BULE HORA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

ASSIGNMENT ON BUSINESS PLAN DEVELOPMENT

COMPLETED BY: GROUP

SN NAME ID No

1. Merga Dida 048/16

2. Tadesse Hundie 062/16
3. Tesfaye Ayele
4. 0910/07
5. Fekadu Berhanu 0979/07
6. Bikila Kebede 0900/07
7. Heyradin Mifta
8. Hassen Ahmed
9. Abdella Adem 0811/07
10. Abdurhaman Feto

Submitted to: MR Fasika F

Jaunary 2017
HARAMAYA, ETHIOPIA

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K

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 TABLE page

Table of Contents………………………………………………………………………………..I
COVERLETTER………………………………………………………………………………...IV
COVER PAGE...............................................................................................................................V
1. EXECUTIVE SUMMARY.........................................................................................................1
2. BUSINESS DESCRIPTION.......................................................................................................2
2.1. Product description...............................................................................................................2
2.2. Overview of the livestock sub-sector....................................................................................2
2.3. Base and significance of the project.....................................................................................3
2.4. Pricing and distribution.........................................................................................................3
2.5. Project area............................................................................................................................4
2.6. Climatic condition and infrastructure...................................................................................4
3. MARKET FEASIBILITY...........................................................................................................4
3.1. Demand.................................................................................................................................5
3.2. Opportunities.........................................................................................................................5
3.3. Threats and their solutions....................................................................................................5
4. TECHNICAL FEASIBILITY.....................................................................................................6
4.1. Production process................................................................................................................6
5. SUPPLY ANALYSIS..................................................................................................................7
6. FINANCIAL FEASIBILITY.......................................................................................................7
6.1. Project capital requirement...................................................................................................7
6.1.1. Building cost...................................................................................................................8
6.1.2. Man power costs.............................................................................................................8
6.1.3. Feed cost.........................................................................................................................9
6.1.4. Field and Office Equipments and machines.................................................................10
6.1.5. Costs for Animal purchase...........................................................................................10
6.1.6. Repair and maintenance cost........................................................................................11
6.1.7. Depreciation cost..........................................................................................................11
6.1.8. Insurance cost...............................................................................................................11
6.1.9. Other costs....................................................................................................................12
6.2. Cash flow statement............................................................................................................13
6.2.1. Cash inflow...................................................................................................................13

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 6.2.2. Cash out flow................................................................................................................14
6.3. Income statement................................................................................................................15
6.4. Balance sheet.......................................................................................................................16
6.5. Funding return schedule......................................................................................................16
7. ORGANIZATIONAL FEASIBILITY......................................................................................17
7.1. Organizational structure......................................................................................................17
7.2. Management team and its back ground...............................................................................18
8. CONCLUSION..........................................................................................................................19
9. APPENDIX................................................................................................................................20

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III
 COVER LETTER

To the Wolkite Small Scale Enterprises Office

SNNPR
Wolkite

From FOCUS Small Scale Dairy Project

Wolkite University
Wolkite

Concern: To ask permission for dairy farm establishment

We six members of Wolkite University Agricultural Economics 3 rdyear students propose this project
named as ‘’FOCUS Small Scale Dairy Project’’ to establish modern dairy farm in Cheha woreda of the
Wolkite administration zone. The project requires five hectares of land and 390600 birr long term loan
from the government to organize the business with initial stock of 20 cross-breed dairy cows and a total
start-up capital of 558200 birr in the year 2017 GC. Therefore we attached this letter to get official
permission from the responsible government body as soon as possible so that the project will be
established based on the proposed time schedule.

