HAWASA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMEN
individual assignment for the course of Entrepreneurship
Title: friendship dairy farm
Group three(3)
NAME ............. ID
SOLOMON TEFERA....... 0110/09
Submitted to: - Instructor Yonatan M.
Submission date: 15/03/2013 E C
Introductory page
Name of the company: friendship dairy farm
Address: Yirgalem kebele 04
Tell:0914326414or 0979545821
Email:[email protected]
amount of money :1150000
source of money: from financial institution and visionary group
I
TABLE OF CONTENTS
PAGES
LIST OF TABLES
EXECUTIVE SUMMARY.............................................................................................................II
TABLE OF CONTENTS..............................................................................................................III
1. INTRODUCTION.......................................................................................................................1
1.1. Overview of the dairy cows industry....................................................................................1
1.2. Description of the farm.........................................................................................................2
1.2.1. Mission...........................................................................................................................2
1.2.2. Objective........................................................................................................................3
1.2.3. Vision.............................................................................................................................3
1.2.4. History of the business...................................................................................................3
2. MARKET PLANNING...............................................................................................................4
2.1. Description of the farm products..........................................................................................6
2.2. The farm positioning and pricing strategy............................................................................6
2.3 Customers...............................................................................................................................6
2.4. Market size and trends..........................................................................................................7
2.5. Competition...........................................................................................................................7
II
2.6. Estimated sales......................................................................................................................7
2.7. Proposed location..................................................................................................................8
3. OPERATIONAL PLAN..............................................................................................................8
3.1. Development status...............................................................................................................8
3.2. Production process................................................................................................................9
3.2.1. Purchase of calves..........................................................................................................9
3.2.2. Feeding...........................................................................................................................9
3.2.3. Housing........................................................................................................................10
3.2.4. Vaccination...................................................................................................................10
3.2.5. Culling..........................................................................................................................10
3.2.6. Rearing and Milking Schedule.....................................................................................10
3.3. Cost of development........................................................................................................11
3.4. Labor requirement...........................................................................................................11
3.5. Expense and capital requirement........................................................................................12
3.5.1. Operating expense........................................................................................................12
3.5.2. Capital requirements.....................................................................................................12
3.5.3. Cost of goods................................................................................................................13
4. MANAGEMENT......................................................................................................................13
4.1. STRUCTURES AND CIVIL WORKS..............................................................................13
4.2. Ownership...........................................................................................................................14
4.3. Support services..................................................................................................................14
4.4. Risk analysis.......................................................................................................................14
5. FINANCIAL ANALYSIS.........................................................................................................15
5.1. Balance sheet.......................................................................................................................15
5.2. Projected Income Statement................................................................................................15
6. IMPLEMENTATION PLAN....................................................................................................16
III
EXECUTIVE SUMMARY
This profile envisages the establishment of a farm for the rearing of milk cows
with raising capacity of 20, heads of cows per annum. Milk’s of cows have become
the most important sources of protein, minerals and other necessary elements in the
human diet by using it directly or after passing through food processing industries.
The major inputs and auxiliary raw materials required are milking cows,
commercial formula feed, good ventilation, best housing and high quality vaccines
which have to be imported. The present unsatisfied demand for milk of cows in
Yirgalem town is estimated at lower number of litter of milk. Therefore; the
visionaries milking cows farm is established to satisfy this demand in Yirgalem
town kebele 04 at November 11 sub city. The total investment requirement is
estimated at Birr 1,150,000 birr and out of which Birr 805000 birr (70%) is from
commercial bank of Ethiopia in coordination with administration of small
enterprises and 34500 birr (30%) gained from the visionaries group members. The
plant will create employment opportunities for more than 10 persons and the major
income sources are milk, manure, and culled cows and calves (specially the male) .
