Getahune Tirkaso

PROJECT PROPOSAL ON DAIRY FARM
PROJECT OWNER: ATO GETAHUN TIRKASO

ADDRESS: BOBICHO KEBELE, LEMO WOREDA, HADIYA ZONE
OCT, 2016 E.C

HOSSANA, ETHIOPIA
ATO GETAHUN TIRKASO Dairy Farm Project
Contents
Project outline .............................................................................................................................................. iv
Executive summary....................................................................................................................................... 1
1. INTRODUCTION ................................................................................................................................ 2
1.1. Background ................................................................................................................................... 2
2. Project Description................................................................................................................................ 4
3. Project Rationale ................................................................................................................................... 5
3.1. Policy Rationale ................................................................................................................................. 5
3.2 Economic Rationale ............................................................................................................................ 5
3.3 Social Rationale .................................................................................................................................. 5
4. Vision, mission and objective of the project ............................................................................................. 6
4.1 vision ................................................................................................................................................... 6
4.2. Mission............................................................................................................................................... 6
4.3. Objectives of the project .................................................................................................................... 6
5. Strategy and implementation ................................................................................................................ 7
6. Description of the planned project ........................................................................................................ 7
7. Area required for the project ................................................................................................................. 7
8. Market Strategy......................................................................................................................................... 9
8.1 Market Assessment ............................................................................................................................. 9
9. MARKET STUDY ................................................................................................................................... 9
9.1. Past supply and present demand ........................................................................................................ 9
10. Demand Projection................................................................................................................................ 10
11. Demand of the Product ......................................................................................................................... 11
12. Supply ................................................................................................................................................... 12
13. Price Analysis ....................................................................................................................................... 12
13.1. Selling Price Plan ........................................................................................................................... 12
14. Marketing and Selling Strategy............................................................................................................. 12
14.1. Product Strategy ............................................................................................................................. 13
14.2. Pricing Strategy.............................................................................................................................. 13
15. Demand determination factors .............................................................................................................. 13
16. Plan of Operation .................................................................................................................................. 13
17. Management Profile .............................................................................................................................. 14
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18. Challenges and Opportunities ............................................................................................................... 14

19. Risks and uncertainties ......................................................................................................................... 15
20. SWOT analysis of the project ............................................................................................................... 15
21. Sustainability of the project .................................................................................................................. 17
22. Technical Plan....................................................................................................................................... 18
22. 1. Structure and Equipment ............................................................................................................... 18
22.3. Feeding........................................................................................................................................... 19
22.3.1. Dry matter requirement ........................................................................................................... 19
23. Organization and staff ........................................................................................................................... 19
23.1. Staff requirements and cost ............................................................................................................ 20
23.2. Organizational chart ....................................................................................................................... 21
24. Project cost analysis .............................................................................................................................. 22
24.1. Fixed cost: ...................................................................................................................................... 22
24.2. Operational cost of the project: ...................................................................................................... 23
25. Bank Loan Repayment ......................................................................................................................... 25
26. Benefits of the project ........................................................................................................................... 25
27. Project benefits justification.................................................................................................................. 26
28. Profitability/loss of the project.............................................................................................................. 27
28.1 project profit & loss statement ........................................................................................................ 28
30. Conclusion and Recommendation ........................................................................................................ 32
30.1. Conclusion ..................................................................................................................................... 32
30.2. Recommendation ........................................................................................................................... 33
iii
Project outline
Project outline…………. Dairy farm production
Main office of the Project………. Bobicho Kebele

