Business Plan & Feasibility Study

Poultry Farm - Business Plan & Feasibility Study

Business Plan Prepared March 2013 Prepared by: Group No. 05 BBA 16th batch, Sec: B Management Studies University Of Dhaka

Business Plan & Feasibility Study

Group Members
Name Mithun Maitra Md.Wahidud Jaman Tusher Md. Didarul Alam Nayan Saha Bappy Faisal Ajit Chandra Barman 144 147 160 151 170 121 Roll

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Contents
1. Introduction .04
2. Executive Summary .04
General Financial summery

3. General..05
Business objective Guiding principles and Values Critical success factor SWOT analysis

4. The Product and competition09

Description of the Farm The product Competitors

5. The Management .10

Training and development Evaluation and control

5. Target market11
Market overview Market needs

6. Strategy and implementation12

Marketing plan

7. Financial Plan13
Sales forecast Personnel plan Budget Cash flow assumption Loans and investment

9. Project appraisal and financial statement17

Methodology Major assumption Conclusion Profit and loss statement Balance sheet

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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.

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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.

General
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

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Guiding Principles & Values

Any business that wants to be successful must follow certain principles and uphold certain values. The management of the proposed venture should believe that the first Responsibility is to be given to the customers. Hence, the foremost importance should be given to ensure that high quality products are delivered to the customers. The management should value the customers as well as its employees and distributors and every possible effort should be made to sustain the lowest possible costs in order to pass the benefits of increased margins to the owners of the business, its employees and the community in which it operates. The management should always inspire and respect the employees by recognizing their merit. It should always be the managements belief that the employees sh ould be adequately compensated. Leadership should be a key guiding principle of the business. It should engage itself by involving, leading by example, trust and confidence of the industry, positive promotion of talent and market innovation. Using all the distinctiveness and diversity of skills of the employees, the management should ensure that the business is always open to and actively seeking out new perspectives and challenges, capitalizing on new opportunities and promoting the access and affordability benefits of the product and experiences offered. Last but not least, Openness should be a key ingredient of all guiding principles. Straight forward communication, listening, clear dialogue and reflections on the industry and the businesss priorities in relation to it should certainly be a core principle in all its e ngagements.

Critical Success Factors

Securing of start-up capital. Suitable size space and good location for the production facility. Management commitment to excellence and customers satisfaction. Emphasis on production of high quality eggs. Consistency in the product, in terms of quality, taste and size Proper management, administration, marketing and good financial management. Existence of suitable infrastructure to support the business on the island.

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Conduct an effective marketing and promotions strategy. Products to be delivered to the distributors in pristine condition without damage to the eggs. That wholesale prices remain constant for a reasonable period of time in order to gain the confidence of distributors. Utilization of appropriate and efficient equipment to meet the set objectives. Keeping the eggs fresh through proper storage and handling. Trained manager and employees working on the production lines. Effective coordination, communication and relationship management with sponsors/lending/aid agencies and other stake holders. Accessibility and responsiveness to the needs of the customers.

SWOT Analysis
Strengths
Competitive price Transport costs are lower as opposed to transport costs of imported poultry products Being a labor-intensive activity, it can provide employment opportunities for women and youth in the local area, which will attract support from the stakeholders Close coordination ensure that the needs of the local community are considered when the infrastructure is developed and the operations are carried out.

Weaknesses
High cost of imported chicken feed in the absence of locally produced feed. Properly establishing and operating poultry units require high startup costs, especially for setting up of the layer house and the rearing house. Intensive training will be required to generate awareness and stress the importance of appropriate operational techniques and procedures

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Limited information available on trade and marketing on the locally produced poultry products Lack of infrastructure due to limited rearing units and laying units

Opportunities
There is a high demand for eggs. Expanding egg production units could lead to economies of scale Fresher and more convenient than importing Labor availability due to high unemployment levels among women and youth in local areas Easier for community owned and managed businesses to attract funding and technical assistance from aid agencies.

Threats
Disease outbreaks may threaten the quality and supply of stock and finished goods Inflationary factors which may drive up the investment and operational costs (especially the cost of feed) may not make the farm financially sustainable Inability to achieve economies of scale may limit the ability to improve efficiency Competition from other poultry production units in the long run could be a possibility Inefficient management practices could turn what would be a lucrative, sustainable economic activity into an inefficient project causing economic and financial losses.

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The products and the competitions

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. we 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 partnership business.

2. Details of entrepreneur:
Name

Mithun Maitra Md.Wahidud Jaman Tusher Md. Didarul Alam Nayan Saha Bappy Faisal Ajit Chandra Barman

Management Managing Director Manager [Operation] Manager [Marketing] Manager [Sales] Manager [HR] Manager [Finance]

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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. 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.