“With regards”
The Managers
Chekol Demis Getahun
Gizenew Maru Tafesse and
Getaneh Endalew Yazie

December 2015
Gondar

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COVER PAGE

S N L i s t D e s c r i p t i o n
1 Type of the Project S m a l l s c a l e d a i r y p r o j e c t
2 Name of the project FOCUS small scale dairy project
3 P r o j e c t o w n e r s Group 1 third year Agricultural economics students
4 P r oj e c t a ddr e s s Cheha woreda of Wolkite adminisiration zone in the SNNP National Regional State at a particular district called Gubre
- Phone number +251916685406

- Project preparation date – December 24/12/2015

5 Required land area
6 Required capital
7 M a i n o b j e c t i v e s
8 Pr opos e d da t e of s ta r t- u p
Five hectares from which two hectares wil be covered by constructions of the project, two hectares wil be used for fodder production and the rest one hectare wil be occasional grazing areas for animals in the farm
558200 birr. From this, 20% (birr 167600) is from the project owners and the rest 80% (birr 390600) wil be gained from the bank in long-term loan at 8% interest rate for five years
- Improving the health status of the society by presenting quality milk and milk products (butter, cheese and cream)
- To be a model for modern dairy production system in the
project area by introducing cross-breed dairy cows
- To create job opportunities and to enhance the project
income
November 2008 EC after the fulfil ment of all the pre-operative activities and the purchase of 10 lactating cows and 10 pregnant exotic heifers from reliable sources based on their production level, disease resistance and agro -ecological adaptation

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1. EXECUTIVE SUMMARY

This project is proposed to establish small scale commercial dairy farm with annual production
capacity of 54000 liters of milk. The current demand for milk and other dairy products is
estimated to be about 4.86 million tons at the national level and this demand is projected to
reach 32.89 million tons in the year 2022.

Initial stocks of 20 cross-breed dairy cows are assumed to be included in the start-up stage of
the project. From these animals, 10 will be lactating cows and the rest 10 will be pregnant
heifers purchased based on their milk production potential, disease resistance capability and
agro-ecological adaptation.

The project is supposed to be established in Sebeta Awas woreda of Oromia special zone in
the Oromia National Regional State on five hectares of land from which two hectares will be
covered by construction, other two hectares will be used for animal fodder production and the
rest one hectare will be occasional grazing area for the farm cows.

The total capital required for establishment of this project is birr 558200. From this capital,
the 20% (birr 167600) will be contributed by the project members saving account while the
80% (birr 390600) is assumed to be gained from the bank in the form of long-term loan for
five years at 10% annual interest rate.

The project considers various opportunities and threats that determine the future success or
failure of the firm. Suitable climatic conditions, better infrastructure, availability of animal
feed at lower cost, plenty of all-weather and dry-weather roads and increased demand and
market value of milk and other dairy products are among the opportunities. The competition
from other nearby dairy farms, seasonal fall in the price of milk and lack of quick response
from the responsible government body are some of the proposed threats.

The annual income generated by this project in the first year is estimated to be about 992300
birr and this is assumed to increase by 10% in the second year and to double it in the
subsequent years.

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2. BUSINESS DESCRIPTION

Description of the business here deals about the products generated by the project and the
livestock sub-sector this project will be operating.

2.1. Product description

The products assumed to be produced by the project include raw milk, cheese, butter and cream.
Milk is one of the most important agricultural commodities produced in the country. It is a
traditional component of the Ethiopian diet. From nutritional point of view milk provides the
nation with basic food containing all essential ingredients (carbohydrates, proteins, fats, minerals
and vitamins) to promote and maintain life.

2.2. Overview of the livestock sub-sector

Ethiopia takes the lead in its livestock population from the rest of African countries with an
estimated livestock population of 46 million cattle 24 million sheep, 22 million goats, 9 million
equines and 56 million heads of poultry. Although our livestock population is numerically huge,
the production of milk and milk products is very low as compared to the number of animals and
productivity level seen in our nearby countries like Kenya and Somalia. This low production is
due to various diseases challenges, inadequate nutrition, lack of support services like extension,
lack of information on how to improve animal production systems and keeping animals for
status. Currently, a number of dairy farms are established in different parts of the country but
most of these farms are concentrated in and around the regional towns and the capital cities.

The need for milk and milk products in zonal and woreda level is still higher. Therefore,
expansion of dairy farms to the lower level is mandatory and milk and milk products as well as
productivity of farms have to be increased through the introduction of cross- breed dairy cows to
balance the demand and the supply. As a result, the establishment of this dairy project is based
on the following objectives.

1. To introduce high milk producing cross-breed dairy cows to the society.

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 2. To improve the health status of the community through presenting quality milk
and milk products.
3. To be a model dairy farm for training the local people on animal husbandry
practices.
4. To enhance the project capital as well as the national economy.
5. To create job opportunities for the project area people.

