Cattle Pen Fattening Business

Project Proposal
2013 EC

Promoter: - Beruf Fattening PLC

Dukem, Oromia

Ethiopia 2013 EC
 CATTLE PEN FATTENING BUSINESS PROJECT PROPOSAL

Table of Contents
Executive summary.....................................................................................................................................3
Introduction.................................................................................................................................................3
Mission, Objectives and Keys to success.................................................................................................4
Mission....................................................................................................................................................4
Vision.......................................................................................................................................................4
Core Values..............................................................................................................................................4
Objectives................................................................................................................................................4
Keys to Success........................................................................................................................................4
PLC Summary...............................................................................................................................................5
Ownership...............................................................................................................................................5
PLC Structure...........................................................................................................................................6
Operational Requirements..........................................................................................................................8
Feedlots...................................................................................................................................................8
Operational Strategy.................................................................................................................................11
Filling the Feedlot..................................................................................................................................11
Choosing Cattle (Feeders) for feedlots..................................................................................................12
Feeding System.........................................................................................................................................14
Complete Feeds.....................................................................................................................................16
Health Management & Disease.............................................................................................................16
Marketing Strategy....................................................................................................................................18
Market Analysis.........................................................................................................................................20
Demand.................................................................................................................................................20
Market Segmentation............................................................................................................................20
Industry Analysis........................................................................................................................................22
Competition and Buying Patterns..........................................................................................................22
SWOT Analysis...........................................................................................................................................23
PEST analysis.............................................................................................................................................24
Financial Statements.................................................................................................................................25
Start-up Costs........................................................................................................................................25

Page 1
 CATTLE PEN FATTENING BUSINESS PROJECT PROPOSAL

Pro Forma Income Statement................................................................................................................26

Variable Costs per Cycle........................................................................................................................27
Pro Forma Cash Flow.............................................................................................................................28
Pro Forma Balance Sheet.......................................................................................................................29
Break-even Analysis...............................................................................................................................30
Payback Period......................................................................................................................................30
Risk Analysis..............................................................................................................................................31
Potential Sources of Finance.....................................................................................................................32
Equity Financing....................................................................................................................................32
Debt Financing.......................................................................................................................................32
Top reasons for failure of cattle pen fattening business............................................................................33

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Executive Summary
1. Project Title; - Fattening

2. Type of The Project:- Fattening

3. Promoter; Beruf Fattening PLC

4. Project Location

- Oromia Regional State

- Dukem town

5. Planned Land Area 10,000 M 2

6. Planned Sarvice

6.1. Grade fattened cattle

7. Employment Opportunity

7.1 Salary for One Year 320,000.00

7.2 Manpower 10

8. Total Initial Investment…..........................Birr 5,242,500.00

9. Source of Fund

9.1. Promoter Contribution …………Birr 1,048,500.00

9. 2. Bank Loan ………………………..Birr 4,194,000.00

10. Revenue /Annual/……………………. 10,500,000.00

11. Net Profit

11.1 First Year ………………………………….. 4,852,500.00

11.2 3rd Year …………………………………….. 4,852,500.00

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Introduction
Fattening has been defined as intensive feeding of highly nutritious feed to
promote fast growth and fat deposition to achieve desired carcass growth and
quality (Alemu, 2007). Such systems can be applied to cattle as they` can easily
adapt to an intensive system of production under feedlots (Pasha, 2006).
Fattening programs aim to realize maximum growth rate and higher carcass
yields in a minimum period of time, which would raise production per unit of
land and the value of the livestock. This could be an economically viable
strategy compared to systems where animals are kept for long periods of time
on sub-optimal levels of feeding with consequent cyclic changes in weight gain.

Cattle fattening in Ethiopia has been recognized as a potential profitable

activity that enhances the income of smallholder farmers (Shapiro et al., 1993;
Pasha, 2006). Success stories from the project “Improving Productivity and
Market Success of Ethiopian Farmers (IPMS, 2013)” highlighted that Cattle
fattening has transformed the lives of smallholder farmers in parts of the
Oromia region by enhancing household incomes which has led to
diversification of agricultural activities. However, such benefits have not been
realized on a wider scale due to insufficient interventions as a result of the
limited attention that cattle fattening has been received to date.

Our PLC intends to fatten cattle in pens/feedlots. Cattle will be purchased from the rural areas of
Oromia where it is cheap, and transported to our farm which is located close to Dukem. We will
then feed the cattle for a period of 90 days. During this period, we expect the cattle to increase in
weight, and an increase in the quality of the beef to super grade. We will then sell the cattle, and
make a profit. We will continuously do this throughout the year.

Most important to us is our financial success and we believe this will be achieved by offering
high-quality fattened cattle while minimizing costs. We have created financial projections based
on our experience and knowledge of the area.