IV
1. INTRODUCTION
1.1. Overview of the dairy cows industry
Milking cows’ farm business is an agro-based project. That means rising of
milking cows for the purpose of commercial milk production. Milking cows that
we are purchase when they are four years of age on giving milk, such a special
breed of cows. They remain milking continuously till their 8 years of age. They
can produce average of 12 liters of milk per day, from two times of milking by
consuming about 6 kg per day of food during their milking period. For the purpose
of producing hybrid milking cows, consider the various characteristics of bulls and
cows before breeding. There are various types of highly milk productive cows
breeds available throughout the world.
It become one of the most profitable business ventures due to easy availability of
inputs, and demand for cows, suitability for all weather conditions, encouragement
from the government especially for educated unemployed and the like. It cannot be
said that, agriculture production alone can meet the demand of human population.
In this context production through dairy cows sector has become centre stage as a
means of alternative source of minerals and protein. This can be started in both
rural and semi-urban areas. According to the current industry practice, dairy cows
shed area available on rent basis. Dairy farming requires large area with high
return than any other animal husbandry and agriculture activities. The agricultural
sector plays a central role in the economic and social life of the nation and is a
cornerstone of the economy. About 80-85 percent of the people are employed in
agriculture, especially farming. The sector contributes about 40 percent of total
GDP; livestock and their products account for about 20 percent of agricultural
GDP.
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Dairy represents an important sub-sector in the Ethiopian agriculture. Dairy as
industry is also of high economic value for the country. Dairy products including
milk and milk products constitute a significant share in the global food industry.
Cheese with kitfo is commonly preferable food in various parts of Ethiopia. Dairy
cows products are also known for having high nutritional value.
In Ethiopia, Dairy cows is an integrated part of the smallholder production systems
and plays a significant role in poverty alleviation because of its source of foreign
exchange and it can be an income earner for households for household farmers.
Globally dairy cows are known to have a significant potential to generate income
for households. Many developing and developed countries have integrated dairy in
their economy. Dairy production has high socio-economic value and vital
especially for those who engages in an intensive farming system.
In Ethiopia much of the milk and butter is produced by household farmers. The
high increase in consumers’ demand for dairy products mainly in urban areas will
have major implications on the prices of the products which obviously is important
for those engaged in the sector. They were primarily raised for human food. Dairy
consumption is more common in urban than in rural areas and commonly high
during holiday periods.
1.2. Description of the farm
1.2.1. Mission
Visionaries’ dairy cows’ farm is going to be established to provide fresh and high
quality milk and butter to the individual customers, hotels, restaurants and
distributors found in and around Yirgalem.
2
1.2.2. Objective
It is expected that the dairy farm will meet the following objectives
• To ensure self-employment of the member owners.
• To create work opportunities for others.
• To market milk and milk products for the consumers.
• Milk will be marketed for individuals, hotels, restaurants and different
consumers.
• Reach profits that allow the whole group members to work for the company
full-time and make sufficient incomes.
1.2.3. Vision
The visionary project envisages production of milk and milk product. Based on the
cash flow statement, the project will have a cash inflow of 1,176,620 birr in the 1st
year& 2nd of operation and cash out flow of 678,532 birr in the same year.
Therefore, the project profit will be 408,088 birr; indicating the visionaries milking
cows farm is profitable and our vision is at the 5th year the total debt to be returned
and being one of the mostly known competitive milking cows farm in the country.
The farm is expected to create employment opportunities for about 11 persons at
the beginning and it will extend to 19 persons at 5th year.
1.2.4. History of the business
There are inadequate dairy farms (no qualified milk suppliers) in and around
Yirgalem town. There is an increasing demand for milk, so we are encouraged to
establish our milking cows farm to fulfill this gap.
3
2. MARKET PLANNING
Strength:
• Favorable Government policy measures.
• Good network of animal health institutions.
• Milk and milk products constitutes an important component of human diet in
the most of the developing countries in the world. The consumption is also
increasing at
Rapidly due to easy availability & cost effectiveness.
• Calcium, Phosphorus and Iodine along with fat.
• Dairy farming requires no much large area husbandry and agriculture
activities.
• Ample professional knowledge of members on livestock production and
health management.
