UNIVERSITY OF GONDAR

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING&FINANCE

Group assignment for the course of Entrepreneurship

friendship dairy farm

Group members Id no

1. Amanuel Jemere………………………………05697/10

2. Alex Demeke…………………………………..05756/10

3. Desyilal Nibret………………………………….05714/10

4. Alemtsehay Asfaw………………………………05682/10

5. Dessie Mullie……………………………………05722/10

6. Abraham Guadie………………………………04803/11

7. Adugna Anley ……………………………………05778/10

8. Asrie Getie,…………………………………….05761/10

9 . Tobiaw Amare………………………………….

10 .Kelemwork Addis……………………………….05382/09

Submitted to: - ass/professor

 Submission date: 5/10/2011 E.C

2
 Introductory page

Name of the company: friendship dairy farm

Address: Gondar city kebele 18

Tell:0920758961

Email:freindsdairy33@gmail.com

Amount of money :1150000

Source of money: from financial institution and visionary groups

Legal form :PARTNERSHIP

Type of business: product provider

Year of the Business plan:  from 2019to 2020

Business activity; providing quality and consistence product for our
customer.

3
TABLE OF CONTENTS
PAGES

LIST OF TABLES

TABLE CONTENTS………………………………………………………………………………. I
EXECUTIVE SUMMARY.............................................................................................................II

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

2.6. Estimated sales......................................................................................................................7

2.7. Proposed location..................................................................................................................8

3. OPERATIONAL PLAN..............................................................................................................8

4
 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

5
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
Gondar town is estimated at lower number of litter of milk. Therefore; the visionaries milking
cows farm is established to satisfy this demand in Gondar town kebele 18 at 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) .

6
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.

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

7
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
Gondar.

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.

8
 • To supplay 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 Gondar town. There
is an increasing demand for milk, so we are encouraged to establish our milking cows farm to
fulfill this gap.

2. MARKET PLANNING

Strength:

• Favorable Government policy measures.

• Good network of animal health institutions.

9
 • 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.

10
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

11
 • Product demand and consumer preferences.

• 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 Gondar university) and milk distributors. There is high demand of hotels
for meal in Gondar and nearby cities like Azezo and tseda and 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.

12
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, Bahirdar and Gondar. 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

s t n d
1 y e a r 2 y e a r

Products 1stquarter(4 month) 2 n d

q u a r t e r3 r d
q u a r t e r

M i l k During fasting 20*42*12(12)=120960 20cows*55 2 0 c o w s * 3 5 20 cows*141 days*12(12)birr=406080

days*12(12)birr=15 days*12(12)birr=10
8400 0800

13
 Not fasting 20*78*12(15)=280800 2 0 c o w s * 6 5 20 cows*85 days*12(15)birr=306000 20 cows*224 days*12(15) birr=806400

days*12(15)birr=23
4000

Culled cows During fasting 0 0 4 cows*2500 bir r 5 c o w s * 2 5 0 0 b i r r

Non fasting 0 0 4 cows*3500birr 5 cows*3500bir r

Manure 8quntals*80bir r 8 q u n t a l s * 8 0 b i r r 8 q u n t a l s * 8 0 b i r r 26quintals*80 birr

2.7. Proposed location

The dairy firm will be in Gondar 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 Gondar
city. 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 Gondar
Kebele 18 particularly called keha which is found around to the rivers of keha.

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.

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

14
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.

15
 • 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.

16
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.

3.3. Cost of development

Table 2: Total Project Cost

P r o j e c t C o s t sI n b i r r

Total Fixed Costs (machinery & equipment) 1 2 0 , 5 0 0

R a w m a t e r i a l i n v e n t o r y3 0 0 , 0 0 0

T o t a l W o r k i n g C a p i t a l6 0 0 , 0 0 0

T o t a l P r o j e c t C o s t1 0 2 0 5 0 0

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

S r . D e s c r i p t i o nN o . of Salary, Birr

17
 No. Persons

M o n t h l yA n n u a l

1 M a n a g e r1 3 0 0 03 6 0 0 0

2 S e c r e t a r y 1 1 2 0 01 4 4 0 0

3 Production supervisor 1 2 0 0 02 4 0 0 0

4 L a b o r e r3 3 0 0 03 6 0 0 0

5 A c c o u n t a n t1 1 3 0 01 5 6 0 0

6 Sales/Purchase man1 1 0 0 01 2 0 0 0

7 S t o r e k e e p e r1 1 1 0 01 3 2 0 0

8 C l e a n e r1 5 0 06 0 0 0

9 G u a r d1 7 5 09 0 0 0

T o t a l1 11 2 , 8 5 01 6 6 , 2 0 0

3.5. Expense and capital requirement

3.5.1. Operating expense

Table 4: Operating expense

C o s t o f P r o d u c t i o nI n b i r r

18
 C o s t o f c o w s3 6 4 , 9 5 0

F e e d c o s t2 4 , 9 5 0

S a l a r y 1 6 6 , 2 0 0

I n s u r a n c e e x p e n s e s1 3 , 9 5 0

Marketing & Misc. expenses2 9 , 9 5 0

T o t a l6 0 0 , 0 0 0

3.5.2. Capital requirements

Table 5: Financial Plan

I n i t i a l F i n a n c i n g B i r r i n a c t u a l

D e b t7 0 %8 0 5 , 0 0 0

E q u i t y3 0 %3 4 5 , 0 0 0

T o t a l1 0 0 %1 , 1 5 0 , 0 0 0

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.

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

19
 F a r m E q u i p m e n tU n i tU n i t C o s tT o t a l C o s t

Drinkers (genda)5 2 0 0 01 0 , 0 0 0

F e e d e r s5 1 5 0 07 5 0 0

T o t a l1 03 5 0 01 7 , 5 0 0

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

Defaru Setegn and H/mariam Alemkere M a n a g e r Some experiences in managing staffs.

Habtamu Anleye and H/mariam Abate S e c r e t a r y New comer, graduated by management and ready to take basic computer training

K e l e m u T a d e l P r o d u c t i o n s u p e r v i s o r New comer, graduated by management

B i r u k M i t k u V e t e r i n a r y d o c t o r 10 years’ experience in animalhealthadministration in 3 districts.

Libmogn Dagnew and Abdulaziz Habtamu S a l e s / P u r c h a s e m a n E x p e r i e n c e d i n s h o p p i n g

20
4.2. Ownership

The visionaries’ Dairy farm is going to be built by the members of the group (defaru setegn,
h/mariam alemkere, habtamu anleye, h/mariam abate, kelemu tadel, libmogn dagnew and
abdulaziz habtamu with 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

21
5. FINANCIAL ANALYSIS

5.1. Balance sheet

Table 8: Balance sheet

Projected balance shee t

Y e a r 1

C a s h6 0 0 , 0 0 0

Stocks and Inventory2 5 0 , 0 0 0

G r os s F ix ed A s s e t s3 0 0 0 0 0

T o t a l A s s e t s1,150,000

L i a b i l i t i e s8 0 5 0 0 0

E q u i t y3 4 5 , 0 0 0

T o t a l1,150,000

22
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.

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 Gondar city administration.

23
24