Project owner …………………Ato GETAHUN TIRKASO
Project objective
➢ To establish standardized dairy farm production
Project Area……………Central Ethiopia Region, Hadiya Zone, LemoWoreda, Bobicho Kebele
Employment opportunity.............14 permanents and 16 temporaries
Land required ……………………….1 Hectares
Investing land type…………………. Private/own land
Project Cost
Fixed cost……………………………………. 5,240,000.00 Birr
Operating cost………………………………...4,860,000 Birr
Total Project cost…………………………….10, 000,000 Birr
Finance contribution: -
Owner (30%) =3,000,000.00
Bank loan (70%) =7,000,000.00
Total (100%) =10,000,000.00 Birr
iv
Executive summary
This project is prepared by the private entrepreneur dairy farm production program in line with the
new investment policy of the country in general and the Hadiya Zone, investment policy in
particular together with south region vast investment potential and opportunity in integrated
agriculture sector especially in dairy farm project. This business proposal is developed to precisely
define the dairy farm business owned by Ato Getahun Tirkaso. An investor further to identify its
goals and objectives its markets, services, financial situation and organizational structure. The
project plan outline provides an organized system for researching the feasibility of structure. The
project plan outline provides an organized system for researching the feasibility of the business
entity. The owner of this project has great interest to participate in dairy production project. The
project proposal examines the total cost and operating cost and the related benefit comprising
description. The project will provide job opportunity for 14 permanent persons& 16 temporaries
to contribute in alleviating unemployment and the improvised life through income. The main
objectives of the project will be generating income from sale of milk and milk products, and live
animals to support family livelihood. As the project will be located at the surrounding of Hossana
town, it is accessible to many institution support possibilities woreda& zonal agricultural and rural
development offices have responsibilities to support this dairy farm project by providing
continuous extension support and health services. The total costs required for the project is
estimated 10,000,000.00 Birr. Out of this fixed cost is 5,240,000.00 birr; the remaining
4,860,000.00 birr is for operational cost. From the total required for the project birr 10,000,000.00,
70% (7,000,000.00) birr Will be financed by loan from domestic bank hopefully by Ethiopian
development bank. The loan will be paid within 5 years of will equal installment including 12.5%
interest. The remaining 30% of project cost birr 3,000,000.00 will be covered by the owner.
According to the project income statement the project will generating 5,240,000-birr profit in the
first year of operation. The total loan amount of 7,000,000.00 is expected to be paid back by 5th
year of the project. In fourth year the enterprise will achieve the breakeven point when the capital
investment cost along with interest will be paid back. Based on fact discussed so far, undertaking
of this project will have positive contribution to the overall development of the country as it enables
the country use its idle economic resources more economically. The dairy farm project with special
will contribute to food security. Furthermore, as per the financial analysis projected, it is
technically viable in all aspects of different circumstances.
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1. INTRODUCTION
1.1. Background
Ethiopia has a land area of 1.130,138 km2and is predominantly an agricultural country with 80-
85% of its population engaged in subsistence agriculture, the agricultural sector has a significant
place in the country’s GDP It accounts for 46% of the gross domestic product (GDP), and
Livestock contributes 30% to the agricultural GDP, and 19% of the export earnings.
Ethiopia is endowed with the largest livestock population in Africa. According to the report of the
central statistical agency (CSA) the cattle population was estimated at about 60 million the
indigenous breeds accounted for 99.19 percent, while the hybrids and pure exotic breeds were
presented by 0.72 and 0.09 percent, respectively of the total cattle population 45.13 percent are
males and 54.87 percent females.
As Ethiopia has the second largest population in Africa and this means that demand for livestock
and livestock products is set to increase substantially in the coming years. If the country fails to
meet this with an increase in production and productivity locally, household’s nutrition and food
security will be severely challenged with Ethiopia will facing hike in its import bills related to
animal sourced foods and an increase in the price of livestock products. The demand for dairy
products in Ethiopia is expected to increase, in particular in urban areas. Demand is geographically
differentiated in the sense that households in lowlands daily consume milk, while in highlands
milk is mainly consumed by children and elderly.
About 50 million liters of milk are sold as raw milk yet an estimated 285 million liters are
processed in to butter or cheese. Raw milk is not often bought, but taken from own production and
home consumption accounts for about 370 million liters. Cheese, or Ayib, accounts for 9% of the
total milk produced (Ahmed et al, 2004) There are three types of dairy farming are distinguished
in the country. First, the small holder dairy households keep the majority of the cattle in Ethiopia
accounting for 97% of all milk produced and 75% of commercial milk production. They own
mainly indigenous cows of low-productivity, native zebu breed, producing between 400 to 680 kg
milk/cow per lactation period.
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This project is developed with the intent of channeling our overall effort towards our ends by
insuring effective preparation and implementation our programs and allied activities. We are
certain that it will assist the end user in setting the long term direction and resources allocations
by providing guidance for multiyear program plans and budgets.
In the same way, this project is developed to portray the business of domestic supply activities as
well as provides and relevant and pertinent information to any concerned stakeholders. Initially, it
tries to describe the prime cornerstone of our business and examines the crucial consideration
which must be addressed for the successes of the company as a whole.
The owner of this project plan to engage in fattening and dairy farm business to fatten cattle and
supply milk products like better and cheese to customers to nearby market like hosana, worabe,
butajira, woliyta-sodo, and especially fatten cattles to Addis Ababa, supply to local market.
Moreover, we supply such commodities to wholesalers in the Ethiopian market.
We aimed at engaging in sales activities as the government of Ethiopia has put in place a number
of incentives which create a favorable environment for us. We will engage in fattening and milk
processing our customers seeks this commodity as it provides them with a point of differentiation.
Moreover, we plan to diversify our business by incorporating other agricultural products. Since
the market is becoming attractive and lucrative with consistent rise in price, we intend to supply
the above-mentioned items to local market in the coming year.
Realizing the role of private investment in propelling economic growth and development, the
Ethiopian government and Centeral Ethiopia Region have issued a new economic policy that give
prominent importance to the participation of the private sector. Subsequent to the new economic
policy, a number of macroeconomic policies have been issued that are conductive top private
sector to take part as partner in building the economy of our country in general and Centeral
Ethiopia Region in particular.
1. Owner of the project has, therefore took initiative to respond to the call and planned to
establish farm product processing at Hadiya zone, Lemo woreda, and Bobicho Kebele to
contribute his share as partner in development endeavors of the region as well as the nation
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Livestock development, dairy farming and fattening had been started and used when peoples start
living in the area. The peoples used livestock development together with agriculture in small land
at rural areas to lead their life. The area, Hadiya zone is known by its livestock number Lemo
Woreda and the surrounding area is one of the most populated areas in livestock number.
The people of the area used fattening and dairy farming for subsistence’s that is hand to mouth,
not for supply for those who need the product. The production of dairy product and meat cattle is
not sufficient in the area demand is far below the supply currently the demand of dairy product
and meat cattle is high still most of livestock producers use traditional system.
2. Project Description
The project is a private business that will be established in 2023 with an initial registered capital
of birr 10,000,000.00 the business was funded by Ethiopian owner, whose name called Ato
Getahun Tirkaso, and he has proposed mainly to involve in the dairy development. He has
anticipated involving in preparation and supply of quality milk and milking products that
acceptable in the market.
The founder (owner) and general manager of the company is matured, capable and will
experienced entrepreneur. The owner and his family have tremendous related work experience
and profound knowledge of business for the late 20 years specializing on trading of farm precuts
in the local market he has built remarkable reputation as a trust worthy and dependable person to
do business with suppliers, creditors and brokers. The owner of the project is known person in
Hadiya zone and has huge experience in livestock development he has strong financial back
ground.
The owner supply fattens cattle’s and milk products like cheese and butter to the nearby and other
central market in the zone, region and Addis Ababa. For milk production the owner will use, 50%
of hybrid cows. Ato Melas Bayan is the first and the pioneer one in dairy farm in the area there is
no such kind of business sand person who engage in the business like lum absence of competitor
in the area gives him great advantage to dominate the market.
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3. Project Rationale
3.1. Policy Rationale
The federal democratic republic of Ethiopia has now mapped out new economic policy
which includes investment code. The policy has given greater attention to the development
and expansion of private sector to contribute the development of farm projects. The
regional government also has given due consideration to attract potential private investor
by facilitating basic requirements that is land and incentives. Besides that, the regional
government updates the investment proclamation to suit with the interest of inventors.
Recently the regional government has launched to give land for potential investors to create
conducive environment for participation of private business men especially agriculture
sector. Therefore, it gives a good opportunity to the potential investors to get land for
investment without any exhaustive manner.
3.2 Economic Rationale
The Federal democratic republic Ethiopia, new economic policy which may help to initiate
private investors in reducing the shortage of agricultural sectors. Therefore, the proposed
project will have its own meager contribution towards attaining these objectives. The
acceptance of the project may be viewed in its contribution towards meeting the need of
standardized dairy farm hence, the project will contribute to an increase in the investment
level of the country.
3.3 Social Rationale
The prime beneficiary of the project next to the owners is community of the project area, where
the proposed project will be established is rich in job seeking population especially youth for that
reason the proposed project will provide job opportunity for about 30 permanent and temporary
persons to contribute in alleviating the improvised life through income
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4. Vision, mission and objective of the project