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Mission, Objectives and Keys to success

Mission
Our mission is to provide super grade beef and healthy fattened cattle to customers at affordable
prices. We value our relationships with current and future customers and hope to communicate
our appreciation to them through our outstanding, guaranteed product quality, personal service,
and efficient delivery. Our commitment to our customers will be reflected through honest and
responsible business. We will provide a safe, friendly working environment for our employees.

Vision
To produce high quality of beef that can be marketed.

Core Values

 Customer satisfaction
 Commitment to achieving results
 Sustainability
 Employment Creation
 Innovation
 Integrity

Objectives
 Achieve annual sales of more than 300 cattle per annum
 Create jobs as we expand our operation
 Produce cattle with super grade beef

Keys to Success
 Purchasing good breeds of cattle
 Giving the cattle high quality feed
 Providing the required medication and vaccination to cattle
 Purchasing cattle at a low price
 Minimizing feed cost

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Some Important Features of the project Area

Infrastructure development
Undergoing the necessary suitability assessment Dukem Town has been
selected to establish the project. The area is suited Eastern part of Addis Ababa
at about 44 kms where Infrastructure is well development it has relatively well
developed, and many thousands of people reside. As it is near the federal
capital and sites of many international organizations the area has relatively
well development social and economic infrastructure such as asphalt road
which connect it to eastern parts of the country Addis Ababa and
communication services (Telephone, Postage, etc). Hydroelectric power is also
available with good quantity and quality. Other services are relatively better
developed at near distance in Addis Ababa.

Major Resources potential of the area

The majority of the population is a farming population who grow teff, cereals
and oil seeds and other, while the urban population is participating in
business activities.

So, in general the major resource potential and prospect of the surrounding
areas include;

- Agricultural products

- Business activities

- Other services

Hence, these and other related ones have contributed a lot to increase the
services demand prospects and production prospects of the resources by
different private investors of both domestic and foreign ones.

Page 6
Population and socio economic resources

Currently Dukem town is estimated to have the population of over 100,000

which is actually not the exact figure but the projection made based on the
estimated growth rate of 8% which is briefly discussed on the Oromia Regional
State Master Plan Document of Dukem Town. During the 1994 census the then
population size of Dukem town was around 50000 which is still used by some
organs and does represent the current situation of population rather
undermines the figure. This is because Dukem has undertaken many
developments after the census which in turn led to the increment of its
residents. Amongst these developments one is the embracement of the
surrounding three village farmer associations with their population. The
second and most important is the establishment of Industrial zone in Dukem
town as a result of which many job seekers fled to the town in search of job
opportunities. Therefore, the final output of these major changes was the
increment on the population size of Dukem town.

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Location

The envisioned project is planned to be located in dukem town (which is 37 km

far from the capital city to the way to Adama), Oromia special zone
surrounding Finfine, Oromia Regional State. The main justifications behind the
selection these locations are:

The main justification behind the selection of this location is

 Strategically located to the central and largest market of the nation

(Addis Ababa)
 Relatively advanced development in infrastructure (power, water,
telephone, internet, road etc.)
 All asphalt to the nearest market outlet
 Availability of huge skilled labor force
 High construction works are undergoing in the vicinity
 It is one of the future area for the national; train destination from the
port that will make easy to import inputs and export finished products
 Conducive investment policy and governance
 Environmentally fit to manufacturing industry.

PLC Summary
Our PLC intends to fatten cattle in pens/feedlots. Cattle will be purchased from the rural areas of
Oromia region where it is cheap, and transported to our farm which is located close to Dukem.
We will then feed the cattle for a period of 90 days. During this period, we expect the cattle to
increase in weight, and an increase in the quality of the beef to super grade. We will then sell the
cattle, and make a profit. We will continuously do this throughout the year.

Products
Our end products will consist of many species of high grade fattened cattle. We will manage our
cattle systematically, in feedlots, feeding them with quality, nutritious feeds, till they reach the
target weight.

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Ownership
You must choose a legal structure for your business, and there are 3 options you might consider.
The structure you choose will depend on the size of your business, along with your personal
circumstances and how much you want to grow the business. Keep in mind that if you need to,
you can change your business structure later on if you find that a new structure will meet your
needs better.

Partnerships

In a partnership, two or more people run a business together. Each partner shares responsibility
for running the business, shares in any profit or loss equally, unless the partnership agreement
states otherwise, and is liable for any debt within the partnership. It is wise to establish your
partnership with a formal written partnership agreement.

The advantage of a partnership is that it is easier to raise the start-up capital, as all the partners
will contribute towards the start-up capital. If 2 or more of the partners are actively involved in
the business, there will be an advantage of skills diversification, whereby one might have
experience in the cattle business, and the other experience with accounting issues etc. The
combined skills, experience and knowledge can provide better products and service in the
business. A partnership is also simple and inexpensive to set up, there are minimal reporting
requirements, and you can share management/staffing responsibilities.