2.3. Base and significance of the project

Currently, modern dairy production systems are gaining higher emphasis both from the society
and from the government. This contributes for the increase in the number of dairy farms from
year to year indicating that the current market needs improved animals both in type and quality
in addition to their quantity. Hence, viewing these aspects, this small scale dairy project is
prepared to establish modern dairy farm in Sebeta Awas woreda and it will have the following
advantages.

A. It supports the government’s poverty reduction programs through creating new

areas of employment and reducing joblessness.
B. Payments from income tax and selling tax help the development of the woreda
where the project is established.
C. It will become an educational ground for improved dairy cattle management
practices (feeding, health care and environmental hygiene) in the project area.

2.4. Pricing and distribution

Milk is highly perishable in nature that is difficult to transport it and thereby exploit the market
at a wide geographical coverage. Thus, considering the nature of the product, it was found more
appropriate to relay on the regional markets rather than the national market.

Therefore the milk produced by this project will be sold directly to the consumers in the nearby
towns or it will be processed in to butter, cheese and cream by the milk processing machine

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depending on the season. Up on the selling of milk and milk products of this project the price
will depend on the local market. Currently, the price of milk at the national level is ten birr.

2.5. Project area

This small scale dairy project will be established in Sebete Awas woreda of Oromia Special
Zone around finfinne in the Oromia National Regional State at a particular district called Gubre
on 8 hectares of land. Sebete Awas woreda is found at about 24 kilometers from Addis Ababa in
the South-west direction. The capital city for this woreda is Sebete it self .

2.6. Climatic condition and infrastructure

The annual average temperature of the woreda is about 25 degree centigrade and the annual rain
fall ranges from 1400 millimeters up to 1800 millimeters. The elevation of the woreda from sea
level is about 1918 meters. It has sub-tropical climate (Woina Dega climate) suitable for
adaptation and productivity of dairy cows as well as growth of different plants for animal feed.

The woreda has ample dry- weather and all-weather roads connecting it with the Regional andthe
National markets. Surface water is in excess and the potential to get under ground water is high.
Telephone access necessary for market information and electricity important for increasing the
shelf- life of milk and milk products are also other facilities available in the woreda.

3. MARKET FEASIBILITY

Market feasibility deals about the market demand for milk, the competitive situation in the dairy
industry and the demand gap remained to be fulfilled.

3.1. Demand

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According to the Food and Agricultural Organization, the total milk production of Ethiopia in the
year 2013 was about 1.5 million tones. The total national demand of milk by the same year was
about 4.86 million tones. This indicates that about 3.36 million tones of milk demand gap occurs
in the national population. The demand is assumed to grow parallel with the growth of the
population. Currently 2.9% growth rate is used to project the future demand. Therefore the
entrance of this project in to the dairy industry will have great role to narrow the demand gap.

3.2. Opportunities

This project has many opportunities. The climatic condition of the woreda is suitable for
adaptation and productivity of dairy cows. In addition, the presence of animal feed at a lower
cost, the presence of well established infrastructure, availability of industrial by products at
nearby places and the increased demand and market value of milk and other dairy products
(butter, cheese and cream) are some of the opportunities for the project. The woreda has also
relative peace and stability important to run day to day activities without interruption and the
investment policy of the woreda is conductive.

3.3. Threats and their solutions

The required land area and government support are mandatory for the establishment and growth
of this project. These conditions have to be considered by the responsible government body so
that the project will be established based on the proposed time schedule.

The competition from nearby farms may be another challenge for this project but this can be
solved by slight reduction the price per liter of milk and by producing value added products. The
market value and the demand for milk and other dairy products will also decrease in the fasting
seasons of the year. This may impose negative impacts on the future income of the project. But
this can be solved by the following ways.

A. The milk and other dairy products can be sold in areas where the number of
fasting people is low.

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 B. Those products can be converted in to butter, cheese and cream to elongate the
shelf- life so that they can be presented to the market after the fasting season
ends.

4. TECHNICAL FEASIBILITY

Technical feasibility describes the degree of newness of the project idea or the availability of
technological facilities and man power capable of operating in the project. Rearing of dairy
cows, milk production and milking have been practiced traditionally for many years in Ethiopia.
Hence, the practice is not new and it does not require highly skilled man power and sophisticated
materials as compared to other business areas.