4.1 vision
Ato Melas Bayan dairy farm business has the vision to build successful and competitive
business with accepted products which ultimately will be the right choice for customers. The
business will extend to reach significant market share by meeting market requirements via
strategic distribution and retail partners across markets everywhere in addition the company
has a vision of,
✓ Maintain professional standards.
✓ Integrity
✓ Providing outstanding customer service.
✓ Offering quality products at reasonable price.
4.2. Mission
The business has the mission to continually expanding our successful business lines by providing
the best quality and reliable products that exhale our customers’ expectations. Keep our margin
high as possible with continual growth in our market share and work competitively and profitably
in the business.
4.3. Objectives of the project
➢ Main objective
The main objective of the project is aimed at to maximize the return on invested capital in the form
of profit for the promoter, by establishing standardized dairy farm production and milk precuts
processing however, its implementation will benefit the employee, the consumer society and the
government at different levels. In this respect the project is aimed to promote the following specific
objective: -
➢ Specific objective
• To maximize the return on invested capital through marketing milk and its products
• To raise the significance and importance of the sector and thereby raising its contribution
to the national economic development
To be able to meet the growing demand of milk products
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• To provide gainful employment opportunity to the population of the project area and
augment earning capacity at the grassroots level
• To increase government revenue through different forms of taxes, which in turn use to
facilitate social and economic development
In general, the project is believed to have significant social and economic benefits that accrue to
the society, the region and the country beyond the financial returns to its owner.
5. Strategy and implementation
Our strategy is to expand dairy farming in order to fulfill the request of buyers, in addition we
seek to establish additional contract with our customers and increase the supply of milk
products sold on the market for hotels, cafeterias butcheries and so on
We intend to first maximize quantity of milk products sold and the consequential sales turnover
within existing channels and second. Establish additional purchase contract with our suppliers
i.e. cattle traders’ of cattle’s through targeted marketing efforts.
6. Description of the planned project
The owner has planned to provide livestock product that milk, butter and cheese by observing
and understanding the ever increasing demand of the products by household, individuals,
hotels, cafeterias and pastries in the town, but the supply is very limited.
Currently at Hadiya Zone there are few livestock development businesses, and the supply is
far below the demand, milk and milk products consumption per day per person is not satisfied
yet therefore this expansion in asset and value help the owner to increase the supply of milk
and milk products in the area and provide for the needy for its major customers.
7. Area required for the project
The total land proposed for the project is 10,000m² to place the building and other elements for
dairy investment and the proposed land is private land for the project Owner. Therefore, land
utilization plan is detailed here under as follows
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✓ For dairy farm

❖ Stable – 1200m2
❖ Hay shade= 800m2
❖ Feed through=800m2
❖ Water through= 400m2
❖ Crash-400 m2
❖ Isolation room= 400 m2
Sub to total = 4,000 m2
✔For sales and cafeteria service
❖ Dining room-70m2
❖ Cooking room=50m2
❖ Store and sales room=160m2
❖ Bed room-150 m2
❖ General store=120 m2
❖ For parking-400m2
❖ Pasture area -400m2
❖ Shade for machinery=200 m2
❖ Free walk way= 600m2
Sub Total = 2,170 m2
✔For forage plantation and feed preparation =3830 m2
Grand total-----------------------------------10,000 m2
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8. Market Strategy
Our marketing strategy will include the use of targeted custom errs and direct selling to those
customers in the market. We will capitalize on existing relationship with customers who have
stated their willingness to buy our products and loyal in the future.
8.1 Market Assessment
The number of milk and milk products suppliers in the areas is very few. Thus, there are a vast
market opportunity in the area. Besides Addis Ababa may be the major center of supply therefore
the business will not suffer market problem.
9. MARKET STUDY
9.1. Past supply and present demand
According to FAO, the country's total cow milk product in year 2000 was estimated at 738
thousand tones. The production almost remained constant over the past seven year which lie
Between 738 and 750 tones. Currently, fresh milk is not imported. Hence, the domestic demand is
supplied through local production.
However, to, estimate the current demand for milk products, the 2000/2001 house hold income,
Consumption and expedite survey" revised and published in 2002 by CSA is used as a base
The demand estimated based on the above survey is shown in table 1.
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Table I: House hold consumption of milk products

Income group Number of Individuals in Average Quantity Total Consumption (Tones)
(Annual) the Annual
Group Consumed (GM)
<600 39,733
600-999 215,708 303 65
1000-1399 548,063 1,244 682
1400-1999 2,048,185 1,579 3,234
2000-2599 3,285,193 2,131 7,001
2600-3399 5,746,321 4,175 23,991
3400-4 199 7,014,673 8,129 57,022
4200-5399 9,606,476 9,829 94,422
5400-6599 7,770,21 7 11,326 88,006
6600-8999 8,746,435 13,577 118,750
9000-12599 5,061,294 14,565 73,718
12,600-16, 199 1,331,572 15,670 20,866
16,200-19,999 612,842 17,792 9,678
>20, 000 662.299 20,998 13,907
Total 52,689,066 512,567
As can be seen in the above table, the total national consumption of milk products at the time of
Survey was 512.567 tones. Considering total number of the population, which was 52,689 66 the
per capital consumption will be 9.73 litters. Milk is highly perishable in nature that it is difficult
to transport it and thereby exploit the market at wider geographical coverage, Thus, considering
the nature of the product it was found more appropriate to rely on the regional market rather than
National. Hence, considering per capital consumption i.e. 7.73 gram and the population of centeral
Ethiopia region which was 3,797 thousand in year 2000 (statistical abstract 2000), the Demand of
centeral Ethiopia Region 1S assumed to be 36,944 grams per annum.
10. Demand Projection
The demand for milk products is assumed to grow parallel with the growth of population; hence
2.9% growth rate is used to project the future demand. Table 2 shows demand project of milk in
South Region. The population growth rate of 2.9% per annum, the present effective national
demand for beef meat is estimated at 186,453 tones.
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Table 2: Demand Projection demand
Year Projected Domestic Demand in gram

