MITHUN's Dream Project [Poultry Farming]

Business Plan & Feasibility Study

Poultry Farm- Business Plan & Feasibility Study

Business Plan Prepared December 2012 Prepared by Mithun Maitra [email protected]

mailto:[email protected]


Business plan- 2

Poultry Farm - Business Plan & Feasibility Study

Contents

1. Introduction 3

2. Executive Summary 3

3. Business Description 5

4. Market Research 6

5. Competitor Analysis 7

6. Sales and Marketing Plan 7

7. Operational Plan 8

8. Financial Plan and Projections 9

9. Entrepreneur’s Bio-data 20


Business plan- 3

Introduction

A business plan clearly sets out the objectives of business (the self-sufficient school). It states

exactly how the business intends to operate and how it will become profitable.

A good business plan will keep anyone focused on his objectives. It will help him plan for the

future, because he will have already planned his activities. It will lay down a budget and predict

future cash-flow so that he will stay on-track in his drive towards the goal of a self-sufficient

school. It will also help someone identify areas that he might have overlooked or areas that

require more thought and planning.

Executive Summary

General

The Bangladeshi economy is highly dependent on the import of goods and services to meet the

domestic demands in the country. A large component of the imports consists of a variety of

food products, ranging from agricultural products, canned goods and poultry. As a result, the

government has been on a constant lookout for ways to negate this dependency and become

self-sufficient. Poultry farming was introduced to serve this purpose.

The proposed business model in this document has many similarities to various poultry firm.

The plan emphasizes on the importance of the eggs produced at the poultry farm be of

premium quality and that it should clearly differentiate itself with its larger size and weight.

The major market that has been identified for the purpose of this study is the domestic market.

The reason being that a product of this nature should ideally command a premium price to

generate a reasonable return on the investment. The importance of a sound management and

adhering to fundamental business principles is also highlighted. The plan identifies the high

investment cost and the high cost of chicken feed as the biggest impediment for the success of

the proposed poultry farm.


Business plan- 4

Financial Summary

Financial Highlights

The proposed investment in this plan is financially feasible. The Net Present Value is negative at

BDT 228,280.92 over a period of 3 years and has a payback period 4+ years. The IRR of the

project is -3%. Following are some financial highlights for the projected 3 year term.

Business Objective

Some important objectives of the proposed business should be to:

1. Introduce the product to a niche market where the eggs will fetch the highest average price.

2. Develop a sustainable business, able to survive off its own cash flow

3. Increase income and job opportunities for the people and bring diversification to land-based

economic activities.

4. Give confidence to the general people to invest and engage in similar commercial ventures.

5. Seek and secure the required funds to finance the proposed plans.

7. Become a reliable and stable and supplier of eggs.

8. Ensure that the potential customers are informed of the product's unique attributes.

9. Develop the range of markets, and opportunities for consumption of the locally produced eggs and

encourage participation, understanding and engagement.

10. Generate a reasonably good return on investment to the investors within a reasonable amount of

time through sustainable and eco-friendly investment practice


Business plan- 5

Description of the Farm

This is a sole proprietorship business where the main activity of the firm is to provide quality

product through the Dhaka city. I will collect chicken and eggs from different producer near to

Dhaka city especially from Narayangonj. Chicken and eggs will be distributed to restaurant,

super shop, hotel, community center, and bakery and catering houses around Dhaka city.

Prolong the sufficient supply to the customer is one of my most important purpose. I want to

supply extend area of Dhaka city with affordable price.

a) Name: Sonargaon poultry farm

b) Address of the firm:

Factory: Chasara, Narayangonj.

Office: 8/1 bus-stand road, Narayangonj

1. Owners’ equity of the project:

It is mainly a sole proprietorship business.

2. Details of entrepreneur:

Name Address and Tel Share of partnership Management

Mithun maitra Chasara, Narayangonj, 01676284858

100% Owner come manager

The Product

The eggs produced at the poultry farm should be of premium quality and shall differentiate

itself with its larger size and weight. The eggs produced in the farm will be of 60g per egg

compared to common imported white eggs of 45g per egg. The eggs will be produced in an

environmentally friendly manner.

The price of the eggs will be competitive considering the high quality and freshness of the eggs

in comparison to the price of imported eggs of the same quality.


Business plan- 6

The proposed farm will have the capacity to produce 250 eggs per day, and eggs shall be sold to

the market at BDT 8 per egg in the first year of operations. To ensure a non-stop stable supply

of eggs to its customers, one rearing house and another layer houses (26' x 36' each) shall serve

to maintain a continuous supply.