What is required from this project is conversion of the usual traditional production system in to
improved and modern production methods. The main areas of technical practice in dairy sector
include feeding, milking, storing, processing, packing and transporting areas. The technical gaps
that will occur in such areas will be solved by short-term and long- term trainings provided by
the agricultural officers before the start-up of the project works. The milk processing machine
and packing materials can be produced domestically. Therefore, milk production is possible
using domestic technology and labor and does not require the hiring of foreign experts or the
introduction of equipments from foreign countries, hence it is technically feasible.

4.1. Production process

After the construction and establishment of the farm including buildings, farm structures and
fodder production, lactating cows and pregnant heifers will be purchased from the reliable
suppliers based on their production level, diseases resistance ability and environmental
adaptation. Initial stock of cross- breeds of ten lactating cows and ten pregnant heifers are
considered. These twenty dairy cows are assumed to produce about 200 liters of milk per day.

The milk will be taken directly from the milking parlor with pipeline to a cooling tank for
temporary storage and processed immediately. One percent of the fat content is separated and
chilled in a cold store. Then cream is either churned to butter or sold as it is depending on the

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availability local market. After cream separation process, milk is filtered and sealed with plastic
bags or bottled and distributed to the market.

5. SUPPLY ANALYSIS

The supplies of this proposal refer the inputs required for successful establishment and continuity
of the project. The main inputs for milk production include different types of feeds, replacement
dairy cows, man power (labor), water and electricity. Some types of animal feeds like alfalfa and
elephant grass will be grown in the project site while others like grains and concentrates will be
purchased from nearby markets, agricultural areas and factories. Those feeds will be collected
during periods of excess feed supply to prevent seasonal shortage.

Dairy cows will be purchased at the initial stage of this project establishment but in subsequent
years, female calves delivered in the project site will replace the death or the senility of
previously purchased cows. Hence, no difficulty will occur in the supply of dairy cows.

The water and electricity supplies will be kept constant through discussion with the respective
officers but the project will extract underground water and will also generate bio-gas from cow
dung to solve problems of water shortage and power interruption. Therefore, this project will not
face much difficulty in supply situation.

6. FINANCIAL FEASIBILITY

It refers to how much initial capital is required for the establishment of this dairy project, the
source of the capital and repayment schedule.

6.1. Project capital requirement

The total initial capital required for this project is birr 558200. From this the twenty percent (birr
167600) is contributed from the project members saving account and the rest eighty percent (birr
390600) will be gained from government loan at eight percent interest rate for five years. This

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analysis is done by summing up the costs required for project inputs including building cost,
manpower cost, feed cost, field and office equipments’ cost, costs of animal purchase (dairy
cows), repair and maintenance cost, depreciation cost and insurance cost.

6.1.1. Building cost

The project will construct separate buildings for milking cows, pregnant heifers, calves, feed
store and mixing, milk store and processing and offices and rest rooms.

Table 1. Building cost

SN B u i l d i n g t y p e Need U n i t c o s t ( b i r r ) Total cost

1 Cow house (milking cows) 1 1 2 0 0 0 1 2 0 0 0
2 H e i f e r s h o u s e 1 1 0 0 0 0 1 0 0 0 0
3 C a l v e s h o u s e 3 1 0 0 0 0 3 0 0 0 0
4 Feed store and mixing 1 8 0 0 0 8 0 0 0
5 Milk store and processing 1 8 0 0 0 8 0 0 0
6 Office and rest rooms 4 6 0 0 0 2 4 0 0 0
S u b t o t a l 1 1 - 9 2 0 0 0

6.1.2. Man power costs

This refers to the costs for personnel employed by the project. Managers, animal health
professionals, production experts, milkers, pasture area workers, sanitarians, guards, milk
processing plant workers and sales man are the required personnel of this project. They will be
hired based on their academic rank and experience following the rules and regulations of the
government.