• Commitment of the members to run the business as they are visionary
groups.
• Similar economical and social status that enables the members to work and
communicate easily.
• The potential for future specialization with quality service provision both at
national and international level.
Weakness:
• Price fluctuation.
• Highly capital intensive.
• Slow adoption of automation in production system.
• Lack of capital to invest in assets, equipment and inputs that would improve
quality are the major challenges faced by the market value chain.
4
Opportunity:
• Availability of infrastructures.
• Availability of cheap labor force.
• Availability of local materials used for making different equipments.
• Good progress of modern animal production system in the country.
• Domestic Consumption.
• Changing social trend
• Diversification
• Increase demand of milk and milk products
Threat:
• Disease
• Short shelf life
• Price fluctuations in the market
• Lack of adequate land.
• Presence of long fasting days so that demand will decrease during these
times.
• Prevalence of many tropical diseases.
• Livestock market structure
• Challenges with exports
• Product demand and consumer preferences.
5
• Inadequate finance, lack of technical and managerial skill, lack of efficient
and modern equipment, and lack of proper infrastructural facilities among
others.
2.1. Description of the farm products
The main products of our farm are milk which are important sources of high
quality proteins, minerals and vitamins to balance the human diet, and meat of old
aged cows. Another product like manure for fertilizer is also going to be available.
2.2. The farm positioning and pricing strategy
The milk is going to be distributed either directly to the nearby individual
customers or indirectly to the distributors. The envisaged farm, as a new entrant
into the market, has to penetrate the market and create awareness and product
loyalty first. Therefore, the objective of the pricing policy should be to gain a foot
hold in the market, get a sizable market share and attempt to sustain a reasonable
profitability, which at the initial stage, could only be achieved through
charging of lower prices that could influence users of the product. Accordingly, the
price of one litter milk will be 11 birr in non fasting season and 9 birr in fasting
season.
2.3 Customers
The primary customers will be local community, hotels, restaurants and institutions
(the cafeteria and lounges found in Hawasa university) and milk distributors. There
is high demand of hotels for meal in Yirgalem and nearby cities like Hawasa and
Aleta wodo demand of local community are high during holidays so that there will
be more production during these times. There will be shops for distribution during
holidays in the home city and nearby towns. Cows’ by-products such as manure
will be sold to local farmers to be used as fertilizer.
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2.4. Market size and trends
The product can be sold directly to bulk buyers. For individual buyers existing
outlets such as super markets and specialized food items department stores can be
used. Past Supply and Current Demand: Dairy products such as milk, butter and
cheese are the central diets of Ethiopian’s virtually in every household in the
country. Moreover, milk as they are easy to prepare and digest, have good test and
nutrient are becoming the favored breakfast items in urban areas like Addis Ababa
& Adama. Accordingly, due to the traditional consumption habit and as the
awareness of the population on the nutritional and other advantages of dairy
products increases the market for the products is also expected to expand.
2.5. Competition
There are some small sized individual household milking cows’ farms in the town.
In which thus are not such strong competitors in the market by taking the higher
demand of the population into consideration.
2.6. Estimated sales
Table 1: Estimated sales in birr
Sales in birr
1st year 2nd year
Pro 1st quarter(4 2nd quarter 3rd quarter
duct month)
s
Mil Du 20*42*12(1 20 cows*55 20 cows*35 20 cows*141
k rin 2)=120960 days*12(12)b days*12(12)b days*12(12)b
g irr=158400 irr=100800 irr=406080
fast
ing
7
Not 20*78*12(1 20 cows*65 20 cows*85 20 cows*224
fast 5)=280800 days*12(15)b days*12(15)b days*12(15)
ing irr=234000 irr=306000 birr=806400
Cull Du 0 0 4 cows*2500 5
ed rin birr cows*2500bi
cow g rr
s fast
ing
No 0 0 4 5
n cows*3500bi cows*3500bi
fast rr rr
ing
Man 8quntals*80 8quntals*80b 8quntals*80b 26quintals*8
ure birr irr irr 0 birr
2.7. Proposed location
The dairy firm will be in Yirgalem city. This may create significant opportunity for
the firm because currently there are so many milk and milk products café
throughout the city. Therefore, this will create more demand for our product. The
farm also will be around the village of shimbet. This site will have an advantage
for easy access of supply. This geographical location is suitable for our milking
cows’ farm and it is going to be established in the town of yirgalem kebele 04
particularly called Awada which is found around to the referral hospital.