The Management
Training & Development
The management should always inspire and respect the employees by recognizing their merit. It should always be the managements belief that employees should be adeq uately 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

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

Evaluation & Control

The management should evaluate the effectiveness of this plan and the feasibility study in meeting its goals. Regular quarterly meetings should at least be held to assess and evaluate the results of each quarter. The plans should then be reviewed if needed and new goals should be re-assessed and developed for the periods ahead. Proper internal controls should be utilized to achieve its goals and objectives. It should be the means by which the resources should be directed, monitored, and measured and should play an important role in preventing and detecting fraud and protecting the businesss resources, both physical.

Target Market
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.

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.

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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 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.

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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.

Financial Plan
Sales Forecast: 1st year
Unit Sales Eggs Chicken meat Price Per Unit Eggs Chicken meat Sales Eggs Chicken meat Total Sales Direct Cost Per Unit Eggs Chicken meat Direct Cost Eggs Chicken meat Total Direct Cost Gross Margin Gross Margin % 192000 0 BDT 7.00 BDT 0.00

2nd year
288000 1200 BDT 7.50 BDT 120.00

3rd year
288000 1300 BDT 8.00 BDT 130.00

BDT 1344000 BDT 2160000 BDT 2304000 0.00 BDT 144000 BDT 169000 BDT 1344000 2304000 BDT 3.40 0.00 BDT 652800 00 BDT 652800 691200 52% BDT 3.42 0.00 BDT 984960 00 BDT 984960 1319040 61% 2473000 BDT 3.46 0.00 BDT 996480 00 BDT 996480 1476520 64%

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Sales by month
30000 25000 20000 15000 10000 5000 0 1 2 3 4 5 6 7 8 9 10 11 12

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.

Personnel Plan
Personnel Table Year 1
Manager Administrator Contract labor[3] total BDT 1,20,000 96,000 1,20,000 BDT 3,36,000

Year 2
1,32,000 1,00,000 1,26,000 3,58,000

Year 3
1,44,000 1,04,000 1,30,000 3,78,000

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About the Personnel Plan

It is assumed that a total of 5 employees will be sufficient to operate a poultry farm of 1000 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. 03 Contracted labor to undertake the daily farm work including cleaning, Feeding and other minor work.

Budget
Budget Table Year 1
Expenses(BDT) Salary Employ related Marketing and promotion Rent Utilities Office suppliers Packaging vaccination 336000 11000 55000 60000 20000 18000 20000 24000

Year 2
358000 12000 55000 60000 20000 20000 22000 25000

Year 3
378000 13000 56000 60000 20000 22000 25000 25000

total Major purchase Poultry shed Component & equipments total

544000

572000

599000

900000

000

000

900000

000

000

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Loans and Investments

Loans and Investments Table 1st year
Equity investment Total amount BDT 12,00,000 BDT 12,00,000

2nd year
BDT 00 BDT 00

3rd year
BDT 00 BDT 00

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 04 Layer House of 1000 Birds: BDT 4,00,000 2. Freight & Handling Costs of Imports: BDT 50,000.00 3. Physical Structure for 04 Poultry Sheds (Material Cost and Labor) : BDT 280000 4. 02 Sets Automatic DE beaker: BDT 80,000 5. Other Accessories: BDT 50,000.00 6. Water Storage Tanks: BDT 40,000

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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 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.

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Production
It is assumed that the facility will have a production capacity of producing 800 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.

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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 three 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 4,56,562 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.

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Profit and Loss Statement

Profit and Loss Statement Year 1
Revenue Direct cost Gross margin Gross margin% BDT 1344000 652800 691200 52%

Year 2
2304000 984960 1319040 61%

Year 3
2473000 996480 1476520 64%

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 / loss

336000 11000 55000 60000 20000 18000 20000 24000 544000 147200 00 300000 00 (152800) (11%)

358000 12000 55000 60000 20000 20000 22000 25000 572000 747040 00 300000 00 447040 20%

378000 13000 56000 60000 20000 22000 25000 25000 599000 877520 00 300000 00 577520 24%

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Gross margin by year

70% 60% 50% 40% 30% 20% 10% 0% year 1 year 2 year 3

30% 25% 20% 15% 10% 5% 0% year 1 -5% -10% -15%

Net Profit (or Loss) by Year

year 2

year 3

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Balance sheet
As of periods end
Cash 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

Year 1
300000 00 00 300000 900000 (300000) 600000 900000 00 00 00 00 00 00 1200000 00 (152800) 1047200 1047200

Year 2
673444 00 00 673444 900000 (600000) 300000 973444 00 00 00 00 00 00 12,00,000 (152800) 447040 1494240 1494240

Tear 3
1214587 00 00 1214587 900000 (900000) 00.00 1214587 00 00 00 00 00 00 12,00,000 294240 577520 2071760 2071760

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