Competitors

Once the product is introduced, small businesses which are more organized in this kind of

production and distribution may see the opportunity and seize it before the product is firmly

established in the target markets. Other forms of competition will emerge from importers of

similar size and similar quality eggs. However, the key target market for the locally produced

eggs would normally be high quality local produce.. Hence, competition will be limited and

prospects for locally produced eggs are expected to remain good.

Training & Development

The management should always inspire and respect the employees by recognizing their merit.

It should always be the management’s belief that employees should be adequately trained and

compensated. Personnel training and remuneration should be regularly reviewed to keep up

with market developments and to keep staff motivated. Competition in the long run can affect

staff turnover and hence sufficient emphasis on staff training is critical to maintain stability in

the operations.

Market analysis

Bangladesh is an over populated country. So, there is no equilibrium between demand and

supply and more or less suppliers fail to satisfy the customers. Most of all, in food business if it

is daily product there is no loss. So there is a great prospect being succeeded. Each and every

people need chickens and eggs. Eggs are the ingredients of cake, bread, omelet etc. So

restaurant, bakery, hotel, community centers needs eggs and chickens every day. As the

different customers have high demand of chickens and eggs we have a high prospect of

success.


Business plan- 7

Market Needs

The target market prefers premium quality eggs whose origins are familiar to them. Quality,

fresh produce coming from known environments have an edge over similar products imported

from unfamiliar producers.

The concept of 'ethical purchasing' and 'positive buying' would be an important driving force in

making purchasing decisions at high end resorts. The facts that the eggs purchased contribute

to job creation in the community and empowerment of women or contribute to the betterment

of other disadvantaged people are very important factors taken into consideration in the target

market.

Strategy and Implementation Marketing Plan

Positioning

The eggs farmed at the poultry farm should be emphasized as being of premium quality and

distinguish themselves with its larger size and weight of 60g per egg compared to common

imported white eggs of 45g per egg. The fact that the eggs are produced in an environmentally

friendly manner must also be highlighted.

Pricing

Pricing for the eggs should ideally be market driven based on the weight of the egg and the

targeted market segment. Its pricing structure should be based upon the targeted clientele and

a survey of egg suppliers and their prices in Bangladesh.

For the purposes of this study, we have assumed the tourist market as the key market and

estimated a selling price of BDT 8 per egg in the initial year of production. The price of the eggs


Business plan- 8

are highly competitive considering the high quality and freshness of the eggs when compared

to the price of imported eggs of the same quality.

For the purposes of this study, it must be noted that the cost of feed has been assumed to at

50% lower than the actual cost of feed, if imported.

It would not be possible to maintain a selling price of BDT 8 per egg unless cost of feed is

minimized by 50% or a subsidy or a grant is given to the poultry farm.

Promotion

Brochures and documentaries should be prepared capturing the farming process and benefits

of the farm to the local community. Such material should be carefully packaged and distributed

to the Dhaka city and other targeted places Invitations should be sent to the resort managers

and other key staff to visit the farm and experience the role the farm plays in the community.

This could be used as a good opportunity to negotiate contracts and impress them to associate

with the farm in providing technical and financial support.

Distribution

It is unlikely that a farm of the proposed size in this plan would require several distribution

channels to sell its produce. Networking with one or two resorts will be sufficient to ensure that

the entire production will be purchased by them.

Any excess stocks could be sold to the island community at a similar rate.


Business plan- 9

Financial Plan Sales Forecast:

1st year 2nd year 3rd year Unit Sales Eggs Chicken meat

64710 0

91356 370

91356 400

Price Per Unit Eggs Chicken meat

BDT 7.00 BDT 0.00

BDT 7.50 BDT 110.00

BDT 8.00 BDT 120.00

Sales Eggs Chicken meat

BDT 452970 0.00

BDT 685170 BDT 40700

BDT 730848 BDT 48000

Total Sales BDT 4,52,970 7,25,870 7,78,848

Direct Cost Per Unit Eggs Chicken meat

BDT 3.40 0.00

BDT 3.42 0.00

BDT 3.46 0.00

Direct Cost Eggs Chicken meat

BDT 220014 00

BDT 3,12,438 00

BDT 3,16,092 00

Total Direct Cost BDT 2,20,014

BDT 3,12,438

BDT 3,16,092

Gross Margin Gross Margin %

2,32,956 52%

4,13,432 57%

4,62,756 60%


Business plan- 10

Sales by month

About the Sales Forecast

Due to the nature of this business, egg production can only commence from 3.5 months

onwards. Egg production will continue for 12 months and then a new cycle will commence

thereafter. It is assuming that the proposed investment will include 2 farms of 300 Birds each,

with planned production cycles starting immediately one after the other to ensure a stable

supply of eggs to the market.