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PLC Structure

MANAGER/ACCOUNTANT

Cattle Keeper

Manager/Accountant

One person will act as the manger and accountant. This person will be the owner of the business.
The duties will include:

 Staff management, supervises and coordinates activities of all the workers, assigns
workers to duties

 Directs maintenance and repair of facilities and equipment at the farm

 Trains new workers

 Day-to-day operational decisions

 Business planning and operations, strategic planning, business management

 Giving employees their salaries

 Analyze business operations, trends, costs, revenues, financial commitments, and

obligations, to project future revenues and expenses or to provide advice.

 Develop, maintain, and analyze budgets, preparing periodic reports that compare
budgeted costs to actual costs.

 Compute taxes owed and prepare tax returns, ensuring compliance with payment,
reporting and other tax requirements.

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Cattle Keepers

Duties include:

 Feeding the cattle

 Miscellaneous chores which includes include medicating, vaccinating, repairing

equipment, mowing grass, removing caked litter

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Operational Requirements
Feedlots
A beef cattle feedlot/pen is a confined yard area with watering and feeding facilities where cattle
are completely hand or mechanically fed for the purpose of beef production. Feeding is done
under confinement to prevent loss of energy through movement.

Why confine cattle within pens?

The confinement of cattle is fundamental for the operation of beef feedlots for the following
reasons.

 The confinement of animals within feeding pens improves control of the environmental
impacts of cattle.

 Feedlots are constructed to allow efficient collection of manure and effluent and provide
protection to surrounding land, surface and ground water resources.

 The confinement of cattle permits the close health inspection of animals on a regular
basis, and the removal of ill or injured cattle for treatment.

 The confinement of cattle allows the efficient provision of feed and water.

The feedlot must provide for:

 The proper construction and maintenance of facilities to high standards and the
employment of full time, well trained and sufficient personnel.

 The correct siting of the feedlot to meet the needs of the confined animals for proper
shelter from the weather. A well-drained, hard standing surface and a constant supply of
suitable and sufficient food and water.

 Consulting of veterinarians experienced with feedlot animals whose instructions

regarding the maintenance of animal health and welfare must be followed.

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  Sick animals to be quickly identified and isolated in proper sick bay facilities with
appropriate treatment instituted.

 Special facilities for the proper care and handling of offspring born to confined mothers

 Constant monitoring of food quality, palatability, and disease processes.

Design and Layout

Proper housing is important in successful cattle fattening operation. Adequately protect animals
against the adverse effects of weather when they are raised in relatively small areas. The
permanent type of housing consisting of roofing, timber frames, concrete floor, feed trough and
water troughs are used in most farms. The shelter is open-sided and is located near the farmer’s
house or under the shade trees. Building height ranges from 1.79 to 1.9 meters while the width
varies from 2.1 to 2.7 meters. Each animal can be allocated with 5 to 10 square meters. Cattle
housing must offer very easy access to food and water, freedom of movement, ventilation that
prevents harmful effects from poor air quality and natural ventilation and light.

The floors for the fattening pens must be smooth but not slippery. Housing must include a clean
and dry area with ample bedding of straw or other suitable material. Feet problems are less
severe in straw yards, mastitis tends to be a great problem that in cubicle-housed cows. If the
straw yard system is chosen, best possible straw yard management should be implemented with
frequent clearing of yards (maximum 5weeks) and plentiful bedding, with dry straw, both
mornings and evenings. Appropriate design of yards, avoiding dampness and contamination
from water troughs and narrow entry points, is equally important.

Basically, the design and layout of the feedlot depends on permanency, size of operation, method
of feeding and feed supply. It must be sited close to feed stores, handling facilities and water
supplies. The feed otter must also consider drainage by sitting on a 2% slope or on rocky ground
and where there are windbreaks. A roof is not usually necessary, except over the feed troughs to
prevent wetting of the feed in rainy weather and bleaching and loss of vitamins in hot sunny
weather.

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Space Allocations

A floor space allocation of 5-10 square meters/head is ideal depending on size and breed.
Feeding space allocation should be 30-50cm/head depending on whether the animals are poled or
horned. Feed must be offered free choice and at least 50l/head of drinking water must be
available. A water reserve that carries 2-3days supply must be installed in case of pump or
borehole failure. Water troughs must be easy to clean, have a drain plug and sited far away from
the feed to prevent fouling of the water. It can be economic to have several pens drinking from
the same water trough.

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Operational Strategy
Filling the Feedlot
Feedlot managers must be aware of the fact that keeping a feedlot enterprise running, a
continuous income is needed. The only way this can be achieved is by having livestock to sell all
the time. This is a difficult part of feedlot ting, because animals remain in a feedlot for 90 to 120
days. The feed otter must therefore predict market demand, and consequently predict selling
price at least three months ahead. A continuous source of feeders is needed, but not always
available.