3. OPERATIONAL PLAN
3.1. Development status
The visionary project is on the progress of establishing the dairy farm, since we are
beginners we are going to request working capital and we are also on saving our
money.
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3.2. Production process
The production cycle for the envisaged dairy farm starts with calves’ production
and contains a feeding process, management process of the farm and dairy farms
where the calf are raised, to avoid risk usually away from 20-30 km radius from
the processing plant. But the envisaged farm starts from the calves from the birth
and grows for production of milk. The calves live in medium houses which hold as
many as 20 calves. These grow-out houses are kept at about 30°C through
ventilation controls. The floor of the house must be dry and conceit. The dairy
cows are fed a diet of cow feed, which is typically 60% hay, 30% legumes , and
10% other ingredients such as vitamins and minerals.
Sick cows are treated with antibiotics or other medications. The cows are usually
watered through gendadrinkers.
A significant waste produced in dairy farming is the feces of the cows. So these
feces have to be collected and used for fertilizer or biogas generation for energy
source. By doing this environmental effect will be controlled.
The overall processes of production are indicated as follows:
3.2.1. Purchase of calves
The calves should be of uniform size, active and alert. The skin of calves should be
free from disease. Improved and high yielding calves should be purchased from
reputed farms.
3.2.2. Feeding
The requirement of feed during milking depends on the rate of milk production and
the body condition of milking cows. The cows may need more feed in winter and
less feed in summer. During summer months the herd is under severe stress then it
is suggested to temporarily change the ration to a higher level of protein content.
The actual feed consumption may be influenced by several factors as follows:
• Body condition of the cow.
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• Rate of milk production.
• Season and weather condition.
• Health and physical condition of the cows.
• Feed quality such as protein contents, caloric value of feed etc.
Generally the feed intake increases with an increase in milk production.
3.2.3. Housing
The dairy house should be well ventilated, dry and concrete. It is also free mud,
cracked ground. Extensively wet and dusty floor should also not be used. Using
proper floor is good for raising disease-free milking cows reasonably warm in
winter and cool in summer. The dairy house should be cheap, comfortable and
safe.
3.2.4. Vaccination
Vaccination can be applied to cows through injections. The medicine can also be
mixed in the water and also through mouth. Vaccination is provided to the cows
once in the rearing period and once in the milking period.
3.2.5. Culling
Culling is the procedure of selection and rejection of unproductive and poor
producers. Culling is a very important job for running dairy farm profitably. Poor
milking cows should be culled to minimize the cost of production.
3.2.6. Rearing and Milking Schedule
The cycle of 1 up to 8 years of herd dairy farm is divided into two distinct phases,
the rearing phase and the production phase. During the rearing phase of 4 years,
the cows consume feed and are non-productive. After the rearing phase is over, the
cows start birth and remain productive for the next 8 years. So, the revenues and
costs occur in the form of cycles.
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3.3. Cost of development
Table 2: Total Project Cost
Project Costs In birr
Total Fixed Costs (machinery & 120,500
equipment)
Raw material inventory 300,000
Total Working Capital 600,000
Total Project Cost 1020500
3.4. Labor requirement
The total manpower required is 9 persons. There will be labor requirement that are
skilled, unskilled and professional. We will recruit employees who are well
experienced and also in accordance of their skill they will take short term training.
Details of manpower and annual estimated labor cost including the fringe
benefits are given in Table 3.The total annual man power cost is estimated at
Birr 166,200.