It is estimated that each cycle of 300 Birds will produce 250 eggs per day. Income is also

expected from sale of chicken for chicken meat at the end of each cycle.

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1 2 3 4 5 6 7 8 9 10 11 12


Business plan- 11

Personnel Plan

Personnel Table

Year 1 Year 2 Year 3 Manager Administrator Contract labor

BDT 48,000 24,000 12,000

52,800 26,400 13,200

56000 28000 14000

total BDT 84,000 91,000 98,000

About the Personnel Plan

It is assumed that a total of 8 employees will be sufficient to operate a poultry farm of 350

Birds.

01 Manager who shall be responsible for the daily management of the farm site. • 01 Administrator to assist the Manager in the management and financial Areas. • 06 Contracted labor to undertake the daily farm work including cleaning, Feeding and other minor work.

Contracted labor can be utilized on roster basis.


Business plan- 12

Budget

Budget Table

Year 1 Year 2 Year 3 Expenses(BDT) Salary Employ related Marketing and promotion Rent Utilities Office suppliers Packaging vaccination

84,000 3500 15000 17500 7500 6000 12000 13000

91,000 3550 22000 17500 7500 10500 20000 13000

98,000 3800 25000 17500 7500 12000 23000 14000

total 1,58,500 1,85,050 2,00,800

Major purchase Poultry shed Component & equipment’s

327000

000

000

total 327000 000 000

Loans and Investments

Loans and Investments Table

1st year 2nd year 3rd year Equity investment

BDT 4,00,000 BDT 00 BDT 00

Total amount BDT 4,00,000 BDT 00 BDT 00


Business plan- 13

Sources of Funds

For the purposes of this study, it is assumed that the initial investment will be funded either by

100% equity or by a mix of grant aid and equity. It would not be feasible to set-up the business

through debt, as it would erode the limited excess cash flow generated from sales in the form

of interest.

Alternative interested parties could seek soft loans through various government managed loan

schemes to minimize the burden on its cash flow.

Use of Funds

Funds invested in the proposed business will be utilized as follows:

1. Equipment for 02 Layer House of 300 Birds each: BDT 58,840.00

2. Freight & Handling Costs of Imports: BDT 15,000.00

3. Physical Structure for 02 Poultry Sheds (Material Cost and Labor) : BDT 2,00,000.00

4. 02 Sets Automatic DE beaker: BDT 44,000.00

5. Other Accessories: BDT 19,000.00 6. Water Storage Tanks (2 nos) : BDT 20,000.00

Project Appraisal & Financial Statements

Methodology

In order to assess the financial feasibility of the project, two basic methods were used for

project evaluation, namely the Payback Period method and the Net Present Value (NPV)

method.

The payback period method evaluates the project, based on the period of recovery of the initial

investment. For this purpose, the future cash flows generated by the project are compared


Business plan- 14

With the initial cash outlay in order to determine the period required to recover the

investment.

The Net Present Value method attempts to evaluate the project by taking into account the time

value of future cash flows. For this purpose, the estimated future cash flows are discounted by

the cost of capital in order to arrive at cash flows at present value. The net cash flows at

present value are then compared with the initial investment in determining the feasibility of the

project.

As an initial step in evaluating the feasibility, we have projected the future cash flows of the

proposed project. In order to forecast the future, several assumptions were made with regard

to both the supply and demand side, operating revenues and related costs. These assumptions

are detailed in the relevant sections of the feasibility study.

Major Assumptions

All specific assumptions are shown the detailed Financial Statements and in the accompanying

Business Plan.

Following are some selected assumptions from the table:

• All financial figures are presented in Bangladeshi TAKA.

• The financial projections are for a period of 3 years.

• Capital: 100% Equity/Grant

• No inventory or finished goods will be kept in store. Eggs shall be dispatched to customers on

a daily basis.

Initial Outlay

• Initial outlay is BDT 4, 00,000.00 (Four Hundred Thousand)

• Approximately BDT 2, 00,000.00 has been allocated for the layer house and the rearing house.

• BDT 60,000.00 has been allocated for equipment for the 2 houses.


Business plan- 15

• About BDT 100,000.00 for Water Tanks and other miscellaneous items.

• The remaining funds have been allocated for other miscellaneous expenses and for working

capital.

Production

It is assumed that the facility will have a production capacity of producing 250 eggs per day

from 3.5 months onwards.

Selling Price

• It is assumed that 100% of the sales will be generated from the market/segment

• Price of each egg bottle with full packaging has been estimated at BDT 7.00 in year 1

Direct Costs & Overheads

All assumptions made for direct expenses and overheads are shown in the financials and are

self-explanatory.