Livestock can be obtained directly from farmers or be bought by private treaty through an agent
or at livestock auctions. Where a buy-in feedlot system is used, buyers must be experienced in
evaluating the potential for fattening of different types of animal (maturity type, age, gender) in
relation to the market demand (price) of different grades of carcass. Funds to buy in animals
must be available at all times. A lack of funds to buy in animals when prices are favorable could
lose an opportunity to make a profit.

Transport

You will have to hire Lorries to transport your cattle from the rural areas to your farm. Transport
is not usually a problem, as there are many transporters who are in the business of transporting
cattle from the areas.

Police Clearance and Veterinary permit

There are some requirements for you to be able to transport cattle from one area to another. You
need a police clearance and veterinary permit. You get these from in the area you purchased the
cattle from.

Page 15
Choosing Cattle (Feeders) for feedlots

There are many factors to consider when choosing cattle for feedlots.

Sex
Females are earlier maturing than steers and steers in turn are earlier maturing than bulls. Bulls
can do well in feedlots, but often cause problems by fighting. Females can do well in feedlots,
but often have poor growth rates partly because they reach carcass finish at an earlier age and
there is a tendency to be tardy in sending them for slaughter. Disruptions caused by females
coming on heat could be a contributory factor. Heifers consume slightly less feed than steers and
are about 7 % less efficient. They finish sooner and their corresponding minimum mass should
be approximately 10% less than for steers. Bulls and short scrotum bulls grow faster, are most
efficient and grade better than steers. This is provided they are sold at milk tooth.

Age
Animals can be placed in the feedlot at any age, usually after weaning. In practice animals tend
to arrive at feedlots shortly after weaning (7 to 9 months of age), as yearlings (12 to 18 months of
age) or at two and a half years of age. In most feedlots there is no differentiation in feeding
regime between animals of different ages and it has been found that irrespective of the age,
animals tend to gain about 150 kg and are then ready for slaughter. Cattle placed on high energy
rations at an early age tend to deposit fat more rapidly than if they are kept on low energy diets
for a time before being placed on a high energy ration.

Arrival

On arrival at the feedlot animals must be processed. Processing varies from feedlot to feedlot,
but usually includes:

 Dose and dip. Dipping is essential, but many people question the need to de-worm
animals arriving at a feedlot. A positive response to dosing is often not seen, possibly
because many farmers dose their animals before selling them.

 Supplementation of animals prior to putting them in the pens will get them used to eating
concentrates and boost animal growth to achieve target induction masses.

Page 16
 Vaccinate all animals against botulism, anthrax, quarter evil, IBR and any other
diseases the veterinarian considers essential in the area where the feedlot is
situated.

 Administer growth promotes. These have been shown to be highly cost effective.
Injecting Vitamin A is usually worth the nominal cost involved.

 Identify and number the animals for record keeping purposes.

 On arrival at a feedlot it is good practice to group animals according to size and sex.
Large animals tend to bully smaller animals and keep them away from feed troughs.

 The initial weight of animals should be recorded, preferably after 7 to 10 days in the
feedlot. At this time, careful observation can identify poor performers and these can, at a
next weighing which ideally takes place two to three weeks later, be culled if the mass
gains confirm the earlier observations.

 Horned animals are a problem. Dehorning sets an animal back a great deal. Leaving
animals with horns can lead to severe losses resulting from damage to other animals and
bruising. It is best to refrain from buying in animals that have not been properly
dehorned.

Page 17
Feeding System
many feed otters mix their own ration, usually a complete feed, using the most readily available
ingredients at the best price they can bargain for. Where home-produced feeds are available at
low cost e.g. silage, the profitability of a feedlot can be improved.
Other feeding systems include:

 Buying in a complete feed. If large volumes of feed are bought, a better price can be
negotiated. This option must always be investigated, especially when beef prices are
good and ingredients are difficult to obtain. Cost of transport often offsets gains made on
the feed price.
 Cafeteria feeding systems have been developed and have the advantage that the animal
selects an increasingly concentrated diet over time, which leads to greater efficiency of
feed utilization.

Other nutrients

The diet should be well balanced for calcium and phosphorus at correct levels. Diets based on
most energy feeds other than molasses will be deficient of calcium and limestone flour needs to
be included

Excessive amount of phosphorus (P) can adversely affect the use of other minerals and increase
incidences of urinary calculi. Diets containing 70 % or more of grain or grain by products
usually contain adequate P and there is no need to add more. But if such feedstuffs like molasses
or silage or orange pulp make up a large proportion of the diet, additional P, in form of MCP or
bone meal will need to be added. Ruminants can tolerate a wide range of Ca: P ratio than
monogastrics but extremes result in reduced performance. The ratio less than 1:1 or more than
7:1 should be avoided. Undesirably low levels are most likely in diets based on grains and grain
by products and it may be necessary to increase calcium levels well above requirements to
improve the ration.

