plan and Loan Requirement

The total investment cost of the project Birr 5,186,022.8 will be financed from two sources:
equity of the owner and a loan from Development Bank of Ethiopia. By this, about 80% of
the project cost (4,148,820 Birr) will be financed from the Bank, while the remaining
balance (1,037,202.80 Birr) will be from owner’s equity.

5.3. Security for Loan

The most common type of security a lender will request from a borrower is a mortgage
over real property. This is where the borrower (as mortgagor) provides the lender with a
security interest over their property. All Members of the Partnership agreed on the
Mortgage over their real property.

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5.4. Profit or Loss Statement

Family Dairy Farm Enterprise
Profit and loss statement
As of June 30/2016 E.C
Income
Total product sales revenue 6,898,500
Production cost 2,397,622.80
Promotion 88,400
Repair and Maintenances 128,000
Insurance 25,000
Fuel and Lubricant 215,000
Contract labor Expense 225,000
Office Supplies 50,000
Phone Expense 36,000
Rent Expense 90,000
Miscellaneous Expenses 12,000
Total Expenses 3,267,022.80
Profit Before Tax 3,631,477.20
Income Tax (35%) -18,000 1,253,017.02
Net Income 2,378,460.18
Debt payment Interest and
1,122,547.51
Principal
Net Cash 1,255,912.67

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5.5. Cash Flow Statement

Statement of Cash Flow
Family Dairy Farm Enterprise
As of June 30/2016 E.C
Cash Inflow

Beginning cash From Saving 1,037,202.80

cash from Sales 6,898,500.00

Money Borrowed 4,148,820.00

Net Cash Provided and Used by Enterprise 12,084,522.80

Cash Out Flow

Cost of Building 2,650,000.00

Purchase of Milking Equipment 700,000.00

Purchase of Vehicle 800,000.00

Purchase of Office Equipment 88,400.00

Purchase of milk Cows

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 Business Plan on Dairy Farming

840,000.00

Feed Cost 421,575.00

Vaccination Cost 6,300.00
Artificial insemination (AI) 1,050.00
Laboratory 5,500.00
Cleaning Supplies 3,500.00

Water and Electric Cost 103,500.00

Plastic Package 432,812.00

Salary Expense 563,635.80

Labor Wage 225,000.00

Principal Repayment 666,177.31

Cost of Finance 456,370.20

Total 7,963,820.31

Net Increase (Decrease) in Cash and Cash Equivalent 4,120,702.49

5.6. Loan Repayment Schedules

No Beginning Interest Principal Ending Balance
Balance
1 $4,148,820.00 $456,370.20 $666,177.31 $3,482,642.69
2 $3,482,642.69 $383,090.70 $739,456.82 $2,743,185.87
3 $2,743,185.87 $301,750.45 $820,797.07 $1,922,388.81
4 $1,922,388.81 $211,462.77 $911,084.74 $1,011,304.06
5 $1,011,304.06 $111,243.45 $1,011,304.06 $0.00

6. Exit Strategy
We recognize that any investor in a start-up company, no matter how well on paper,
ultimately needs an exit vehicle. Our purpose is to provide the best alternatives to protect
investor's interest, while maintaining the potential growth of our company, the liquidity,

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 Business Plan on Dairy Farming

and the profitability of future operations. Typically, the fear of investors is that they will
become locked into a company that might show no sign of either going public or going
bankrupt. To overcome this potential threat, we are open to discuss with the investor
several exit alternatives, and include the best provisions in the agreements that are
expected be reached by the time of the incorporation. There are several options that could
be discussed while considering alternative methods for the investor to turn illiquid
securities into readily tradable securities or cash. These options include, but are not limited
to:

 IPO (Initial Public Offering)

 Acquisition terms
 Liquidation terms, certain rights and liquidation preferences over common stock
 Selling to a friendly buyer
 Preferred stock, redeemable at option of the holder
 Convertible preferred stock
 Investor's right of first refusal in the next round of financing
 Anti-dilution measures
 Buy-back after the initial five years

In addition, we believe that following negotiating terms are expected to increase investor
confidence, and improve management-investor communication:

 A board position and possible a consulting role of the investor

 Good communication between company's management and the investor (For
example: quarterly reports, monthly updates, etc.)
 Setting clear return objectives for the management (projected IRR, potential
returns, sales projections, etc.)
 Not taking certain actions without investor's approval, such as: selling all or
substantially all of the company's assets, setting stock options programs,
issuing additional stock to existing management, selling stock below prices
paid by the investor, or creating classes of stock with liquidation preferences
or other rights senior to the investor's class of security.
 Stock price protection, an anti-dilution provision that will result in the
investor receiving more stock, should the company issue stock at a lower
price that paid by the investor
 Corporate governance provisions.

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