2010 36,945
2011 38,016
2012 39,119
2013 40,253
2014 41,420
2015 42,623
2016 43.858
2017 45.129
2018 46,438
2019 47,785
2020 49,171
The increase in household milk consumption is mainly a function of three demand determining
Variables i.e. population, Income and consumption habit.
The total population growth rate in Ethiopia is 2.996 per annum, while that of the urban Population
growth rate is 4% per annum. The consumption of milk by the rural population is expected to
increase as a result of higher income. Hence, in order to estimate the probable level of future
demand present demand is assumed to increase by a slightly higher rate than the urban
Population growth rate.i.e. 5% per annum.
11. Demand of the Product
Livestock product like milk, cheese and butter will be sold for hotels, cafeteria and other Customer.
There exist a far from-satisfied demand gap for livestock products in the area the Population are
high; the number of livestock products like milk and milk products need is also Very high. Thus
no sort of market problem is expected to be faced by the project.
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12. Supply
According to the existing condition the supply of livestock products is not sufficient and
satisfactory as of the development of the town, the number of consumers which found in the area
and the products they provide couldn't accommodate the increasing demands of livestock products.
So, we can confidently say that there is a demand and supply gap in the town for livestock products.
13. Price Analysis
The current market price is considered in the business plan. The price is indicated in the assumption
part of this study.
13.1. Selling Price Plan
Pricing is the critical decision in marketing management. In most of the case there may be General
Price range where above the upper limit it will be hard to get a buyer and lower the limit the owner
may not be willing to sell its products.
In the case of the proposed business, it has to introduce its product where the market is vast and
attractive. The price plan has been prepared after assessing the market, willingness of the consumer
and competitor price. Hence, after competitors selling price analysis has been carried out and the
average market price of milk and its product is set.
14. Marketing and Selling Strategy
To be successful in market penetration and achieve the estimated revenue the fallowing Marketing,
product and price strategies are recommended for the envisage plan
❖ Improving quality of milk and its products

❖ Value Added services like delivering milk products to customer home using own
transport
❖ Quick response to customer need
❖ Use advertising system.
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14.1. Product Strategy
In order to differentiate our product from products offering from competitors, we have planned to
supply all fresh guaranteed and are supplied within short days of preparation, the project will
Selectively purchase milking cows and heifers from Borena, research institutions and farmers who
produce, such quality breads.
14.2. Pricing Strategy
The market in the area determines the price condition of milk and milk products however, because
we adhere to higher quality standards, the price of our products is slightly higher than the market
average. So we could charge completive prices that our customers will afford and like it. Of course,
the price charged for products should cover all the various costs involved in Producing and
marketing them.
15. Demand determination factors
✓ The fast growing economy of the country.

✓ Increasing in need of live stoke products.
✓ The growing demand of live stokes products.
✓ The growing wealth of the people.
✓ The growing inflow of peoples in to the town.
16. Plan of Operation
In this fiscal year it is planned that the promoter will purchase the required caw Heifers, cattle
‘sand animal feed The total amount of cash budget for purchase of heifers, cattle’s and animal feed
is high as of the experience of the owner. This increment is considered by observing high need and
market demand in the area and based on this fact this year’s injection of working Capital loan is
expected to increase the owner's activity. The required animal feed will be purchased in 4 round
and caws are expected to be Purchase in 2 round.
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17. Management Profile
The success of any business basically lies on the management ability of its main players.
Especially, in this business timely purchase, efficient fettering maintaining fast and efficient
Logistics and distribution system requires the presence of competent and caliber management
team. Accordingly, in order to manage such competitive business, well qualified and experienced
Workers will be employed in all key operational area of the company in the future AS founder and
general manager, the project owner is in charge managing the entire Company in the right strategic
direction to position it as preferred company. He provides executive guidance to all activities and
operation of the company with remarkable accumulated experience, she decided to start the
business and he will actively participate in management of the activity of the company. Ato
Getahun Tirkaso has tremendous and profound experience particularly in local business of whole
sale trade of agricultural products, milks and its products.
18. Challenges and Opportunities
The dairy sector is complex and presents a number of opportunities for farmers and investors to
take advantage of, some of the current challenges in the dairy industry are: for purchase of Heifers,
cattle's
1. Cold Storage: Refrigeration issues are a big challenge for such a sensitive and delicate product
as milk. This is a particularly serious concern when one considers the need for milk to be kept at
degrees Celsius from the udder of the cow to the Consumer s refrigerator-electricity is unreliable
and expensive, this must be factored in.
2 Packaging: Packaging issues are of serious concern in the Ethiopia Currently the only serious
Packaging that a commercial dairy producer could consider is located in Addis Ababa. This is an
added expense of transportation and duty fees.
3. Marketing challenges are very apparent. There are no milk collection points, stationary or
Mobile.
4. Inadequate veterinary services make it difficult. To invest in foreign breeds of cow that requires
Special medical attention. The lack of appropriate medicines and expertise is a threat to the
Success.
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5. Prohibitive construction costs make it considerably expensive to build.

6. Dairy machinery and equipment is unavailable and
19. Risks and uncertainties
It is essential that we first understand the meaning of risk and uncertainty in a business. Risk is
used to describe cases of known chances or probability. On the other hand, Uncertainty refers to
the cases where one does not know the prospect of an event. Therefore, when talking about risk
and uncertainty, it is like dealing with two ends of a single spectrum. Dairy enterprise is capital
intensive. It is expensive to start and it takes long turn over time to generate income and pay back
the loan for establishment. Dray enterprise deals with live animals vulnerable to disease outbreak
and the risk of animals being succumbed to diseases is high. Because it requires land for fodder
production the scope of expansion is limited. Also the Marketable products; the milk and milk
products are highly perishable and have short shelf life.
However, with the strong government policy support. high level of entrepreneur’s skills and
Commitment of the entrepreneurs shall take care of all the weakness and threats of this enterprise
20. SWOT analysis of the project
Every business has its own strength and weakness to its internal environment and opportunities
and threats to the external environment. Strong policy support of the Government for Dairy
projects is primary source of motivation. The Government has been providing credit at lowest
possible interest rate. The demand of milk and milk products has always been high and ever
increasing. The market is readily available: the price is high and entrepreneurial skills are adequate.
Besides, land to grow pasture, standing fodder tree in the farm, crop residues to feed the cows,
farm road passing through and nearness to the highway are the strengths of this enterprise.
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Project proposal on dairy farm development