Other minerals

Page 18
Mineral Level on DM basis

Salt 0.5

K 0.5

Mg 0.1

S 0.15

Cu 10ppm

Co 0.1ppm

Fe 30ppm

Mn 30ppm

Zn 30ppm

Se 0.1ppm

I 0.2ppm

Of these only zinc, copper, cobalt and iodine are added to high-energy diets.

Fats

Fats can be added to increase the energy content of the diets and to reduce dustiness. The total fat
in the diet should not exceed 7 % otherwise feed intake may be depressed. If protected fats are
used the fat content may be increased to 10 % (Not unsaturated fats). Fat should not be used as
grain substitute and where unsaturated fats are used rancidity will be a problem.

Complete Feeds
These are the easiest to use, though they are expensive compared to home-made feeds. They are
complete, balanced meals, designed for finishing cattle in pens over the normal 70-90 days. They
are high energy fattening meals containing all nutrients necessary for ad lib pen fattening.
Feeding rate will depend on factors such as live weight and age of the animal, but normally

Page 19
averages between 8-15kg per head per day or 3.4% of a steer’s live mass per day, and average
daily gain at 350Kg live mass is about 1.6Kg.

It is advised that even if you are feeding these complete feeds, make available a good quality
roughage source as an extra. The cattle might or might not nibble it, but when they do need it, it
will help if it is available. These feeds contain urea; hence it is advisable to introduce your cattle
to them gradually, preferably over a period of two weeks.

You may also buy concentrates to mix with snap corn. Snap corn is snapped maize (husk, cob
and grain), and it has 78% grain content. After mixing the two, the result will be a complete feed.
The reason behind using concentrates is to try and decrease feed costs, but for cattle fattening
feeds, the cost decrease is usually slight, thus it may be more convenient to use straight complete
feeds.

Health Management & Disease

A feature of crowded accommodation is the rapid spread of disease. Apart from the better known
cattle diseases that can appear in feedlots, there are a number of diseases associated with feedlot
ting. Diseases such as rumen stasis, acidosis, laminitis and urinary calculi can be a problem in a
feedlot. Prevention is always better (cheaper, hustle free) than cure in a feedlot operation.

The services of a veterinarian or animal scientist to advise on disease prevention and the
treatment of sick animals is a cost well justified. However, one still needs to keep the veterinary
cupboard stocked with such drugs as ammonium chloride, hypo (Na thio-sulphate), activated
charcoal, vinegar, brown sugar, bicarbonate of soda, veterinary milk of magnesia, Epsom salts
and some antibiotics in case of outbreaks of the above or other health conditions. Slurry disposal
is a major issue in most feedlots and warrants attention. Waste can be wet or solid and, if not
properly taken care of, can result in a fly and insect problem. Flies and insects must be combated
in a feedlot because they worry animals and increase stress. Stress has a negative effect on
growth rate. A feedlot manager needs to be aware of the potential danger of these diseases,
especially infective diseases such as IBR which can spread through a feedlot at a very rapid rate
and even if mortalities are relatively low, profits are eroded by depressed animal performance.
Although deaths occur in feedlots, where losses exceed 2% prompt action must be taken to find
and eliminate the cause(s) of the mortalities in order to minimize losses.

Page 20
Performance in feedlots

Factors which will affect performance:-

 Quality of cattle

 Consistency of size and type within pen

 Setting realistic performance targets in relation to the above

 Avoid waste

 Ensure clean fresh water is always available

Page 21
Marketing Strategy
Our PLC will attempt to rapidly achieve awareness in Dukem about its business in the first year.
To be successful in this business, you should have many customers. Our marketing strategy is
based upon the marketing mix, which are the 4 p’s of marketing, which are product (service),
price, promotion and place (distribution).

Product

Our fattened cattle will be of high quality, with super grade beef, and also healthy. The cattle’s
appearance will be very attractive. Customers will be pleasantly surprised at how attentive we
are in regards to their needs.  The business operates on the assumption that it will do whatever is
reasonably necessary to keep the customer happy.  This reflects the notion that if the customer is
kept happy; long-term profits are ensured.

Price

We will try and minimize our production costs so that we can offer a more competitive price on
the market. The price of the cattle will be determined by market forces. It will depend on the
weight and grade of the beef.

Promotion

Word of mouth advertising via quality products will be used to market our PLC. We will give
incentives to customers who refer others to our farm. We will spread the word of our cattle in our
community. We will also use our personal networks to identify new customers. We will talk to
family and friends; inform the local community; showcase products at community functions.

Place/Distribution

Our farm will be located close to Finfine city, which is our intended market. We will supply
cattle to various entities.