Table 3. Manpower requirement and estimated labor cost
Sr. Description No. of Salary, Birr
No. Persons
Monthly Annual
1 Manager 1 3000 36000
2 Secretary 1 1200 14400
3 Production 1 2000 24000
supervisor
4 Laborer 3 3000 36000
5 Accountant 1 1300 15600
6 Sales/Purchase man 1 1000 12000
7 Store keeper 1 1100 13200
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8 Cleaner 1 500 6000
9 Guard 1 750 9000
Total 11 12,850 166,200
3.5. Expense and capital requirement
3.5.1. Operating expense
Table 4: Operating expense
Cost of Production In birr
Cost of cows 364,950
Feed cost 24,950
Salary 166,200
Insurance expenses 13,950
Marketing & Misc. expenses 29,950
Total 600,000
3.5.2. Capital requirements
Table 5: Financial Plan
Initial Financing Birr in actual
Debt 70% 805,000
Equity 30% 345,000
Total 100% 1,150,000
Note: The debt will be taken from Commercial Bank of Ethiopia and other credit
institutions with correlation to administration of small enterprises and covers 70%
of our total budget and other 30% of the budget is from the group members’
contribution.
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3.5.3. Cost of goods
Various types of farm equipment are needed for feeding, drinking and handling the
cows. List of the required farm equipment is given in Table 6
Table 6: Farm Equipment
Farm Equipment Unit Unit Cost Total Cost
Drinkers (genda) 5 2000 10,000
Feeders 5 1500 7500
Total 10 3500 17,500
4. MANAGEMENT
4.1. STRUCTURES AND CIVIL WORKS
The manager and other most personnel of the farm are from the group members
and the responsibility of each person is described in the following table:
Table 7: Management description
Solomon Tefera and Manager Some experiences in
kassay Amare managing staffs.
Muluken awoke Secretary New comer, graduated by
yoftahidegeme management and ready to
take basic computer
training
Yeshawebabeye Production supervisor New comer, graduated by
management
Sisaytadesse Veterinary doctor 10 years’ experience in
animalhealthadministration
in 3 districts.
Yalewandualem and Sales/Purchase man Experienced in shopping
kelemeworktamene
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4.2. Ownership
The visionaries’ Dairy farm is going to be built by the members of the group
(SolomonTefera,kassaye amare habteutibebu, kelemeworktamene,muluken
awokeyeshawebabeyeyalewandualemyoftahidegemewith contribution of 99% of
the total share.
4.3. Support services
Commercial bank of Ethiopia and other credit institutions with small business
administration by providing capital as a loan and we have also an insurance
advisor, who is responsible for his task and is experienced, are some of supporters
for the farm.
4.4. Risk analysis
The visionary’s dairy farm may face the following risk factors:
• Dairy cows diseases like infectious Mastitis disease etc.
• Financial problems
• Competitors
• Shortage of commercially prepared dairy feeds, and other inputs
• Exeo parasites and end parasites of cows
• Environmental effects like flood, drought
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5. FINANCIAL ANALYSIS
5.1. Balance sheet
Table 8: Balance sheet
Projected balance
sheet
Year 1
Cash 600,000
Stocks and Inventory 250,000
Gross Fixed Assets 300000
Total Assets 1,150,000
Liabilities 805000
Equity 345,000
Total 1,150,000
Note: since the visionaries dairy farm is going to be established by equity & debt
ratio of 30% to 7 0% respectively and the amount of equity is paid up in the first
year.
5.2. Projected Income Statement
The project mainly gains its money from selling of milk, culled cows and male
calves and collected manure. By considering the whole products to be sold in the
market, the project will have a cash inflow of 10,876,250 birr in the 1 st year of
operation and cash out flow of 662,966.84 birr in the same year. Therefore, the
project profit will be 10,213,283 birr; indicating the visionaries’ dairy farm is
profitable.
15
6. IMPLEMENTATION PLAN
The implementation of the business is expected to start after one year. During the period the
project is expected to fulfill license certificate requirement from the regional government through
which a support from bahir dar city administration.
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