The initial front-end capital investment is high the shelf of milk is low and the enterprise One
gestation period. These are the strong Weaknesses of the enterprises, which deer most
Entrepreneurs.
Cheap import from Ethiopia and the possibility of disease
Availability and high cost of replacement stocks are the policy support is also a potent threat.
Table 3: SWOT analysis
Strength Weakness
• The owner has acquired pertinent working • High initial capital investment
experience in livestock development to • Long production/turnover period
manage the project properly • Short shelf life of milk
• Planned to recruit well educated and • Require large area of | land
experienced workers • Incapability of covering the full estimated
• Good level of entrepreneurial skills cost of the project. Deer most enterers
• The initial front-end capital investment is
high.
Opportunities Threats
• Strong government policy support/great • Cheap import from Ethiopia
attention of the government on agriculture • Sudden change in policy support/Tread
&livestock development. regulations
• Absence/Less competitors • Alarming Price increase
High demand, ready market and good price Replacement stock not readily available and
for milk and milk products the cost is high.
• Good scope for product diversification • The possibility of disease outbreaks and
• Expansion of hotels, cafeterias, snacks death of the cows, non-availability and
and similar business in the area high cost of replacement stocks are the
• Obtain ability of manpower in the area Sudden change is the policy support is
• Socially acceptable enterprise also a potent threat.
• Availability of land, lab our, fodder, crop
residues and water
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• Financial support of DB at lowest

possible interest rate
• Adequacy of infrastructure
Keeping in view the above considerations, dairy enterprise requires high level of animal husbandry
and management skills.
21. Sustainability of the project
The sustainability of this project can be guaranteed because of several reasons. First this Project
involves the participation of different stakeholders especially the community and government
offices. These will handle and monitor the project through the implementation of the project:
Second, the project beneficiaries will have their own income from the salary that they get.
Thus, the project will ensure sustainability of its outputs, by strengthening the capacities of linkage
with Governmental organizations such as Zonal Agriculture department, Agricultural department
of Wachemo University, Banks, private companies operating in dairy farm etc. In addition, the
following points are helpful to sustain the project and key for success;
► Establishing and maintaining working relationship and contractual agreement with customers
of the company's product.
► increasing the profit margin and reinvesting it in feasible and profitable projects.
► Effective communicating to current and potential! Customers through targeted market in
efforts.
►Establishing well-structured organization with competent and dedicated employees.
► Utilizing the new facility and system to maximize product quality and sales turnover within
three years of operation.
► offering the highest quality milk cows and milk products that help our organization to be a
differentiated provider in the area market.
17
22. Technical Plan
22. 1. Structure and Equipment
Structures: -
The structures will include: Main shed, Dung peat, Feed store, Calf Pan, Water Tank (1000-liter
tank and stand), Biogas plant (Standard size) and wire mesh fencing. Total wall height of main
shed shall be 12m. At 8m height, a wooden ceiling will be made. The 4 m tall ceiling space will
be used for keeping silage and hay. The total wall height for feed store (8 m x 6 m) and calf shed
(5m x4 m) shall be only 8 m. The dung peat will be made of stone concrete masonry. The urine
will be collected in urine pit. The Biogas plant will be built under guidance of the District Livestock
Service Office.
Equipment: -
The following necessarily required dairy equipment shall be purchased
1. Chaff cutter-----------------------------------------------------------------------------------------2 no.
2. Milk Cans (5, 10, 20 and 40 lit. cap.) -----------------------------------------------------------2 set
4. Cream Separator cum/Butter Churner----------------------------------------------------------2 no
5. Deep Freezer (65-125 liter) ----------------------------------------------------------------------2 no
22.2. Stock and Herd dynamic
Jersey cows:
Jersey is small dairy cattle bread that is mainly raised for milk production and it is the second-
largest breed of dairy cattle in the world. It is well-known for its high milk production as well as
the high butterfat content of its milk. The jersey breed is the second largest breed of dairy cattle in
the word. Jersey cows are highly productive cows can give over 10 times their weight in milk per
lactation.
The jersey cow is also known as a breed of dairy cow, and it is originated in Jersey Island. It is
mainly considered as one of the most essential assets of the dairy business in the United States.
Jersey cows can have a chance of to get more fresh milk and have a valuable breed. Jersey cow
yields about 20% to 25o more cheese, 10% more non-fat dry milk, and 30% more butter. This is
the main reason why jersey cow is proven a profitable product. Because of this reason, more and
more people are planning to have this jersey cow.
There the owner of this project has planned to purchase the Jersey cross bred cows.
Jersey crosses breed cows:
18
The Jersey cross bred cows having up to 75 % exotic blood inheritance giving 16L milk/day,
preferably in 1 to 2md lactations shall be procured. Twenty in milking and thirty dry pregnant
cows (70:30 ratios) shall be procured to ensure continuous production of milk year round. The
female progeny born will serve aš the replacement stock to replace aging and/or low performing
cows. The male progeny born will be reared for I5-18 months and sold off
22.3. Feeding
22.3.1. Dry matter requirement
The Dry Matter (DM) requirement will be mot with a combination of concentrated feed and the
green fodder from pastures, fodder trees and forest, crop residues, silage and hay. A cow on an
average weighing 300 kg live body weight will be considered as one adult unit (AU)
• In a day, DM equivalent to 2.5% live weight of the cow shall be fed

• To I AU weighing 300 kg 7.5 kg DM shall be fed in a day
•100 kg green fodder in growth stage shall be considered equivalent to 20 kg DM and in lowering
or later stage shall be considered equivalent to 23 kg.
•About 80% of DM requirement will be met with green fodder (50%), silage (20%) and hay/straw
(10%. The balance 20% will be met from concentrate.
23. Organization and staff
As the envisaged business is development the issue of human side and management is very crucial.
Above all in this kind of business meeting and satisfying customer demand require employing
developing and retaining competent staff.
Therefore, the business will hire about 16 permanent full times higher, middle and lower level
employee. Ato Getahun Tirkaso the manager will ultimately control all operational activities, and
will carefully monitor the overall business activates.
19
23.1. Staff requirements and cost
For successful achievement of the desired objective employing qualified workers is fundamental.
The proposed project will run its activities with prearranged numbers of personnel; in long run the
project increases its employees as of the expansion of the business. The necessary man power is
standing by available in the area. The owner of the project has spent several years, in various
businesses developing, and has long ten experiences in selecting qualified employees. Thus, no
sort of managerial and man power problem is expected to be faced by the project.
Table 4: Personal Requirement of the project
No Position Qualification Quantity Salary Per Annual