Page 22
Page 23
Market Analysis
Demand
Dukem and its surrounding towns consumed beef worth over a year. which was increase from
the value of beef consumed. Data shows that beef consumption in Dukem has been on the
increase since before. The average demand of beef per month in Dukem is about 100 cattle. The
demand for beef is expected to increase.

Market Segmentation
Potential customer groups for beef are:

Hotels And Restaurants And Fast Food Outlets

You can supply your beef to hotels and restaurants. They buy beef in bulky to prepare meals for
their customers. By creating and maintaining good relationships with the hotels and restaurants,
you will end up having long term contracts with them. This will create predictable income and
stability for the PLC. The price for your beef if you are supplying to hotels and restaurants is
usually higher.

Butcheries

Butcheries are big customers for your beef. Many butcheries buy beef from small scale and
medium scale producers. You will have to negotiate for good payment terms, preferably cash. By
creating and maintaining good relationships with the butcheries, you will end up having long
term contracts with them. This will create predictable income and stability for the PLC.
Organisations

You can supply your cattle to various organizations like universities, schools and hospitals,.
Selling direct to consumers allows producers to set a price that covers costs and provides a larger
profit.

Individuals

Page 24
Individuals buy beef in bulky for various reasons including for parties, weddings and family
functions. Selling direct to consumers allows producers to set a price that covers costs and
provides a larger profit.

Page 25
Industry Analysis
The producers of cattle in Dukem can be divided into the following segments:

Competition and Buying Patterns

Customers consider the quality of beef when buying. Beef is graded into different grades. After
cattle fattening, it is expected that your cattle will have the highest quality of beef, which is the
super grade. Butcheries are concerned about quality, and price. They want a low price so that
they can have high profits. The price is usually determined by market forces (supply and
demand) and at any point in time, there will be a generally accepted supplier price of beef. The
customers are willing to establish relationships and enter into long term supply agreements with
suppliers who can reliably deliver beef to them when they need it.

Page 26
SWOT Analysis
Strengths

 A large market

 Experienced owner-operator

 Good quality feeders

 Access to cheap cattle

 Plenty of water supply

Weaknesses

 Limited Capital

 High feed costs

 Little negotiation power with customers

Opportunities

 Growing market

 Economic growth

Threats

 Disease outbreak

 Decline in cattle demand

 Low market prices for beef

 Change in government regulations

 Increase in feed costs

Page 27
PEST analysis
We understand that our business is affected by Political, Economic, Social and Technological
factors. Below we look at how those external factors may affect our business and the
assumptions we have made in making this business plan.

Political

Change in regulations which affect the agriculture sector especially cattle farming will affect us.
New legislation may create risks of non-compliance with the law, or create new administrative
burdens. The tax policies of the Government will affect the operations of our business. If the
government increases the taxes, it will affect the profitability of our business. Political instability
like wars, protests will affect our business. Changes in employment laws, safety regulations
especially those targeted to the agriculture industry will affect the operations of our business. We
expect political stability to continue, and we do not expect any significant changes in the
regulations of the government.

Economic

Liquidity crisis in the country has caused high interest rates. The high interest rates affect the
cost of capital, the rate of interest being directly proportionate to the cost of capital. Rate of
inflation determines the rate of remuneration for employees and directly affects the prices of our
services. Again, the proportion between the inflation rate and wages/prices is direct. Economic
trends act as an indicator of the sustainability and profitability of our business and will help us
determine the right marketing strategy.

Social

We expect the population growth will continue. This will mean more potential customers and
greater demand. We expect that which are being carried out by the government and Non-
Government Organizations, will make people more health conscious we expect that the health
facilities will continue to improve as the economy recovers

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Financial Statements
These financial statements are based on the Production Cycle which we outlined under
Operational Strategy section.

Start-up Costs
Item Quantity Unit Cost Total
Land Acquisition 1 10,000.00 10,000.00
Feedlot Construction 5 20,000.00 100,000.00
Feeders 350 500.00 175,000.00
Drinkers 350 500.00 175,000.00
PLC Registration 1 5,000.00 5,000.00
Transport from source + licenses 350 25.00 8,750.00
Transport + licences to market 350 25.00 8,750.00
Cattle(250 Kg @ $1/Kg live weight) 350 10,000.00 3,500,000.00
Repairs and Maintenance/year 1 30,000.00 30,000.00
Contingency Cash 1 350,000.00 350,000.00
Feed Kgs (1 cycle advance) 1500 350.00 525,000.00
Veterinary Supplies (1 cycle advance) 350 100.00 35,000.00
Salaries (1 cycle advance) 8 40,000.00 320,000.00
Total 5,242,500.00