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 Table 2. Man power cost

S N Man power N e e d Academic rank Monthly salary (birr) Annual salary

1 Veterinarian 1 1 0 + 3 1 5 0 0 1 8 0 0 0
2 Production expert 1 1 0 + 3 1 2 0 0 1 4 4 0 0
3 Manager 1 1 0 + 3 1 7 0 0 2 0 4 0 0
4 Sales man 1 1 0 + 3 1 2 0 0 1 4 4 0 0
5 Milk processing plant workers 2 1 0 + 3 1 5 0 0 3 6 0 0 0

6 M i l k e r 4 Completed grade 10 6 0 0 2 8 8 0 0

7 Sanitarian 1 Completed grade 10 6 0 0 7 2 0 0

8 Pasture area workers 2 Completed grade 6 5 0 0 1 2 0 0 0
9 G u a r d 1 Completed grade 6 5 0 0 6 0 0 0
Sub total 1 4 - 9 3 0 0 1 5 7 2 0 0

6.1.3. Feed cost

A cow is assumed to consume 1.5 kgs of mixed feed per day and the monthly and annual feed
requirements are calculated by multiplying the daily requirement for twenty cows by thirty and
then by twelve respectively.

Table 3. Feed cost

SN N o o f c o w s Daily feed requirement per cow Monthly feed requirement Annual feed requirement
1 2 0 1 . 5 k g ’ s 9 0 0 k g ’ s 1 0 8 0 0 k g ’ s
2 Feed cost (birr) 5 birr per kg 4500 birr 5 4 0 0 0 b i r r

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6.1.4. Field and Office Equipments and machines

This includes costs for furniture, sanitizers (soaps), field bags and clothes.

Table 4. Costs for equipements and machines

SN E q u i p m e n t Requirement Unit cos t (birr ) T o t a l c o s t

1 T a b l e s 4 1 4 0 5 6 0
2 C h a i r s 6 1 0 0 6 0 0
3 S h e l v e s 3 4 0 0 1 2 0 0
4 Sanitizers, field bags and rain clothes - - 4 0 0 0
5 Machines(cooling and milk processing machine) 2 1 0 0 0 0 2 0 0 0 0
S u b t o t a l 1 3 - 2 6 3 6 0

6.1.5. Costs for Animal purchase

This includes the costs budgeted for purchase of ten lactating cows and ten pregnant heifers at
the start-up stage of the project.

Table 5. Animal purchase cost

SN A n i m a l t y p e Number of animals Unit cost (birr) Total cost

1 Lactating cows 1 0 1 2 0 0 0 1 2 0 0 0 0
2 Pregnant heifers 1 0 1 0 0 0 0 1 0 0 0 0 0
S u b t o t a l 2 0 - 2 2 0 0 0 0

6.1.6. Repair and maintenance cost

The costs required for repair and maintenance of buildings, equipments and milk processing
machine.

Table 6. Costs for repair and maintenance

SN I t e m Total cost Rate (%) Repair and maintenance cost(birr)

1 Building 9 2 0 0 0 7 % 6 4 4 0
2 Equipments and Machines 2 6 3 6 0 5 % 1 3 1 8

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 Sub total 1 1 8 3 6 0 7 7 5 8

6.1.7. Depreciation cost

The financial losses that occur due to wear and tear or obslation of assets are described under this
title.

Table 7. Depriciation cost

SN I t e m Total cost R a t e ( % ) Depreciation cost (birr)

1 B u i l d i n g s 9 2 0 0 0 5 % 4 6 0 0
2 Equipments and Machines 2 6 3 6 0 1 0 % 2 6 3 6
S u b t o t a l 1 1 8 3 6 0 - 7 2 3 6

6.1.8. Insurance cost

This describes the amount of money required for guarantee of losses of fixed assets. It is
calculated by multiplying the rate of insurance payment by the total cost for fixed assets.

Table 8. Insurance cost

SN A s s e t t y p e To ta l c os t R a t e ( % ) Insurance cost (birr)

1 B u i l d i n g s 9 2 0 0 0 1 % 9 2 0
2 D a i r y c o w s 220000 1 % 2 2 0 0
3 Milk processing and cooling machine 2 6 3 6 0 1 % 2 6 3 . 6
S u b t o t a l 338360 - 3 3 8 3 . 6

6.1.9. Other costs

The costs for medication of dairy cows, animal feed and milk transport costs, costs for water and
electricity and costs for license permission are included under this title.