Month Salary
1. Genera! Manager Management 1 10,500 126.000
2. Secretary degree, 1 3,500 42,000
3. Accountant experienced 1 4,500 54,000
4. Casher Diploma 1 3000 36,000
(10+3)
5. Purchaser Diploma 1 3000 36,000
6. Veterinary Expert 12 complete 1 4,500 54,000
7. Feeder 10 complete 1 3000 36,000
8. Milkier Diploma 3 9000 108,000
9. Store Keeper 10 complete 2 6000 72,000
10. Sales Person 8 complete 1 2500 30,000
11. Guard 8 complete 2 2000 48,000
Total 13 642,000
20
23.2. Organizational chart
For harmonized and coordinated operation, marketing financial and administrative activities of the
business efficient organization's structure and strong management team is required. In order to
meet the proposed standard of the business, currently the owner designed the following
organizational structure.
Figure 1: Organizational structure of the project
Owner
Secretary
General Manager
Chit finance Chief operating Chief HP

&administrate officer Officer
Accountant Dairy science HP & Org DVT

Assistance
Veterinary
Cashier & store Communication
keeper
Purchaser
Sales
21
24. Project cost analysis
24.1. Fixed cost:
The project fixed cost consists of all capital expenditures that include construction warehouse,
Material cost, machineries cost, and equipment cost. The estimated capital investment together
with the corresponding cost depicted here under.
Table 5: fixed cost detail
Description Quantity Unit Unit Price Total Price
Building and construction cost
Cattle house Lump sum 1,480,680
Calf’s house Lump sum 682,000.00
Hay/Fodder shed Cost Lump sum 880,680
Feed through, Water through, Lump sum 612,000,00

Crash and isolation room
Dining room, Cooking room, Lump sum 744,000.00

Sales room, Bed room, office
and general store construction
pasture area Lump sum 362,000.00
Fences Lump sum 511,320.00
parking area Lump sum
Machinery. tools and material Lump sum 5,720,000.00

Cost
Total fixed cost 5,240,000
22
24.2. Operational cost of the project:
The operation costs have two major components; these arc direct cost and indirect cost. The direct
cost includes the cost for purchasing. Milk caw, flood, veterinary, concentrates and transport. The
indirect cost includes the cost of personnel and administration expense, repair and Supplies. The
details major project operation cost arc presented here under in the table.
Description Unit of Measure Amount Unit Cost Total Cost

Direct operating
cost
Dairy cattle No 25 80,000 1,000,000.00
Dairy cattle food Lump Sum - 327,000
Forage Lump Sum - 230,00
Improved feed Lump Sum - 32,000
Medicine and Lump Sum - 54,000
vaccine
Feed concentrates Lump Sum - 54,680
Transportation Lump Sum - 82,000
Sub total - 3,000,080
Indirect operating - 777,600
cost
Employee salary Lump Sum 570,00
Utilities (water, Lump Sum -- 66,000
Telephone &
Electricity)
Fuel & Lubricants Lump Sum - 296,400
Uniform & Lump Sum - 26,500
Clothing
Load and unloading Lump Sum - 24,980
Sales expense Lump Sum - 24,000
Stationary and Lump Sum 24,000
supplies
legal audit and Lump Sum - 21,250
license Fee
Miscellaneous Lump Sum - 370,870
expense
Contingency Lump Sum - 1,405,640
Sub total 1,703,200
Total operating cost 4,860,000.00
Table 6: project operating cost
23
Table 7 Summary of Total Project cost2
S.NO Particulars Amount %
1 Working capital 4,860,000.00 birr 47.6%

2 Fixed cost 5,240,000.00 birr 52.4%
Total 10,000,000.00 Birr 100%
As summarized in the above table, total project cost is 10,000,000.00 birr. From the total project
Capital birr 5,240,000.00 (52.4%) is allotted for Fixed cost, while birr 4,860,000.00 (47.6%) is
allotted for operational cost.
Table 8: Means of Finance

S.NO Particulars Amount %
1 Promoter's contribution/equity 3,000,000.00 30%
2 Bank Finance/Loan 7,000,000.00 70%
Total 10,000,000.00 100%
Based on the above analysis, the total investment capital of the project is to be financed from the
promoter’s equity and bank loan. The total estimated investment cost is ETB 10 Million. Out of
the total capital ETB 3,000,000.00 (30%) is contributed by the promoter. While the remaining
balances of ETB 7, 000, 000, 00 (70%) is to be financed by loan from local banks, hopefully by
the Ethiopian development bank. The nominal rate of interest or discount rate is assumed to be 12.
5 percent. The loan will be paid with 5 years of equal installment payment including interest.
Loan repayment amount is based on agreement between the person and the bank.
24
25. Bank Loan Repayment
Bank loan repayment period depends upon the gross surplus in the scheme the loans will be
repaid in suitable monthly/quarterly installments usually within a period of about 5 years. In case
of commercial schemes, it may be extended depending on cash flow analysis.
The total outstanding balance of the investment loan assumed to be paid fully along with its interest
within Five years. Fixed installment for principal repayment assumed through the year and 12.5%
interest charged up on it. Both interest and principal amount assumed to be paid annually. The
detail repayment schedule stated in the following table: -
• Loan amount = birr 7,000,000.00

• Installment period/term = 5 years
• Interest on loan (including service charge) 12.5%
Table 9: Bank Loan Repayment Schedule
Payment payment Interest payment Total Pay Periodic Outstanding

Principal (12.5%) payment balance
year
0. - - 7,000,000.00
1. 1,400,000 875,000 2,275,000 7,000,000.00 6,125,000
2. 1,400,000 765,625 2,165,625 6,125,000 5,359,375