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Pro Forma Income Statement
Income Statement Year 1 Year 2 Year 3
Revenue
Cattle Sales 10,500,000.00 10,500,000.00 10,500,000.00
Cost of goods sold 3,500,000.00 3,500,000.00 3,500,000.00
Gross Profit 7,000,000.00 7,000,000.00 7,000,000.00
Operating Expenses
Salaries 320,000.00 320,000.00 320,000.00
Depreciation 50,000.00 50,000.00 50,000.00
Water (Borehole) 5,000.00 5,000.00 5,000.00
Advertising - - -
Repairs and maintenance 5,000.00 5,000.00 5,000.00
Contingency 150,000.00 150,000.00 150,000.00
Total Operating Expenses 530,000.00 530,000.00 530,000.00
Net Profit Before Tax 6,470,000.00 6,470,000.00 6,470,000.00
Tax (25%) 1,617,500.00 1,617,500.00 1,617,500.00
Net Profit After Tax 4,852,500.00 4,852,500.00 4,852,500.00

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Variable Costs per Cycle

Variable Costs per Cycle Quantity Unit Cost Total

Repairs and Maintenance/year 1 30,000.00 30,000.00
Contingency Cash 1 350,000.00 350,000.00
Feed Kgs (1 cycle advance) 1500 350.00 525,000.00
Veterinary Supplies (1 cycle advance) 350 100.00 35,000.00
Salaries (1 cycle advance) 8 40,000.00 320,000.00
Total 1,260,000.00

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Pro Forma Cash Flow
Year 1 Year 2 Year 3
Opening Balance - 9,870,000.00 5,970,000.00

Cash Sales 10,500,000.00 10,500,000.00 10,500,000.00

Subtotal Cash from Operations 10,500,000.00 10,500,000.00 10,500,000.00

Additional Cash Received

Start-up Capital 3,100,000.00 - -
Subtotal Cash Received 13,600,000.00 - -

Cash Expenditures
Cattle,feed,vet,transport 3,000,000.00 3,000,000.00 3,000,000.00
Operating Expenses 530,000.00 530,000.00 530,000.00
Subtotal Spent on Operations 3,530,000.00 3,530,000.00 3,530,000.00

Additional Cash Spent

Taxes 200,000.00 200,000.00 200,000.00
Loan Repayment - 1,000,000.00 1,000,000.00
Bank Overdraft Repayment - - -
Purchase Fixed Assets - -
Subtotal Additional Cash Spent 3,730,000.00 3,730,000.00 3,730,000.00

Net Cash Flow 9,870,000.00 6,970,000.00 6,970,000.00

Cash Balance 9,870,000.00 5,970,000.00 12,940,000.00

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Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Long Term Assets 100,000.00 100,000.00 100,000.00
Land 5,000.00 5,000.00 5,000.00
Housings 1,200.00 1,200.00 1,200.00
Equipment 350,000.00 150,000.00 150,000.00
Accumulated Depreciation (50,000.00) (50,000.00) (50,000.00)
Total Long Term Assets 406,200.00 206,200.00 206,200.00
Current Assets
Cash 9,870,000.00 5,970,000.00 12,940,000.00
Accounts Receivable - - -
Inventory - - -
Other Current Assets - - -
Total Current Assets 9,870,000.00 5,970,000.00 12,940,000.00
TOTAL ASSETS 10,276,200.0 6,176,200.00 13,146,200.00
0

EQUITY AND LIABILITIES

Equity
Share Capital
Retained Earnings
Total Equity 6,176,200.00 3,046,200.00 10,996,200.00
Liabilities 4,000,000.00 3,000,000.00 2,000,000.00
Current tax payable 100,000.00 130,000.00 150,000.00
Accounts Payable - - -
Other Liabilities - - -
Total Liabilities 4,100,000.00 3,130,000.00 2,150,000.00
TOTAL EQUITY AND LIABILITIES 10,276,200.0 6,176,200.00 13,146,200.00
0

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Break-even Analysis
Break-even Analysis Value
Selling Price/Unit 30,000.00
Variable Cost/Unit 1,500.00
Fixed Costs/year 2,500,000.00
Break-even point 87

Therefore we must fatten a minimum of 87 cattle per year for our revenue to cover all our costs.

Payback Period
Payback Period Value
Initial Investment 5,242,500.0
0
Net Cash flow Year 1 9,870,000.0
0
Payback Period 0.53

Therefore it will take us 6 months to recover the cost of the initial investment.

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Risk Analysis
These risks could materially adversely affect our business, financial condition or results of
operations. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial also may materially adversely affect our business, financial condition or
results of operations.

Out breaks of livestock diseases can adversely impact our ability to conduct our operations
and demand for our products.
Demand for our products can be adversely impacted by outbreaks of cattle diseases, which can
have a significant impact on our financial results. Efforts are taken to control disease risks by
adherence to good production practices and extensive precautionary measures designed to ensure
the health of our cattle.

Changes in consumer preference could negatively impact our business.