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Table 9. Other costs

SN C o s t c l a s s Monthly expense (birr) Annual expense (birr)

1 Medication cost 2 0 0 2 4 0 0
2 Transport cost 5 0 0 6 0 0 0
3 License permission 6 0 0 6 0 0
4 Water and electricity 3 0 0 3 6 0 0
S u b t o t a l - 1 2 6 0 0

Summary of Total Project Capital Required

Table 10. Total project capital

SN C o s t c l a s s C o s t i n B i r r
1 B u i l d i n g s 9 2 0 0 0
2 M a n p o w e r 1 5 7 2 0 0
3 F e e d c o s t 5 4 0 0 0
4 Field and office Equipments and machines 2 6 3 6 0
5 A n i m a l p u r c h a s e 2 2 0 0 0 0
6 Repair and Maintenance 7 7 5 8
7 D e p r e c i a t i o n 7 2 3 6
8 I n s u r a n c e 3 3 8 3 . 6

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 9 O t h e r c o s t s 1 2 6 0 0
10 R e s e r v e c a p i t a l 2 0 0 0 0
S u m t o t a l 5 5 8 2 0 0

6.2. Cash flow statement

6.2.1. Cash inflow

Cash inflow refers to the amount of money generated by this project in annual bases. The income
of this project is assumed to increase by 10% in the first two years but for the next three years, it
is assumed to double itself. The milk produced by the project cows is the main source for this
income but male calves and organic manure (cow dung) can also be sources of income. The
income from milk is calculated based on lactation period of the cows. The average lactation
period for a cross breed cow is estimated to be 270 days per year pre calving.

Table 11. Cash inflow

SN I n c o m e s o u r c e Number of animals Daily out put Unit Selling price Daily income Annual income (270 days)
1 M i l k 2 0 12 lit per cow per day (20*12 lit =240 lit per day) 12 birr per lit 2880 birr 777600 birr
2 Selling of growing male calves - 8000 birr - 80000 birr
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3 Organic manure (cow dung) 2 0 3kgs per cow per day (20*3kgs =60kgs per day) 3 birr per kg 180 bir r 65700 birr
Total annual income (year 1) (2017) 992300 birr

Year 2 (2018) 1 0 9 1 5 3 0

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 Year 3 (2019) 2 1 8 3 0 6 0
Year 4 (2020) 4 3 6 6 1 2 0
Year 5 (2021) 8 7 3 2 2 4 0

6.2.2. Cash out flow

Cash out flow describes the annual or monthly expenditures of the project for different farm
components.

Table 12. Cash outflow

SN E x p e n s e c l a s s Year 1 (2017) Year 2 (2018) Year 3 (2019) Year 4 (2020) Year 5 (2021)

1 Selling tax (2%) 1 4 4 6 6 1 5 9 2 . 6 31825.2 31825.2 31825.2

2 Income tax (20 ) 168460 185306 370612 370612 370612
3 Interest (10%) 3 9 0 6 0 3 1 2 4 8 101556 9 3 7 4 4 8 5 9 3 2
4 Production cost 4 9 8 2 1 0 5 4 8 0 3 1 602834.1 663117.5 729429.25
5 Maintenance cost 7 7 5 8 7 7 5 8 7 7 5 8 7 7 5 8 7 7 5 8
6 Depreciation cost 7 2 3 6 7 2 3 6 7 2 3 6 7 2 3 6 7 2 3 6
7 Insurance cost 3 3 8 3 3 3 8 3 3 3 8 3 3 3 8 3 3 3 8 3
T o t a l 7 3 8 5 7 3 784554.6 1125204.3 1177675.7 1236175.45

6.3. Income statement

Income statement compares the revenue generated by the project and the money expended from
the project to calculate the annual benefit gained. It is calculated by subtracting the annual cash
out flow from the annual cash inflow as follows.
Projected annual profit = projected annual cash inflow – projected cash out flow

Table 13. Income Statement

SN Y e a r s

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 Cash statement 1 (2 01 7 ) 2 (2018) 3 (2019) 4 (2020) 5 ( 2 0 2 1 )
1 Annual cash inflow (birr) 992300 1091530 2183060 4366120 8732140
2 Annual cash outflow (birr) 738573 784554.6 1125204.3 1177675.7 1236175.45
3 Annual profit (birr) 253727 306975.4 1057855.7 3188444.3 7495964.55

6.4. Balance sheet

Balance sheet compares the amount of project capital covered by equity and the amount of
capital gained from bank in the form of long term loan (debt). The financial position of this
project is estimated to increase from year to year and the amount of money gained from loan is
assumed to decrease significantly as shown in the following table.