3. 1,400,000 669,921.875 2,069,921.875 5,359,375 4,689,453.125
4. 1,400,000 586,181.640625 1,986,181.640625 4,689,453.125 1,400,000.00
5. 1,400,000 105,000.00 1,512,000.00 1,400,000.000 0
26. Benefits of the project
Finical benefits: One of the most important reasons of establishment of any project is to become
profitable and viable in its business undertaking. The profitability analysis of the aforementioned
project is justified based on Net present value, breakeven point, payback period, cash flow analysis
projection are used for project analysis. These indicators show that the project is viable and will
become profitable after the third year of operation and will fully recover it initialing vestment cost
within five years. The dominant income source of the project will be from the sales of milk product.
25
Socio- economic benefits: the establishment of this dairy farm would have so many socio-
economic benefits. The benefits of economic development are often more immediate, important,
and obvious to the societies and the project owner.
• Employment Creation: the project creates job opportunity for many skilled and unskilled
workers in line to reduce unemployment which hinders the stability of macroeconomic
variables of the country.
• Technology transfer: it enables the local farmers and community to share technology in
dairy farm.
• GDP Contribution: the supposed project will contribute to the GDP of the country,
increases the income of the workers employed in and the owners too.
• Food security: the project would contribute it increasing the supply of food which is most
important issue for the country now Every business project establishes in one area has not
only profit security motivate but al so provide social and economic benefits in the area.
These benefit many or may not be quantified and measured in monetary terms. Its benefits
have invaluable contributions to the development of the area and society. Thus, the major
Socio-economic benefits of the project many be described as follows: -
✓ Create employment opportunity for the
✓ Show the true picture of the area for other potential investors
✓ Increase the access of agriculture output for customers
✓ Will have foreign currency creating and saving effect to the country by promoting exports
and substituting imports
✓ Participate in community development program
27. Project benefits justification
Service production: At full capacity of production the project is expected to provide milk and its
by products to customer.
The project also benefits by providing employment opportunity for a total 14 permanent & 16
temporary high and middle level staff and show the picture of project area for potential investment.
26
28. Profitability/loss of the project
According to the final analysis and projected income and expense of the project, it will start
generating profits starting from first year of operation and continue with net surplus profits Net
profit to equity and net profit interest to total investment rations will show an increasing trend
throughout the operation life of the project this arithmetic project is recommended for immediate
to run fattening and dairy farm work, it doesn't need she to worry about market opportunity. No
need of promotion works for the sales of whole products, because the supply and demand of these
products need long for export. And big effort to meet export demand regional and country level
due to limited participation of private investors in the sector. As demands for this products is high
the return stand always at an Increasing rate without any objection.
As the work progresses from 50% cross bread to 75% and 100% pure breed for dairy cattle increase
in profit well be geometric. This will be true because as the spray against disease weakening the
prevalent of the disease by the concerned project: in addition Lemo woreda is also in favorable
location to the federal capital Addis Ababa which increase the chance of high market condition
and export possibilities.
27
28.1 project profit & loss statement
❖ Output or products pricing assumption
Since the project objective livestock development by agro industry activities the pricing of Output
product assumed as follow:
✓ One litter of raw milk currently estimated 33 birr

✓ One kg butter will sold by 250 birr
✓ One kg cheese will sold by 100 birr
The project start up by 25 Holsteins bred cows
❖ Milk and milk by predict estimation

✓ one milk cow gives 25 liters per day
✓ one milk cow in a year gives milk for 300 days
❖ Total milk production in a year 29*36 *300= 520,000 liters
✓ From total product 40% (108,000 liters) will sold in fresh milk that is 108,000x43
= 6,494,000 birr
✓ 162,000 liters of milk processed to butter and cheese
✓ From 10 liters of raw milk one kg of butters gained that is (162,000 +10)*250-
4,050,000
birr will be sold
✓ From 10 1etters of milk 3kg of cheese will gained that it will be sold ((162,000*5) :
10))
X100 =1,121,000 birr
Table 10: Income summary
1 Income generating from Income generating 5,564,000 birr/year

sales of Milk from sales of fresh
milk assumed to be
2 Income generating from Income generating 6,050,000 birr/year.
28
sales of Butter from sales of butter

assumed to be
3 income generating from Income generating 9,340,000 birr/year
sales of Cheese from sales of cheese
assumed to be
Total income per year Birr 12,474,000
Table 11: Total revenue for five years by 10% increment
Project Year Product sales
From milk sales From butter From cheese sales Total soles
sales
Year one 3,564,000 4,050,000 4,860,000 12,474,000
Year two 3,920,400 4,455,000 5,346,000 1371,900
Year three 4,312,440 4,900,500 5,880,600 15,093,540
Year four 4,743,684 5,390,550 6,468,660 16,602,894
Year five 5,218,052 5,929,605 7,115,526 18,263,1 83
Table 12: Total operational cost for five years by 10% increment
No 1st year 2nd year 3rd year 4th Year 5th year
1 4,568,680 5,025,548 5,528,102 6,080,9 12 6,689,003
Table 13: Projected Income Statement
Description 1st year 2nd year 3rd year 4th Year 5th year
29
Total annual 12,474,000 13,7 1 1,900 15.093.540 16,602,894 18,263,183

revenue
Annual 4,568,680 5,025,548 5,528,102 6,080,912 6,689,003
expense
Gross profit 7,905,320 8,686,352 9,565,438 10,521,982 11,574, 180
before tax
35% taxation 2,766,862 3,040,223 3,347,903 3,682,693 4,050,963
Net profit after 5,138,458 5,646,129 6,217,534 6,339,289 7,523,2 17
taxation
Table 14: Projected

Year
Description 0 1 2 3 4 5
Cash inflow 2,880,000 - - - - -

Owners' 6.720,000 - - - - -
equity
Bank loan - - - - - -
Net profit - 5,138,458 5,646, 129 6,217,534 6,839,289 7,523,217
Depreciation 9,600,000 214,698 214,698 214,698 214,698 214,698
Total Cash - 5,353, 156 5,860,827 6,432,232 7,053,987 7,737,915
inflow
Cash - - - - -
outflow
Fixed Asset 5,031,320 - - - - -
Working 4,568,680 652,668 652,668 652,668 652,668 652,668
capital
Replacement - - - - - -
costs
Principal - 700,000 700,000 700,000 700,000 700,000
payment
Withdrawal - 243,680 256,401 260,411 267,555 275,123
Total Cash 9,600,000 1,496,348 1,509,069 1,513,079 1,520,223 1,527,79 1
outflow
Net cash - 3,856,808 4,351,758 4,919,153 5,533,764 6,210,124
flow
Table 15: Payback Period
30
Year Amount paid back Outstanding balance Remark

at the end of the year
0 Initial investment 7,000,000
1 3,000,000 3,000,000
PBP = total investment per annual cash flow