Dividends

For the purposes of this feasibility, no assumptions have been made for payment of dividends.

Availability of healthy cash reserves from year 2 onwards indicates availability of sufficient

funds for business continuity.


Business plan- 16

CONCLUSION

The analysis of the project shows that the investment is not highly profitable within the first 3

years but financially sustainable with positive cash flows throughout. Net cash flow is positive

throughout the first five years. The projections show a healthy cash flow from the 2nd year

onwards. Dividends can be paid each year from the 2nd year onwards.

The baseline discount rate used in the projections was at 11.75% p.a, which is the assumed and

expected cost of capital for a business of this nature.

The Net Present Value (NPV) of the project for a 3-year period at a 11.75% discounting factor

resulted in a negative value of BDT 228,281.00 and a payback period of 4 years. Internal Rate of

Return (IRR) is a not favorable at -3%.

Although there is sufficient cash flow to sustain the business over a 3 year period, based on the

above results and subject to the assumptions made, the proposed poultry farm business appear

to be financially feasible over a period of 1 year.

Finally, a stable supply of the various kinds of feed required is essential for the success of such a

project. Even more important would be the cost of such feed. This study shows that the cost of

imported feed is too expensive to make the project feasible.

Therefore, it is essential that a low cost alternative for securing feed supplies is guaranteed. The

need to explore low cost feed options for such projects will remain an important issue for

consideration.


Business plan- 17

Profit and Loss Statement

Profit and Loss Statement

Year 1 Year 2 Year 3

Revenue (BDT) Direct cost Gross margin Gross margin% Expenses(BDT) Salary Employ related Marketing and promotion Rent Utilities Office suppliers Packaging Vaccination Total expenses Operating income Interest Incurred Depreciation and Amortization Income Taxes Net Profit Net Profit / Sales

4,52,970 2,20,014

7,25,870 3,12,838

7,78,848 3,16,092

2,32,956 52% 84,000 3500 15000 17500 7500 6000 12000 13000

4,13,432 57% 91,000 3550 22000 17500 7500 10500 20000 13000

4,62,756 60% 98,000 3800 25000 17500 7500 12000 23000 14000

1,58,500 74,456 00 1,09,000 00

1,85,050 2,28,382 00 1,09,000 00

2,00,800 2,61,956 00 1,09,000 00

(34,550) (8%)

1,19,382 17%

1,52,956 20%


Business plan- 18

Gross margin by year

Net Profit (or Loss) by Year

48%

50%

52%

54%

56%

58%

60%

62%

year 1 year 2 year 3

Series 1

-50000

0

50000

100000

150000

200000

year 1 year 2 year 3

Series 1


Business plan- 19

Balance sheet

As of period’s end Year 1 Year 2 Tear 3 Cash (BDT) Accounts Receivable Inventory Total Current Assets Long-Term Assets Accumulated Depreciation Total Long- Term Assets Total Assets Accounts Payable Sales Taxes Payable Short-Term Deb Total Current Liabilities Long-Term Debt Total Liabilities Paid-In Capital Retained Earnings Earnings Total Owner's Equity Total Liabilities & Equity

58,469 00 00

1,31,252 00 00

2,36,719 00 00

58,469 3,27,000 (1,09,000)

1,31,252 3,27,000 (2,18,000)

2,36,719 3,27,000 (3,27,000)

2,18,000 2,76,409 00 00 00

1,09,000 2,40,252 00 00 00

00.00 2,36,719 00 00 00

00 00

00 00

00 00

00 4,00,000 00 (34,550)

00 4,00,000 (34,550) 1,19,382

00 4,00,000 84,832 1,52,956

3,65,450 3,65,450

5,19,382 5,19,382

6,37,788 6,37,788


Business plan- 20

Bio-data of entrepreneur

1. Name: Mithun Maitra

2. Father/husband: Mihir Maitra

3. Address:

Present: Chasara, Narayangonj

Permanent: vill: Bethuri Po: College Ramdia Up: Kasiani

Dis: Gopalgonj

4. Nationality: Bangladeshi

5. Dis: Gopalgonj

6. Birthday: 22-02-1991 age: 22

7. Education: BBA

8. Vocational qualification: N/A

9. Occupation: Student

10. Business and industry related experience: N/A

11. Other related information : Efficient at any work

Declaration

I am declaring that:

1. I am a legal citizen of Bangladesh.

2. I am not a minor.

3. I am not engaged in any public job.

4. My above information is true as I know.

Place:…………Dhaka

Date:…………… 23.12.2012 signature:……… Mithun Maitra

MITHUN's Dream Project [Poultry Farming]

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