Table 14. Balance sheet

SN Y e a r s
Share 1 ( 2 0 1 7 ) 2 (2018) 3 (2019) 4 (2020) 5 (2021)
1 E q u i t y 1 6 7 6 0 0 253727 3 0 6 9 7 5 1057855 3188444
2 D e b t 3 9 0 6 0 0 312480 234360 156240 7 8 1 2 0
3 Equity to Debt ratio 0 . 4 2 9 0 . 8 1 2 1 . 3 0 6 . 7 7 40.812

As shown in the above table, the project will cover half of the annual expenses in the 3 rd year.
After the 3rd year, the amount money from loan decreases gradually and the project approaches to
freedom from loan.

6.5. Funding return schedule

From the total capital required ( 558200 birr), 80% (birr 390600) will be gained from the bank
loan for 5 years at 10% interest rate and it will be repaid in the 5 years by the following schedule.

Table 15. Repayment Schedule

Years Principal repayment Interest repayment (10%) Total repayment Un repaid capital
0 3 9 0 6 0 0
1 7 8 1 2 0 3 9 0 6 0 1 1 7 1 8 0 3 1 2 4 8 0

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 2 7 8 1 2 0 3 1 2 4 8 1 0 9 3 6 8 2 3 4 3 6 0
3 7 8 1 2 0 2 3 4 3 6 1 0 1 5 5 6 1 5 6 2 4 0
4 7 8 1 2 0 1 5 6 2 4 9 3 7 4 4 7 8 1 2 0
5 7 8 1 2 0 7 8 1 2 8 5 9 3 2 0

7. ORGANIZATIONAL FEASIBILITY

Organizational feasibility describes about the structure of the project, the management team and
their background.

7.1. Organizational structure

This project will mainly be led by the founders (Lamma Etana, Abdullah Mohammed and
Tewedros Engida) but employers of financial administration will be included in the management
team. The management team is responsible to minimize personal as well as business risks as
much as possible. Conductive inter personal relationship has to be created between the
managerial team and the employees and between the employees to maintain initiative staff
interaction. Appropriate incentive mechanisms should also be there to improve the desire for
working.

Figure 1. Organizational Structure

THE WORK

Manage

Guards and
Veterinaria other laborers

Milkers
Production
expert

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 Sanitarians
Sales man

7.2. Management team and its back ground

Members of the management team of this project are currently (2009 EC) students of
Economics at university of Haramaya and they will be graduated in 2009 EC from the same
institution by Degree of Economics. These members have taken the courses of entrepreneurship
and enterprise development. Therefore, we hope that the management team is fit for the project
and they it will add values to the society.

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8. CONCLUSION

As indicated by the above analytical steps of income statement and the balance sheet, this project
named “FOCUS SMALL SCALE DAIRY PROJJECT” is supposed to be profitable and the
daily, monthly and annual revenue generated from presenting milk and other dairy products
(butter, cheese and cream) is assumed to increase from year to year. The market, financial,
technical as well as organizational aspects are also shown to be feasible.

Therefore, both the responsible government body and the project owners have to do pre-
operational works including the arrangement and hiring of required man power, getting license
and provision of capital loan and required land area as soon as possible so that establishment of
the project will be realized according to the budgeted capital and the proposed time schedule.

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9. APPENDIX

Project Managers --- Lamma Etana, Abdullah Mohammed and Tewedros Engida
Position ---Students at University of Haramaya
Current address --- University of Haramaya
Form of organization--- Private
Registration--- on progress from the Oromia National Regional State Small Enterprises office
Status of the project--- New
Project duration--- 5 years
Start-up date--- 2017 GC
Annual milk demand (CSA 2015) --------4.86 Million tons

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