𝑡𝑜𝑡𝑎𝑙𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑃𝐵𝑃 =
𝑎𝑛𝑛𝑢𝑎𝑘𝑐𝑎𝑠ℎ𝑓𝑙𝑜𝑤
10,000,000
𝑃𝐵𝑃 = = 2.59
3,856,808
PBP = 2 + (0.59 * 12 months)

PBP = 2 year to 5month
29. Sensitivity and Risk Analysis
a. Success factors at macro level
✓ Conducive environment
✓ Political stability
✓ Presence of institutional support to be supplied by up-to-date information, training
andtechnical assistant.
✓ Security:-
b. Success factors at micro level
The key factors for the foundation of any successful and sustainable at micro level of dairy
project includes: -
✓ Responding quickly to changing economic forces, changing policies from Non-
agricultural as well as agricultural and shifts in milk products supply and demand
factors.
✓ Continuous innovation by adopting new technology and adapting to changing
✓ Consumer demands.
31
✓ Consumer base with sufficient disposable income to create and drive the Market formilk
and milk products
✓ The availability of the human, animal, natural and material resources to secure the
production of milk.
✓ The existence of the requisite infrastructure for an efficiently operating facility.
30. Conclusion and Recommendation
30.1. Conclusion
According to the project income statement the project will generating profit in the first year of
operation. Important ratios such as profit to total sales net profit to equity (return on equity) andnet
profit plus interest on total investment (return on total investment ) show an increasing trend during
the life - time of the project The income statement and the others indicatory of profitability show
that the project is viable. High initial capital investment, long turnover period and risk of outbreak
of diseases make dairy a daunting enterprise for poor farmers. Unlike other enterprises, like
poultry, it requires land for fodder production which makes unfeasible for farmers with small land
holding.Nonetheless, with strong government support, entrepreneurial skill and increasing demand
and price of milk and milk product the project is expected to succeed. The benefits of dairy farming
are multiple. The difficulties faced in the short run yields sustained income for the family in the
long run providing opportunity for young children getting employed at home itself.
The dairy farming will enable to have Bio-gas for cooking which will alleviate the hard work of
collecting firewood and cooking food in firewood. Besides it will enable to practice organic
farming.The total loan amount of 6,720,000.00 is expected to be paid back by 5th year of the
project. In fourth year the enterprise will achieve the breakeven point when the capital investment
cost along with interest will be paid back.
Dairy is a socially appropriate enterprise and with the strong government policy support as t Is
now, it has good scope for more farmers of Lemo woreda to take similar enterprise which would
alleviate rural poverty, create job, reduce dependence on forest for firewood and enable practicing
organic farming.
32
The entrepreneur shall put utmost effort to promote Micro Dairy Farm, organic farming and
adoption of Bio-gas in the Bobicho kebele.
Based on facts discussed so far, undertaking of this project will have positive contribution to the
overall development of the country as it enables the country use its idle economic resources more
economically. This dairy farm project with special will contribute to food security. Furthermore,
as per the financial analysis projected, it is technically and financially viable in all aspects of
different circumstances.
The project shall further generate an indirect employment around the farm site and its neighbor
loads. The effect of additional income earned and spent by the beneficiaries would create
corresponding employment in other sectors supplying the goods and services on which the income
is spent. The establishment of this project will result to enhancement of domestic food security,
employment opportunity, contribute to national GDP and also enables technology transfer. In all
scenarios IRR of the project is by far more than the investment interest rate which indicates that
the project is liquid enough to settle its debt over the projected period.
30.2. Recommendation
The proposed project has an attractive financial and socio-economic benefit. Also, the intended
project will directly employ 14 permanent persons and 16 casual workers. Therefore, by
considering the significant social and economic benefits that will be accrued to the society. All the
concerned offices & financial institutions should give their support to facilitate the implementation
of this plan.
33

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PROJECT PROPOSAL ON DAIRY FARM

PROJECT OWNER: ATO GETAHUN TIRKASO

OCT, 2016 E.C

18. Challenges and Opportunities ............................................................................................................... 14

Project outline…………. Dairy farm production

Main office of the Project………. Bobicho Kebele

3.1. Policy Rationale

3.2 Economic Rationale

3.3 Social Rationale

4. Vision, mission and objective of the project

4.3. Objectives of the project

5. Strategy and implementation

6. Description of the planned project

7. Area required for the project

✓ For dairy farm

Sub to total = 4,000 m2

✔For sales and cafeteria service

Sub Total = 2,170 m2

✔For forage plantation and feed preparation =3830 m2

8.1 Market Assessment

9.1. Past supply and present demand

Table I: House hold consumption of milk products

10. Demand Projection

Table 2: Demand Projection demand

Year Projected Domestic Demand in gram

11. Demand of the Product

13. Price Analysis

13.1. Selling Price Plan

14. Marketing and Selling Strategy

❖ Improving quality of milk and its products

14.1. Product Strategy

14.2. Pricing Strategy

15. Demand determination factors

✓ The fast growing economy of the country.

16. Plan of Operation

17. Management Profile

18. Challenges and Opportunities

5. Prohibitive construction costs make it considerably expensive to build.

19. Risks and uncertainties

20. SWOT analysis of the project

Project proposal on dairy farm development

• Financial support of DB at lowest

21. Sustainability of the project

22. Technical Plan

22. 1. Structure and Equipment

Jersey crosses breed cows:

22.3.1. Dry matter requirement

• In a day, DM equivalent to 2.5% live weight of the cow shall be fed

23. Organization and staff

23.1. Staff requirements and cost

Table 4: Personal Requirement of the project

No Position Qualification Quantity Salary Per Annual

23.2. Organizational chart

Figure 1: Organizational structure of the project

Chit finance Chief operating Chief HP

Accountant Dairy science HP & Org DVT

24. Project cost analysis

24.1. Fixed cost:

Table 5: fixed cost detail