The food industry in general is subject to changing consumer trends, demands and preferences.
Trends within the food industry change often, and failure to identify and react to changes in these
trends could lead to, among other things, reduced demand and price reductions for our brands
and products. We strive to respond to consumer preferences and social expectations, but we may
not be successful in our efforts. We could be adversely affected if consumers lose confidence in
the safety and quality of certain food products, or the food safety system generally.

Theft & Vandalism

There is a risk that our cattle farm may be subject to theft and vandalism. This could have an
adverse effect on our financial results, as we might end up losing our cattle.

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Potential Sources of Finance

Equity Financing
Equity financing means exchanging a portion of the ownership of the business for a financial
investment in the business. The ownership stake resulting from an equity investment allows the
investor to share in the PLC’s profits. Equity involves a permanent investment in a PLC and is
not repaid by the PLC at a later date.

Personal Savings
Not everybody has savings but if you do, they are a good place to start. If you don’t have savings
yet, now is a good time to start. Your timeline for starting your business may be six months to a
year anyway, so if you start putting money away now, you’ll have at least a starting point from
which to raise more cash. Starting a business is about sacrifice and so you should cut down your
lifestyle as far as possible and save the cash, you’ll be glad you did..

Friends and Relatives

Founders of a start-up business may look to private financing sources such as parents or friends.
It may be in the form of equity financing in which the friend or relative receives an ownership
interest in the business. However, these investments should be made with the same formality that
would be used with outside investors.

Debt Financing
Debt financing involves borrowing funds from creditors with the stipulation of repaying the
borrowed funds plus interest at a specified future time. For the creditors (those lending the funds
to the business), the reward for providing the debt financing is the interest on the amount lent to
the borrower.

Debt financing may be secured or unsecured. Secured debt has collateral (a valuable asset which
the lender can attach to satisfy the loan in case of default by the borrower). Conversely,
unsecured debt does not have collateral and places the lender in a less secure position relative to
repayment in case of default.

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Debt financing (loans) may be short term or long term in their repayment schedules. Generally,
short-term debt is used to finance current activities such as operations while long-term debt is
used to finance assets such as buildings and equipment.

Banks and Other Commercial Lenders

Banks and other commercial lenders are popular sources of business financing. Most lenders
require a solid business plan, positive track record, and plenty of collateral. These are usually
hard to come by for a start- up business. Once the business is underway and profit and loss
statements, cash flows budgets, and net worth statements are provided, the PLC may be able to
borrow additional funds.

Top reasons for failure of cattle pen fattening

Buying expensive and inappropriate cattle (feeders)

One must be able to source an animal of the right breed, age, sex and conformation for optimum
performance in the pens. As a general guide, if the animal cannot achieve a daily live mass gain
of 1.2-1.6kg/day with a feed conversion ratio of at most 8:1 then it may make business sense not
to pen fatten. If you buy expensive cattle, you may already be in a loss before you begin pen
fattening. Calculate the profitability margins first.

Management Problem

An incompetent management may not be able to operate a profitable cattle farm. The managers
of the farm must know what they are employed to do and possess the ability to do it. Some cattle
managers fail to recognize the peculiarity of cattle fattening in their management style, thereby
preparing good ground for losses in the venture. Many managers do not recognize the need for
timely planning and control in running the farm.

Poor feeding condition and wastage of feed

The cattle need to be fed well in the pens in order to produce maximum meat. The cattle must be
fed with the appropriate feed. Those who attempt to make home-made feeds without consulting
experts are endangering their business.

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Security

Your farm should be secure so that the cattle won’t be stolen. Just imagine waking up on the 90 th
day and you find your feedlots empty.

Housing

Cattle need minimum space and convenient place to grow well and produce maximally meat. If
they are overcrowded they won’t do well, and some may die.

Inability to prevent, detect and control disease

It is often said that prevention is better than cure, as far as disease are concerned and this is a true
statement and relevant one to cattle farming. A cattle farmer should know how to prevent cattle
disease, as well as how to cure them. If he or she does know anything about preventive measures,
the services of consultants in the field should be engaged for good result. And all cattle should be
dipped first before the fattening operation.

Lack of Technical Know-how

It is regrettable that many people and organizations have ventured into pen-fattening without
technical knowledge. Knowledge of pen-fattening techniques is required before anyone can
operate the business profitably. Make sure you attend a workshop for pen-fattening before you
start the business, or visit someone who is doing it.

Ignoring the role of livestock consultants

There are always practicing experts in every profession or occupation who function as
consultants. They are there to proffer solutions to problems that exist in such professions at a
minimum cost. Where a livestock farmer doesn’t have adequate technical and managerial
experience, he or she can consult experts for necessary advice to bridge the gap. Even where the
farmer thinks he or she has all it takes to run a farm successfully, there may be need to seek the
services of experts in the field, as it is usually said that two heads are better than one.

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